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I.  Protection of Trade Secrets

Currently there is no specific or separate legislation that regulates the protection of trade secrets and confidential information in India.[1]  However, the courts in India have relied on equitable and common law remedies as a means of protecting trade secrets.  Specifically, Indian courts have relied on the principles laid out in the Saltman Engineering case,[2] which, as summarized by Patrick Hearn, author of The Business of Industrial Licensing, states that

. . . maintenance of secrecy, according to the circumstances in any given case, either rests on the principles of equity, that is to say the application by the court of the need for conscientiousness in the course of conduct, or by the common law action for breach of confidence, which is in effect a breach of contract.[3]

In other words, “[i]n India, parties must primarily rely on contracts to protect trade secrets.”[4]  However, “Indian law does recognize the common law tort of ‘breach of confidence’ irrespective of the existence of a contract.”[5]  According to a New Delhi Court, a trade secret “can be a formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.”[6]  However, the Court adds that, “routine day-to-day affairs of employer which are in the knowledge of many and are commonly known to others cannot be called trade secrets.”[7]  The requirements for a cause of action for a breach of confidence that are used by the Indian courts are borrowed from the English common law and are enunciated as follows:

(1)  the information itself must have the necessary quality of confidence about it;

(2)  that information must have been imparted in circumstances imparting an obligation of confidence;

(3)  there must be an unauthorized use of that information to the detriment of the party communicating it.[8]

Moreover, the Indian Courts have applied these principles in three sets of circumstances out of which proceedings may arise:

(a) Where an employee comes into possession of secret and confidential information in the normal course of his work, and either carelessly or deliberately passes that information to an unauthorized person;

(b) Where an unauthorized person (such as a new employer) incites such an employee to provide him with such confidential information . . . ; and

(c) Where, under a license for the use of know-how, a licensee is in breach of a condition, either expressed in any agreement or implied from conduct, to maintain secrecy in respect of such know-how and fails to do so.[9]

Many trade secret decisions come in the context of breach of contract proceedings for restraint of trade.  The courts have held that, “although an employer is not entitled to restrain his servant after the termination of employment from offering competition, he is entitled to reasonable protection against exploitation of trade secrets.”[10]  Moreover, absent a contract, courts in India have still issued injunctions based on the rules of equity.[11]

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II.  Available Remedies

In India only civil or equitable remedies are available for a breach of confidence cause of action.  The available remedies include the award of an injunction “preventing a third party from disclosing the trade secrets,” the return of all “confidential and proprietary information,” and compensation or damages “for any losses suffered due to disclosure of trade secrets.”[12]  The court may also order the party at fault to “deliver-up” such materials.[13]

Injunctions may be interlocutory (interim relief) or permanent.  According to Advocate P. Narayanan, “[t]he information may remain confidential only for a limited period in which case the injunction will not extend beyond that period.”[14]  Moreover, “[s]ince the information alleged to be confidential may be of value to the plaintiff only for a specified period, interim injunction will ordinarily be granted only for a specified period depending upon the circumstances and the nature of the confidential information.”[15]  The rules that the courts use to determine whether to award an interim or permanent injunction were summarized as follows in the Gujarat Bottling Co. Ltd. case:

The grant of an interlocutory injunction during the pendency of legal proceedings is a matter requiring the exercise of discretion of the Court.  While exercising the discretion the Court applies the following tests – (i) whether the plaintiff has a prima facie case, (ii) whether the balance of convenience is in favour of the plaintiff, and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for interlocutory injunction is disallowed.  The decision whether or not to grant an interlocutory injunction has to be taken at a time when the existence of the legal right assailed by the plaintiff and its alleged violation are both contested and uncertain and remain uncertain till they are established at the trial on evidence.  Relief by way of interlocutory injunction is granted to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could be resolved.  The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial.  The need for such protection has, however, to be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated.  The Court must weigh one need against another and determine where the “balance of convenience” lies.[16]

The determination of damages is based on the “market value of the confidential information based on a notional sale between a willing seller and a willing purchaser.”[17]

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III.  Proposed Legislation

In 2008, the Department of Science and Technology, as part of the Ministry of Science and Technology, published draft legislation titled the National Innovation Act of 2008[18] that would in part “codify and consolidate the law of confidentiality in aid of protecting Confidential Information, trade secrets and Innovation.”[19]  Trade secrets would be regulated under Chapter VI, which is titled “Confidentiality and Confidential Information and Remedies and Offences.”[20]  The current status of this draft legislation is unclear.

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Tariq Ahmad
Legal Research Analyst
August 2013

 

[1] Zafar Mahfood Rahmani & Faizanur Rahman, Intellection of Trade Secret and Innovation Laws in India, 16(4) J. Intell. Prop. Rts. 341, 347 (July 2011), http://nopr.niscair.res.in/bitstream/123456789/12449/1/IJPR%2016(4)%20341-350.pdf

[2] Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd., 1948 (65) R.P.C. 203.

[3] Patrick Hearn, The Business of Industrial Licensing: A Practical Guide to Patents, Know-How, Trade Marks, and Industrial Design 112 (1986), quoted in John Richard Brady and Others v. Chemical Process Equipments P. Ltd. and Another, A.I.R. 1987 Delhi 372.

[4] Sonia Baldia, Offshoring to India: Are Your Trade Secrets and Confidential Information Adequately Protected?, Mayer Brown Bus. & Tech. Sourcing Rev., Mar. 1, 2008, at 10, http://www.mayerbrown.com/files/Publication/c4321838-f2ec-4fe5-990d-1ea497a7398b/Presentation/PublicationAttachment/5a87579c-8d2b-469d-ad3d-bb95435fe6ff/ART_OFFSHORINGTOINDIA_0308.PDF.

[5] Id.

[6] Ambiance India Pvt. Ltd. v. Shri Naveen Jain, 122 (2005) D.L.T. 421, para. 6.; see also American Express Bank, Ltd. v. Priya Puri, (2006) 3 L.L.N. 217.

[7] Ambiance India Pvt. Ltd. v. Shri Naveen Jain, para. 6.

[8] Emergent Genetics India Pvt. Ltd. v. Shailendra Shivam and Ors., (2011) 125 D.R.J. 173, para. 33.

[9] Homag India Private Ltd. v. Mr. Ulfath Ali Khan (Oct. 2012), http://judgmenthck.kar.nic.in/judgments/bitstream/123456789/759406/1/MFA1682-10-10-10-2012.pdf (quoting the Delhi High Court in John Richard Brady and Others v. Chemical Process Equipments P. Ltd. and Another, A.I.R. 1987 Delhi 372). 

[10] Rahmani & Rahman, supra note 1, at 346.

[11] John Richard Brady and Ors. v. Chemical Process Equipments P. Ltd. and Anr., A.I.R. 1987 Delhi 372.

[12] Deepak Gogia, Chakravarty’s Intellectual Property Law 753 (2010).

[13] Parameswaran Narayanan, Intellectual Property Law 331 (1990).

[14] Id.

[15] Id.

[16] Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 S.C.C. 545, para. 43.

[17] Narayanan, supra note 13, at 42.

[18] National Innovation Act of 2008 (Bill), http://www.dst.gov.in/draftinnovationlaw.pdf.

[19] Id., preamble.

[20] Id. ch. VI.

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Last Updated: 02/28/2014