PROTECTION OF TRADE SECRETSA SHORT PRESENTATION ON PROTECTION OF TRADE SECRETS REGARDING INTELLECTUAL PROPERTY RIGHTS

R a j a t A g r a w a l

INTRODUCTION

Trade secret is:• Information• A secret or not generally known in relevant industry• Giving the owner an advantage over competitors• It is subject of reasonable efforts to maintain its secrecy• Examples:- formulas, patterns, methods, programs, techniques, processes or compilations

TRADE SECRET

Not protected by law Protected without disclosure of the secret Does not need to pass the test of novelty Must be somewhat new, unfamiliar to many people including many in the same trade Unregistered and not created via a statute

MORE ABOUT TRADE SECRETS

Trade secrets are not disclosed to the world As long as it remains a secret, it remains valuable for the entity owning it. Stringent measures to be taken to protect it from competitors through civil and commercial

means. Violation of agreement should carry stiff financial penalties, which should be agreed to in

writing by the parties Entity may not offer to register trade secret as a patent in order to protect its ingenuity

(Coca Cola Company)

WAYS OF KNOWING TRADE SECRETS OF COMPETITORS

WAYS OF KNOWING TRADE SECRETS

Reverse Engineering Industrial Espionage

REVERSE ENGINEERING

Process of extracting information or knowledge or design from man made and reproducing it.

Dissembling of components, analysing it and working in detail. Intentions may be socially beneficial or criminal, depending upon situation. No IPRs are breached as information is reverse engineered to find what it does and how it

does it. Doesn’t create a copy or duplicate; it’s only design to deduce features from products with

little or no knowledge about procedures involved in original production.

REVERSE ENGINEERING

Reasons for reverse engineering:1) Product security analysis2) Bug fixing3) Improving documentary shortcomings4) Obsolescence5) Saving money6) Academic/ learning purpose7) Repurposing & modernization

INDUSTRIAL ESPIONAGE

It is a form of espionage i.e. an illegal practice by a commercial concern with acts of spying to gain a business advantage.

Intention is to acquire a trade secret such a proprietary product specification or formula or information about business plans.

Either IPR is acquired or proprietary information is captured. A successful industrial espionage makes a level competitive playing field. Either a dissatisfied employee reveals secret information to competitors to damage

existing entity or favouring interest or competitors acquire it to advance its own financial interest.

INDUSTRIAL ESPIONAGE

Reasons for industrial espionage:1) Get in and out of information field without being noticed.2) Competitive environment.3) Stealing personal information for ransom from target company.4) Stealing personal information NOT for own use but for selling to another rival company.5) Giving out of information by a disgruntled employee for a price or coercion.6) Future plans and prospects.7) Hacking into information field to disrupt and/ or damage existing information present.

HOW INDUSTRIAL ESPIONAGE IS DONE?

o Revealing information by a dissatisfied employee having mala-fide intentions to its competitors to damage company structure and financials voluntarily.

o Insiders may provide secret information in exchange of bribe or employment at higher positions at competitors company.

o Outgoing employee may provide information to new company.o Intrusion of a ‘spy’ – engineer, cleaner, insurance salesman or inspector who has legitimate

access to premises.o Search may be made through waste paper refuse, (dumpster diving).o Data may be transferred via internet (paperless unauthorized disclosure of information).

CASE LAW

UK Supreme Court confirmed that there can be no liability for misuse of trade secrets unless and until confidential information is acquired. Test for cause of action for breach of confidence is given in case of Coco vs. A.N. Clark (Engineers) Ltd. Elements laid down if in case a breach of confidence is to succeed: The information itself must have the necessary quality of confidence about it. That information must have been imparted in circumstances imparting an obligation of

confidence. There must be an unauthorized use of that information to the detriment of the party

communicating it.

INTERNATIONAL TRADE & TRADE SECRETS - CHECKLIST

I. Technical information/ research and developmentII. Proprietary technology informationIII. Proprietary information concerning research and developmentIV. FormulasV. CompoundsVI. PrototypesVII. ProcessesVIII.Laboratory notebooksIX. Experiments and experimental data

INTERNATIONAL TRADE & TRADE SECRETS – CHECKLIST (CONTD..)

X. Analytical dataXI. CalculationsXII. Drawings – all typesXIII.Diagrams – all typesXIV.Design data and design manualsXV. R&D reports – all typesXVI.R&D know-how and negative know-how (i.e. what does not work)XVII.Production/ process informationXVIII.Proprietary information concerning production/ process etc.

FACTORS TO BE TAKEN TO DETERMINE APPROPRIATE LEVEL OF SECURITY TO PROTECT TRADE SECRETS

Extent to which the information is known outside the company Extent to which the information is known by employees and others involved in the

company Extent of measures taken by the company to guard the secrecy of the information Value of the information to the company and competitors Expenditure by the company (time, money and effort) in developing the information Ease or difficulty with which the information could be properly acquired or duplicated by

others.

