a.

Justice Singh explained that traditionally our courts have exhibited a

socialist tilt in such matters, often allowing the setting-up of competing

industries, letting employees grow and coming down heavily on restrictive
or negative covenants, allowing their operation only during employment
and not post-termination etc. This was on account of the prevailing
situation in our country at that point in time wherein competition was
required and rights of employees needed more protection. However, over
the past 5-6 years, there has been a change in perspective and the courts
seem to be reorienting themselves. Slowly, the courts are becoming more

liberal towards employers as well, especially in light of the economic and

industriat progress. In cases of trade secrets involving employees, the
courts are able to appreciate that employers invest a lot in ensuring the
acquisition and development of skills by their employees especially in
certain sectors where intensive training is required.
b. On the question of whether we require a law on the subject matter, Justice
Singh highlighted that in the current economic scenario we have big
innovations happening, especially within the Artificial Inteltigence (AI),
technotogy and start-up ecosystem. Data is very vital to all these industries
and one leak of any sensitive information can have a crippling impact on

the progress of an entity, especially if it is a start-up. Even with big

companies, a substantial capital is invested in research and most ofthe data

that they seek to protect is at the research stage thus incapable of being
protected under the system ofpatents and copyright, which may not afford
adequate protection against the misappropriation ofsuch data. Loss ofsuch

data has serious economic imptications for such companies. Hence. a law
on trade secrets is required.

c. Justice Singh also highlighted that an increasing number of cases

pertaining to trade secrets were being filed before the Delhi IP Division
and out ofevery 20 cases, 3 to 4 cases were related to trade secrets.

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d. It was further highlighted that confidential information usually
complements and co-exists with other fonns of IP such as patents and how
a dubious protection over trade secrets could come in the way of
technology transfer especially in vital sectors such as pharmaceutical
where a patent may not have been filed in India and the information is
being protected as a trade secret. A law on this subject would serve three
purposes - firstly, it would give clarity to companies and enable them to
better protect their confidential information; secondly, it will increase

industry confidence and enable technology transfer to India; and thirdly,

absence of a clear law on trade secret often comes up as an issue during

negotiation of free trade agreements.

e. On the question ofwhat shape the law should take, Justice Singh expressed

that we should enact a law after assessing the needs ofour own economy
and suited to our own needs. Further, such a law may actually encourage
disclosurein the sense that the companies will have more faith and
assurance while sharing information which will bring in greater
cooperation and collaboration as a matter of principle. A law will also aid

the courts in determining the issue better.

f. In respect to the question whether trade secrets must be treated as
"properfy", it was expressed that it is definitely an "intangible asset" and
is nothing but a database in a larger fom.
g. On the question of registration, it was stated that registration of trade
secrets should not be mandated as it may prove to be counter-intuitive.
Certain issues such as jurisdiction were also discussed, Justice Singh was
of the opinion that suits relating to trade secrets must fall within the scope
of "commercial disputes" within the Commercial Courts Act, 201 5

irrespective of pecuniary jurisdiction given the inherent nature of trade

secrets. Further, while "trade secrets" or "confidential information" do not

find a specific mention under Section 2(1)(c)(xvii) but it has been held by
142
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 the Delhi High Court that these fall within the purview of "commercial
disputes". Thus, jurisdiction must lie with district courts and above.
h Another important aspect which was brought to the Commission's
attention was that of "confidentiality clubs" as has also been incorporated
in Rule l9 of the Delhi High Court Intellectual Property Rights Division
Rules,2022. Given that a lot of confidential information is involved in such
suits, it would be prudent to have such a provision in order to maintain the
integrity and secrecy of the information disclosed before the coun'
On the question of adopting criminal remedies, it was stated that the same
need not be incorporated as provisions pertaining to theft etc. covered
under the IPC would suffice. However, it was agreed that sensitive national

data, defence, atomic energy and like sectors are an exception and higher

penal consequences may be warranted in respect of these. Thus, criminal

sanctions for these may be provided making these cognizable with
punishabte up to seven years of imprisonment' So, there can be one law for

trade secrets and espionage with criminal sanctions being provided for
espionage where the State is involved.

.l Some procedural issues were also discussed and it was expressed that when

it comes to inspection ofelectronic data, given the technical nature ofsuch

a task, an independent body such as Local Commissioners may be

appointed which would be driven by the court. Order XXVI of the Code of
Civil Procedure, 1908 may be utilised for the same. It must also be ensured
that there is stringent discovery and preservation ofevidence in compliance

with Order XI of the Code of Civil Procedure'

B. AcadenricPersPeclive

7 .3. The Commission also sought the views of Prof. (Dr.) N. S,

Gopalakrishnan who has been the T{RD Chair on tPR at Cochin

143
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 University of Science & Technology, Cochin, Kerala. He has also worked
in association with the Covemment of India contributing towards policy
making at the National and Intemational level. Prof. (Dr.) N. S.

Gopalakrishnan was accompanied by Dr. Naveen Gopal who was earlier

a Ph.D. candidate under him and had conducted an empirical study on trade
secrets in the SMEs and Ayurveda industries in Kerala (2016-2023) as part

of his doctoral thesis. The interaction has been summarised below:

a. The two invitees contextualised the entire issue in light of the post-TRIPS
Agreement scenario. After signing the TRIPS Agreement, India amended
all its existing lP laws, especially the Patents Act, 1970 and even

introduced certain new ones. While doing so, we kept our national
concerns central such as protecting our generic pharmaceutical industry.
However, there has been a persistent demand from the foreign pharma
industry such as protection of trade secrets, data exclusivity and

introduction of utility model. The invitees drew the attention of the

Commission on various efforts made by the govemment on the issues of

protecting trade secrets. The Department of Industrial Policy and

Promotion (DIPP) formed a committee referred to as the "IPR Think Tank"

to formulate a National IPR Policy which also dealt with the question of
enacting a legislation on trade secrets. Further, in 2021 the Parliamentary
Standing Committee on Commerce had suggested enactment of a specific
legislation in its Report. Further, the need for such a law also arises from
the pressure exerted by our trading partners, especially during the

negotiation of Free Trade Agreements as well as the consistent mention of

lack of adequate protection of trade secrets in India highlighted in the
USTR Special 301 Report.
b. Accordir-rg to Prof. Gopalakrishnan there are three n-raj or concems when it

comes to protecting trade secrets. Firstly, trade secrets are not in tune with

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 the basic objective of IP information dissemination. Secondly, IP rights
are a quid-pro quo for disclosure of information and this is absolutely
absent in case oftrade secrets. Thirdly, IP rights are limited properly rights,

however, trade secrets persist in perpetuity so long as secrecy is

maintained. Further, it is generally assumed that stronger trade secret laws
are detrimental to the society as they adversely affect technological
advancements and undermining the objectives of other IP rights. 'the
TRIPS Agreement itself promotes information dissemination and also
protects secrets. Hence, we must adopt a balanced approach.
c. It was pointed out that from a conceptual point of view, no single theory of
IPR justified protection of trade secrets. Further, there was lack of
empirical evidence on the economic implication of a separate legislation
or that it would in fact incentivise innovation. Furthermore, the TNPS
Agreement did not mandate a separate legislation' It was also highlighted
that two approaches are available, one being the legislative approach
adopted by the US which was more in favour of the trade secret holder and

the other being the common law approach as adopted in the UK which was

more flexible and sought to maintain a balance. It was expressed that if we

look at the Indian experience, we can see through the case laws that there
has been a balanced approach.

d. Dr. Gopal atso highlighted that his empirical study in fact indicated that
the existing provisions remain underutilised and there is as such no demand

of a separate legislation from the Ayurveda and Micro, Small & Medium
Enterprises ("MSME") industries in Kerala. The key aspect that needs to
be borne in rnind whether we choose to enact a separate legislation or
continue the curent practice is that various interests need to be balanced.
There are three interests at play - first, that of the holder of infotmation or

the industry who are mostly concemed with maximum protection and
prevention of misappropriation; second is that of employees who are
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 mostly concemed with freedom to use the skills acquired during
employment and desire no restrictions post-employment or on self-
employment; third is that of competing industries who are concerned with
protecting independent innovation and reverse engineering. Thus,
misappropriation ought to be prevented without affecting the interest ofthe
employees and competing industries.

e. Further, under Article 39(l) & (2), the protection is against "unfair
competition". Treating trade secret as a "property" is in itself contentious
as there is no conclusive theoretical justification to treat it as property.

While the US treats it as property. many common law jurisdictions

including the UK treat it as "quasi-property" and under unfair trade
competition. India was opposed to the inclusion of trade secrets during the
TRIPS agreement negotiations and specifically stated that it is not a form
of property. White the TRIPS Agreement treats it as an IP, unlike other
forms of IP there is no exclusive right over it. While protecting such
information the balancing of interest calls for maintaining a robust public
domain as well as fair contractual terms. Articte 39 provides enough
flexibility to members to decide on allowing independent innovation,
reverse engineering and post-employment restraints. Further, the general

obligation under the TRIPS Agreement is to mandatorily provide civil

remedies and criminal remedies are optional.

f. In order to highlight the practices of Indian Industry, Dr. Gopal explained

his study and its findings. With respect to the MSME sector, his Study
revealed that patenting activity had been weak, hence strong secrecy had
been maintained with respect to information, new processes and products.
The measures adopted to safeguard trade secrets included confining
disclosure to a very few employees and segmenting production-related
processes among employees so as to prevent disclosure of knowledge in

its entirety. Most MSMES gave oral instructions with regard to

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confidentiality of information and very few have written NDAs in place.
The Study revealed that in most sectors, departing employees had set-up
competing businesses while utilising such confidential information,
however, no legal measures against misappropriation were instituted in
such cases mainly due to absence of any rnarket failure for the employers

as a result. Further, these entities had come up with altemative measures to

overcome competition including changing designs according to customer
requirements, quality assurance, timely supply, pricing, reliance on other
IPs like trademark and designs etc. Further, the difficulty in reverse
engineering faced by the competitors had also helped secure a strong place
for their products in the market. With respect to the Ay'r-rrveda industry, the
Study revealed that most companies own proprietary medicines which
contain secret information and such blockbuster drugs provide a

competitive edge. Further, all information with respect to such medicines

is not disclosed to the drug authority. While true ingredients of the

medicine are required to be displayed on the label, an element of secret

remains by not disclosing the exact manner of mixing components or the
exact ratio of components in the composition. Confidentiality measures
employed included oral contracts/instructions; Coding and pre-mixing of
raw materials; and confining the knowledge of confidential information to
very few employees. As with MSMEs, departing employees had taken
confidential information and started competing business and no measures
against such misappropriation were taken. Reverse engineering was
difficult in this industry and measures taken to overcome competition
include reliance on other IPs, in specific trademark, efficacy ofproduct and
quality of raw materials and preparation and standardization of products.
Reliance on current trade secrets mechanisms was very low both due to
lack ofawareness and the difference in the cultural settings as compared to
the west. No market failure was observed and the need for a law was found

t47
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 to be absent. There was not a single case where legal measures were

initiated against such misappropriation. This went on to confirm that

companies will innovate and maintain secrecy irrespective of whether there
exists a trade secret law or not.

While the Indian courts have granted protection to a wide range of subject
matter, common knowledge has been clearly excluded from the purv'iew of
protection. Further, a wider interpretation has been given to public domain
and unreasonable restraints especially post-employment have been struck
down. The courls have also adopted procedural safeguards such as

confidentiality clubs.
h The shortcomings of the previous attempt on a specific law, the National
Innovation Bill 2008, were also highlighted. The Bill adopted several
provisions from the US law and was quite stringent. Further, some
provisions of the Bill were in conflict with the Indian case laws and the

Indian Contract Act, 1872. Further, there were no safeguards within the
Bill and certain provisions were highly likely to lead to arbitrariness. Some

shortcomings of the law in the US were also highlighted such as wide

interpretation of protected subject matter leads to shirking of public

domain and post-employment restraints affect employee mobility. Further,

the Federal Trade Commission (FTC) was considering a ban on non-
compete agreements.

