Trade Secrets 2020 Comparisons

Last Updated April 28, 2020

Law and Practice

Authors



Shardul Amarchand Mangaldas & Co is one of India’s leading full-service law firms and is recognised globally for its exceptional practices in M&A, private equity, insolvency and bankruptcy, competition, dispute resolution, capital markets, banking and finance, and projects and project finance. With over 115 partners across ten practice groups, the firm is at the helm of major transactions and litigation across all industry segments in India and advises leading multinationals on their entry into the Indian market and on legal strategies impacting their business. The IP team has over 45 members and assists on a range of IP-related issues, including application filing, prosecution, and post-grant formalities for trade marks, patents, copyright and designs. On the contentious side the team assists in handling proceedings before Indian courts and IP tribunals. It also assists in conducting pre-filing formalities, including searches, analysis, patent specification drafting and attendant advisory. The team has also acted for clients on issues relating to breaches of confidentiality, trade secret violations and the like.

In India, there is no specific statute for the protection of trade secrets. Trade secrets are protected under the principles of equity and the law of contracts. The Indian Contract Act, 1872 and the Information Technology Act, 2000 (for digital contracts) are the statutes under which trade secrets may be protected. There is no conflict between these two statutes and they are read together wherever necessary. Cases relating to protection of trade secrets are ordinarily adjudicated on a case-by-case basis, depending on their facts.

Since trade secrets are primarily protected under the principles of equity and the law of contracts, information which is maintained as a secret and protected by its owner from disclosure to the public may be protected as a trade secret. The three factors that cause a piece of information to be considered a trade secret are:

  • the information not being generally known, or readily accessible by people who normally deal with such information;
  • the information having commercial value as a secret; and
  • the lawful owner of the information taking reasonable efforts to maintain its secrecy.

Courts, in adjudicating issues relating to the enforcement of trade secrets, have provided protection to, inter alia, client databases, technical information and the concept of a television programme. The cases in which such protection was provided are detailed below.

Database of Client Information

In the case of Diljeet Titus, Advocate v Alfred A. Adebare And Ors, (2006(32) PTC 609(Del)), which related to the theft of client information by an attorney at a law firm, the court held that “The information about clients and solicitors also to some extent is in public domain where it appears in printed directories and everyone can use the same. However, as an advocate or a law firm develops its work and relationship with other law firms or clients, the details about the particular persons in such law firms handling certain nature of work or as to which officer in a client’s company is material for getting the work becomes of great importance. Such a list is of great importance to an advocate or a law firm. The mere fact that defendants would have done work for such clients while being associated with the plaintiff would not give them the right to reproduce the list and take it away. It may again be emphasised that it is possible that a part of this information is retained in the memory of the defendants and if that is utilised no grievance can be made in this behalf. This would, however, be different from a copy made of the list.” The court further held that since the plaintiff and the defendant were involved in competing businesses, providing legal services, the defendant’s use of the list of clients, opinions and agreements of the plaintiff would prejudice the plaintiff. Therefore, the defendant was found to be taking advantage of the plaintiff’s confidential information.

Technical Information

In the case of John Richard Brady and Ors v Chemical Process Equipments P. Ltd and Ors (AIR 1987 Delhi 372), the court held that the specifications, drawings and other technical information, in this case in relation to the fodder production unit (FPU) of the plaintiff, which were transferred to the defendant were confidential in nature. In this case, the court relied on the findings in the case of Saltman Engineering Co v Campbell Engineering Co, ((1948) RFC 203), in which the court held that:

  • If two parties make a contract, under which one of them obtains for the purpose of the contract, or in connection with it, knowledge of some confidential matter then, even though the contract is silent on the matter of confidence, the law will imply an obligation to treat such confidential matter in a confidential way as one of the implied terms of the contract, but the obligation to respect confidence is not limited to cases where the parties are in confidential relationship.
  • If a defendant is proved to have used confidential information, obtained directly or indirectly, from a plaintiff, without the consent, express or implied, of the plaintiff, he or she will be guilty of an infringement of the plaintiff’s rights.
  • It would not matter the least bit whether there was a contract if the defendants got those drawings into their hands knowing, or knowing shortly afterwards, that they belonged to Saltmans, that they were obviously confidential matter, and that they had got them into their hands for a strictly limited purpose.