HOW TO PROTECT TRADE SECRETS

Keeping a check and watching information being provided to outside party. Use of a warning label. Restrict of physical and electronic access to information data base. Continue the use of NDAs (Non Disclosure Agreements) Create a decoy memory dump or an information pool.

IS STEALING TRADE SECRETS A CRIME?

No specific law covering trade secrecy crime in India. Enforced using common law or contractually. Common law action of breach of confidence [Coco vs. A.N. Clark (Engineers) Ltd]. Injunction preventing offender from disclosing trade secrets, return of information or

payment of damages or losses suffered.

PRESENT SCENARIO REGARDING PROTECTION OF TRADE SECRETS IN INDIA

The current scenario on protection of trade secrets in India is not enough because: Onus to prove breach of confidentiality lies on aggrieved party than the perpetrator. Remedies are easier to obtain under civil law since under criminal law establishes the

aggrieved party to establish that trade secrets is property of which the theft is committed. Since burden to prove is on aggrieved party, ultimate beneficiary of theft is the offender is

rarely prosecuted since its difficult to cite evidence regarding the theft. No fixed law to deal with theft of trade secrets in reality. Cumbersome criminal procedure in awarding justice in India.

ENTER, THE TRIPS AGREEMENTINTRODUCTION & POSSIBLE REMEDY FOR TRADE SECRET THEFT IN INDIA

TRIPS AGREEMENT

TRIPS Agreement (Agreement on Trade Related Aspects of Intellectual Property Rights) is an international agreement administered by World Trade Organisation (WTO).Role of WTO with respect to TRIPS Agreement:1) Setting down minimum standards for intellectual property.2) Providing enforcement procedures3) Provision of remedies4) Dispute resolution procedures

TRIPS AGREEMENT

Article 39 protects trade secrets in the form of undisclosed information and provides a uniform mechanism for the international protection of trade secrets.Such information must be a secret.The information must have commercial value.Reasonable steps must be taken by owners to protect the secrecy.

MORE ON ARTICLE 39 OF TRIPS AGREEMENT

Fulfilling trade secret requirements under Article 39.2 of the WTO Agreement on TRIPS In India, now under National Innovation Act of 2008, parties may enforce any rights relating

to breach of confidence covering equitable and tortious claims. Narendra Modi seeks to further his ‘Make in India’ concept by creating a stringent law on

protection of trade secrets to attract foreign companies to conduct research and development and knowledge intensive activities in India.

HOW COCA COLA COMPANY PROTECTS ITS TRADE SECRETS?How the world famous beverage company manages to keep its famous taste of cola, a secret since a long time..

SOME IMPORTANT POINTS

Coca Cola’s recipe is one of the best kept secrets in the world. It was developed by a pharmacist and kept secret for more than 100 years. The secret recipe circulating the internet is a myth and even if it isn’t, the ingredients are made

known and NOT the procedure. The recipe is kept in a vault. Debatable since many argue it is a marketing gimmick, some do not. Bags containing contents are marked with alphabets numbered ‘X’ or ‘Y’ to prevent spilling

knowledge of contents of bags with instructions on how and when to mix them. Distribution facilities are given raw mixture in powdered/ syrup form and mixed with carbonated

water. If actual syrup making plants are abroad, then instructions are issued like “Mix Bag X with Bag&3

at 30 degrees in 5 mins after Bag Y as been introduced”

SOME IMPORTANT POINTS

Many companies have tried fractionally distilling coca cola and even went to know the ingredients, but NOT the formula and procedure.

Even if someone manages to replicate formula of coke, and manages to bottle it, it is immensely difficult to do it consistency because it is still NOT COCA COLA. Beware of brand power!

The recipe is supposedly locked away at SunTrust Bank in Atlanta, Georgia, USA who own shares of coke and have two executives of coke sitting in their Board.

Coca-Cola has still not converted or registered its trade secret as a patent – for reasons obvious.

The assembly line of coca cola is highly automated and not manual. Chances of leakage of ingredients, process is thus lowered.

IF I FIND OUT THE SECRET FORMULA OF COCA-COLA, CAN I COPYRIGHT IT AND SUE THE COMPANY?

Recipes are list of ingredients. You cannot copyright a list of ingredients. Even if you could copyright a list of ingredients, it would not matter because there is no

limit in producing the final product because it is injunction on distribution of ingredients only.

Coca-Cola can of course, demonstrate that their production pre-dates your copyright. Recipes use existing process which are not patentable. If you are an employee of Coca-Cola, they can sue you if you disseminate the recipe

publicly because there are plans and policies of company limiting release of recipe. It does not attract the case if someone independently discovers the formula.

P.S. Recipes ≠ Formula

CONCLUSION

If a trade secret is well protected, there is no term of protection. It can extend indefinitely and till it extends, it continues providing user with benefits over competitors.

THANK YOU!BY RAJAT AGRAWAL (RAJATAGRAWAL21@GMAIL.COM)