It was highlighted that a separate legislation may shift the balance in favour

of a holder in contrast with the present situation wherein it is delicately

balanced by the courts. lt may funher shrink the public domain, restrict
employee mobility, stringent criminal remedies may impact independent
creation, may undermine Patent Act and the ultimate beneficiary may be
big industries rather than MSMEs. Thus, if it is decided to opt for a
legislation, then it must follow the principle of unfair competition rather
than a property approach. Further, as under the TRIPS Agreement. rather

t48
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 than defining trade secrets, only the qualifying criteria must be specified in

order to retain the flexibility. Common knowledge must be expressly

protected along with employee mobility, reverse engineering and
independent innovation. There must also be an express provision for
compulsory licenses in certain cases, akin to that under the patent law.
furthermore, the law must be restricted to civil remedies and not criminal
ones for which the existing provisions under IPC may suffice. Largely, the

common law principles must be retained and legislated.

7.4. The Commission also met with Dr. Arul George Scaria to seek his views
on legislating a separate Iaw on trade secrets. Dr. Scaria expressed the
following views:

a It was stated that it is difficult to justify trade secrets under any single

theory of intellectual property protection. There are two approaches to

trade secrets that we find across jurisdictions over the world. It is either
premised on unfair competition or it is treated as a "property". Under the
principles of unfair competition, it is fairness and honesty in the market
that one seeks to uphold. Further, the economic arguments justifying
protection of trade secrets is that it prevents free riding and enables

information sharing with employees and third parties.

b It is difficult to conceptualise trade secret as an IP since no information

dissemination takes place and the traditional quid pro qrlo of disclosure is
completely absent in the case of trade secrets.
c In India, there is no specific law on trade secrets and protection is afforded
by courts based on principles of equiry, common-law action of breach of
confidence and contractual law. There are also certain criminal remedies
under IPC and the Information Technology Act that also exist.

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d In India the courts have taken a fairly inclusive or liberal approach and a

variety of information including formulae, manufacturing processes,

technical details/drawings, MoUs/joint-venture agreement, due diligence
reports, concept, manuals etc. has been protected within the ambit of trade

secret. The broad category of cases pertaining to trade secrets relate to

employer-employee disputes govemed by contracts, breach of confidence,
actions against joumalists, and criminal actions. With regard to employer-
employee disputes, Section 27 of the Contract Act, 1872 becomes relevant.

It has been observed that courts usually do not view restrictive covenants

in employment especially post termination of employment in a very

favourable light and are inclined to strike down the same. However, High
Codrts have diverging approaches when it comes to trade secrets and
employment. In respect of breach of confidence, it is covered both under
the law of contract and in the absence of a contract, an implied duty of
confidence between the parties would give rise to an action. The courts in
India have in general followed the principle laid down in Saltman
Engineeringv. Campbell Engineering [(1948) 65 RPC 203] to read breach
of confidentiality even where there is no contract. When it comes to the
criminal law that would apply to misappropriation of confidential
information, Sections 403,405,408, 418, 420 and 381 ofthe IPC become
relevant. In addition to this Sections 66,72 and 72A of the Information
Technology Act are also relevant. Hence, there is a wide variety of civil as

well as criminal remedies available under the law to deal with any

misappropriation of trade secrets.

C It was highlighted that there have been previous attempts to legislate upon
this subject matter, The National Innovation Bill, 2008 was one such

attempt though it failed to be introduced in the Parliament. The National

Innovation Bill rvas not exclusive to trade secret protection and dealt with
the larger issue of innovation, research and development.

t50
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f Certain observations can be drawn from the Indian experience on trade
secrets so far. If we analyse the case laws, it shows that a balanced
approach has been taken by the courts in India so far in consonance with

the historical position taken by India on trade secret protection at

intemational fora. While there may be a demand for a separate law,

however, there is hardly any empirical data to illustrate inadequacies of the
current legal regime. Hence, before opting for legislation, broader

consultations with experts and stakeholders is required.

Dr. Scaria also expressed that should we choose to go for a specific
legislation on trade secrets, there are ceftain aspects that must be bome in
mind. For instance, we must avoid pressure from trade partners and craft
our own path based on judicial precedents and by carefully balancing all
interests. Further certain flexibility is in law such as the very definition of
trade secrets must be retained so as to permit evolution of law and have
certain measure ofjudicial discretion in order to cater to the unique needs
of each parlicular case that may come up before the courts. Further
employee mobility is an issue that must be addressed and the spirit of
Section 27 of the Indian Contract Act must not be undermined by
unreasonably restricting employee mobility. Furthermore, protection of
competition and free speech should also be allowed. Equally important is
ensuring ceftain procedural safeguards for so as to
defendants
disincentivise frivolous suits. Perhaps the most crucial aspect to be
considered is that exceptions as central to the framework of trade secrets
at present. Hence, any law that is made on the subject matter must provide

for broad exceptions such as reverse engineering, independent creation,

whistle-blower protection etc. Given the recent global experience of
COVID, we must also consider introducing provisions akin to compulsory
licensing under the Act to address situations such as national or health
emergencies that may arise. Lastly, such a law must limit itself to civil
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 remedies and must not introduce criminal remedies. The criminal remedies

as available under the current scheme of IPC and the Information

Technology Act can be utilised in situations where such a remedy may be
waranted, however, the trade secret legislation must only restrict itself to
civil remedies.

7.5. The Commission also invited Dr. Tania Sebastian to express her views
before the Commission. Dr. Sebastian expressed the following views:

a. Dr. Sebastian stated that it is difficult to find any empirical study on the
adequacy of trade secret law in the Indian context. There is reluctance on

part of secret holders in opening up on the subject. Hence, she focused her
study on litigation trends in India and analysed the existing case law
focu5ing on categories, types and outcomes.
b. Trade secrets are present in almost all industries, for instance the criteria
for the New York Times Bestseller list are a secret. Even when it comes to
movie scripts, there is a lot of secrecy in order to protect the unique
expression of even a generic storyline. Trade secrets cover expansive
subject matters and all would fall within the framework of the TRIPS
Agreement as there is great flexibility under intemational law. Broadly,
there are two categories of knowledge - explicit and tacit. While the former

will be protected, the later may not. E-mails, documents etc. fall within the

category of explicit knowledge whereas experience will fall within tacit

knowledge. However, this categorisation is often difficult to enforce and
has to be proved with the help of evidence.

c. Dr. Sebastian also stated that an analysis ofthe existing case laws reflected
that the maximum number of cases arise in the context of employment
which entails issues pertaining to employee mobility and it was contested
that knowledge and skill gained during employment should not be taken to

152 \_
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 the new place of employment. Such cases were usually filed by the

employer and a vast number ofthese cases have been decided in favour of
the employee.

d Dr Sebastian drew attention to 6 findings from her study. The first finding
pertains to challenges related to evidence collection. There rvas

inconsistency in cases and the major reason was that evidence collection,
dissemination and production by parties was lacking. The parties were
hesitant to share or reveal information even before courts. While parties
state that their trade secret has been misappropriated, they however fail to

give evidence of confidential information in the nature of a trade secret or

that it was entrusted to the defendant or even speciffing as to what
concemed the trade secret is beyond giving vague descriptions or labels.
While there are provisions under CPC and CrPC, despite this evidence
collection is a challenge as parties fear unintended disclosure through such
court proceedings. In other countries, sealed envelopes, in-camera trials,
confidential proceedings and confidential clubs have been instituted to
mitigate these challenges. The second finding highlighted was that because
it further results in problems with
there is no definition of trade secret,
identification before courts. The third finding was the conflict of
recognition oftrade secrets as a right separate from copyright. In copyright
suits, when evidence is lacking courts look at ancillary rights such as trade

secret and provide protection thereby circumventing copyright as it does

not allow rights over ideas but only on its expression. Courts in such cases
have ignored precedents and have granted an injunction for in respect ofa
work already in public domain. The fourth finding pertains to conflict with
contract and breach ofconfidence. Even ifthere is no contract, courts read
the dury to maintain confidence. While post-employment restraints are
void in light of Section 27 of the Indian Contract Act, 1872, courts have
atso upheld such clauses based on evidence adduced and in special

153
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 circumstances of the case. These cases cause worry of retention of
employees by employers and reflect changing notions of employee. The
fifth finding highlighted by Dr. Tania pertains to tacit and explicit
knowledge. It is not very easy to demarcate between these two even if it
appears so. It can be difficutt to ascertain where tacit knowledge end and

rvhere explicit knowledge begins. Whenever the question of tacit

knowledge has emerged Courts have expressed that some skills will be

leamt as a result ofjob experience and there cannot be restriction on use of

this tacit knowledge or skill. The sixth finding brought to the

Commission's attention pertains to cases that do not have employer-

employee relationship. These cases are mostly settled outside the court.
e. It was also submitted that many countries have adopted specific legislation
on trade secrets such as the US. However. despite having single definition

and law concems still remain even in these -iurisdictions. While bringing a

law has not provided solutions to all issues, however, it has definitely

brought in consolidation. India should not base its law on any other
jurisdiction but entirely based on the Indian context though we may
definitely look at adopting the best practices from other countries.
f. With respect to the adequacy of the prevailing laws, it was submitted that
the current legal regime provides adequate protection as the courts have
taken a balanced approach in determining trade secret litigation in the past
in India. However, there is a jurisprudential split with different courts in
India interpreting the use of non-compete clauses and in the repercussions
regarding the issue of pre-emptive injunctions that restrained former
employees from joining (or the possibility of joining) rivals and thereby a

possibility of violating a duty of confidence.

C. On being asked if we need a specific legislation, it was stated that while

the present system was adequate, should lndia choose to legislate, it should

incorporate certain elements in order to be a better law. Such a law must

154 \^
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 provide for procedural safeguards during court litigation. The law must
also address relative secrecy and the need for it to be kept so. Further, third

party rights and the principle of good and bad faith must be retained.
Moreover, penal provisions if included should have riders to ensure that
the same are not abused. The law must also address aspects related to data

protection and foreign investment protection. Further, there need to be

guidelines as to destruction of evidence etc. the contours of law specifying
what cannot be misappropriated, such as independent creation and reverse
engineering, must also be clearly defined. For the tacit knowledge
protection should be incorporated so as to ensure that employee mobility
is not unnecessarily curtailed.

h On the aspect of creating a Registry, it was submitted that the main element
of secrecy in such a case might be compromised in the case of creation of
such a registry. Trade secret registries are usually the creation of an intemal

arrangement by companies to protect and secure their trade secrets.

t. On the aspect of including provision(s) akin to compulsory licenses or

govemmental use as provided under the Patent Act or any sort of waiver
in order to address exceptional situations affecting public health or national

security, it was submitted that any sort of govemment intervention relating

to the access to medicines is a welcome step especially in light of the
COVID- 19 pandemic. This issue also has to be addressed with an

understanding of the role of technology transfer with respect to trade

secrets protection. Further, incorporation of whistle-blower protection was

also desirable.

.l On the question of applying Code of Civil Procedure read with

Commercial Courts Act to suits relating to trade secrets, it was stated that
CPC procedures should remain intact in order to give structure to the
procedural aspects oftrade secrets litigation.

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C. IndustryPerspective

7.6. The Associated Chambers of Commerce & Industry of India

(ASSOCHAM) was invited by the Commission in order to get an

understanding of the subject matter from an industry perspective. The

delegation from ASSOCHAM brought to the fore a range of issues for the
Commission's consideration. 'fhese havc been outlined below:

a The members of the association were of the view that a separate codified
law on trade secrets is required. The reasons stated were that firstly,
absence of a codified law retards growth of businesses both domestically
and internationally. Secondly, recourse to common law and torts etc.
requires a lot of effort and it is not easy to assert rights under the current
framework. It is tedious endeavour for the parties as well as the judiciary.
Thirdly, enacted laws with overriding effect and disposal within the time
frame will instil confidence in the industry and investors. Fourthly, many
other jurisdictions have codified law as well which brings in ease of doing

business, upholding fair business practices and principles of justice etc.