The court also held that for information to be confidential, it must, apart from a contract, have the necessary quality of confidence about it, such that it must not be something which is public property and public knowledge.

In the case of Homag India Private Ltd v Mr Ulfath Ali Khan & Anr (2012 SCC OnLine Kar 9199), the court held that non-existence of an actionable right would not be assumed, merely due to the absence of a contract between the parties, as long as the petitioner could establish the wrongful disclosure of its proprietary information by the defendant. The court also held technical information relating to the manufacturing process and technical know-how of the plaintiff’s machine to be confidential in nature.

Concept of a Television Programme

In the case of Anil Gupta and Ors v Kunal Dasgupta and Ors (2002(25) PTC 1 (Del)), the court deliberated on whether a concept for a television programme developed by the plaintiff qualified as confidential information. The court held that, although the concept of the television programme was developed by the plaintiff based on material which was already publicly available, the final product was the outcome of the application of the plaintiff’s intellectual capabilities, pursuant to which the concept qualified as confidential information.

There are no codified elements in place for the protection of a trade secret. As mentioned in 1.1 Sources of Legal Protection for Trade Secrets, trade secrets are protected under the law of contracts. The elements constituting a trade secret are discussed in 1.2 What is Protectable as a Trade Secret. The existence of these elements, along with misuse on the part of the defendant of the trade secret, are vital for the plaintiff to seek protection of the trade secret. In addition, judicial precedent has held that, even in the absence of a written agreement between the parties, as long as the person in receipt of the information was aware of its confidential nature, that information could be a trade secret.

When adjudicating matters pertaining to trade secrets, courts apply the three-prong test discussed in 1.2 What is Protectable as a Trade Secret. One of the elements of this test is whether the owner of the trade secret has taken reasonable measures to protect its trade secret.

Please note that India is also a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights. Article 39(2) of the Agreement envisages that trade secrets are information with commercial value, which are not in the public domain, and in relation to which the owner has taken reasonable steps to maintain secrecy. Based on a review of judicial precedent it may be concluded that, aside from the traditional form of entering into a non-disclosure agreement, if the trade secret owner has communicated the sensitive and confidential nature of the information under disclosure, then even equitable relief is available to him or her.

For example, in a case wherein the information believed to be a confidential was already known to an ex-employee, owing to her designation in the organisation, that information was not found to be confidential in nature. There was an implied inference that the organisation alleging misappropriation of its information had not taken reasonable measures to protect the information.

Furthermore, in cases wherein information was shared by the plaintiff with the defendant under confidence and, if misappropriated, could have led to competitive disadvantage to the plaintiff, that information was found to be confidential in nature, as reasonable steps were taken by the plaintiff to protect his or her information.

The disclosure of a trade secret to an employee does not extinguish the sensitive nature or protection of the trade secret. It is usually incumbent on the employee to abstain from disclosing or misusing the trade secret. In such cases, entering into non-disclosure agreements with employees assists in protecting the trade secret.

A trade secret ceases to have protection under law if any person who does not have legal access to it is able to decipher it by working on, or with, publicly available information. Such instances of adopting the publicly available information as a starting point and working schematically backwards to arrive at the information amounting to a trade secret is known as an act of reverse engineering. Usually, in a suit involving trade secret misappropriation, reverse engineering is one of the defences taken by the defendant.

Please note that computer software and/or technology are not treated differently if they are trade secrets. The difference arises only in cases where statutory protection is sought. The statutory protection is granted only upon the disclosure, or publishing, of the relevant information in accordance with Indian law.

Since there is no statutory protection for trade secrets and they are protected under the law of contracts, the protection ceases only when a trade secret is disclosed and it becomes public or when the sensitive nature of the trade secret is compromised. There is no distinction between voluntary and accidental disclosure of a trade secret made in India. Any disclosure of a trade secret, irrespective of the circumstances in which it was made, would lead to cessation of protection as a trade secret. Controlled disclosure of a trade secret in India would be disclosure under contract, in which case the owners of trade secrets are required to prove that their disclosure amounted to breach of contractual obligations. Furthermore, if the right-holder apprehends an unauthorised disclosure of its trade secret, the owner may seek assistance from the court for equitable relief.

