Trade Secrets

Trade secrets may be defined as any piece of information that is only known to the producers or manufacturers of a commodity that is usually maintained as a secret to gain a competitive advantage in the market. It have various forms such as a design,pattern,instrument,formula,method or a unique method only used by that particular producers.

With reference to intellectual property rights trade secrets can be defined as a rights on confidential information which may be solid or licenced.In india there exists no specific statutes or laws that grants protection of trade secrets rather it is dealt under the competition, contract and intellectual property laws. Unlike India countries such as U.S,Indonesia, Thailand have statutes that grants protection to the trade secret rights.In Japan the there are no specific provision for protection but rather a law that covers this aspect which makes trade secret rights violation as an unfair trade practices.

Arbitration

Arbitration under Indian law refers to a method of resolving disputes outside of traditional court litigation where parties agrees to solve or resolve there dispute by submitting there issues to an arbitrator or a group of arbitrators.In india arbitration is governed under the Arbitration and conciliation act 1996 and the decision reached through arbitration is final and is enforceable and appealable in the court. The disputes that can be settled in arbitration are the one that involves right in personem ie,only rights in personem can arbitrated and rights in rem cannot be arbitrated.

Arbitration Of Intellectual Property Disputes

Generally IPR rights was considered as a right in rem this can be further understood by analysing patents act ,trademarks act.So because of the underlying fact that the issues related to right in personem can only be arbitrated the dilemma arose whether the IPR disputes can be arbitrated or not. The statement or rule that only rights in personem can be arbitrated came from the decision of the case Booze Allen and Hamilton inc vs SBI Home Finance limited the above rule was still followed but after the decision of Vidya roila vs Durga trading corporation it yet again got decided that the disputes involving rights in rem can also be arbitrated if rights of the parties under a contract unless the statute creating those rights expressly or by necessary implication bars arbitration.

When taking on a global perspective it can be found out that hong kong and Singapore have statues the arbitration in issues related to intellectual property disputes and Arbitration amendment oridnance 2017 for hong kong and Intellectual property dispute resolution act 2019 for Singapore.These two acts facilitate the arbitration process of IPR disputes and facilitate them.

As said above IPR issues can be arbitrated if they are considered to be right in personem the case of trade secret is also somewhat similar ie,one of the main advantage and importance of choosing arbitration as the dispute resolving mechanism is to maintain confidentiality. Such an advantage of this over other methods attracts the parties in the dispute. The very term trade secrets gives out the meaning of something confidential which is to be protected from outside access in such case it can be said that disputes regarding trade secrets should only be solved in camera.

Such an facility already exists in arbitration proceedings. Adding to this trade secrets can also be interpreted as a right in personem for instance the famous protected trade secret ie,coca colas recipe if got leaked by one party the claim for damages and the claim for compensation can be arbitrated and decided.One of the main advantage that can be obtained when using the arbitration method is the further leakage and proceedings will be in private and hence trade secret disputes can also be arbitrated.

TRIPS Agreement On Trade Secret Protection

The TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights) sets minimum standards for intellectual property protection, including trade secrets. Article 39 of the TRIPS Agreement addresses trade secrets, stating:

1. Members shall protect undisclosed information, such as trade secrets, that is commercially valuable and has been kept secret.
2. Members shall ensure that persons having access to such information shall not disclose it without consent, except in limited circumstances (e.g., to protect public health or safety).
3. Members shall provide legal remedies for unauthorized disclosure or use of trade secrets.

The TRIPS Agreement does not explicitly define trade secrets, but it provides a framework for countries to establish their own trade secret laws and regulations. The agreement aims to balance the need to protect trade secrets with the need to promote innovation, public health, and safety.

In framing trade secret law, the TRIPS Agreement suggests that countries should consider the following:

1. Define trade secrets broadly to include undisclosed information with commercial value.
2. Establish legal protections against unauthorized disclosure or use.
3. Provide remedies for trade secret misappropriation, such as injunctions, damages, and criminal penalties.
4. Ensure that trade secret protection does not impede legitimate competition or public access to information.
5. Consider exceptions for public health, safety, or other overriding public interests.