Sixthly, while the Constitution of India allows freedom of trade, it is

subject to reasonable restrictions. Law should balance all considerations.

b. It was submitted that remedies under contract law are clearly not sufficient
because ifthere is no contract then there is no liability and the only recourse

that remains is under torts. The problem here is at two levels. On the
conceptual level, we have to leave it entirely to thejudges to access as to
how people have exercised caution and what ought to be the law. the High
Court recognise equity but it takes time fbr them to decide and they are not
guided by statute. Lower courts usually ask for statutory basis and this
brings up enforcement issues. Further, while equitable relief is

unbelievably wide, there is remarkable lack of awareness about equitable

156
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 relief in India. Accessing justice is in itself a problem. Furthermore, the
judicial officer can decide a mafter in multiple directions thereby bringing
in lack of certainty which is the basic point of law. Since there is no guiding
factor, it can really lead to waste of time as well as uncertainty.
C It was also highlighted that no civil law is sufficient on the point. Contract
law govems only a limited aspect. Information Technology Act only caters
to computer related harm whereas trade secrets are wider than the digital
space. The example of pharmaceutical industry was cited to drive the point

that market inteltigence is required by competitors to survive' In fact,

competitors have the right to have certain information however when it
crosses the line and becomes a bad practice and unethical, liability must

arise and this is what trade secret law should seek to address'

d On the aspect of whether or not criminal sanctions are required, it was

expressed that while criminal liability is rnostly not required yet in certain
situations they may be warranted. Criminal provisions are necessary where
there has been clear malfeasance such as bribery, unauthorised access,
deliberate taking away of material by way of photo-copying, carrying
samples, destruction of and breaking-in computer systems to access hard

disk drives which only digital forensics later reveals etc'

on the question that whether trade secret should be treated as property it

was stated that it is definitely intangible property. The dichotomy between

trade secret and traditional IP need not exist. There are classical statutory
IPs such as patent, copyright, trademark and there are non-statutory IPs
such as confidential information, trade secrets and traditional rights of
indigenous people. what one must consider is does it have the capability
of intellectual capital? If yes, it ought to be protected
f It was further stated that not having a law hurts us more as a jurisdiction as

businesses are going and preferring other jurisdiction over us and there is

flight of intellectual capital. Further, start-ups are most anxious about their
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 IP as they do not have the capital but only talent. The only trading element
they have is the intellectual capital. Codification of law will help start-ups
as they do not have the capital to engage in litigation with uncertain
outcomes and navigate the nuances of law filled with lack of clarity. A
definite law will help them enforce the rights better. Further, we see

movement towards statutory law in other jurisdiction as well for instance

China. Evolution must be as per what is working for the industry. We are
unableto capitalising here because there is no law to address the escape of
trade secrets. Further, if we do not protect, then we will be excluded from

access to "know-how" and reverse engineering is not easy.

g. Another member of the delegation stated that what we need is a strong law.
While there is confusion whether trade secrets is property or not, what
constitutes a trade secret is also in itself confusing. A company may have
knou.how to use particular technology in a new way but may not want to
bring it to the market right now. In such a case, there should be a right to
stop disclosure or get another patent, whether you term it as a property right

or not. Currently protection is only by the interpretation of courts and we

need a law to clarify the position.

h. Further, economic espionage is a reality, for example hacking' Without law

we can become a safe haven for such hackers' While developing countries
do need technology, but we are no longer in the same space' Indian
companies themselves invest in R&D and they need to protect outflow of
their R&D and will also bring in foreign companies. This will also enable
transfer oftechnologies and development ofthose technology will help the
overall ecosystem. A separate law will provide a better framework to
address emerging issues such as the data, AI etc-

i. It was also highlighted that trade secrets and economic intelligence affects
the state as a whole. For instance, 5G technology is being developed, if
hacked by another State, we have no comprehensive law to address such a

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 hack. The lnformation Technology Act in the Indian ecosystem is
insufficient as in instances where data is stored on cloud and data
processing is done in the US, the Act provides no legal protection and this

fails competition. Further. reverse engineering is a common defence

strategy however, with machine leaming wherein pattems can be

recognised it is easy to crack and reverse engineer and then there is no
protection left. Hence, this aspect must also be addressed especially in
sectors such as banking. The repercussions in case of economic espionage

are significant, for instance if a country's nuclear programme is attacked

fines will serve no purpose. Artificial Intelligence and Machine Leaming
are in their infancy and there are no counter measures to protect us. Cyber-

attacks are more common when it comes to economic espionage. While the

Information Technology Act may provide relief to protect trade secrets, we

need infrastructure to address economic espionage. Economic Espionage

is broader than industrial espionage and a separate law is required.

7.7. A delegation from the Confederation of Indian Indrrstry (CII) also

presented its view before the Commission. The CII also conducted a survey

amongst the industry rnembers in order to best reflect the industry

sentiment before the Comrnission. A brief of the submissions made before

the commission and the wriften response along with survey finding has
been provided below:

a There has been a demand from the industry for a separate law on trade
secrets since the 2000s. It is one area ofIP that remains a cause ofconcem
for innovative industries given that a large percentage of new technology
is covered by trade secrets and not the other traditional forms of IP. Loss
on account of inadequate protection to trade secrets is a direct loss to the
cconomy. Enforcement of trade secrets remains difficult especially as the
159
 law as it stands lacks uniformity. At present, outcome or enforcement also
largely depends on the court which one goes to. There is a lack ofstringent
provisions to create sufficient deterrence and availability of immediate

relief is also an issue. Parties find it very difficult to get interim orders of
protection or other reliefbefore lower courts or the police. Further, district
courts often lack understanding of trade secret laws and ask for statutory
provisions when parties try to enforce rights. Lack of confidentiality of
such proceedings allows critical information to flow into the public domain

thereby jeopardising the confidentiality of the information. It is on this

account that a specific law is urgently required. It will encourage transfer

of technology and investments in lndia.

b. The current position on protecting trade secrets majorly revolves around
putting in place strong contracts, however, this is far from satisfactory.
Trade secret violations are very common in India and there are tremendous

limitations to the existing tegal framework which comprises several

statutes and is mostly a judge made law. The absence of a separate

legislation has rendered the Indian market vulnerable, especially the

pharmaceutical and chemical sectors. Improvement can be brought upon
by simplification of norms and adoption of unified singular legislation'
There is a need to align with developed countries like the US' While we
must study laws of other jurisdictions, we must ensure that the rights in
Indian companies are protected without violating any treaties that India
may be a signatory to and we need to come up with our own legislation'
c. Due to uncertainty and lack of adequate protection, a lot of novel and
modern technology do not flow into India. In the Aerospace and Defence
sectors, secrecy is paramount and the global Original Equipment
Manufacturers (OEMs) are very zealous in guarding their IP' As an Indian
partner of these OEMs it is necessary to comply with such norms, however'

lack of sufficient legal framework on trade secrets in India deters them

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 from localising the work which is sub-contracted to vendors outside India.
This stops transfer of critical technology to and development of local
industry in India. Further, the police are not equipped to understand the
nuances of technology thus the holders of information find it difficult to
file a complaint.
d. While legislating on trade secrets several aspects such as the parameters of
what constitutes a trade secret, licensing such secrets, enforcement of
rights, competent authority to determine remedial action are all required to
be determined. It is necessary to accurately assess India's requirement in

view of the ptace, time and situation in order to avoid possible risks or
misuse of the adopted principles and practices. During an earlier study
conducted by CII, a few judges of the Bombay High Court said that they
did not feel the necessify of a separate law for protecting trade secrets.
Howevbr, given the great variation in the interpretation given by courts due
to multiplicity of laws on the subject, a specific law will definitely bring
certainty and uniformity.
e. A specific law will have benefits across the industry be it Pharma, MSMEs'
technology etc. MSMEs often lack the financial capacity to protect such
IP. Small and medium-sized enterprises often face difficulty in protecting
trade secrets because of the costs involved in creating infrastructure to
maintain confidentiality as well as the high cost of litigation to institute
legal actions faced with misappropriation of their confidential information.

A definitive law witl enable even the small players to enforce their rights'
Further, considering the lower standard o[ education and literacy,
especially among workers in the MSME sector, we must be careful in
suggesting criminal penalties for any sort of violation by rvorkers or
employees when a separate codified law for trade secrets is enacted.

f. Industry survey conducted by the CII showed that the majority of the
respondents had trade secrets and there was an overwhelming demand from

l6l
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 the industry for enactment of a specific law on trade secrets and economic
espionage. This demand majorly flowed from the pharma and
manufacturing companies.
g. On the question of introducing altemative dispute resolution in such cases,
it was submitted that protection of trade secrets is an in-house challenge
but misappropriation when detected becomes time and resource consuming

to contest in courts. In such a situation, an altemative dispute resolution

system, if evolved to address these problems which are beyond a contract,

could be faster, cheaper and probably more deterrent.

h. The use of cyberspace, cutting-edge computer technologies, and mobile
communication devices has increased trade secret theft making theft more
covert and challenging. Even trade secrets held by the Govemment of India
have been consistently targeted by certain foreign govemments in acts of
active and passive economic espionage. Hence, there is a need for a single
statute that can address all issues related to trade secret leakages and
economic espionage.
i. As for the question on introducing compulsory licences or use by the
govemment with respect to trade secrets it was submitted that the principle
of compulsory licence is neither applicable nor should it be made

applicable to trade secrets. Further on the point ofcreating an exception for

public health or national security situations, it was conveyed that the
argument suffers from fallacy as how does one know which trade secret is
applicable and critical for public health when no disclosure oftrade secret
has been made. It was submitted that without knowledge it is not
practicable and feasible to enforce a rule like this as even the govemment
cannot force any company to disclose their trade secret' However, the
survey conducted showed that on the aspect of introducing compulsory
licences or used by the govemment, the number of respondents supporting

and opposing the same were close. However, on the issue ofexceptions for

t62
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 situations affecting public health or national security, the majority of
respondents said that such exceptions may be permitted under law. For
instance, in situations such as COVID or in the event of a war or

widespread hostility with a foreign power, when a trade secret holder is

unable to meet the demands then holder could be compelled to license the

know-how but not the know-why to third parties. However, the law should
make clear provisions of cessation of the third-party activity utilising the
trade secret immediately on cessation of war or the hostilities and also
definite penalties for contravention.

.J
With respect to establishment of a trade secret board may be problematic.
Registration might not even be possible for every industry and registration
in itself would bring in apprehension that there may be a leak at the time
ofregistration. Thus, registration oftrade secrets should not be prescribed'
While the idea of registration or creating a registry will be counter-
productive, however, a specific authority or a board to implement the law
would be a good idea and a separate quasi-judicial authority can be
constituted.
k on the aspects ofprocedural law that should apply to treat secret litigation,
such cases involve enquiry or investigation through a specialised body
therefore the provisions of CPC may not be entirely appropriate' The

Commercial Court Act should apply. Further, trade secret law should have
linkages with criminal law in order to deter miscreants.
It was also submitted that the highest level of confidentiality should be
maintained for trade secrets protection and enforcement via courts by
ensuring confidentiality of proceedings.
m The earlier attempt at a law in 2008 focused on innovation in the context
of public funded research and development. However, trade secret laws
should go beyond only the public funded R&D. The law should not only
define trade secrets but also ways to administer the disputes in private
t63 \
Sr',
 space by independent subject matter experts. It should also provide for
damages as well as criminal penalties for violation of trade secrets.

