Introduction
In March 2024, under the heading of Hon’ble Justice Ritu Raj Awasthi, the 22nd Law Commission of India submitted its 289th report regarding Trade Secrets and economic espionage. It presented the Protection of Trade Secrets Bill, 2024, conceived to provide a strong legal framework for protecting trade secrets in India. The Bill is a significant step towards aligning Indian intellectual property law with similar international standards in respect to addressing economic espionage and misappropriation of confidential business information.
Current Legal Framework for Trade Secrets in India
So far, there seems to be no dedicated codified legal framework in India for the trade secrets like patents and copyrights. Businesses are dependent on contract law, common law principles, and specific provisions under the existing statutes to protect their proprietary information. The key sources of protection include:
- Indian Contract Act, 1872: Confidentiality agreements (NDAs) and non-compete clauses are enforced under contract law.
- Information Technology Act, 2000: Sections dealing with data protection and cybersecurity provide limited safeguards against data breaches.
- Competition Act, 2002: Addresses anti-competitive practices, including misappropriation of confidential business information.
- Common Law Principles: Courts have recognized breach of confidence as a cause of action in various cases, protecting businesses from unauthorized disclosures.
Despite these protections, the absence of a specific statute has left businesses vulnerable to economic espionage, trade secret theft, and a lack of effective enforcement mechanisms. These Contracts seem to be less effective now a days.
Position before the Trade Secret Bill, 2024
- India, as a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), is obligated to ensure protection for undisclosed information. Article 39 of the TRIPS Agreement mandates legal measures to protect confidential business information from unfair commercial practices. The lack of a dedicated trade secret law has often been a point of contention in international trade negotiations, with countries like the United States advocating stronger protections.
- The National IPR Policy, 2006 states in Objective 3.8.4 that the protection of trade secrets is crucial for strong and effective intellectual property (IP) laws to balance the interests of rights-owners with the larger public interest.
Key Features of the Trade Secret Bill, 2024
The Protection of Trade Secrets Bill, 2024, proposes a comprehensive framework that addresses key concerns related to trade secret misappropriation, protection mechanisms, and legal remedies. The salient features include:
1. Definition of Trade Secrets
The Bill defines a trade secret as: Trade secrets have been defined with precision as any information that is a secret and not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; and that derives commercial value on account of being secret; and that has been subject to reasonable steps under the circumstances, by the holder of such info, to keep it secret and; the disclosure of which is likely to cause damage to the holder of such information.
This definition aligns with global standards set by the TRIPS Agreement and the U.S. Defend Trade Secrets Act (DTSA).
2. Rights of Trade Secret Holders
According to the Bill, a trade secret holder has the right to exploit and disclose his trade secret, including licensing thereof. Further, he may enter into a contract or agreement to protect, restrict access to, and prevent disclosure of information that might fall under trade secrets.
3. Modes of Lawful Acquisition
Independent discovery or creation, observation, study, reverse engineering, disassembly, or testing of a product or object made available in any other manner to the public or lawfully possessed by the enquirer or some other legal action or practice within honest commercial practices may legally acquire a trade secret.
4. Unlawful Acquisition and Economic Espionage
The Bill explicitly prohibits economic espionage and theft of trade secrets which includes Breach of contract (violating NDAs or confidentiality agreements), Theft, fraud, or bribery to access confidential information, Industrial espionage, including hacking and corporate spying, Unauthorized disclosure by employees or business partners.
Exceptions to Trade Secret Protection
The Bill incorporates specific exceptions where disclosure of trade secrets may be justified:
- Whistleblower Protections: Employees who disclose trade secrets to report fraud, corruption, or illegal activities are safeguarded.
- Public Interest: Certain disclosures may be permitted if they are necessary to protect public health, safety, or the environment.
- Government Use: The government may use trade secrets in cases of national emergency, defense, or economic stability.
Legal Remedies and Enforcement Mechanisms
The Bill provides civil and criminal remedies for trade secret misappropriate use.
In civil remedies aggrieved party can get Injunctive Relief, Monetary relief, or Account of profits which means the defendant has to hand over all the profits gained from the trade secret misappropriate use.
In criminal remedies, Fines and imprisonment for willful theft of trade secrets and Higher penalties for corporate espionage, including offenses involving foreign entities.
Courts are also expected to keep matters under wraps and spare the barrel of confidential events in order to prevent more sensitive information from being disclosed.
Implications for Businesses and the Economy
The introduction of the Protection of Trade Secrets Bill, 2024, will create a paradigm shift concerning businesses, innovation, and economic growth in the Indian context. A strong legal regime will motivate businesses to invest in R&D with the assurance that their proprietary knowledge will be secure from exploitation. Clearly defined and enforceable norms on trade secret protection will make India more attractive for foreign direct investment (FDI), especially as multinational corporations are selective about the markets they enter, favoring those with strong intellectual property protection. Meanwhile, compliance with TRIPS obligations would enhance India’s bargaining power in international trade negotiations by diminishing disputes against the enforcement of intellectual property rights. Furthermore, small and medium-sized enterprises (SMEs) and startups, which are often less resourced to file for patents, would find a cost-effective way to protect their innovations, fostering a more competitive and innovation-driven business environment.
Challenges and Considerations
Though good, the Bill still has its share of requisite hurdles. It must find a balance between protecting trade secrets and accessing information and content that is often necessary for public interest, like pharmaceuticals, healthcare, and the environment. For the Bill to achieve success, its mechanisms would need to be enforced, which would demand specialized courts or tribunals for the swift handling of trade secret disputes. Also, it is important to equip businesses, particularly startups and SMEs, with knowledge about best practices to protect their trade secrets and legal avenues available to them to maximize competitiveness.
Comparative Analysis with Global Trade Secret Laws
The proposed Bill can be compared with similar trade secret laws in other jurisdictions:
- United States: The Defend Trade Secrets Act (DTSA), 2016 provides both federal and state-level protection, allowing companies to sue for trade secret misappropriation.
- European Union: The EU Trade Secrets Directive (2016/943) harmonizes trade secret protections across member states, emphasizing confidentiality and legal redress.
- China: China’s Anti-Unfair Competition Law has been amended to include strict provisions against trade secret theft, with significant penalties for violators.
Conclusion
The Trade Secret Bill, of 2024, is an important landmark in India’s intellectual property landscape. With clear legal protections and effective remedies, while also being aligned with international standards, it aims to foster innovation, economic growth, and investor confidence in India. However, strong enforcement and judicial accessibility, and awareness among different stakeholder groups will be vital for the successful implementation of the Bill, so that India’s trade secret protection regime is robust and effective.
Written by Esha Jaiswal, Legal Intern at Intepat IP
