This is a case on trade secret / confidential information. The Indian jurisprudence on trade secret law is still at a nascent stage. While discussing this case, I am limiting the scope to the issue of protection of trade secret / confidential information only.
This is a commercial appeal filed under Section 13 (1A) of the Commercial Courts Act read with relevant provisions of CPC. The Appellant had earlier unsuccessfully pleaded for an interim injunction at the Court of Additional City Civil and Sessions Judge (which is the Court of First Instance).
The Appellant is a tech-company. It developed a pioneering technology on the process of extrusion (which can be used in the manufacture of ‘Horlicks’). It claimed that the relevant information pertaining to this technology is made available on a ‘need to know’ basis. Its contentions are two-pronged (paragraph 3):
- The Appellant’s test results and data bases are protected under Section 2(o) of the Copyright Act, 1957. The Respondent infringed the Appellant’s copyright.
- The Appellant entered into a Master Services Agreement for technology transfer. This entailed transfer of Confidential Information. The Appellant alleged that the patent applications filed by the first and second Respondents described ‘experiments conducted at the plaintiff’s premises’ and ‘the appellant was shocked to find that the impugned patented application incorporates the appellant’s intellectual property and confidential information’. Therefore, the filing of patent application amounted to infringement of appellant’s rights in ‘its proprietary information and intellectual property’ (para 5).
The Appellant sought permanent injunction to restrain the Respondents and sister concerns from ‘infringing the rights of the appellant in its intellectual property or confidential information in any manner including by asserting, enforcing any rights in the International Patent Application No……’ (para 6).
The Respondent refuted the claims citing various grounds; some of which are beyond the scope of this post. One of the main contentions was that the Respondent was the lawful owner of IPR vide the Master Services Agreement. Also, the Appellant should have exhausted the alternate remedy of filing pre-grant opposition under Section 25 of the Indian Patents Act, 1970 before filing the instant commercial suit (para 8).
The Trial Judge had earlier agreed with the contentions of the Respondent by inter alia holding that the Appellant does not enjoy proprietary rights over the concerned Confidential Information (vide the Master Services Agreement).
The Appellant claimed that its test results and databases are protected under Section 2(o) of the Copyright Act, 1957. The basic allegation is that the patent application filed by some of the Respondents contained ‘appellant’s intellectual property and confidential information. The appellant has quoted what is stated in the patent application and the key claims made in the patent application…( ) Thus the case of the Appellant is that the acts of 1st to 3rd Respondents of using, storing and reproducing the test results of the Appellant amounts to infringement of its copyright. Secondly, the confidential information that is proprietary to the plaintiff is reproduced in the impugned patent application’ (para 22).
The Court noted that the Appellant had not produced before the Trial Court the original work (proprietary test databases and test results) in respect of which copyright is claimed. Only a redacted version of alleged original work was produced. This attracted adverse inference (para 23).
As on confidential information, the Court was not prima facie convinced as to whether the respective information fell under the clause of confidential information. The Court held that the ‘Appellant was required to clearly identify the information relied upon by it and establish that, prima facie, the said information is of a confidential nature’ (para 30).
The Court also took note of the delay on the part of the Appellant in filing the suit (when a discretionary equitable remedy is claimed). The High Court also noted that the scope of interference of an Appellate Court ‘against an order refusing to grant discretionary and equitable relief of temporary injunction is limited’ (para 32).
I do not think that the Copyright Law will help the Appellant. Copyright Law protects expression and not the information / contents. As far as protection of database is concerned, the Copyright Law protects arrangement, presentation, selection etc of the database.
The EU Directive on Databases (96/9) offers copyright and sui generis protection for databases. While Copyright Law protects selection or arrangement of contents which constitutes author’s own intellectual creation, sui generis right protects the contents of the database (Arts 3 and 7). India doesn’t offer a sui generis protection for databases (unlike the European Union). Indian Copyright Law can only be invoked as far as expression is concerned (and definitely not with regard to the contents of the database). This doesn’t help the case of the Appellant.
On protection of confidential information, the Appellant may have a case. It is an issue involving law and facts. Confidential information, otherwise known as trade secret, is an area of law which is not explored much in India. Art 39 of the TRIPS, the relevant article, provides as follows:
- Natural and legal persons shall have the possibility 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 so long as such information: (a) 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; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
(Principles of Unfair Competition Law should be read along with trade secrets (Art 39.1 of TRIPS). India, unfortunately, doesn’t have a robust legal framework on ‘Unfair Competition’ (which is not Competition Law / Antitrust Law). We, however, do have principles of tort law and equity which deal with unfair competition. But this area of law has not received the deserved attention.)
Trade secrets is a mixed bag. It has its pros and cons. As to appreciate the finer aspects associated with trade secrets Law, consider the following: In case of patents, the patentee enjoys exclusivity. That is not the case with trade secrets. Secrecy and exclusivity associated with trade secrets law are factual aspects (and not necessarily legally warranted). The protection offered by trade secrets law is available only against wrongful appropriation. Since facts play a major role in adjudication, cases involving trade secrets may end up as ‘hard cases’.
Broadly speaking, trade secrets can be protected in two ways (other than Common Law principles): statutory trade secret protection and contractual trade secret protection. Statutory trade secret protection may generally be retrospective in nature i.e addressing a violation which has already happened. On the other hand, contractual trade secret protection is generally prospective in nature i.e to preclude violation. Considering that India doesn’t have a robust statutory framework for protection of trade secrets, the importance of contractual trade secret protection cannot be overemphasized.
Any case involving trade secrets, like the instant one, generally involves three issues:
- Is the information a trade secret?
- Has the information been misappropriated?
- What are the remedies?
The instant Karnataka High Court judgment doesn’t deliberate upon the above-mentioned three aspects. Plausibly, they were not raised before the Court. It may be the case that the Appellant relied too much on Copyright Law (which is conceptually incongruent and therefore, unhelpful).
I shall later discuss the above-mentioned three aspects from a comparative law perspective (US and EU). These jurisdictions are far more advanced on trade secrets law. As principles of equity, they can be brought to the attention of the Court for better appreciation of trade secrets law. [For EU position, click here.]