7.8. The Commission also invited the Federation of Indian Chambers ol

Commerce & Industry GICCI), a businesses and industry body, its
opinion on the subject matter. The following issues were discussed during
the meeting:

a. It was submitted that indeed there is a gap in existing legal protection

creating uncertainty in law. This uncertainty is from the end of both those
who are trying to protect such confidential information and those who are
trying to enforce the same. A coherent law laying down criteria and
delineating clear boundaries is required.
b. Some sectors such as MSME require trade secret protection more than
others. It is important for India to enact such a law if it wants to stand at
equivalence with other jurisdictions such as the EU. We also need to build
on emerging sectors such as AI, data protection and these wide facets must

also be considered while enacting such a law'

c. Unlike the US, we should take up Trade Secrets and Economic Espionage
separately as trade secrets are purely from the point of view of commerce

and not national security. These two operate at very different levels.

d. On the aspect of criminal sanctions, it was submitted that perhaps these

may not be a good idea in India. We should perhaps limit our prospective
law to civil remedies and monetary penalties as criminal sanctions may
have a chilling impact on business activity and may be prone to abuse by
current employees. It is the basic principte of law that remedies must be
proportionate to the breach./harm and traditionally in the context of trade
secrets, civil remedies have sufficed'

l6-+ Sr/
e. With respect to the question as to whether there should be a system for
registration oftrade secrets, it was expressed that a Trade Secret Board for
registration will not be fruitful and companies will not be comfortable
sharing such sensitive information with a registry especially given that
companies often refuse to taken part in regulatory trials because ofthe risk

of leak of their confidential information. Horvever, if a Board for

implementation of the law or as a specialised body serving as the first level
of dispute resolution is introduced, it may work.
f. On the point of exceptions, if any, ofdisclosure in regulatory process etc.
it was said that the same should be available only when necessary and such
exceptions should be narrow and must specift the criteria of when it is

necessary. Another related aspect highlighted was insistence on disclosures

during investigation such as under the Competition Act, 2002 vrherein

parties are forced to disclose even that information which is not necessary

to the investigation. The same should be prevented and it causes prejudice

to the legitimate holder of information.

g. It was further stated that both under and over protection must be avoided.
While adopting a property conception of trade secrets may allow wider
protection, it may be best to align with the Paris Convention and the TzuPS
Agreement. Too wide a protection may lead to clogging of the system' To
begin with we can start rvith a narrow protection and then continue to
evolve the same. We must leave room for the law to grow since the law,
industries and the economy are all growing.
h. Not having a definite law in many regards allows for wide protection
however it leads to uncertainty. From the broader perspective of ease of
doing business, investors must know the level of protection that will be

available to them. In shaping the law, we must take existing principles of

common law and codifu the same. This way courts will still have space for
interpretation and we can include newer elements as well. While this will
16s v
 ensure that rights, duties and obligations are clarified, it will not be overly
restrictive. An enacted law witl bring in judicial certainty and will help

mitigate wide divergence in opinion of various courts.

I Further, it was submitted that trade secrets should be defined in an
inclusive manner. This will ensure that any existing gaps are addressed by
such law. For instance, in the pharma industry. there is an ecosystem of
activities around the patented drug such as testing, R&D and marketing,
that has no protection whatsoever and a specific legislation on trade secrets
can play a key role to help protect the sanre.

J It was further discussed whether provisions for whistle-blower protection

could be incorporated. It was answered in the affirmative as the protection
of trade secrets can only be availed for legitimate activities.
k On the aspect of reverse engineering, it was stated that it cannot be

disallowed but at the same time the new law should leave some space for
addressing emerging threats such as using artificial intelligence and
machine learning to reverse engineer with considerable ease'
In order to provide effective and efficient resolution of such disputes,
sefting up a dedicated institutional framework along the lines of Delhi
Intemational Arbitration Centre could be considered'
lTl On request and to better gauge the industry perspective, FICCI also
conducted a survey among its industry members' The survey got 16
responses and revealed industry sentiment on the issue. A majority of the

respondents thought the current laws were inadequate and this has

impacted their business. A considerable number ofrespondents were ofthe

view that protection of trade secrets under common law, torts, the lndian
Contract Act, provisions of the IPC and the Information Technology Act
was insufficient and majority of them felr that it was necessary for India to

enact a specific legislation on the subject of trade secrets and economic

espionage as it would improve the ease of doing business. on the contents
166
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 ofsuch a law, majority of the participants stated that trade secrets should
be defined; both trade secrets and economic espionage can be dealt under

the umbrella of the same Act; the trade secret law should incorporate
provisions akin to government use under Patent Act or a waiver; public
health and national security exceptions can be incorporated in the Act; and

both civil and criminal remedies ought to be provided as criminal sanctions

can vastly improve the efficacy of trade secret investigations. Further, a

majority ofthe respondents indicated that trade secrets should be treated as

"properfy"; there could be no negative impact on start-upsAvlSMEs

including the AI/Data extensive ones; and the legal contours of data
protection and AI should be included in the prospective law on trade
secrets.

II In its written response containing the survey findings, FICCI also

highlighted some additional aspects such as lack of confidentiatity
disincentivises enforcement of trade secrets and protective measures like
in-camera hearings and confidentiatity clubs need to be incorporated to
address the same. Further, third-party liability for misappropriation
especially where acts ofcorporate espionage are involved must be ensured.
It was further submitted that lack of weak protection, inadequate remedies
and lack of confidentiality in such proceedings disincentivise entities from

developing nations to license technology to India. It was submitted that

there should be a definitive scope of the term "trade secret", principles
deciding ownership of trade secrets, and remedies available for
infringement. Lastly, it was stated that the law should be industry friendly
and the burden of proof should be on the misappropriating party.

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 D. Governmenl Perspective

7 .9. The Commission was sent the reference on this subject matter by the
Ministry of Law and Justice, however the nodal ministry on matters
pertaining to intellectual property and applicable laws is the Ministry of
Commerce. Within the Ministry of Commerce, the Department for
Promotion of Industry and Internal Trade (DPIIT) is tasked with the
charge over matters related to Protection of intellectual properry rights and

administers acts related to I PRs. Hence, the Commission thought it

necessary to invite DPIIT to articulate its understanding and position on

the subject-matter. The representation from DPII'I comprised Ms. Himani

Pande (Joint Secretary), Mr. Karan Thapar (Director) and Dr. G. R.

Raghvendra (Senior Consultant). The fotlowing insights were given by
the Department:

a. Protection of trade secrets has been a matter of concem for the govemment
and the National IPR Policy 201 6 mentions it as well. The CIPAM Manual

2018 also discusses the trade secrets landscape in India. In view of the
importance of the subject matter, DPIIT in the past held consultations with
some ministries and had tasked FICCI with work on trade secrets. This
project was still ongoing.
b During their consultations with the industry certain concems were brought
to the fore which DPIIT thought is also prudent for the Commission to
consider. The Pharma companies, especially generic manufacturers, had
expressed concerns on impinging regulatory data protection. Nonetheless,

the industry largely supports enactment ofa dedicated law on trade secrets;

however, some concems regarding protecting non-patentable subject

matter under the garb of trade secrets remain and the same should be
carefully considered. A specific law may support development of

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 industries but may hinder it as well so a delicate balance has to be

maintained. We must be cautious that comparative advantage in sectors

such as pharma should not be defeated when enacting a trade secret law.

C It was further highlighted that lack ofadequate trade secret protection often
comes up during negotiation of free trade agreements with other nations.

There is a push from our trading partners for inclusion ofprovisions on this
subject matter. Even if India tries to rigorously push-off such clauses, the

other parties try to re-word it and push it in by including such provisions

in another clause. There are serious concems with patents and trade secrets,

especially allowing ever-greening etc. and this chapter often proves to be

most contentious during negotiations. We must exercise caution to prevent

the same while enacting a law.

d It was submitted that a legislation on trade secrets should amalgamate
existing laws and incorporate new elements as well. lf we look at laws
prevailing in other jurisdictions, the law in the EU has detailed limitations
and exceptions which can aid in protecting public interest while the US law

is more business friendly and is TRIPS-plus in its approach. While we can

possibly look at the EU law, however, any law enacted should be from the
point of view of our own economy and vital sectors such as pharma,
telecomm, electronics etc. as well as catered towards domestic
industries/MSMEs.
e It was also highlighted that que could be taken from the 2007 Satwant
Reddy Committee Report on Steps to be taken by Govemment of India in
the context of Data Protection Provisions of Article 39.3 of TRIPS
Agreement wherein in formulating the recommendations, board industry
perspective and consensus was taken into consideration.
f. The National Innovation Bill was drafted in 2008 and there was no

National IPR Policy at that point in time. The issues of a specific legislation

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 must be explored from the perspective of the National IPR Policy,2016 as

well as in light of the changing economic context.

(J
On the question of whether the subject matter ofprotection oftrade secrets

and prevention of economic espionage should be combined within one Act,

DPIIT was of the view that these two should be dealt with under separate
laws. Espionage can continue to be dealt with under common law and
applicable provisions of IPC.
h On the question of introducing exceptions for national emergency, health
and govemment use, it was expressed that clear and carefully drafted
exceptions should be introduced so as to restrict ever-greening of patents
via trade secret protection. While introducing compulsory licenses is not
advisable, a provision for waiver of trade secret/confidential information
etc. and for govemment use (similar to section I 00 of the Patent Act, I 970)

can be carved out. However, the same can be narrowly tailored and defined

properly to strike the right balance.

Regarding the possibitity of putting in place altemative dispute resolution
mechanisms to resolve these disputes expeditiously, it was submitted that

while we can look at pre-litigation proceedings or resolution, it may be

perceived as impinging on commercial freedom as it may amount to
enforcing something akin to a license where there is none.

J Dr. G. R. Raghavendra also submitted a detailed written response on the

subject in order to aid the Commission in its endeavour. In his response he
highlighted the various contours ofprotecting trade secrets and the law in
other jurisdictions as well. Attention was drawn to the relevance of trade

secrets especially in emerging fields such as AI. It was submitted that trade
secret protection was an areaof high priority for the Govemment. A
definitive law on the subject will help increase the confidence of
intemational investors and in fact facilitate exchange of otherwise
confidential information and foster collaboration in the industry' Thus, a

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110
 sui generis legislation on trade secrets will have a positive impact on
India's economy.

E, Other Stakeholders

7.10. During the course of the consultations being held by the Cornmission, a
request was made by the United States Patent and Trademark Office
(USPTO) to allow the U.S. Intellectual Property Counselor for South Asia,
Mr. John Cabeca, to present their view on the subject. Since trade secrets

is one area where the US is actively pursuing India to adopt a standalone

law, and Mr. John Cabeca wanted to share the US experience in terms of
what has worked for them and what has not, the Commission proceeded to
hear Mr. Cabeca. The following aspects were discussed during the
meeting:
a Mr. Cabeca highlighted that the Defend Trade Secrets Act,2016 (DTSA)
empowered employers to preserve trade secrets shared with employees. If
the employee wants to leave, they are still barred from trade secrets with a

competitor. The DTSA sets parameters to enforce trade secret rights within
the employee contract and allows enforcement of contractual obligation
even with respect to third party vendors. The DTSA set forth guidelines,
provides for whistle-blower protection and clearly sets forth what would
constitute misappropriation of trade secrets.
b It was stated that in line with the 2016 National IPR Policy, a law on trade
secrets will benefit Indian industries as wel[. When DTSA was adopted as

a federal law in 2016 it set the stage clearly for protection oftrade secrets

as prior to DTSA the trade secret law was protected by different state level

legislations. It was stated that the success of a lot of initiatives and

industries will be dependent on being able to safeguard certain rights such

171 G/
 as patents and trade secrets and hence attention must be paid towards the

same.

c While it has been felt even in the US experience that sometimes employers
try to stretch the provisions to their favour, however, they cannot stop
employees completely from seeking employment elsewhere in its entirety.

Trade secret law works just like a contract and allows for collaboration and

sharing of know-how. Like all other IP, trade secret law would also be
territory.
d With respect to India, USPTO also helps US companies enter and navigate
the Indian economic and legal landscape. Since there is no law on the
subject, US companies are apprehensive as there is lack of clarity on how

they will be able to protect their valuable trade secrets in India. This hinders

technology collaboration and if a law with definite criteria comes into

existence, there would be clarity thereby incentivising such technology
transfer and collaboration. It was also submitted that in 2015, the US and
Indian Government had set up an IP working group. It was decided to have
a trade secret group as well and discussions took place wherein it was

concluded that a law was required on the subject.

It seems that the law on the issue of misappropriation, as it currently stands,
is inadequate and on the remaining aspects, there is no cohesiveness
making it difficult for innovators and right holders to understand the
patchwork ofsafeguards in place. Further, the USTR Special 301 Report,
which is driven from industry input, has cited the difficulty faced by
industries in navigating the trade secret landscape in India. While there is
a law and companies do navigate it but by no measure is it an easy task
especially for foreign companies. Such a law will further help start-ups
because the hrst intellectual property start-ups create is a trade secret when

they are at that stage of innovation and ideation. It is critical for such start-
ups to be able to secure such IPs at such a critical time for them.