By setting these minimum standards, the TRIPS Agreement encourages countries to establish a consistent and predictable legal framework for trade secret protection, facilitating international trade and innovation while protecting confidential business information:

• Uniform Trade Secrets Act
• Defend Trade Secrets Act
• Economic Espionage Act

Uniform trade secrets act and defend trade secrets act and economic espionage act are the statutes that govern the trade secret protection in the united states.Unifrom trade secrets act passed by uniform law commission in us focuses on unifying trade secrets protecting laws across the states.This was needed for to the companies and businesses operating in more than one state.

Under Uniform trade secrets act trade secrets are defined as:
Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use
2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy

The Defend trade Secrets act is a united states federal law that provides American companies with a federal cause of action to protect against trade secret misappropriation in federal court.

According to Defend trade secrets act trade secrets are defined as:
All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing."

In order to grant or get protection under these two laws there are some essentials aspects ie:

• Secrecy: They should have secrecy in maintaining and should not be given access to public.
• Commercial value: They should have a commercial significance and should contribute to the competitive advantage of the business.
• Reasonable efforts to maintain secrecy: The holders of the trade secret must give or put in good efforts to maintain their secrecy.
• Misappropriation: Misappropriation should happen in these.

So unlike India, the U.S. has two separate statutes that govern trade secret protection in the country till to the date they have been functioning efficiently. Some of the verdicts that came as landmark ones are described under:

• Versata Software Inc. v. Ford Motor Co., No. 2:15-cv-10628 (E.D. Mich. Oct. 26, 2022), in which the jury awarded Versata Software $105 million for its breach of contract and misappropriation of trade secrets claims against Ford Motor Co. on the theory that Ford had misappropriated software developed by Versata utilized in managing how Ford vehicles are assembled.

In another sky high verdicts case it was held that misappropriation of trade secrets of a former employee of a software company was held liable and was held for compensation.

The above defined explains defend trade secrets act and uniform trade secrets act.In the united states arbitrating trade secret disputes are preferred over other forms is because of the fact that IPR rights may be the ancillary form to many of the agreements and Trade secret disputes ie, TCT disputes can be among various combination of parties such as a company or individual or a company or between any other parties and the underlying reason for choosing arbitration as the procedure for dispute resolution is that if the licence agreements or contracts involve cross border commerce and activities arbitration is the most effective form because it can provide a neutral forum and it is enforceable under New York convention.

In the United States one another statute that deals with trade secret is, the Economic Espionage Act (EEA) addresses trade secret theft. It outlaws two forms of trade secret theft:

Economic Espionage: This involves theft for the benefit of a foreign entity. Offenders face imprisonment for up to 15 years and fines of up to $5 million or twice the loss or gain associated with the offense.

Theft of Trade Secrets: This refers to theft for pecuniary gain. Individual offenders can be imprisoned for up to 10 years and fined up to $250,000 or twice the loss or gain associated with the offense.

The EEA makes the theft or misappropriation of a trade secret a federal crime. It focuses on commercial information rather than classified or national defense information. The Act defines "economic espionage" as the theft or misappropriation of trade secrets with the intent or knowledge that the offense will benefit any foreign government, foreign instrumentality, or foreign agent.

One important cases that happened in U.S was IBM VS APPLE In 2008, Mark D. Papermaster, an executive at IBM, accepted a position at Apple. IBM filed for a restraining order to prevent him from working at Apple, citing concerns about trade secret misappropriation. The court granted the restraining order, emphasizing the importance of protecting trade secrets in the tech industry. Ultimately, the case highlighted the tension between employee mobility and safeguarding intellectual property.

One another important case that came up was GOOGLE VS UBER.

In the autonomous vehicle industry, Anthony Levandowski, an early pioneer, left Google and started his own company called Otto. Uber quickly acquired Otto in 2016. However, this acquisition led to a trade secrets theft lawsuit between Waymo (Google's former self-driving project) and Uber. Waymo accused Uber of stealing and using trade secrets related to Lidar technology, which is crucial for autonomous cars to understand their surroundings.

The legal drama spanned several years, with twists and turns. Ultimately, Uber reached a settlement agreement with Google. Under this agreement:

• Uber paid Google a "substantial portion" of the $179 million awarded in arbitration in 2019.
• Levandowski, who faced financial ruin, received $2 million from Uber.
• The settlement avoided a potentially embarrassing trial for Uber and marked the beginning of the end for Levandowski's bankruptcy proceedings.
• Levandowski had previously pleaded guilty to a single count of trade secret theft from Google and was pardoned by then-President Trump in January 2021.

