A secret in business is an intangible property, which is kept private and encoded into a tangible property for an enforcement of legal recognition to gain an economic advantage over the competitors. The constitution of trade secret depends on the business. In some jurisdictions, such secrets in business are referred to as ”Confidential Information” or a “Trade Secret”.
A bona-fide trade secret gains economic value because of its SECRECY ONLY and only a bona-fide trade secret can be legally recognized by any Court when a dispute arises.
A valid trade secret is a method for creation, which may be a process in manufacture or product in development. A trade secret in a business can be of various types; it may be scientific, technical, financial, economic or engineering.
Trade secrets, which are not a product or a process of an invention, are not eligible under the Intellectual Property Rights. Nevertheless, a trade secret can avail legal protection under the intellectual property rights and also non-intellectual property rights (Statutory or Common Law Intellectual Property). A trade secret under the intellectual property rights shall have a definite period of statutory protection while a trade secret under the common laws of the country (Judge-Made Laws) shall also have a legal protection for a period, which may be indefinite.
After the recognition of any information or any property as a “Trade Secret”, the next step is to keep the trade secret “A Secret” to obtain profitable value. A secret is something you tell everybody to tell nobody, this conventional definition of the Secret begins to imply in every business.
A business may have many protocols and stratagem. It is crucial to understand which information can qualify as a Trade Secret in such Business. The following succeed as Trade Secrets:
1. Patterns, plans, program devices, formulas, designs, compilations, customer list, financial data, product prototype, source code, a sui generis know – how or a negative know – how.
2. Unpatented inventions and process, unique products, prospect products designs/models and research projects.
3. Valuable, non-public company documents, drawings, blueprints, laboratory notebooks, test data and training manuals.
4. Marketing, purchasing, planning and customer information.
5. Financial accounting, recruiting and legal information.
A trade secret does not involve the costs for registration and has an immediate effect. A trade secret does not require any disclosure of the invention (whether a development or a technique) to the public. A trade secret to achieve an optimal monetary worth must undergo legal policies, procedures and records. A good trade secret policy can minimize the chances for future legal actions. A person or a company must adopt the following for maintaining a successful trade secret:
1. Documentation and Inventory
The person or the company must keep a clear written record of all activities and documents, which may contain confidential information including application, usage, disclosure and management.
2. Non – Disclosure Agreement
The person or the company must release a non-disclosure agreement and utilize such document while disclosing the trade secret of the business.
3. General Clause for Confidentiality
The person or the company must include a general clause of confidentiality for a trade secret in every agreement.
4. Procedure for Trade Secret
The person or the company must develop bona-fide procedures in accordance with the laws of the country for such application, usage of the trade secret. The procedures are to be followed by everyone during the disclosure of any trade secret. Every employee and partner is then bound by the procedures at the time of disclosure.
The policy, procedures and record strengthen such trade secrets in a private capacity. In any event of a breach of contract or theft of confidential information, a person or a company may plead due process by the court under the provisions of statutory law as well as the common law codes of the country including Unfair Competition Rules.
Any information is confidential to the business but a person or a company pleading before the Court must be able to convince a legal course of action because the Court shall not regard any disclosed information as a trade secret. The person or the Company must be able to prosecute the following requirements for succeeding in a trial:
1. A prior disclosure of the trade secret, which was necessary for the business.
2. That such information has been revealed after the disclosure.
3. Modus Operandi (The Usage of Computer and Internet)
4. Determination of Theft or Breach of Trust/Contract/Promise/Confidence even after exercising reasonable restraint over the recipient in personal capacity by the making use of policy, procedure, records.
Trade secret is a valuable asset that takes effort, time and capital. It is the confidential information that increases the goodwill of a brand, company, invention, which is generally not known to the potential competitors or the consumers. The court cannot consider every secret in issue or revelation as a valid trade secret. The Court generally considers the following, whether:
1. The information was confidential to the Business or Company.
2. The information has been revealed in the Breach of Contract or Promise or Confidence or Trust.
3. The information was used in an improper or fraudulent manner which resulted in financial damage to the business company.
From the Lawyer’s Desk
The doctrine of Trade Secret is widely accepted by The World Trade Organization. The Trade Secret Protection Act, 2014 was enforced by United States Government to create a civil cause of action in the disciplines of intellectual property. India is a party to such Intellectual Property multilateral agreements and soon India will also pass such legislation and codify a separate Act for the Protection of Trade Secrets.
A trade secret is an important valuable asset to every company. Any person can reveal a trade secret for a personal temporary profit and sometimes inadvertently. The trade secret policy must be periodically discussed with all the employees and staff members of the Company, especially at the time of recruitment and upon the termination. A company must instruct its members the precise application and the usage of such sensitive confidential information through computer system with and without the internet. In addition to every agreement, a company must inform and educate the importance of a trade secret in the sphere of commerce and the role for maintenance of such trade secret to all the staff, employees, third – parties and business partners.
A trade secret can range from a secret sauce from the kitchen to a first class invention from the laboratory. Always seek advice from a business lawyer, perhaps an intellectual property specialist prior for the execution of such secrets and to obtain optimal economic value in the fields of business. The endeavor of the author is that more readers be benefitted from this article and help remove any or all misconceptions which may arise due to ignorance of law in nexus to Trade Secret. Business Authenticity requires legal transparency, fairness and integrity and hence live by the righteous motto in business ethics “Fair in Life, Succeed in Life.”