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New Legislation For Trade Secrets


Prelims: Current events of national and international importance.

Mains: General Studies III: Issues relating to intellectual property rights

Why in the News ?

The 22nd Law Commission, under the leadership of Justice Ritu Raj Awasthi, has recently proposed the introduction of a new law aimed at safeguarding trade secrets. This recommendation, issued on Wednesday, underscores the necessity for legislative measures to protect valuable proprietary information, while also considering provisions for exceptions related to whistleblower protection, compulsory licensing, government use, and public interest.
Source: IE

📌 FYI on Prelims

Significance and Historical Context

  • Historical Precedent: The concept of trade secrets gained prominence in 1977 when the Indian government requested Coca-Cola to disclose the formula for its cola drink, leading to the company’s temporary exit from the Indian market.
  • Contemporary Relevance: Recent developments, including the National Intellectual Property Rights Policy, 2016, and parliamentary discussions, have reignited the focus on legislating to protect trade secrets.

Trade Secrets

  • Definition: Trade secrets are classified as intellectual property rights encompassing confidential information that may be commercialized through sale or licensing agreements.
  • Qualification: For information to be recognized as a trade secret, it must fulfill certain criteria:
    • It holds commercial value by virtue of its secrecy.
    • It is known only to a restricted group of individuals.
    • Measures have been taken by the rightful holder to maintain its confidentiality, often through the implementation of confidentiality agreements with business associates and employees.
  • Protection: Unauthorized acquisition, use, or disclosure of such confidential information, contrary to established commercial practices, constitutes an unfair practice and a breach of trade secret protection.

Necessity for New Legislation

  • Rationale: The recommendation for new legislation stems from the absence of a dedicated legal framework for the protection of trade secrets in India.
  • Current Status: Presently, trade secrets are safeguarded under general contractual laws, common law principles, criminal statutes, and equity considerations.
  • Government Initiative: The 289th Law Commission Report, titled ‘Trade Secrets and Economic Espionage,’ was prompted by governmental discussions highlighting the need for legislation in this domain.

Proposed Framework for Protection

Legislative Progression

  • Initiation: The Department of Legal Affairs and the Legislative Department initiated discussions on enacting the Economic Espionage Act and Trade Secrets Protection Act.
  • Commission’s Involvement: The matter was subsequently referred to the Law Commission in October 2017, tasking it with conducting a thorough evaluation and proposing potential legislative measures.
  • Comprehensive Study: The Law Commission conducted extensive consultations with experts from various sectors, including the judiciary, academia, government, and industry, to formulate a comprehensive approach.

International Perspectives and Draft Bill

  • Global Context: The Commission examined international agreements such as the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and studied legislative frameworks from jurisdictions like the UK, USA, EU, and Germany.
  • Draft Legislation: In response to its findings, the Commission prepared a draft Protection of Trade Secrets Bill, 2024, aimed at addressing the complexities of trade secret protection in the Indian context.

Economic Espionage Concerns

  • Government Targets: The report highlights instances where even government-held trade secrets have been targeted by foreign entities, necessitating comprehensive legislation to address economic espionage.
  • Unified Approach: A unified statute is proposed to tackle all aspects related to trade secret leakage and economic espionage, providing a cohesive framework for protecting sensitive information.

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