INDIA Law and Practice Contributed by: Pravin Anand and Rohil Bansal, Anand and Anand
As previously mentioned, trade secrets in India are protected by virtue of contractual obligations that are regulated by the Indian Contract Act, 1872. Therefore, if there is a specific agreement with the employee to maintain confidentiality of any information given to them in the course of business, which renders exclu - sivity to their employer’s business, such employee can be injuncted by the court from disclosing such confi - dential information to a third party without the express consent of their employer. In AIA Engineering v Bharat Dand , AIR 2007 Gujarat (NOC) 1456, the court held that “it is no doubt true that, under common law, a servant can be prevented from diverting the trade secret and, even in a given case, a third party can also be restrained from acting in any manner on the basis of receiving such trade secret”. A rights-holder of a trade secret can also bring an action against the defendant for tortious interference where it has induced an employee to breach a con - tractual confidentiality obligation to the employer, as the court cannot allow misuse of a trade secret by a third party under the broad principles of equity, which stipulate that whoever has received information in confidence may not take unfair advantage of it (upheld in the John Richard and Konrad Wiedemann cases). As regards claims founded on unlawful interference with the business of the claimant or of enticement to breach of contract, it is important to show that a clear violation or wrongful gain has been caused to the employee, as well as wrongful loss caused to the employer. It should also be shown that some trade secret or confidential information was taken without authorisation by the employee. However, where it is impossible to identify the rea - sons behind the breach of the existing contract by the employee and the reasons for the employee joining a new employer, the court has opined that the claim cannot be enforced (see Modicare Limited v Gautam Bali CS (Comm) 763/2016)). 1.14 Criminal Liability There is no specific offence of trade secret misap - propriation under Indian law. The offences of criminal
breach of trust, theft or cheating may apply, as per the facts of a particular case. See the detailed analysis in 9.1 Prosecution Process, Penalties and Defences . The owner of a trade secret may simultaneously initi - ate civil and criminal proceedings against misuse of their trade secrets. A civil action can lead to damages (refer to 7.2 Meas- ures of Damages ) and injunctive reliefs (refer to 7.3 Permanent Injunction and 7.5 Costs ). 1.15 Extraterritoriality A civil dispute concerning a trade secret claim can be brought before any civil court in India where the defendant resides, carries on business or personally works for gain, or where the cause of action wholly or partly arose. If the person who indulged in misappropriation that occurred in another country is located in India, or if a part of the cause of action arose in India, the con - cerned Indian civil court will have jurisdiction to enter - tain a claim for injunctive relief, damages, costs, etc. Furthermore, if a trade secret misappropriation is car - ried out outside India by a person located in India or through a computer system located in India, a criminal action can also be simultaneously filed against the wrongdoer by the claimant in India. See also 9.1 Pros- ecution Process, Penalties and Defences . 2. Misappropriation of Trade Secrets 2.1 The Definition of Misappropriation The courts in India have passed a catena of judgments identifying the essential elements to be established by the rights-holder when proving trade secret misap - propriation. The word “misappropriation” finds mention in Sec - tion 314 of the Bhartatiya Nyaya Sanhita, 2023, which states that a person who dishonestly misappropriates or converts the movable property of another for their own use shall be punished with imprisonment of a term that may extend to two years and a fine.
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