A trade secret owner can license its trade secret effectively by placing confidentiality and non-disclosure obligations on the recipient. A trade secret which is disclosed to a licensee continues to be a trade secret. An owner of a trade secret can protect it through stringent clauses in a licensing agreement. For instance, a trade secret owner can impose restrictions on the contracting party which prevent it transferring information to its affiliates. Where the use of the trade secret by the licensee results in the development of a new technology or work product having intellectual property value, the owner of the trade secret may also seek an assignment back to it, of all improvements and modifications, so as to limit circulation and disclosure.

Unlike copyrights, patents, designs and circuit layout designs, a trade secret is not really a "property right" as there are no exclusive rights assigned to the trade secret owner. There is no fixed statutory term for protection of a trade secret unlike other forms of intellectual property.

It is possible for a plaintiff to assert trade secret rights in combination with other forms of intellectual property rights. There is a difference between protection in the form of a trade secret and under copyright law. While trade secret protection protects the underlying data, copyright protects the expression of that data. The Indian courts have provided protection to a trade secret, along with copyright protection, under the Copyright Act, 1957 in the following cases.

Zee Telefilms Ltd v Sundial Communication Pvt Ltd, (2003(3)MH LJ)

This case involved a dispute relating to a concept for a television programme developed by the plaintiff, which was thereafter conceived by the defendant. The plaintiff had presented its concept for the television programme to the defendant, in anticipation of a collaboration. The court held that since there was substantial similarity between the works of the plaintiff and the defendant, a clear case of copyright infringement was made against the defendant. The court also ruled that the use of the plaintiff’s concept by the defendant was in the nature of breach of confidentiality, which could prejudice the plaintiff’s business.

John Richard Brady and Ors v Chemical Process Equipments P Limited & Another, (AIR 1987 Delhi 372)

In this case, the court held that the plaintiff was successful in establishing a prima facie case of copyright infringement and breach of confidentiality in relation to its technical information, specifications and drawings. Accordingly, the defendant was restrained from selling products related to the plaintiff’s drawings and from transferring technical know-how and product specifications owned by the plaintiff.

Diljeet Titus and Ors v Alfred A. Adebare and Ors, 2006(32)PTC 609(Del)

In this case, the plaintiff had instituted a suit alleging copyright infringement of its privileged information and breach of confidentiality by the defendants. The court held that the information about the working relationship between the firms and the role of an individual person in the firm was confidential in nature. Furthermore, the court also upheld copyright in relation to a database including client information.

Most of the cases in India in relation to trade secrets involve an element of misappropriation. It is possible to bring a claim of breach of fiduciary duty against an employee who steals a trade secret. Diljeet Titus and Ors v Alfred A. Adebare and Ors (2006(32)PTC609(Del)) was one such case where the plaintiff instituted a suit against its ex-employees, pressing charges in respect of breach of confidential information and infringement of copyright. The plaintiff averred that the defendants had acquired the client-related information and templates of the firm. The court held that the acts of the defendants did amount to breach of confidentiality. Furthermore, the court held that the use of the plaintiff’s information by the defendant could lead to competitive disadvantage to the former and it would be difficult to undo such harm. Therefore, the plaintiff was successful in obtaining injunctive relief against the defendants.

Additionally, since India is a common law country, relief for tortious interference is available. However, we are yet to see a case which involves tortious interference along with breach of confidentiality.

In order to prove trade secret misappropriation, an owner is required to plead the particulars of the trade secret(s) which is/are the subject matter of the dispute. The plaintiff is not required to divulge the particulars of the trade secret; however, it is vital for the plaintiff to itemise the information believed to be a trade secret. It is also imperative for the plaintiff to show how the information, believed by him or her to be a trade secret, is different from the information that already exists in the public domain.

The plaintiff is required to show how the trade secret was actually used or misappropriated by the defendant. The plaintiff is required to provide details of the manner in which the information, believed to be a trade secret, was divulged, to the prejudice of his or her interests.

If the dispute involves an ex-employee, it is beneficial for the owner if he or she is able to prove that the defendant gained access to the trade secret through unlawful means. In order to build a compelling case, the pleadings should disclose the manner in which the defendant obtained the trade secret, which was not feasible for him or her during the course of employment. In the case of American Express Bank Ltd v Ms Priya Puri, (2006(3) L.L.N.217), the plaintiff failed to show that the defendant obtained the information by conniving with her colleagues. It was concluded by the court that, owing to her position in the organisation, it was likely that the defendant was already in possession of the information believed to be a trade secret by the plaintiff. Furthermore, there was no reasoning given by the plaintiff for its allegation of retrieval of information by the defendant through her colleagues. Therefore, the plaintiff was unable to obtain injunctive relief against the defendant.

