Law Commission Proposes Bill Codifying the Law Relating to Trade Secrets

TRIPS & Intellectual Property:

The treaty that internationally governs intellectual property laws is commonly referred to as the ‘TRIPS Agreement’, formally known as the Trade-Related Aspects of Intellectual Property Rights Agreement[1]. TRIPS is comprehensive multi-lateral agreement that lays down the minimum protection requirement of intellectual properties globally. TRIPS identifies seven categories of intellectual property rights viz.

• copyright and related rights;
• trademarks;
• geographical indication;
• industrial design;
• patent;
• layout design (topography) of integrated circuits; and
• undisclosed information.

Undisclosed Information or Trade Secrets:

Unlike previous international instruments like the Paris Convention for Protection of Industrial Property, the TRIPS Agreement is the first international instrument that recognizes ‘undisclosed information or trade secrets’ as an intellectual property.

Under the TRIPS Agreement, undisclosed information is included in the ambit of intellectual properties to ensure effective protection against anti-competitive practices and unfair commercial use of any protected information. However, the protection accorded to undisclosed information under TRIPS is unlike the traditional intellectual properties. Article 39 of TRIPS defines undisclosed information as any information that:

• “is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
• has commercial value because it is secret; and
• has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”

Additionally, the protection accorded to the undisclosed information is not constrained by a specific duration but is rather considered to be in perpetuity. Any individual or legal entity has the capacity to be the proprietor of undisclosed information and is entitled to rights of “…preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices.”

Undisclosed Test Data & Disclosure for Public Good:

Paragraph 3 of Article 39 of the TRIPS Agreement pertaining to undisclosed test data puts an obligation on the countries that mandate organizations to submit undisclosed test data for the approval of new agricultural or pharmaceutical products. It states that such countries shall ensure the protection of the undisclosed test data from unfair commercial exploitation. Para 3 of this Article further lays down an exception, it states that disclosure of undisclosed test data shall not be considered misappropriation of trade secrets in cases where such disclosure is for the public good.

A reading of Article 39 showcases that concept of “disclosure for public good” does not arise in protection granted to undisclosed information unless such undisclosed information is a test data which utilizes new chemical entities in the pharmaceutical or agricultural industry. In contrast to traditional intellectual properties addressed within the TRIPS framework, undisclosed information does not entail a trade-off between grant of exclusive rights for a limited period and public disclosure.

Protection of Trade Secrets Globally:

In line with the minimum requirement laid down in TRIPS, globally, trade secrets are protected either through specific legislations like in Germany, China, South Korea, etc, or through equity or under common law. Pursuant to the TRIPS and discussions between member states, India, as a country, has always taken a strong stance against inclusion of trade secret under the ambit of intellectual property rights[2]. In India, trade secrets are protected by a spectrum of laws and common law practices including the Indian Contract Act, 1872; Specific Relief Act, 1963; Indian Penal Code, 1870 and the Information Technology Act, 2000.  

289^th Law Commission Report & The Protection of Trade Secrets Bill, 2024

Recently, the 22^nd Law Commission headed by Justice Ritu Raj Awasthi dealt with the concept of trade secrets and its implications in the current knowledge-based economy of countries. The Law Commission of India in its 289^th Report dated March 05, 2024, recommended that a special law should be devised to ensure protection of trade secrets in India.

This bill was proposed by the Law Commission with an intent of protecting trade secrets against misappropriation, to encourage innovation and competition. The bill draws upon Article 39 of the TRIPS Agreement and lays down a definition of trade secrets consistent with the definition outlined in TRIPS. A trade secrets holder is defined as a natural or legal person having lawful control on a trade secret. Further, a trade secrets holder under the proposed bill has the right to license the trade secret. The significant difference between the minimal requirement laid down in TRIPS and the proposed bill is that the proposed bill tries to bring trade secrets under the traditional concept of intellectual property.

Section 5 of the proposed bill lays down certain acts which do not amount to misappropriation of trade secrets. This includes disclosure of trade secret “in good faith to protect public interest”. Further, Section 6 lays down provisions for compulsory licensing, and grants the Central Government the right to mandate the holder of a trade secret to issue a compulsory license for its utilization by third parties or the Government.

Analysis of the Bill:

The proposed bill fails to address the potential ramifications of compulsory licensing of trade secrets on competitive markets within the knowledge economy. Further, identifying the scenarios warranting such compulsory licensing in case of trade secrets shall be challenging. Additionally, the bill includes a provision for instances where disclosure is deemed necessary for the “public good“. However, such a provision fails to differentiate between “undisclosed information” and “undisclosed test data“, since trade secrets in general business parlance typically involve proprietary commercial information which is unrelated to public welfare.

Taking into consideration the need for fair competition in a knowledge-based economy, the bill is a welcome change showcasing an effort to codify the trade secret law in India. It is noted that there is a necessity for a sui generis legislation governing trade secrets to acknowledge the commercial significance of safeguarding such proprietary information. Despite the gaps in the proposed bill, it stands out as the inaugural proposal codifying recourses in case of trade secret misappropriation. The bill encompasses provisions for confidentiality proceedings and, if enacted, will serve as an additional remedy for trade secret holders in India.

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[1] TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights (April 15, 1994).

[2] Law Commission of India, Trade Secrets and Economic Espionage, Report No. 289 (March 05, 2024), accessed at, https://lawcommissionofindia.nic.in/report_twentysecond/.