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f. Mr. Cabeca also offered to arrange a technical session with the team in the
US that could better guide on the workings of the law in the US. This online

technical session was subsequently conducted wherein the position as it

exists in the US was clarified before the Commission. Mr. Mark
Abumeri, Attomey Advisor, USPTO explained the working of the law in
the US. He stated that the law on trade secrets touches many other areas of

law such as patent, contract and employrnent. In the US, while the source
of other IP rights is the Constitution, trade secrets have their source in
statute. In the US, trade secrets are treated as property. Further, trade
secrets are considered supplementary to patent and trade secrets are in fact

closest to patents when the subject matter ofprotection is over an idea then

it can either be protected as a patent or treat secret depending upon whether

the entity seeks to disclose the information or not. In the US, there are two

main levels of law. First is the USTA model law that has been adopted by
most states and serves as the state-level law. The second is the federal level

law which includes the Economic Espionage Act of 1996 and the DTSA,
2016, both of which are complimentary. Under state laws, trade secrets are

defined as any information having independent economic value, giving a

competitive advantage and there is no need for novelty but what is required
is that something is not generally known and that the custodian takes steps

to maintain secrecy. There is no need for registration and the owner will
identify, document and protect it within the company itself. Under the
federal law, though trade secrets have been worded differentty, they
convey the same meaning and the same criteria of any information having
independent economic value, being subject to secrecy, and not being
generally known have been specified. Thus, in substance there is not much
difference.
g. It was further stated that the umbrella oftrade secrets is broader and hence
complimentary to patents. For example, while a process may be patentable

173
 the temperature range in which a certain process works cannot be patented

but it can certainly be held as trade secret. While there are certain
disadvantages towards protecting something as trade secret in the sense
that the secrecy could be lost at any time on account ofreverse engineering

or independent creation. Furthermore, whereas the term used in respect of

other IPs is "infringement", in case of trade secrets it is "misappropriation"

because if it were infringement, independent creation could not have been

possible. When it comes to defining misappropriation, there is a difference
between the US state-level laws and the t-ederal [aw. Under state laws, they
protect private owners when information is acquired by unlawful means
without authorisation, or it is disclosed or used without consent. However,
under the federal law the provision pertaining to misappropriation is far
more extensive. Anyone accessing information by improper means or any
recipient thereol is tiable for misappropriation and this is punishable with
imprisonment of up to l0 years or fine or both. Misappropriation can be

committed by persons or a company since the term "whoever" is used.

Further, because there is criminal liability, intention is required. For civil
actions, intention may not be required to be established.
lr The DTSA 2016 was monumental in the sense that it creates both civil
action and criminal enforcement thus there is a private federal trade secret
civil action and the recovery of value is up to 3 times. Limitation period is

also specified as three years and this law has some extraterritorial
applications as well. The state-level laws and the federal law work together
and the state-level law is in addition to the federal [aw. Aspects such as
confidential proceedings etc. have also been highlighted under the law
while whistleblowing is a permitted exception. State District courts have
jurisdiction and so does the United States Intemational Trade Commission
which can issue monetary damages and orders for customs authorities
when items are being imported so as to stop the same at the border. When

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it comes to employment and trade secrets, confidentiality and non-compete
clauses are common, however, not all US States allow such clauses, for
instance, Califomia does not allow non-compete clauses and is very pro-
competition. The law also has provisions for protective order, filing of
information in sealed covers, sealing orders etc. On the question whether
the State could compel divulsion of trade secret under any law such as

National Defence Act or the Fifth Amendment Takings Clause to the US

Constitution, it was expressed that generally the Govemment cannot
compel a company to divulge its trade secrets but it can ask them to share,
license it out and work out an altemate arrangement as was seen during

COVID.
As a consequence of enactment of the federal law, secret owners have
direct access to the federal court which is huge as the system is more
eloquent, has better resources and there are more reasoned judgements.
Hence, the relief that trade secret owners get it is more comprehensive. The

biggest practical difficulty that has been observed is that trade secret
owners do not articulate their trade secrets well. Unlike patents, which are
fixed based on the documents filed during registration, and cannot be

changed, when it comes to trade secrets, the legislation must also indicate

how to describe the trade secret. Ifthere is apprehension on a trade secret

violating another law, then a court hearing can be sought for only that
portion of the trade secret which is allegedly in violation. Mechanism is
there to divulge only that limited part of a trade secret and not the entire
secret. Specific provision for whistle-blowing would suffice in order to
address this issue.

1'7 5
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 8. CONCLUDING ANALYSIS AND RECOMMENDATIONS

8.1. Owing to the significance of the subject and the large-scale ramifications
it can have on further innovation and development of the economy, the
Commission held wide-scale consultations with a variety of stakeholders.
The points considered by the Commission and its recommendations have
been detailed below.

A ll/hether there is need for a specific legislation on the proleclion of trade

secrets?

8.2. In light of the in-depth analysis of laws and widespread consultations held
by the Commission, the Commission is of the view that the time is ripe for
enacting a specific legislation on protection of trade secrets. While India
may have historically opposed the inclusion of trade secrets within the
ambit of the TRIPS Agreement and fought off pressure to legislate on the
subject matter, the current economic scenario and state of development of
our indigenous industry is substantially different from when the TRIPS
Agreement was being negotiated. In today's economic climate, there are
fast emerging technologies and sectors such as artificial intelligence (AI)
and data-driven technologies that have gained significance.

8.3. There is a need for transfer oftechnology and cooperation among industries

across borders and a clear and precise law on trade secrets will enable such
an ecosystem in India. The law as it stands now is fragmented and difficult
to navigate. A statute will bring in clarity and espouse confidence in the
legal system amongst the industry. Even when it comes to MSMEs and
start-ups, which forrn a major chunk of our indigenous industry, such a law

stands to benefit these as well. Most MSMEs and start-ups do not have

t16
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 much capital but what they have is creative resource or intellectual capital
and they need a clear framework to protect the same. A legislation on this
subject with ensure certainty which is essential to any law. Thus, the
Commission is of the considered opinion that a specific law on protection
oftrade secrets ought to be adopted.

8.4. A sui generis law on trade secrets evolved by consolidating the existing

principles of common law, equity, confidence and contracts as affirmed in

judicial precedents while also adding in new elements and contextualising
it against the special needs of the Indian industry and economy would be

best suited. The courts have largely followed a balanced approach and the

same must be incorporated and maintained under the proposed Act.

B. llhether there should be a single law on trode secrets ond economic

espionoge or should they be dealt separalely?

8.5. The Commission is of the opinion that misappropriation of trade secrets

and economic espionage, though they may appear to be the same, stand on

different footings. Espionage itself can be economic, industrial or

commercial. In economic espionage, the actor targeting domestic
companies or the government entities to steal their trade secrets is a foreign

govemment whereas in industrial espionage the actor is another company

or commercial entity.455 The benefit in the former is derived by a foreign
govemment and in the latter by another private entity.a56 While industrial
espionage is driven by strictly commercial motives and can be covered
within the ambit of a trade secret legislation, economic espionage has

a55 Mark Button, "Editorial: Economic and Industrial Espionage" 33 Security Journal I (2020\, qtailable al
httpsy'/doi.org/ 10. I 057/s41284-019-00195-5 (last visited on February 18, 2024).

t11
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 deeper implications for the economy and national security as well and is

directed at the State.

8.6. The aspect of economic espionage, thus, should continue to be govemed

under the existing provisions of Indian Penal Code and common law as
was also expressed by DPIIT. An altemate and more suitable approach,
however, would be enacting a separate law on prevention ofand redressal
for economic espionage with more focus on criminal liabilities as fines and
damages will hardly suffice in such cases as they lack the requisite
deterrent impact. Further, given that critical technologies and sectors such
as defence, nuclear, telecom etc. may be targeted by acts of economic
espionage, it is vital to have a stricter approach towards such acts. A
separate legislation on economic espionage is also desirable as economic

stability and national security become more inteftwined. Moreover,

protection of trade secrets, just like in the case of traditional forms of
intellectual property, is territorial in nature; however, provisions dealing
with economic espionage may require some extra-territorial application.
Thus, it would be prudent to have a separate law to address the issue of
economic espionage while commercial espionage will fall within the
purview ofthe proposed Trade Secrets Act.

C. ll/hat should be the scope and shape of the proposed law?

l. Treating trade secrets as "property" or under principles of unfair

competition

8.7. The law must codify the existing principles that have been established by
the courts by way of judicial precedents. With respect to the conceptual
issue of whether trade secrets should be treated as "property" or not, the

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 Commission is of the considered view that "trade secrets" cannot have a
"property-like" conception such as in the case of other intellectual
property. There are no definite monopoly rights with respect to trade
secrets. Further, a strong property-like conception may not be prudent as it

may blur the distinction between trade secrets and other forms of IP such
as patents without even complying with the central requirement of
traditional intellectual property regime, namely, disclosure of information
in the public domain. In such circumstances, trade secrets law may become

a gateway to sidestep the limitations of patent and copyright law and may

prove to have debilitating impact on innovation, information available in

public domain and further vital developments.

8.8. Further, under the TRIPS Agreement, though undisclosed information has
been categorised as an "intellectual property", such a categorisation does

nol ipso facto confer property like status on it. This owes to the fact that
"intellectual property" as a terrn suffers from certain level of conceptual
impotency as such categorisation is not instructive enough on the nature of
underlying subject-matter. It is neither determinative as to the content
included, nor does it suffice as a description of the very nature and
character ofthe rights.l57 Even Article 39 paragraphs I & 2 ofthe TRIPS
Agreement carefully avoid the use of such language that would indicate
proprietary character and consider it under the principles of preventing
unfair competition.

8.9. While trade secrets and confidential information may be termed as

"property" in the metaphorical sense, the overwhelming majority of case
laws go on to show that relief in cases of misappropriation is not premised

Lionel Bently, "'l'rade Secrets: "lntellectual Property" But Not "Property"?" in H. Howe and J. Grifliths (eds.),
a5r

Concepts of Ptopertf in lnlellectual Properly Ldw 8l (Cambridge University Press, 2013)

179

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 on treating the information as "property" stricto sensu but on principles of
common law, breach of confidence, contract etc. Hence, even in India,
while trade secrets and confidential infbrmation are treated within the
umbrella of intellectual property, recognition and relief from courts has
flown from other applicable principles and therefore, they are not treated
as property per se. In enacting our law, we must avoid any terminology that
would imply proprietary conceptions. Further, providing protection on the
anvil of unfair competition wilt allow the much-required space for judicial
discretion to apply the framework to emerging forms of information and
secrets as well as in new sectors while also ensuring that we do not

facilitate over-protection. This would allow for a more balanced approach

wherein adequate protection can be afforded against misappropriation
while avoiding application of the principles of strict liability and restrictive
reading of exceptions traditionally associated with traditional property
protection.

ll Defining trade secrets

8.10. With respect to definition of "trade secret", the proposed law must provide
a broad definition that allows rooms for judicial interpretation so that
emerging aspects and industries may also fit within the framework of our
law. The approach followed under the TRIPS Agreement wherein the triple
criteria of secrecy, commercial value and reasonable steps is specified as

the qualifying criteria for protection should be adopted. Trade secrets are
expansivein nature. There is ambiguity surrounding what forms trade
secrets may take which may also differ based on the facts and
circumstances of each case. Thus, a close-ended definition may lead to
exclusion of several categories of information that may otherwise warrant
protection. Hence, following the approach of Article 39.2 of the TRIPS

180
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 Agreement wherein the basic qualifying criteria is laid down is thought
prudent.

llt. Defining misappropriation of trade secrcts

8.11. When it comes to defining misappropriation, precaution must be exercised

to avoid installing an over-protective frarnework. Liability, whether third-
party or otherwise, should not be extended in cases where the acquisition,
disclosure or use is honest or bona fide. Only bad faith acts must attract
liability and not acts that flow from good faith. Further, what does not
amount to misappropriation or is lawful acquisition or use must also be
clearly defined; for instance, independent discovery, reverse engineering
or any.thing that is a result of an honest commercial practice. A restriction
on independent discovery or reverse engineering would undermine the
system of patents as innovators will be incentivised to hold traditionally
patentable subject matter as trade secret, thereby avoiding public
disclosure while enjoying blanket monopoly in perpetuity. This would
jeopardise competition, further research and development and ultimately

the public interest.

iv. Trade secrets, restrictive covenants and doctrine of inevitable

disclosure

8.12. Further, on the interface oftrade secrets and contracts, negative covenants
or post-employment restraints must not be permitted as is clearly

established under the current legal framework. The spirit of Section 27 of

the Indian Contract Act, 1872 that prohibits agreements in restraint of trade

must not be undermined. Further, in the garb of NDAs, no claim of

confidentiality or secrecy should be allowed over information that is
already in the public domain.

l8l
&,/
8.13. Furthermore, the inevitable disclosure doctrine that has emerged in the US

should not be apptied under our proposed law. This would go against the
well-established position as developed by Indian courts, wherein an

employer cannot prevent a departing employee from joining a competitor

based on the argument that the employee has learnt intellectual skills and

knowledge that will lead to use of their trade secrets in the future

employment. In India, what has to be established is that the employee either

took away something concrete like emails, documents etc. or that he is
using the trade secrets of his former employer in his new employment with

a competitor which can be shown in the facts and circumstances of each

case; for instance, showing that the competitor started manufacturing the

exact same product soon after the ex-employee joined the competitor's
organisation. There is no presumption that such use or disclosure will take
place and the employee is not injuncted based on any such presumption.
Doing so would undermine the principle against restraint of trade imbibed
under Section 27 of the Indian Contract Act.