There is no difference in the elements of a claim for trade secret misappropriation when an employee of the owner is involved. However, it has been observed that, in such cases, courts take the following factors into consideration:

  • whether the information that is believed to be a trade secret by the owner qualifies as one, mere skill or expertise acquired by the employee during the course of employment is not a trade secret;
  • whether the employee already had access to the information, owing to his or her designation in the organisation, leading to an inference that there could be no reason for the employee to steal or embezzle the information; and
  • whether the information that is believed to be the trade secret is in the public domain.

If there is a confidentiality agreement entered into between the employee and the employer, it is incumbent on the employee to not divulge trade secrets and confidential information to any third party.

It is incumbent on the parties in a joint venture to refrain from divulging the trade secrets and confidential information of the other party. In Fairfest Media Ltd v ITE Group PLC, (2015(2) CHN Cal, 704), the parties had entered into a non-disclosure agreement (NDA) prior to a proposed joint venture agreement. Following this agreement, the appellant shared its confidential information relating to marketing with the respondent. The NDA, however, expired after six months and the respondent withdrew the proposal for joint venture agreement. It was alleged by the appellant that the respondent was in possession of its confidential information. The court ruled in favour of the appellant. It was ruled that, even in absence of the contract, it was imperative for the respondent to maintain the confidentiality of the information shared with it. The confidential information of a party cannot be used by a third party as a springboard to gain a competitive advantage. Therefore, the remedy to the appellant was held to be not dependent on the existence of the contract, and the rights of the appellant were protected as per the principle of equity.

The Official Secrets Act, 1923 is a piece of legislation in India designed to curb espionage and to impose criminal penalties against any individual attempting to get access to a secret information that may prejudice the security of the State. Legislation relating specifically to industrial espionage is yet to evolve in India. The Information Technology Act, 2000 also deals with this issue under Section 72. It imposes a penalty which may extend to a fine of INR2 lakh, or imprisonment for up to two years, on any person who gains access to an electronic record, book, register, correspondence, information, document or other material, without the consent of the concerned person. Additionally, an owner of a trade secret has the option to sue the defendant for breach of contractual obligations, in case of any instance of trade secret misappropriation.

The best practice adopted for protection of trade secrets in India is a robust contractual arrangement. There are no industry specific practices relating to trade secrets and this would normally depend on the nature of the trade secret, the extent of the disclosure and the recipient of the information.

There are no standardised forms for exit interview formalities. Ordinarily, the exit formalities would depend on the particular policies of an organisation.

Courts in India have been cautious to carve out a distinction between general knowledge or skills and protectable trade secrets. It is indisputable that certain facts and information about an organisation come to the knowledge of an employee during his or her employment. Such information and facts cannot qualify as trade secrets. Similarly, the mannerisms and modalities of a business, and rates and prices of a particular business commodity, which are generally known to the public, are not protectable as trade secrets. Additionally, the skill and expertise that an employee inherits owing to his or her own efforts are also not protectable trade secrets. It is, therefore, crucial for the owner of the trade secret to indicate the nomenclature and itemise the information that is believed to be a trade secret (Star India Private Limited v Laxmiraj Seetharam Nayak, (2003 (3) Mh.L.J).

Indian courts have, in the past, refrained from enforcing the doctrine of inevitable disclosure, holding it to be in contravention of Section 27 of the Indian Contract Act, 1872, which prohibits the enforcement of any agreement that prohibits exercise of a trade or a profession (American Express Bank Ltd v Ms Priya Puri, 2006(3) L.L.N. 217, Ambiance India Pvt Ltd v Shri Naveen Jain, 2005 (81) DRJ 538, Navigators Logistics Ltd v Kashir Qureshi and Ors, 2018 (76) PTC 564 (Del)).

There is no standardised requirement for disclosure from new employees and any joining formalities depend solely on the internal policies of the company.