In summary, the dispute between IBM and Apple over Mark Papermaster and GOOGLE VS UBER highlighted the complexities of trade secret disputes and the challenges faced when high-level employees switch companies which may cause troubles in trade secret related issues.

Europian Union Directive (2016/943)

The EU Trade Secrets Directive (Directive (EU) 2016/943) aims to protect undisclosed know-how and business information (commonly known as trade secrets) against their unlawful acquisition, use, and disclosure within the European Union (EU). It covers a wide range of information beyond technological knowledge, including commercial data like customer and supplier details, business plans, and market research. All businesses, regardless of size, benefit from trade secret protection. The directive establishes harmonized minimum standards across EU member states, with additional protection possible at the national level. Legal action related to trade secret misappropriation has a maximum limitation period of six years. Comparable civil action mechanisms are available across the EU to ensure consistent trade secret protection and enforcement.

Finlands Trade Secret Act

Abiding to the europian unions directive Finland formed a trade secret statute.Finland's Trade Secrets Act provides legal protection for confidential business information. It defines trade secrets as information not generally known, having economic value, and kept confidential. The act prohibits unlawful acquisition, use, and disclosure of trade secrets. Civil remedies include injunctions, compensation, and damages, with jurisdiction in District Courts and the Market Court.

Law No 30 Of 2000 (Indonesian Statute On Trade Secrets)

Under Indonesian law trade secrets are protected under the law no 30 of 2000 it addresses the protection of undisclosed information commonly known as trade secrets.According to law no 30 of 2000 trade secrets are defined as the information related to technology or business that is not publicly known and holds economic value for business activities.The rights to owners of trade secrets are conferred upon this law it allows the owners to grant protection under this law amd safe guard there information.

Unlike any other laws that govern trade secrets in other countries Indonesian law prescribes the scope of protection that is granted by it.Law no 30 of 2000 protects these aspects of trade secrets they are:

• Methods Of Production
• Methods Of Processing
• Methods Of Sale
• Other Economically Valuable Information

Law no 30 of 2000 protects all these aspects the secrets related to methods of production,processing and sale. In addition to that if any other secrets that hold economical value also falls under the law and will get protection.One such trade secret dispute case that arose out of Indonesia was PT Basuki vs Large construction company In this ongoing case, a European engineering firm, PT Basuki, filed a claim against a large construction company in Indonesia and several other parties. The dispute revolves around the misuse of PT Basuki's secret know-how in boiler construction.

Arbitration is not explicitly prescribed for trade secret disputes in Indonesian law, it can be a viable option. Balancing this with the possibility of criminal enforcement ensures a comprehensive approach to protecting trade secrets.

Trade Secrets B.E 2545 2002 (Thailand)

Trade secrets B.E 2545 2002 enacted on April 23 2002 grants protection on undisclosed trade secrets and protects them. The Act defines trade secrets as confidential information discovered, invented, compiled, or created by an individual without infringing someone else's trade rights.The act contains provision on protection of trade secrets,procedure for trade secret infringements,maintenance of trade secrets by state agencies,trade secret board and competent officer for the same.Unlike all other acts and statutes under Thailand a clause is explicitly given in the act ie,conciliation and mediation.It is given in the act that before taking any legal action under section 8 of the act parties may choose to opt for mediation and conciliation.

Both the parties involving in the trade secrets dispute can approach the trade secrets board and submit there case towards conciliation and mediation.Similar to arbitration proceedings if such a proceeding becomes fruitful they can proceed with the award but if not they can proceed with other legal remedies provided under the act.Such a clause in personal opinion is recommended in every statute wherever this trade secrets are protected because the mediation and conciliaton protects the very concept of trade secret.From avoiding the lengthy trials to speedy execution they are the best form of dispute resolution that exists.

Although Thailand have a specific act and cases are brought up for the same there are only 66 number of cases that came related to trade secret disputes out of this a large percentage cases was judged not in favour of the plaintiff because of the failure to establish the information was protected under secrecy.

For example, in Supreme Court Judgment 10217/2553, the Court determined that a general non-disclosure and non-compete clause inserted in an employment agreement was not an appropriate measure to maintain the secrecy of the trade information, and it consequently dismissed the plaintiff's claim. There are several other Supreme Court decisions in which plaintiffs' claims have been dismissed for a similar reason. In fact, it was not possible to prove which specific documents containing trade secrets where subject to confidentiality. To win a theft of trade secrets claim, you must show that the information stolen is (1) not publicly known, (2) has commercial value, and (3) that you took measures to keep it secret.