D. What exceptions should be ctrved out in lhe Act?

Whistle blower protection

8.14. On the aspect of exceptions, the Commission is of the opinion that the
legislation must allow for the exceptions so as to ensure a proper balance
of competing interests. In this vein, the Commission holds the view that
the Act must incorporate a provision for protection of whistle-blowers.
Illegal activities cannot be exempt from the purview of law in the garb of
trade secrets. Law cannot permit use of non-disclosure agreements to
discourage reporting on illegal activities. Such agreements in any case are

void under Section 23 of the Indian Contract Act, 1872 as enforcing the
same would have the effect of defeating the provisions of law and also
182 \^
a#u,,
 being opposed to public policy. Even where a claim for protection oftrade
secrets is based on the principle of equity, and where disclosure is being

made to bring to light an illegal activity or contravention of law, the

principle that one who comes into equity must come with clean hands
would prevent such a party from gelting any relief against alleged
misappropriation. Thus, incorporating a provision grating immunity from
civil or criminal action/retaliation to whistle-blowers is not at variance with

the principles oI contract law or equity.

8.15. Furthermore, even jurisdictions that adopt an extensive TNPS-plus

approach to trade secrets have such provisions within their law, for
example, the US. The protection to whistle blowers in US is restricted in
the sense that it is available only when disclosure is confidential and made

to the govemment or in a court filed under seal.asE There is no specific

clause exempting or protecting journalists or other activists, although the

First Amendment may provide them protection. The EU Directive on the

other hand, specifically carves out an exception for revealing misconduct,
wrongdoing or illegal activity, provided it is done for the purpose of
protecting the general public interest. Thus, whistle-blowers revealing the
misconduct of companies or even journalists would fall under this
category. In EU, there is Directive (EU) 201911937, which specifically
addresses whistleblower protection.a5e While the Directive (EU)
201911937 is a lex specialis on the subject-matter of whistle-blower
protection, however, it complements the Trade Secret Directive as can been

seen from Article 2l(7) of the Directive (EU) 2019/1937, which provides

058
t8 u.s.c. .s 18i3.
15e
Directive (EU) 2019/ 1937 ofthe European Parliament and ofthe Council of23 October 2O l9 on The Prorection
of Persons Who Report Breaches of Union Law, avoil.tble at. https://eur-lex.europa.eu/legal-
contenVen/TXT/?uri=CELEX%3A320 I 9L I 937.

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 that ifthere is a need to disclose trade secrets, when reporting or disclosing
information which falls within the scope of the Directive (EU) 201911937,
such disclosures are considered to be lawful disclosures under Article 3(2)

of the Trade Secret Directive.a6{)

8.16. India does not have such a whistle-blower protection law and the Whistle
Blowers Protection Act, 2014{6r only applies with respect to disclosure of
allegations of corruption or wilful misuse of power or wilful misuse of
discretion against any public servant. Therefore, it is required that the
proposed Act must incorporate this safe harbour clause. The proposed
provision must grant immunity to whistle-blowers and not make it a mere
defence, thereby saving them from protracted litigations that may
discourage them to come forward. Flowever, the requirement of good faith

and public interest may be added to ensure that such immunity is not
abused for personal gains.

lt. Compulsory Licensing & (lovcrnment Use

8.17. In the considered opinion of the Commission, it is important that the

proposed Act contains provisions akin to compulsory licensing and/or
govemment use for exceptional situations such as public health and
national security wherein there is an overwhelming public interest
involved. However, such an exception needs to be tailored very narrowly
and given a restrictive scope. Disclosure in the context where exceptional

circumstances exist and public interest warrants disclosure does not

a@
Sharon Sandeen and Ulla-Maija Mylly, "Trade Secrets and thc Right to lnformation: A Comparative Analysis
of E.U. and U.S. Approaches to Freedom ofExpression and Whistleblowing" 2l North Carolinq Journal of I.aw
& Technologt I (2020), avaitqble at
https://open.m itchellhamline.edu/cgi/viewcontent.cgi?article: I50 I &context=facsch ( last visited on F ebruary 22,
2024).
a6r Act No. l7 of20l4.
184

W.
 presuppose that it is a "public disclosure". Thus, such a provision must
envisage disclosure by the lawful holder of trade secret to a third party with

strict obligations of confidentiality imposed on the third party. The holder

will not be forced to reveal its trade secret in the public domain thereby
losing its competitive advantage entirely. Disclosure here would imply
only limited disclosure with imposition of obligations on the third-party to
whom such disclosure is made.a62

8.18. Such a provision is especially relevant in the light of the recent COVID-19
experience wherein efforts for voluntary licensing of trade secrets
surrounding vaccines was refused in certain instancesa63 and proved to be
largely inadequate.a6r Companies protect a range of information relating to
different stages of vaccine development such as clinical practice and
regulatory approvals, production, and distribution as trade secrets.{65 Even
unpatented know-hows, such as production methods or skills are also
protected as trade secrets which are vital to ensuring rapid manufacturing
and distribution of vaccines.a66 In such a situation, a provision that would

compel sharing in the absence of voluntary sharing ought to be in place so

that emergency needs in such crises can be met.

8.19. There is nothing in intemational law to prevent the introduction of such a

provision.a6T In fact, Article 73 of the TRIPS Agreement which carves out

a security exception during times of emergency as well as Articles 7 and 8,

462
Olga Gurgula and John Hull, "Compulsory licensing oftrade secrets: ensuring acccss to COVID- l9 vaccines
via involuntary technology transfer" l6 Journal of tntcllcctual ['roperly l,ay, & Practice 1242 (2021\, available
at: httpsy'ldoi.org/ I 0. I 093/j iplp/jpab I 29 (last visited on Februarl 23, 2024).
46r
ld.
e David S. Levine and Joshua D. Sarnoff, "Compelling Trade Secret Sharing" 74 Hastings Lau Journal 98?
(2023\, qvailable at https://repository. uchastings.edu/hastings lawjournal/vol74/iss4/2 (last visited on February
24,2024\.
165
ld.

I85
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 will support such an exception. Attention must be drawn to the fact that
while countries having trade secrets laws may not have provided such
exceptions within the law, there are other legislations which could come to
aid to compel sharing of trade secrets in emergency situations. For
instance, the Defense Production Act, 1950a68 in the US devolves on the
President wide ranging powers to prepare for and respond to natural or
man-made disasters. The provisions of this Act were invoked during the
pandemic to prioritize production and input supply needs for a range of
diagnostic, therapeutic, preventive, and other products, from ventilators to
vaccines.46e Further, this Act influenced the deal between two vaccine
manufacturers, Merck and Johnson & Johnson to ensure adequate
production of COVID vaccine.aT() So there is an argument that the US
President could use this Act to compel disclosure of the trade secrets to
deal with a pandemic, or for any other similar type of emergency affecting

national security, such as climate change.aTr Hence, having a clearly

delineated exception placed within the same law that addresses trade
secrets is a better way forward towards a comprehensive and clear law.

8.20. Furthermore, even the Doha Declaration on the TRIPS Agreement and
Public HealthaT2 would also support such a provision, especially as it seeks
to protect public health and, in particular, to promote access to medicines
for all. Further, the original proposal submitted by India and South Africa
before the Council for TRIPS in 2020 sought a waiver from certain

463
50 U.S.C. Ch. 55: Defense Production.
a6e
David S. Levine and Joshua D. Sarnoff, "Compelling Trade Secret Sharing" 74 Hostings Lav Jotnal 981
(2023\, aeoilable ati https://repository.uchastings.edu./hastings_lawjoumal/vol74liss4/2 (last visited on February
24,2024\.
41o
ld.
411
ld.
4?: World Trade Organization, Doha Ministerial Declaration of l4 November 2001, WTO Doc.
WT/MIN(0| )/DEC/2, 4l l.L.M. 755 (2002), available at..
https://www.wto.oryenglisVthewto e/minist_e/min0l e/mindecl trips_e.htm (last visited on February 23,
2024).

186
 provisions of the TRIPS Agreement for the prevention, containment and
treatment of COVID-19, including patents and undisclosed information
regarding vaccines and related health technologies.aT3 However, the actual
Ministerial Decision adopted by the TRIPS Council on June 17,2022174
was much limited, only expanding conditions for compulsory licensing of
patent rights (which include compensation obligations) and COVID-19-
related vaccines.aTs Thus, such a provision is in line with the stand that
India has maintained at the intemational fora.

I. Freedom of Speech & Expression

8.21. Certain jurisdictions provide for a specific exemption for exercising

freedom ofspeech and expression. For instance, the German law exempts
acquisition, use, or disclosure of a trade secret from prohibitions specified
within the Act when done to exercise the right to freedom of expression
and information, including respect for freedom and plurality of the
media.ai6 This is derived from Article 5(a) from the EU Directive of 2016.

Even Article 2(a) states that the Directive shall not affect the exercise of
the right to freedom ofexpression and inlormation as set out in the Charter,

including respect for the freedom and pluralism of the media. Thus, it
seems that freedom of speech and expression has been placed on a higher

a?r
Council for Trade-Related Aspects of Intellectual Property Rights, Waiver from Certain Provisions of the
TRIPS Agreement for the Preyention, Containment and Treatment of Covid- 19, WTO Doc. lPlClW 1669 (Oct. 2,
2020\. avqilable at,
https;//docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q 7lPlC/W669.pdf&Open=True (last visited on
February 23, 2024).
17'World Trade Organization. Ministerial Decision on the TRIPS Agreement, WTO Doc. WT/MIN(22y30,
WT/L/I l4l (June 22. 2022), available at:
https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filenamrq:/WT/MlN22/30.pdf&Open=True, (last visited
on February 23,2024\.
17t David S. Levine
and Joshua D. Samoff, "Cornpelling Trade Secret Sharing" 74 llastings l-an Journal 987
(2023), ovailable at: hnps://repository.uchastings.edu/hastings_law-joumal/vol74/iss4/2 (last visited on February
21,2024).
476
Gesetz zum Schutz von GeschAftsgeheimnissen vom 18. April 2019 (BGBl. I S. 466), sec. 5( l).
187
 pedestal than protection oftrade secrets.417 In the US on the other hand, the

DTSA has no specific clause on freedom of speech and expression.

However, wherever the enforcement of trade secrets restrains freedom of
the speech and expression, a First Amendment defence may be setup.
However, such cases are rare in the US and mostly in the context of
freedom ofpress on issues ofgreat public importance.aTs

8.22. ln India, the issue of conflict between trade secrets/confidential

information and freedom ofspeech and expression was dealt by the Delhi
High Court in Petronet LNG Ltd. v. lndian Petro Group.aTe The Court, in
this case, endeavoured to strike a balance and weighed in favour ofthe right

to freedom of speech and expression. The Court held that there was public
interest in the news reporting and that the grant of an injunction would
destroy the very essence of press freedom and the right of the general
pubtic to be informed on a matter of public concem. The Court emphasised
the importance of dissemination of news and free flow of ideas to public
interest while noting that unless the impugned piece of news is of such a
sensitive nature that the business or very existence of the commercial entity

is threatened, or it would gravely jeopardize a commercial venture, the

courts would be disinclined towards injuncting the same.