A lawsuit may be filed when the dispute arises and statutorily, should be filed within the limitation period envisaged under the Limitation Act, 1963. However, in cases of IP infringement, the period of limitation may get extended on account of the cause of action arising afresh each time the infringement occurs. Prior to filing a lawsuit, parties are expected to determine the jurisdiction of the relevant court, in which the lawsuit should be filed. This will depend on the nature/subject matter of the claim. Furthermore, parties should keep in mind that no court will proceed with the trial of a suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or in which the matter, directly and substantially in issue, has been directly and substantially in issue in a former suit between the same parties and has been heard and finally decided by that court.

Thereafter, the aggrieved party may file its claims before the court, in the form of a plaint, to commence the lawsuit, along with a court fees, which are a percentage of the total value of the claim.

There is no specific limitation period for breach of trade secrecy or for breach of confidence. The limitation period for breach of contract in India is three years. The commencement of such limitation period depends on factors such as the nature of the contract, the number of breaches and knowledge of the breach. The period of limitation may get extended on account of the cause of action arising afresh each time the infringement occurs.

In addition to the prerequisites set out above, the steps to be taken to initiate a trade secret lawsuit, inter alia, include: (i) collation of the requisite documents and evidence; (ii) drafting of the pleadings and the interlocutory applications for interim relief; and (iii) finalising and filing the suit papers with the court.

There are no limitations in India on the court in which a suit in relation to trade secret misappropriation is instituted. With regard to the jurisdiction of the court to adjudicate a matter, Section 20 of the Code of Civil Procedure is applicable. As per Section 20, a civil suit can be instituted before a court within the local limits of which a cause of action arises wholly or in part, or at the court within whose local limits the defendant resides, carries on business, or personally works for gain. There are no special courts for adjudication of matters relating to misappropriation of a trade secret in India. However, as per the Commercial Courts Act, 2015, a commercial division of any of the High Courts is competent to take up matters in relation to misappropriation of a trade secret.

The pleading standards applicable to any civil matter are equally applicable to disputes relating to trade secrets. In accordance with the same, the pleadings should be succinct and disclose a cause of action against the defendant. An owner of a trade secret must identify the information that is believed to be a trade secret. Merely listing patents or trade marks in relation to any product cannot amount to an inference that there is an existing trade secret in relation to that product. It is vital for the owner of a trade secret to itemise the information believed to be a trade secret. Similarly, it is also important to plead the information which is alleged to be in possession of the defendant. The claim for trade secret misappropriation can be filed based on information or a belief that the trade secret is being infringed or is in the possession of the defendant. However, it may be difficult for the plaintiff to ultimately prove such a claim post trial.

Indian law does not specify any fact or evidence collection mechanisms that are specific to trade secrets. However, the mechanisms in place for any civil commercial dispute would also apply in the case of disputes involving trade secrets. All of the below options are available in cases of civil disputes with the leave of the court.

Appointment of Local Commissioner

As a part of the fact gathering process, a party may seek the appointment of a local commissioner – ie, a court appointed individual who visits the premises of the other party and inspects the records, takes stock of material, and seizes and gathers evidence in a manner they deem fit. The court often grants police assistance to the local commissioner at the time they carry out the raids. A local commissioner is appointed without giving notice to the opposite side and with the intention of maintaining the element of surprise.

Discovery

Parties can file motions for discovery and inspection of the other party’s records. A request for discovery can be made at any stage during the suit.

Interrogatories

Parties also have the option to serve interrogatories on the other side to seek responses to specific queries. The leave of the court needs to be sought prior to serving interrogatories on the other side and the party seeking interrogatories needs to demonstrate their relevance.

Courts have developed confidentiality club mechanisms to protect sensitive data during the evidence gathering process. A confidentiality club has limited members, including counsels of the parties and their respective witnesses. The sensitive information of the parties is shared with the limited group in order for the other party to be able to effectively argue their case. However, all documents based on the confidential disclosure and related pleadings and submissions are placed on record with the court under a sealed envelope. During the course of the proceedings parties may, with the leave of the court, also file relevant documents in a sealed cover. Such sealed covers are only accessible to the relevant judge. Additionally, as per Chapter X Rule 2(iv) of the Delhi High Court Rules, 2018, hearings in judges’ chambers are also permissible in exceptional circumstances.

