The Conundrum Of Co-Existence Of Patents And Trade Secrets

  • Anamika Mishra & K.Amoghavarsha

1.  Introduction

Intellectual property rights have been characterized as a bundle of intangible rights ensuring the protection of commercially valuable insights. Patent and Trade secrets are two methods used by innovators and pioneers to protect their innovation. Patent and trade secret are the two significant strategies for ensuring the protection of innovation that underpins a competitive advantage. While this has been valid for quite a long time, the legal scenario where organizations must pick between them has changed drastically as of late. Organizations are frequently confronted with the issue of whether to protect the property through patent or save the data by means of a trade secret. There are huge contrasts between the sort and level of assurance gave by the patent law and the trade secret law that influence innovators’ decisions between the two.

Amidst all the COVID-19 related interruption, the Delhi High Court has rendered a significant decision in the case of John Richard Brady and Ors v. Chemical Process equipment’s P. Ltd[i] on the issue of the dilemma of interconnection and the relation of patents and trade secrets with potential expansive outcomes.

2.  Intersection Between Trade secret and patent

The Indian context about the relationship between patent and trade secrets has been different. In the case of Kewanee Oil Co. v. Bicron Corp[ii], it was held by the U.S. SC court that pre-emption pf such laws were concerned with the subjects and the laws are considered to be not preempted if the subject is secret and not in the knowledge of the general public in the business.

In India with respect to trade secrets, there is no definite statutory protection for trade secrets. The Indian courts have instead taken an approach of common law by upholding trade secrets on the basis of common law and equity and breach of confidence which is on a similar footing with breach of a contract. An owner of a trade secret as a remedy can obtain an injunction which restrains the licensee from revealing the trade secret, compensation for any losses suffered in consequence of disclosing a trade secret. In the present case, Delhi HC resorted to a broader perspective regarding equitable jurisdiction and injunction was granted even in the absence of any contract.

3. Interpretation by the court

In a single judge decision, it was held that the patent and trade secret cannot be granted to the same product/process. The court stated that when a patent has been applied for and expired too, the invention comes under the public domain and henceforth, a claim for trade secret protection cannot be claimed.[iii]

The most important issue raised before the court was “whether an invention which does not qualify as patented product and has no property right therein, can acquire property rights by the third person entering into an agreement of exchange of Know-How and thus claiming confidentiality”.

The court said it cannot happen so. According to the Hon’ble court’s observation, for any product or process without a patent being applied for it, its know-how would be in the public domain. It was also opined by the court that in India, trade secrets and confidential information are not equivalent to property. There exists a criterion of sufficiency and best mode requirement in patents i.e. they require the complete disclosure of the product/process for it to be operated sufficiently and in its best possible mode[iv]. In addition to this, the compulsory licensing regime ensures that there is complete disclosure of the patent for the licensee to make the product/process.

As the plaintiffs in the above case did not have any subsisting protection of their patent in India and the patent had expired in the US, the court held that the product was in the public domain. The court said that the plaintiff was seeking a judicial creation of a monopoly for perpetuity which was impermissible and would be in complete contrast to the scope and objective of the Patent Act and violating public policy and judicial discipline.

This judgement has far-reaching consequences if it is applied beyond the facts of this case specifically. In the present times, trade secrets and patents are seen to be complementary to each other irrespective of the distinction. A single invention has various aspects and those aspects are protected in different ways i.e. some are protected via patent law and some by trade secrets depending on the specific aspect[v]. This is known as a layered protection model.

The finding of the court that “know-how” is in the public domain without any patent being applied thereon is in contrary to the position taken in previously, wherein it has been established that know-how is protected even if no patent has been applied for in respect thereof.[vi]

4. Conclusion

Earlier deciding whether to protect property through trade secret or patent (or both) used to be a genuinely clear exercise; or if nothing else we as a whole expected it was. Any transition initially feels disruptive but in any case, pendulums swing, and frameworks working in pressure normally come back to stability. Similarly, in this case, the change might be discomforting but will be stability in balancing the intersection of patents and trade secrets.

Regardless of the choice to use trade secret or patent for specific development and innovation, there is currently a more prominent need to focus on how information assets are managed. This is the fleeting property and requires a unique administration centre to ensure integrity, regardless of whether it is held as a trade secret or develops into a patent.

The authors are 3rd Year Students of NLU, Odisha

[i] 416 U.S. 470 (1974).

[ii] AIR 1987 Delhi 372.

[iii] Prof. Dr. Claudio De Simone & Anr v. Actial Farmaceutica, CS(OS) 576/2019.

[iv] Patents Act 1970 s.10(4).

[v] Michael R. Mcgurk & Jia W. Lu,The Intersection of Patents and Trade Secrets, 7 HASTINGS SCI. & TECH. L.J. 189 (2015).

[vi] Seager v. Copydex,1 WLR 923 (1967).