077
Sharon Sandeen and Ulla-Maija Mylly, "Trade Secrets and thc Right to lnformation: A Comparative Analysis
ofE.LI. and U.S- Approaches to Freedom ofExpression and Whistleblowing" 2l No h ('orolina Jorrnol oJ Lav
& Tcchnologv | (2020), availablc atl
https://open.nritchellhanrline.edu/cgi/viewcontent.cgi?anicle= I 5 0 I &context-facsch (last visited on February 22,
2024); Tanya Aplin, "A Critical Evaluation ofthe Proposed EU Trade Secrets Directive" paper no. 2014-25 ,qng s
college London Dickson Poon school of l,an, Legul stu.lies Research paper scries (2014). available it:
http:/idx.doi.org/ I 0.21391ssrn.2467946 (last visired on February 23,2024).
113
ld.
470
(2009) 158 DLT 759.

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8.23. Thus, it seems that freedom ofspeech and expression would not be easily
curtailed in the name of trade secrecy, especially given that it flows from
Article l9(l )(a).

iv. Pu trlic in te rest

8.24. The "public interest" exception is also a feature that can be found in
different jurisdictions. What amounts to public interest can vary according
to facts and circumstances as well as interpretation of the term by a
particular court. The Draft National Imovation Bill, 2008, in clause 11(a),
also provided disclosure held to be in public interest by a court of law to
be an exception. The term 'public interest' is of wide import and can vary

across jurisdictions. While the public interest exception is not as well

developed in the USa80. however, recital 21 of the EU Directive gives some
direction as to the interpretation of the term:

"ln line with

the principle of proportionality, measures, procedures
and remedies intended to protect trade secrets should be tailored to
meet the objective of a smooth-functioning internal market for
research and innoyation, in particular by deterring the unlawful
acquisition, use and disclosure of a trade secret. Such tailoring of
measures, procedures and remedies should not jeopardise or
undermine fundamental rights and freedoms or the ublic interest
such as oublic safetu. consunler Droteclion. oublic health and
environmental proteclion, and should be without preiudice to the
mobili o workers "Jst
(emphasis added)

Thus, the law must specify a "public intcrest" exception as well.

480
Sharon Sandeen and Ulla-Maija Mylly. "Trade Secrets and the Right to lnformation: A Conlparative Analysis
of E.U. and U.S. Approaches to Freedom ofExpression and Whistleblowing" 2l North Corolina Jotnal ofLat
& l'echnologlt I (2020), qvailable dtl
hnps://open.mitchellhamline.edu/cgi/viewcontent.cgi?anicle= l50l&contexFfacsch ( last visired on February 22.
2024\.
a3r
Directive (EU)2016/943 of8 June 2016 on the protection ofundisclosed know-how and business information
(trade secrets) against their unlawful acquisition. use and disclosure, avoilable qt', h(ps://eurlex.europa.eu/legal-
content/EN/TXT/PDF/?uri:CELEX:320 I 6L0943&rid=4.

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 E. Rentedies

8.25. The most vital aspect that a law must provide for is the remedies that are
available. The remedies against misappropriation of trade secrets must
include injunctive relief including interim injunctions, ex-parte injunctions
and permanent injunctions. Further, damages or rendition of accounts or
profits/disgorgement of profits, delivery up, surrender and destruction also
ought to be included. The remedies under the proposed Act, however, must

restrict to civil remedies and any criminal action should be left under the
applicable provisions of Indian Penal Code, 1860 or the Bharatiya Nyaya
Sanhita, 2023 and the Information Technology Act, 2000 or any other
statue that may apply.

8.26. Another aspect of relief that the proposed law must contain is from the
point of view of a defendant. There must be a provision for remedy in the
case of groundless threats of legal proceedings. Analogous provisions can

be found in other intellectual property laws such as Section 142 of the

Trade Marks Act, 1999, Section 60 of the Copyright Act, 1957, Section
I 06 of the Patents Act, 1970 and Section 23 of the Designs Act, 2000. Such

a provision will especially come to the aid of employees whose mobility

might be unreasonably curtailed in the garb of trade secrecy or non-
disclosure agreements that they may have been signed.

F. Procedural Issues

8.27. The Cornmission also considered cerlain procedural issues that the
proposed Act must deal with.

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 i. Limitation Pe riod

8.28. With regard to the limitation period, the same should be a period of three
years from the date of misappropriation or from the date when the holder

oftrade secret first gets to know or could reasonably be expected to know

that misappropriation has occurred. If no specific limitation period is
specified for a suit, then as per Arlicle I I 3 of the Limitation Act, 1963, the
limitation starts running for a time period of three years from when the
right to sue accrues. The same would apply to suits filed in respect of
misappropriation of trade secrets.

lt. Application of Commercial Courts Act, 2015

8.29. Further, on the aspect of procedural law, the provisions contained in the
Commercial Courts Act,20l5 should apply to suits brought in respect of
misappropriation of trade secrets. While trade secrets have not been
mentioned in Section 2(1Xc)(xvii) which deal with intellectual properry
rights, however, courts have held that the same would cover trade secrets
as well.a82 Given the significance of trade secrets as a commercial asset,

the expedited procedure under the Commercial Courts Act, 201 5 is best
suited to such suits in order to provide swift resolution.

ii i. Trade Secret Board/Registry

8.30. Another issue considered by the Commission was the setting up of a Trade
Secret Board that would function as a Registry for trade secrets. The
Ministry of Law and Justice had sent a draft Bill along with the reference
to the Commission and the Bill contained such a clause. The Commission

!x1
Sterlite Technologies Limited v..lnupan Singh & Or.r., CS (OS) 349/2022 (Delhi High Coun) : 2022 SCC
Online Del 2864; Sanofi Winthrop lndustries & lnr. v. Kirti lJ. Maheshwari &,Izr., CS(OS) 226512014 (Delhi
High Court).

l9r
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 is of the considered opinion that such a Registry may prove to be counter-

intuitive and may expose the Board to liability in case of any leak of
information. The task of protecting such sensitive information could prove
to be quite onerous and will be fraught with practical difficulties. Further,
the holders of trade secrets themselves may be apprehensive about
divulging their trade secrets in order to seek registration. If registration is
made optional in order to entitle parties to bring in a claim, such as is the

case with trademarks, it may inevitably lead to difficulties in enforcing

unregistered trade secrets as there may be an insistence on registration.
Further, putting in place adequate institutional measures in order to ensure
the security and confidentiality of the trade secrets so registered with the
Board may prove to be a herculean task. Hence, given the mounting
challenges that compulsory or optional registration may bring in, it is best

not to bring in the element of registration into the domain of trade secrets.
Not mandating registration also goes best with the fundamental pre-
requisite for trade secrets protection, i.e., secrecy of the underlying
information itself.

tv. Confi dentiality Measures

8.31. Lastly, the Commission thinks it frt to have in-built provisions in the Act
pertaining to confidentiality of proceedings relating to misappropriation of
trade secrets. Such a provision will espouse confidence and will make it
easier to adjudicate the dispute with the necessary and adequate disclosures

being made before the court by the parties without apprehension. The
concept of "confidentiality clubs" can be brought in via rules made under
the Act or those prescribed by the High Courts. Confidentiality clubs allow

analysis of documents comprising confidential information filed before the

courts in sealed covers that may be relevant to a suit, by restricting access

t92
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 to few persons including limited representatives from both the parties as

well some experts. All members forming part of this club are bound by
confidentiality.

8.32. The Madras High Court, in Amica Financial Technologies Pvt. Ltd. v. Hip
Bar Pvt. Ltd.,a|3 defined the purpose and constitution of confidentiality in
the following words:

17... ...Confidentiality clubs are typically employed in antitrust or

intellectual property litigation to protect confidentially sensitive
information. However, its constitution involves a careful balancing
exercise requiring the applicant to establish that there is a real risk,
either deliberate or inadvertent, of a party using the sensitive
information for a collateral purpose. An illustrative list offactors
which the Court ought to v,eigh in the balance have been set out in
the judgment of Hamblen, LJ of the UK Court of Appeal in The
Libyan Investment Authority y Societe Generale S.A [2015] EWHC
550 (QB):

"(l) The court's assessment of the degree and severity of the

identified risk and the threat posed by the inclusion or
exclusion of particular individuals within the confidentiality
club - see, for example, lnter Digiral Technologt Corporation
v Nokia [2008J E\4/HC 969.
(2) The inherent desirobility of including at least one duly
appointed representative of each party within a
confidentiality club - see, for example, l[/arner-Lambert v
Glaxo Laboratories fi9751 RPC 354.
(3) The importance of the confidential information to the
issues in the case - IPCom GmbH v HTC Europe [2013J
EWHC 52 (Pa).
(4) The nature of the confidential information and whether it
needs to be considered by people with access to technical or
expert knowledge - see IPCom GmbH v HTC Europe (supra)
(5) Practical considerations, such as the degree of disruption
that will be caused if only part of a legal team is entitled to
reviev, discuss and act upon the confidential information"

n8r
O.A. No. 794 of202l in C.S. No. tt7 of 2O2t (Comm.Div.) (Madras High Coun)

193
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 It is clear from the aforesaid discussion, that the onus of pleading
and establishing the necessity of a confidentiality club lies on the
applicant and that orders ofsuch nature cannol be made on the mere
ipse dixits of one party.

8.33. Confidentiality clubs have become a common feature in infringernent suit

rclating to Standard Essential Patents (SEPs). Further, constitution of
confidentiality clubs has also found formal recognition as can be seen
under Rule 17 of Chapter VII of the Delhi High Court (Original Side)
Rules, 20l8,aEa Rule 1 I of the High Courr of Delhi Rules Goveming patent

Suits, 2022,485 and Rule l9 of The Delhi High Court Intellectual Property
Rights Division Rules, )02).186 In addition to establishment of
confidentiality clubs, redaction of inforrnation on application by a party,
and publication of non-confidential version ofjudiciat decision can also be

incorporated by providing the same in the rules made in this regard under
the Act.

G. Datu E-rclusit'it|t

8.34. Test data and other data submitted before regulatory authorities may be
treated as confidential information or trade secrets by an entity. However,

in the considered opinion of the Conrmission, there is no need to include

data exclusivity within the purview of the proposed legislation on trade
secrets.

{3{ The Delhi High Coun (Original

Side) Rules,2018, No. 100/Rules/DHC, chap. Vll 'ule 17, qvailable at:
hnps://delhihighcourt.nic.in/uploads/courtrule/DownloadFile ACT2I X24lP9.PDF.
o3t The
High Cou( of Delhi Rules Coveming Patenr Suit; 2022, No. I4lRules/DHC, rule ll, avqilable qt:
https://delhihighcoun.nic.in/uploads/notifications/NotificationFile WPCZPIF I R3R.PDF.
436
The Delhi High Coun lntellecrual Properry Righrs Division Rul;. 2022. No. l3/Rules/DHC, ru le 19, avuilable
al; http://dhc.nic.in/writereaddata./uploadArlotificationNotificationFile WD6KNDKFB4G.pDF.

194
x
w/
8.35. This is specially so because the TRIPS Agreement does not explicitly
endorse data exclusivity or patent linkage in the manner desired by
developed nations. Prior to the negotiation of the TRIPS Agreement, many

countries permitted the reliance on originator test data to approve generic

products.487 In tum, simply proving bio-equivalence, meaning that their
product was chemically identical to the original product, was enough for
generic manufacturers. This approach was consumer-friendly as it
facilitated the introduction of generics into the market immediately after
the patent expiration. The significance of maintaining this traditional
approach is emphasized by recent reports such as the UN High-Level Panel

Report on Access to Medicines,a8s the WIPO Development Agenda,ase and

WHO Studies,ae0 all of which stress the importance of ensuring access to
medicines.