While there is no exhaustive list of defences, some of the defences available to a defendant are as follows:

  • the information believed to be a trade secret was already publicly available (ie, already in the public domain);
  • the owner of the trade secret has failed to show what information is believed to be in possession of the defendant;
  • the owner of the trade secret has made an attempt to restrain the defendant from exercising a trade, profession or a business; and
  • the defendant has developed or acquired the information alleged to be a trade secret as a skill during his or her previous employment.

As regards best practices, the defendant should attempt to prove that the information believed to be a trade secret by the plaintiff is not confidential, does not have a commercial value or is otherwise known in the public domain.   

Under the Commercial Courts Act, 2015, parties to a suit have an opportunity to file an application seeking summary judgment when:

  • the plaintiff/defendant has no real prospect of succeeding on the claim/defence, as the case may be; and
  • there is no other compelling reason as to why the claim should not be disposed of before the recording of oral evidence.

An application for summary judgment should include the following details:

  • a statement that it is an application for summary judgment;
  • all the material facts and points of law, if any;
  • in the event the applicant seeks to rely upon any documentary evidence:
    1. that documentary evidence; and
    2. the relevant content of the documentary evidence on which the applicant relies;
  • the reason why there are no real prospects of succeeding on the claim or defending the claim, as the case may be; and
  • any relief the applicant is seeking and the grounds for seeking such relief.

Courts have held that the mere presence of a triable issue would not disqualify the application for summary judgment as long as the court is of the view that the plaintiff/defendant has no real prospect of succeeding/defending.

Litigation in India is not cheap and may cost anywhere between USD200,000 and USD300,000 depending on, inter alia, the number of motions, the complexity of issues and the forum. Costs ordinarily include the cost of the briefing counsel and arguing counsel. The plaintiff has the added cost of paying the court fee at the time of institution of the suit. Court fees vary from court to court and are usually a percentage of the total valuation of the suit.

Indian law does not permit for contingency litigation since Part VI, Chapter II, Section II, Rule 20 of the Standards of Professional Conduct and Etiquette of the Bar Council of India Rules bars any lawyer from charging contingent fees.

Courts in India do grant exemplary or punitive damages and litigation costs. Even in circumstances where costs are granted, however, they are in no manner commensurate to the actual value. Punitive damages on the other hand are granted in exceptional circumstances and where the infringement is grave. We have not seen any litigation financing in India.

There are no jury trials in India. All matters are decided by a judge. 

There is no specific procedure for trials in cases involving trade secrets. The procedure followed for any commercial dispute would apply to trade secret cases as well. Trials in India commence with framing of issues and filing of the list of witnesses. 

Prior to the commencement of a trial, the following procedure is followed in relation to a commercial dispute, which would also apply to matters related to trade secrets.

Pre-Trial

Filing of the pleadings

Every civil suit in India commences with the filing of the plaint. The plaint includes, inter alia, the name and address of the plaintiff, name and address of the defendant, details about the breach of the civil right, infringing activities of the defendant, entirety of the claim, cause of action, and prayers. Specifically in a case relating to trade secret(s), the plaintiff should include details about the trade secret(s) and itemise the information in which the trade secret is believed to be embodied and the specific manner in which the infringement has happened.

Notice to the defendant

Once the suit is listed before the court having requisite jurisdiction, the court issues summons to the defendant and the next date for hearing is fixed. Any application for ex-parte interim relief may also be considered by the court on the first date of hearing.

Completion of pleadings

Once summons are issued to the defendant, the plaintiff is required to serve a copy of the suit papers to the defendant. The defendant, thereafter, files its response within the prescribed period of time. The response, also known as the written statement, should include the defendant’s defence with specific denials to allegations in the plaint. The plaintiff is given an opportunity to file a replication to the written statement within a stipulated time period, fixed by the court. Meanwhile, if the plaintiff or the defendant seek interim relief, interlocutory applications may be filed to this effect. The responses to such interlocutory applications would also have to be filed by the opposite party within the period prescribed by the court.

Case management hearing

Once the pleadings in a matter are complete, and the interlocutory applications are disposed of, the court fixes the date for framing of issues, filing of affidavits of evidence and cross-examination of witnesses. The framing of issues initiates the commencement of the trial procedure.

Trial

Framing of issues

The court frames issues (i.e., the main points of contention between the parties) to be adjudicated in the suit. Issues can be of fact or of law.

