• Shaurya Shukla

What Is A Trade Secret And How It Should Be Protected From Getting Leaked?


A trade secret is a kind of research and developmental process of a company that is protected or kept as a secret from the other companies because of getting an economic advantage over the other companies or competitors. Some examples of trade secrets are formulas, patterns, programs and apps, devices, methods, processes, etc. Is everything that is kept secret by a company a trade secret. The answer is “No”. Every secret is not a trade secret because trade secret is an intellectual property of a company like patents, but it is not publicly known like patents. For a secret to qualify as a trade secret there are certain requirements, which differ in the different jurisdictions. Some common traits of every jurisdiction to characterize a secret of any company as a trade secret is:

  • The company must make a reasonable effort in concealing the information from the public.

  • The secret must be carrying information of vital importance to the company.

  • The secret which a company is protecting must have an economic value.

Now you must have got an idea about what is a trade secret. It has great importance for a company, so how is it protected in India. After the GATT negotiations, it was declared that if a company used a trade secret of another company, it would be considered an unfair practice. India is also a member of the TRIPS agreement and it provides that a trade secret can be protected under article 10 bis of the Paris convention. If any information is declared as a trade secret, it is the duty of the employees of a company also to protect that information from getting leaked or stolen by third parties.

The protection of trade secrets in India deals with contract law. As per the contract law, an employee cannot be restrained from becoming a competition after his termination from the company but trade secrets can be protected against violations. In many cases the contract for the trade secrets was not made between the employer and the employee then the court has also granted an injunction relying on the rules of equity.

The remedies available in India for the breach of trade secrets are the civil and equitable remedy for the breach of confidence. The remedies are:

  • The court can grant an injunction to prevent third parties from disclosing the trade secrets.

  • If any loss is suffered by the company whose trade secret is disclosed, so the court can also award damages to such a company.

The common ways in which a leak of trade secrets take place:

  • The first way in which the trade secrets are leaked is purposeful leaking of information, this is done by an employee in the fit of anger or to take revenge. This kind of leaks can cause a long-lasting stain on the reputation of a company so employers should also consider the emotions of an employee as humans are highly emotional beings.

  • The Second type of leaks is reluctant leaks, this kind of leak happens when a company lures the employees of the competitor company for an interview for better job opportunities and in that interview, they persuade or coerce the employee of the competitor company to tell the trade secret of the company they are currently working with. This type of leak can be tackled by making the employees sign the Non-Disclosure agreement or confidentiality agreement.

  •  If an employee is dealing with confidential information, he must do it with meticulousness because another type of leak is accidental leaks, this happens when a piece of confidential information is mailed at a wrong email address by any careless employee.

So the most important question is: how a company or an organization should protect its trade secrets?

The answer is a bit frustrating, the answer is “there is no answer” because there is no fixed process to protect one’s trade secrets. Constant vigilance is the best possible option to protect trade secrets. But a few steps can be followed by a company to protect a trade secret:

  1. The first step is to identify the trade secrets, a company should perfects classify and decide about which secrets are trade secrets

  2. The second step is to make those secrets as secure as possible by taking the help of various software companies.

  3. A company should make a list of their employees who have their trade secrets.

  4. Access to these secrets should be controlled by the company.

  5. A Company should make all their employees sign the NDAs and Confidentiality agreement.

  6. All the employees should be trained to do their tasks meticulously and to avoid any kind of accident and carelessness.

  7. A backup plan should always be ready like a notification or security process, a company should know about what they can do if their trade secret is leaked.

  8. Following these steps, a company can tackle the problem of leaking or breach of trade secrets, but this process is not guaranteed as I mentioned earlier, consistent vigilance is necessary.

At last, we can conclude that trade secrets are of vital importance for a company and they are a big reason for the economic development of a company. If a trade secret of a company is stolen by any other company then that other company can benefit a lot. The benefit gained by such companies is dishonest and causes loss to the company whose trade secret has been stolen. Though there are laws to stop it, technology advancement plays a big role in this area as due to the advancement of technology the leaks of trade secrets have become easier. So this technology should be used positively to stop the leaks of trade secrets because if such a problem is not tackled at an appropriate time it can cause big and long-lasting harm to innovation.    


References:

  1. Jake Frankenfield, Trade Secret, 31 May 2020, 11:32 pm, https://www.investopedia.com/terms/t/trade-secret.asp

  2. Laws for the protection of trade secret in India, 31 May 2020, 11:48 pm, https://blog.ipleaders.in/laws-protection-trade-secrets-india/

  3. 4 common ways your employees leak trade secrets (and how to stop them), 31 May 2020, 1:30 pm, https://www.inc.com/brian-hart/your-employees-are-probably-leaking-trade-secrets-.html

  4. How to protect your business trade secrets from getting stolen, 31 May 2020, 1:46 pm, https://www.thebalancesmb.com/how-to-protect-your-trade-secrets-4590019


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