The Unfair Competition Prevention Act (Japan)

In Japan, trade secrets are safeguarded by the Unfair Competition Prevention Act (UCPA). This legislation aims to prevent unfair practices related to trade secrets and provides both civil and criminal remedies for cases where a company's confidential information is stolen or unlawfully disclosed. The UCPA defines the term "trade secret." It covers information that companies consider confidential and valuable for their business operations.

In simple words UCPA considers trade secrets rights violations and infringements as an unfair trade practices and they falls under the unfair competition prevention act and hence it is looked upon in Japan

In a recent case nippon steel vs pocso in Japan Nippon Steel, a Japanese company, filed a lawsuit against the Korean steel giant POSCO. The dispute centered around trade secrets, and Nippon Steel sought damages of 100 billion yen. The case highlighted the commitment of Japanese companies to protect their intellectual property rights within their home jurisdiction.

The Arbitration Act was amended in April 2023 to harmonize with the latest UNCITRAL Model Law.The Act on Special Measures concerning the Handling of Legal Services by Foreign Lawyers was amended in May 2020 to expand the scope of "international arbitration cases" that can be represented by registered foreign lawyers.In summary, Japan provides a favorable environment for both court litigation and arbitration in trade secret disputes. While court litigation is common, international arbitration offers advantages such as confidentiality and neutral arbitrators.

Indian Stance On Trade Secret Protection

India does not have a specific codified legislation for trade secret protection yet.It is protected by numerous disparate provisions of various statutes. It is basically dealt with common law remedies for breach of contract and breach of confidence. In some Indian statutes though not expressly mentioned trade secrets are mentioned impliedly.

Eg:

• Section 43 A of Information Technology Act provides compensation for wrongful use of personal information.
• Section 72 of Information Technology Act provides criminal liability for breach of confidentiality and trust.
• Indian Penal Code provides for violation of trust and code.

In order to get protection of trade secrets the owner of the same should make non disclosure agreements that protects it.The agreement may states for what purpose it is used and conditions that it is disclosed to a third party. From the above we can infer that trade secret protection is being made practical in india through a number of statutes but a specific legislation for the same is falling short.Like the statutes that are prevailing in other nations mentioned before india should meticulously vet a statute for the same.

When coming onto the remedies for trade secrets misappropriation the civil remedies includes injuctions and damages other civil remedies include orders granting return of trade secrets and delivery of materials.When coming onto the criminal remedies the remedies may be granted relating to the criminal breach of trust theft or cheating and such liabilities may be included or made. Although these remedies are available trade secrets are of confidential in nature.

The whole point of the concept trade secret is maintaining confidentiality and keeping it confidential.So for meeting out the above purpose other than civil and criminal remedies parties may opt for some ADR mechanisms.The edge that can be yielded from choosing the latter is that for instance Arbitration is one of the main used ADR mechanisms and it can be used for dispute settlement by maintaining secrecy and confidentiality.

India have various famous trade secret disputes and many disputes have invoked arbitration for settlements.

For Instance:

• Eicher Motors Ltd. v. Dhananjay Sharma (2019): Eicher Motors, the manufacturer of Royal Enfield motorcycles, invoked arbitration against a former employee who allegedly misused confidential information and trade secrets. The arbitrator ruled in favor of Eicher Motors, and the employee was ordered to return confidential documents and destroy any copies.
   
• Intas Pharmaceuticals Ltd. v. Alembic Pharmaceuticals Ltd. (2018): Intas Pharmaceuticals invoked arbitration against Alembic Pharmaceuticals, alleging misuse of trade secrets related to pharmaceutical manufacturing processes. The arbitrator ruled in favor of Intas Pharmaceuticals, and Alembic was ordered to cease use of the disputed processes.
   
• Cadila Healthcare Ltd. v. Gujarat Themis Pharmaceuticals Ltd. (2017): Cadila Healthcare invoked arbitration against Gujarat Themis Pharmaceuticals, alleging misuse of trade secrets related to pharmaceutical formulations. The arbitrator ruled in favor of Cadila Healthcare, and Gujarat Themis was ordered to destroy any confidential information in their possession.

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