Filing of affidavits

The parties file the affidavits of the witnesses they propose to depose in support of their case; the affidavit acts as the examination-in-chief.

Cross-examination

The witness is thereafter cross-examined by the attorney of the opposite side; this proceeding either takes place before a Joint Registrar (a judicial officer of the court) or before a Court Commissioner (usually a retired District Court Judge appointed by the Court).

Final arguments

The parties lead final arguments by relying upon the facts and the evidence; this is followed by pronouncement of the judgment by the court.

Final hearing

After completion of the trial, the court hears final arguments based on the pleadings, testimonies of the witnesses and other evidence. After the hearing, a final order is pronounced. The court gives an order on each of the issues framed by it. 

The duration of a commercial trial varies from one court to another. It can take anywhere between three to five years to attain finality (without accounting for time spent on appeals, if any).

Indian law permits the presentation at trial of an expert witness. Such expert evidence may be called for with respect to either foreign law or works involving forensics or other areas of science. The parties approach the experts and provide them with the pleadings in the matter and relevant material in relation to the matter. Thereafter, the expert provides his or her testimony, which is filed in the court. The expert should give an opinion on the technical matter or the issues related to his or her expertise. The court is, however, not bound by the testimony of an expert witness. 

The cost of the expert is likely to differ from person to person and on a case-to-case basis.

The factors that determine the grant of a preliminary or temporary injunction in India are as follows.

  • Prima facie case – the party seeking the interim relief would have to establish a credible prima facie case before the court; there needs to be a flagrant breach of the plaintiff’s legal rights.
  • Balance of convenience – in whose favour does the balance of convenience lie?
  • Irreparable harm or injury – establishing that the infringing acts are in defiance of the applicable law, that such acts result in harm to the plaintiff’s interest that cannot be undone, and that the harm caused by the defendant cannot be monetarily compensated.

There is no limitation on the duration of a permanent injunction.

If a preliminary injunction is granted, the defendant may be directed to file the record of its accounts or other similar information with the court. The magnitude of bond, if any, is decided by the court. There is no prescribed threshold or mechanism for calculation of the bond value.

In India, a successful claimant in a commercial suit can seek actual damages and rendition of accounts of profit. The plaintiff would have to prove such actual damages. The claimant may also seek costs of litigation. To establish costs of litigation the plaintiff may be required to furnish copies of invoices and other relevant documents. In some rare circumstances, courts have even granted punitive damages. Punitive damages are usually awarded when the infringement is found to be flagrant and grave.

The relief of permanent injunction is available to a successful claimant in India. The exact nature of the relief is entirely at the discretion of the court. Courts are not inclined to pass an order restraining further employment of an ex-employee to protect a claimant’s trade secrets, as such actions are in contravention of Section 27 of the Indian Contract Act, 1872. As per Section 27, every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is, to that extent, void.

It is possible to obtain ex parte civil seizure of the offending products or even seizure of offending copies. The applicant would have to seek the leave of the court for appointment of a local commissioner who would carry out the seizure with assistance from the police, if necessary. Such seizure is ordinarily granted when a notice of the filing of the suit has not been served on the defendant. The plaintiff has to prima facie demonstrate its rights and that the same are being infringed by the defendants from a particular location to obtain a seizure order for that location.

It is possible for a plaintiff to recover its attorneys' fees in a civil litigation. As per Section 35(1) of the Commercial Courts Act, 2015, the court can exercise its discretion in determining whether costs are payable by one party to another. The court can also decide quantum of the costs. Furthermore, such costs awarded by the court should be reasonable and may include fees and expenses incurred by the witnesses, legal fees and expenses and any other expenses incurred by a party in connection with the proceedings. Therefore, an unsuccessful litigant may be required to pay costs to the successful litigant. As a matter of practice, a litigant can seek award of attorneys' fees as a part of actual costs, to be allowed by the court. There is no specific procedure for seeking award of attorneys' fees but the same is generally done by filing of an application. The claimant for such costs needs to plead under Section 35(1) of the Commercial Courts Act, 2015 for award of actual costs to include attorneys' fees.

