The protection of trade secret and legal instruments

As businesses keep growing, to sustain it they are resorting to different strategies. The trade secrets and other confidential information of businesses play an important role in both domestic and international investment. 

Trade secrets are considered an invisible part of a company's Intellectual property (IP). These are the most valuable assets of a business. Competitive advantage in the marketplace may rely on a business having certain information which its competitors do not. However, unlike more tangible assets, the law may not automatically prevent others from taking or using valuable information.

Any sort of confidential business information, commercial methods, design, instrument and pattern for commercial applications that provide a competitive advantage and economic benefit to an organisation and is reasonably ascertainable by others is considered as a trade secret. 

The law of the protection of confidential information effectively allows a perpetual monopoly in secret information because it does not expire, unlike a patent. The lack of formal protection means that a third party is not prevented from independently duplicating and using the secret information once it is discovered. 

The protection of trade secrets deals with Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). According to the TRIPS Agreement, a trade secret that is not generally known or freely accessible to the public and has a commercial value needs to be kept as a secret by the owner to ensure its secrecy. This multilateral agreement on trade secrets specifies the trade secret as undisclosed information which protects the trade secrets from illegal or unfair practices. 

The unfair usage of such information is opposite to honest commercial practices by individuals other than the holder. Nevertheless, a trade secret owner cannot stop others from using the same technical or commercial data to acquire or develop similar information by themselves through research and development, reverse engineering, market analysis or by any other means. 

Specifically, according to Section 7, Article 39, paragraph 2 of the Trade-related aspects of Intellectual Property Rights (TRIPs) Agreement, information are protected as a trade secret, if the information is not generally known to the public; confers some kind of economic benefit on its holder (where the benefit must have been originated specifically from its not being publicly known, not just from the value of the information itself); and the information possesses commercial value because it is secret and that those in lawful possession of the information have taken steps to ensure its secrecy.  

The absence of a specified time limit for which protection is afforded in the case of trade secret protection is a significant feature. For this reason, Coca-Cola and WD-40 have long-standing secrets for their formula.

In the perspective of Bangladesh, there is no precise law regarding the protection of trade secrets. But in different Acts, legal protection of trade secrets exists, i.e., in a disorganised way. For example, the Patent and Designs Act, 1911, the Contract Act, 1872, Competition Act, 2012 and the Penal Code, 1860 deals with the legal protection of trade secrets. 

Specifically, Section 49 of the Patent and Designs Act, 1911 says that a person can afford to prevent disclosures of information about industrial designs while it is disclosed in bad faith.

Illustration: TBS

Additionally, Section 73 of the Contract Act, 1872 entitles a party to receive compensation for loss or damage caused by a breach of contract. This includes Confidentiality Agreements and/Non-Disclosure Agreements which are used to protect confidential information. 

The Preamble of the Competition Act, 2012 could be read to extend the realm of antitrust practices to mala fide disclosures of information. Moreover, Section 406 of the Penal Code, 1860 punishes for the offence of Criminal Breach of Trust for 3 years imprisonment or fine or both.

But these existing laws for trade secrets are not up to date, e.g., Section 49 of the Patent and Designs Act, 1911 have little scope to protect trade secrets as it is not applicable for all trade secrets.

In Bangladesh, trade secrets are not popular due to weak intellectual property rights enforcement as well as limited knowledge and skills among law enforcing agencies. Due to the lack of statutory provisions on trade secrets, the courts of Bangladesh protect the right by following common law principles or based on principles of equality, tort, the monopolies and restrictive trade practices, and the laws governing employee or employer relations and fiduciary purposes and obligations. Furthermore, collective management institution information is absent in the private and public sectors.

The growth of a country can only be made through skill development and innovations. But, without proper legislation by the government on protecting the trade secrets of businesses, this cannot be ensured. Being a signatory party of the TRIPS Agreement, Bangladesh needs to ensure better enforcement of trade secrets through good legislation, proper legal and administrative support. The judiciary can play a vital role in these regards by setting a precedent. Even our neighbour India does not have any trade secret law but then again they are safeguarding it by way of legal precedent. 

The government should introduce different specialised training programs on trade secrets for the judiciary, public and private sectors. Moreover, a specialised department should be established for trade secret protection. Furthermore, the government should take initiative to introduce the World Intellectual Property Organisation training initiatives at the root level and with educational institutes.

We can follow the footsteps of the US by the way they have enacted the Economic Espionage Act, 1996 for trade secrets. State-level laws and federal level laws are used for offences like misappropriate related cases, and foreign offences like international corporate competitors, transactional criminal organisations trying to steal data by way of cyber-enabled ways.

Companies and institutions also should take proper steps for trade secrets such as keeping confidential instruments of the business in locked storage areas, satisfactory protection in cyberspace, restrictions on accessibility and other steps which will make their trade secret more secure. Companies can even protect confidential information through non-compete and non-disclosure contracts with their employees. 

For a growing economic country like Bangladesh, innovative ideas and formulas can only flourish in an environment that facilitates fair competition. On the other hand, insecure trade secrets are a major threat. Trade secret protection in Bangladesh needs to be improved. The passing of a trade secret law is crucial for Bangladesh. Companies or institutions should make their own trade secret policy for their betterment. It urgently needs to strengthen the intellectual property rights services and enhance them. 

Mehadi Hasan is from the Department of Law, North South University. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.