8.36. Data exclusivity and patent linkage can impact the implementation of
compulsory licenses. During a public health emergency, patent linkage and
data exclusivity should not hinder regulators from approving drugs
necessary to address the crisis. Article 39.3 of the TRIPS Agreement is not

intended to impose restrictions that would obstruct public health efforts.

However, even if such restrictions were implied, they would not withstand
the principles outlined in the Doha Declaration on Public Health.ael

r37 Srividhya Ragavan, "The Significance of the Data Exclusivity Debate and its lmpact on Gencric Drugs"
l(l) Journal Cf Inrellectual l\'opertv Studies 139 (201'71, @ailable
al: https://scholarsh ip.law.tam u.ed u/cgi/viewcontent.cgi?artic le- I 8 I 6&context=facscholar (las1 v isited on
Febtvary 25,2024).
138
United Nations, Report ofthe United Nations High Level Panel Report on Access to Medicines (September
14,2016\, available 4/: http://www.unsgaccessmeds.org/final-report/ (last visited on February 22. 2024).
13e Development Agenda for WIPO, World Intellectual Property Organization, available qt:
http://www. wipo. int/ip-development/enlagenda./. ( last visited F ebruary 22, 2024\.
{qrEd Silverman, "Hepatitis C. Drugs Remain Unaffordable in Many Countries, says Who
Study", Pharmalot,
(May 31, 2016), uvailahlc at. htlps://www.statnews.com/pharmalot/20 I 6/05/3 l/gilead-hepatitis-drug-prices-
who/(last visited Februarl 22. 1024t.
4er Worfd Trade Organisation, "The Doha Declaration Explaited", ovailable
a/; https://www.wto.org/english/tratop e/dda_e/dohaexplained c.htm (last visited February 22,2024'1.

195

6,/
8.37. The Commission further recommends that if deemed necessary, adequate
amendments be introduced in the existing legislations that mandate such
disclosure of test data and other data. However, the same would require
further consultation. research and del iberation.

8.38. In light of the aforesaid discussion and recommendations, a proposed Bill

on the Protection of Trade Secrets is being appended as Annexure-I.

'Ihe Commission recomrnends, accordingly.

----xxx----

r96 €h/
 ,9 i"\
IJ ustice Ritu Raj Awasthil
Chairperson

"1
[Justice K.T. Sankaranl I Pro r.) Anand Paliwall IProf. D.P. Vermal
Mernber Mernber Member

(o-
r. Reeta Vasishtal [Dr. Rajiv Manil
Member Secretarv Merrber (Ex-O//icio)

[Mr. M. Karunanithil IProf. (Dr.) Raka Aryal

Part-time Member Part-time Member

197
 ANNF]XUItE,-I

THE PROTECTION OF TRADE SECRETS BILL,2024

( of2024)

A Bill to provide for effective protection of trade secrets against

misappropriation so as to encourage innovation andfair competition.

BE it enacted by Parliament in the Seventy-Fifth Year of the Republic of

India as follows:-

CHAPTER I
PRELIMINARY

l. Short title and commencement.{ I) This Act may be called the

Protection of Trade Secrets Act, 2024.
(2) It shatl come into force on such date as the Central Govemment
may, by notification in the Official Gazette, appoint; and different dates
may be appointed for different provisions of this Act, and any reference in
any such provision to the commencement of this Act shall be construed as
a reference to the coming into force ofthat provision.

2. Definitions.-ln this Act, unless the context otherwise

requires,-

(a) "Court" shall mean a Commercial Court constituted under section 3,

or the Commercial Division of a High Court constituted under
section 4, of the Commercial Courts Act, 2015 (4 of 2016);
(b) "control" means ability to use the trade secret and to disclose it to
any third party;
(c) "holder of trade secret" means any person, natural or legal, having
lawful control over the trade secret;
(d) "misappropriation"means-
(i) acquisition ofa trade secret by a person without the consent,
express or implied, ofthe holder oftrade secret by:
(l) unauthorised access to, appropriation of, or copying of
any documents, ob.lects, materials, substances or
198

A\/
 electronic files, lawfully under the control of the holder
of trade secret, containing the trade secret or from
which the trade secret can be deduced; or
(ll) any other conduct which, under the circumstances, is
considered contrary to honest commercial practices; or
(ii) use or disclosure of trade secret without the consent of the
holder of trade secret, whether expressed or implied, by a
person who,-
(l) has acquired the trade secret unlawfully under sub-
clause (i); or
(ll) in breach of a confidentiality agreement or any other
duty not to disclose the trade secret; or
(lll) is in breach ofa contractual or any other duty to limit
the use of the trade secret; or
(iii) acquisition, use or disclosure ofa trade secret by a person,
who at the time of such acquisition, use or disclosure, knew
or ought, under the circumstances, to have known that the
trade secret had been obtained directly or indirectly from
another person who was using or disclosing the trade secret
unlawfully within the meaning of sub-clause (ii);
(e) "prescribed"means.-
(D in relation to proceedings before a High Court, prescribed
by rules made by the High Court;
(ii) in other cases, prescribed by rules made under this Act;
(0 "trade secret" means any information-
(i) 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;
(ii) that derives commercial value on account of being secret;
(iii) that has been subject to reasonable steps under the
circumstances, by the holder of such information, to keep it
secret; and
(iv) the disclosure of which is likely to cause damage to the
holder of such information.
Explanation.-For the purposes of sub-clause (f),

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 (II) expcriences and skills acquired by an employee in the
course of normal professional practice; or
(lII) any information disclosing a violation of any law
shall not amount to trade secret.

CHAPTER II
ACQUISITION, USE AND DISCLOSURE OF TRADE SECRETS

3. Rights of Holder of trade secret.{ ) A holder of trade secret

I
shall have the right to use and disclose his trade secret, which includes
licensing the trade secret.

(2) Any contract or agreement that the holder of trade secret enters
into to protect his trade secret, restrict access to it or prevent the disclosure
ofsuch trade secret shall be subject to the provisions ofthe Indian Contract
Act, 1872 (9 of 1872).

(3) A holder oftrade secret shall be entitled to institute proceedings

under this Act in respect of misappropriation of trade secret, to prevent
further misappropriation or disclosure of trade secret in the public domain.

4. Lawful acquisition, use and disclosure of trade secrets.--( I )

A trade secret may be tawfully acquired by,-
(a) independent discovery or crealionl
(b) observation, study, reverse engineering, disassembly or testing
ofa product or object that has been made available to the public or
that is lawfully in the possession of the acquirer of the information
who is not under a duty to limit the acquisition of the trade secret; or
(c) any other practice which is in conformity with honest
commercial practices.

(2) A trade secret may be lawfully acquired, used, or disclosed if

permitted by any law, pursuant to a law, or by contract.

(3) Acquisition, use or disclosure of a trade secret by means other

than those that fall within the purview of sub-sections (l) and (2), shall
amount to unlawful acquisition, use or disclosure of a trade secret.

200
V
 5. Certain acts of acquisition, use and disclosure of trade secret
not to be misappropriation of trade secrets.- The acquisition, use and
disclosure of a trade secret shall not constitute an act of misappropriation
when donel-
(a) to expose an unlawful act or professional or other misconduct; or
(b) in good faith to protect public interest.

6. Compulsory license.{l) The Central Govemment, if it is

satisfied, that there exist circumstances of national emergency or extreme
urgency involving substantial public interest, including situations of public
health emergency, national security etc., may require the holder of trade
secret to issue compulsory license for use of his trade secret to third parties
or to the Govemment.

(2) Any license issued under sub-section (l ) shall be subject to such

license fee having regard to the nature and value of trade secret, the
expenditure incurred by the holder of trade secret in developing and
maintaining the trade secret, and may be subject to such other conditions
and in such form as may be prescribed.

(3) Any person! legal or natural, acquiring a trade secret as a

consequence of operation of sub-section ( 1), shall have a duty to maintain
confidentiality of the information so received and shall not disclose it
further whether during or after termination of such license or use.

(4) The license granted under this section may be terminated by the
Govemment at any time after the circumstances specified in sub-section
( I ) cease to exist.

CHAPTE,R III
I.EGAL PROCT]EDINGS

7. Relief in a suit for misappropriation of trade secret.{l) The

relief which a court may grant in any suit for misappropriation of trade
secret includes -
(a) injunction, subject to such tenns, ifany. as the court thinks fit;

20r
a\d/
 (b) at the option of the plaintiff, either damages or an account of
profits;
(c) order for surrender and/or destruction of the documents, objects,
materials, substances, or electronic files in the possession or ownership of
the misappropriating party that contain or embody the trade secret; and
(d) order for recall, withdrawal, permanent removal, delivery-up
and/or destruction of goods or products whose conception, features,
functionality, manufacturing process, or marketing is substantially based
on a trade secret that has been misappropriated.
(2) The order of injunction under sub-clause (a) olsub-section (l)
may include afi ex parte injunction or any interlocutory order for any of the
following matters. namely.-
(a) for discovery of documents;
(b) preserving of goods, documents or other evidence which are
related to the subject-matter of the suit;
(c) restraining the defendant frorn disposing of or dealing with his
assets in a manner which may adversely affect plaintiff s ability to recover
damages, costs or other pecuniary remedies which may be finally awarded
to the plaintiff.
(3) The costs of all parties in any proceedings in respect of the
misappropriation oftrade secret shall be in the discretion of the court.

8. Suit for misappropriation,, etc., to be instituted trefore

Commercial Court.{ I ) Suit for the isappropriation of a trade secret
r.n

shall be instituted in a Commercial Coun having jurisdiction to try the suit.

(2) For the purpose of sub-section ( l), a "Commercial Court having

jurisdiction" shal[, notwithstanding anything contained in the Code of Civil
Procedure, 1908 (5 of 1908) or any other law tbr the time being in force,
include a Commercial Court within the local limits of whose jurisdiction,
at the time of the institution of the suit or other proceeding, the person
instituting the suit or proceeding, or, where there are more than one such
persons any of thern, actually and voluntarily resides or carries on business
or personally works for gain.

9. Confidentiality of proceedings.- In relation to any proceeding

conceming actual or apprehended misappropriation of a trade secret, the

202
6r-,,
court shall preserve the secrecy ofthe sub.ject matter of the dispute claimed
as a trade secret by reasonable means in such manner as may be prescribed.

10. Remedy in the case of groundless threats of legal

proceedings.-( 1) Where any person claiming to be the holder of trade
secret, by circulars, advertisements or otherwise, threatens any other
person with any legal proceedings or liability in respect of an alleged
misappropriation of trade secret, any person aggrieved thereby may
institute a declaratory suit that the alleged misappropriation to which the
threats related was not in fact misappropriation oftrade secret ofthe person
making such threats and may in any such suit-
(a) obtain an injunction against the continuance ofsuch threats; and
(b) recover such damages. if any, as he has sustained by reason of
such threats:
Provided that this section does not apply if the person making such
threats, with due diligence, commences and prosecutes an action for
misappropriation of trade secret claimed by him.

(2) A suit under sub-section (1) shall not be instituted in any court
inferior to a Commercial Court having jurisdiction.

CHAPTER IV
MISCELLANEOUS

ll. Power of High Courts to make rules.-The High Court may

make rules consistent with this Act as to the conduct and procedure in
respect of all proceedings before it under this Act and in particular with
regard to confidentiality of proceedings as provided under section 9.

12. Power of the Central Government to make rules.-(i) The

Central Govemment may, by notification in the Official Gazette, make
rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the

foregoing power, the Central Government may make rules for the purposes
of grant of compulsory license, determination of license fee, other
conditions, form and termination thereof under section 6.

203
q--
 (3) Every rule made under this section shall be laid, as soon as may
be after it is made, before each Ilouse of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session or
in two or more successive sessions, and il, before the expiry ofthe session
immediately foltowing the session or the successive sessions aforesaid,
both Houses agree in making any modification in the rule or both Houses
agree that the rule should not be made, the rule shallthereafter have effect
only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that rule.

13. Act to be in addition to, and not in derogation of' other

remedies.-Nothing in this Act shall be construed as abrogating any right
orjurisdiction to restrain a breach oftrusl or confidence.

k,,.'
201