A successful litigant can claim costs for litigation, expenses incurred in giving notices, typing charges, inspection of records, obtaining copies and producing witnesses, and compensatory costs. The claim of costs can even be made by the defendant. The process of seeking an award for costs is that the claim is included in the plaint and/or the written statement. Separately, an application may be filed providing details of the costs that the party seeks to recover. The court will, based on the application and the supporting documents, decide the quantum of costs.

The procedure for appealing a trade secret decision is the same as in any other commercial suit. The appellant is required to follow the procedure as set out in the Commercial Courts Act. It is possible to file an appeal against an interim order as well.

The appeal process is independent of the court before which it is filed. Depending on which court hears the case at first instance, the appeal can either be heard by a single judge bench of the High Court or a division bench (ie, a bench with two judges). A Special Leave Petition may also be referred to the Supreme Court of India in certain cases under the Commercial Courts Act, 2015.

Whilst a first appeal may involve a factual review of the case, a second appeal is judged only on questions of law. The appellate court can adjudicate the abuse of discretion in case the same is pleaded by any of the parties to the appeal. There is no concept of de novo adjudication in Indian law. It is possible to waive an issue before the appellate court. Only those issues which have been argued before the court of first instance can be taken up in appeal. No fresh facts which were available before the court of first instance, but not pleaded, may be introduced at the stage of appeal. The court always hears arguments before passing a judgment on any issue.

Indian law does not specifically provide for criminal penalties for trade secret misappropriation. However, criminal penalties are prescribed for breach of confidentiality and privacy under Section 72 of the Information Technology Act, 2000. A criminal prosecution can be initiated by filing a first information report (FIR) under Section 378 and Section 405 of the Indian Penal Code, 1860 (IPC). Furthermore, Section 405 of the IPC relates to breach of trust. It envisages criminal penalty for dishonest misappropriation, dishonest use or conversion of any property for the alleged user’s use, in violation to any direction of law. The respective penalties for theft and criminal breach of trust are imprisonment for a term which may extend to three years, or a fine, or both. The likely defence in the case of a theft of a trade secret is a claim of ownership of the property or information in case of a trade secret. The accused has an option to defend himself or herself by claiming that the property believed to be stolen is owned by him or her and not by the complainant. The defence in a criminal case is likely to differ from the defence in a civil case. However, this will depend on the facts of the case.

Since trade secret protection is provided by way of a contractual relationship between the disclosing party and the recipient of the information, the agreement may include a clause on dispute resolution by way of arbitration. Arbitration proceedings are more time efficient. The arbitrator is even empowered to grant interim reliefs to secure the interests of the parties. The parties to an arbitration are at liberty to settle the matter as well. If the dispute is brought up before a court, the court is empowered to refer the parties to court assisted mediation. The mediators create an environment conducive to negotiation and the resolution of the dispute. Mediation is particularly utilised where both parties are interested in maintaining confidentiality, and for the protection of the interests of both parties. There are no fixed costs in relation to alternative dispute resolution mechanisms in India. The approximate time period for completion of mediation proceedings is six to twelve months and, for arbitration proceedings, it is one to three years.

The mediation proceedings are not as expensive or rigorous as the court hearing.

If the parties opt for arbitration, the adjudication process turns out to be expensive compared to litigation in civil court.

Shardul Amarchand Mangaldas & Co

Amarchand Towers
216, Okhla Phase III
Okhla Industrial Estate Phase III
New Delhi
Delhi 110020

+91 11 4159 0700

Pallavi.Shroff@AMSShardul.com www.amsshardul.com
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Law and Practice in India

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Shardul Amarchand Mangaldas & Co is one of India’s leading full-service law firms and is recognised globally for its exceptional practices in M&A, private equity, insolvency and bankruptcy, competition, dispute resolution, capital markets, banking and finance, and projects and project finance. With over 115 partners across ten practice groups, the firm is at the helm of major transactions and litigation across all industry segments in India and advises leading multinationals on their entry into the Indian market and on legal strategies impacting their business. The IP team has over 45 members and assists on a range of IP-related issues, including application filing, prosecution, and post-grant formalities for trade marks, patents, copyright and designs. On the contentious side the team assists in handling proceedings before Indian courts and IP tribunals. It also assists in conducting pre-filing formalities, including searches, analysis, patent specification drafting and attendant advisory. The team has also acted for clients on issues relating to breaches of confidentiality, trade secret violations and the like.