IPR Newsletter – Understanding Protection of Trade Secrets Bill, 2024 : July 2024

Introduction:

The value of proprietary knowledge has skyrocketed due to technological advancements and global market integration. The safeguarding of intellectual property has become crucial in India, an economy that is expanding rapidly, as it not only promotes innovation but also helps the country maintain its competitive edge in global markets. By putting out a strong legislative framework devoted to trade secret protection, the Law Commission of India’s 289th report from March 2024 endorsed the “Protection of Trade Secrets Bill, 2024,” which holds the potential to drastically change India’s intellectual property environment. With respect to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in particular, this approach is a cooperative attempt to bring India’s intellectual property laws into line with international standards.

Past attempts to create distinct laws for trade secrets—such as the 2008 National Innovation Bill—have never been taken into legislative review. In its 289th report, the 22nd Law Commission recently advised the necessity of enacting a separate legislation on the matter and put out a draft Protection of Trade Secrets Bill, 2024 (the draft Bill). Some of the main ideas the draft Bill presents are highlighted in this article.

Key highlights of the Bill:

1. 1. Meaning and definition of the Trade Secrete:
      The draft Bill defines a trade secret as information that is not widely known or readily accessible to the relevant persons, i.e.,
      a) those who deal with the type of information in question;
      b) that derives commercial value as a result of its secrecy;
      c) that is safeguarded by the holder of the information through reasonable measures;
      d) that would likely result in harm to the holder if disclosed. This definition is intentionally broad and allows for judicial interpretation, ensuring that emerging industries and aspects of the law are also included.
   2. Confidentiality protection:
      During the course of judicial procedures, the bill ensures that trade secrets are kept confidential, thereby protecting them from potential further publication without authorization and safeguarding the interests of the individuals who own them.

   3. Acquiring, using, and disclosing trade secrets legally:
      The draft Bill provides an extensive enumeration of the authorized methods by which a trade secret can be acquired:
      a) Information acquired by autonomous exploration or innovation;
      b) Data obtained by the act of observing, studying, reverse engineering, disassembling, or testing a publicly available product or object, or data that is lawfully possessed by the acquirer who is not obligated to restrict such acquisition;
      c) By employing any other methods that adhere to ethical business standards; or
      d) In accordance with a legal requirement, contractual agreement, or as authorized by law.

   4. Whistle-blower Protection and Public Interest Exception
      The Bill includes protections for people who blow the whistle on illegal activities. This means that people who reveal trade secrets to bring them to the attention of others are not punished. It is very important for companies and industries to keep up ethical standards. There are also times when the Bill says that a trade secret needs to be made public for the public benefit. If this happens, trade secrets aren’t always kept secret. In these situations, they can be shared if they greatly help the public or are necessary for public safety.

   5. Compulsory licensing:
      The draft Bill includes provisions for mandatory licensing, which allows the central government to require the sharing of trade secrets with third parties or the government in certain situations such as national emergencies, urgent matters of significant public interest, health emergencies, national security, etc. This is analogous to the stipulation found in Section 100 of the Indian Patents Act, 1970.

   6. Rights and Responsibilities of Holders
      The proposed Protection of Trade Secrets Bill, 2024 delineates explicit entitlements and obligations for individuals or entities possessing trade secrets, guaranteeing them legal support to safeguard and administer their intellectual property with efficacy. Having clear and precise guidelines is essential for firms to function inside a legally protected structure, which in turn promotes the growth and preservation of new ideas and advancements. 

Holders’ Rights:

The Bill specifically confers numerous rights upon the individuals who possess trade secrets; 

• Usage and Disclosure:
  Holders have the right to utilize their confidential information in any way they see fit, such as for manufacturing procedures, business tactics, or technology applications. In addition, they have the ability to reveal confidential information to individuals such as workers, partners, or other parties for the purpose of conducting business, while adhering to confidentiality agreements,
• Licensing and Commercialization:
  Trade secret holders have the authority to provide licenses to third parties, enabling them to generate income while keeping the information confidential and safeguarding its protected status.

• Legal Recourse for Misappropriation:
  Holders have the right to begin legal action against individuals who unlawfully acquire and use their trade secrets. This right is essential for upholding the safeguards for trade secrets and acts as a deterrent against illegal utilization or disclosure.

Duties of the Holders:

In order to preserve the safeguarded nature of a trade secret, holders must satisfy specific obligations

• Secrecy steps:
  The individual must provide evidence of employing appropriate steps to maintain the confidentiality of the information. This may entail implementing physical security
  measures, implementing digital cybersecurity standards, or establishing strict business agreements that include confidentiality clauses.

• Legal Compliance:
  Holders must ensure that their utilization of confidential information adheres to all applicable laws, such as labor regulations and contract laws, in order to prevent any legal conflicts that may result in unintended exposure. 

Misappropriation of Trade Secret:

1. Misappropriation encompasses the act of obtaining trade secrets without the owner’s permission by unlawful access, appropriation, or copying of materials, or engaging in behavior that goes against fair and ethical business practices.
2. Unauthorized utilization or divulgence of proprietary information by obtaining it unlawfully, through a violation of a confidentiality agreement, a breach of contract, or any other legal obligation.
3. The act of obtaining, utilizing, or revealing a trade secret by an individual who knew or should have known that the information was obtained through an illegal disclosure made by someone else. 

Exceptions to misappropriation are enumerated, including the revelation of trade secrets for the purpose of revealing an illegal act or professional wrongdoing, such as safeguarding whistleblowers or acting in good faith to safeguard public interests.

Remedies for the Misappropriation of Trade Secrets:

A lawsuit alleging misappropriation can be initiated by commercial courts that possess the authority to handle such cases. Possible remedies for trade secret misappropriation encompass a range of options, such as injunctions, damages, or accounts of profits. Additional remedies may involve orders for surrender and/or destruction of trade secret materials, recall or permanent removal of goods derived from misappropriated trade secrets, or the imposition of costs. The proposed legislation also mandates that courts uphold confidentiality in cases related to proprietary information.

Conclusion:

The Law Commission’s Report reveals a substantial shift in India’s image as an innovation and economic hub, based on TRIPS and stakeholder inputs. Formalizing trade secret protection regulations would ease foreign investors’ concerns about India’s weak business secrets and sensitive information protection. Overall, India’s intellectual property system is enhanced in the Protection of Trade Secrets Bill, 2024 draft. A legislative framework protecting trade secrets is proposed to create a safe and dynamic corporate environment. Domestic and global stakeholders will feel secure knowing their intellectual property is protected. The Bill not only tackles the existing deficiencies in safeguarding but also establishes India as a frontrunner in the realm of intellectual property rights protection in Asia. Although the specific effects of the Bill will rely on how it is put into action and how the courts interpret it, it unquestionably establishes a solid basis for safeguarding trade secrets in India, fostering a business environment that is more conducive to innovation. As the Bill advances through parliamentary procedures, stakeholders from all sectors of the economy will closely monitor its improvement and eventual implementation.