Trade Secret Infringement Requires Existence Of Valid Secret Which Owner Took Reasonable Steps To Protect: Telangana High Court

The Telangana High Court Division Bench, comprising Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar, observed that while hearing a Commercial Court Appeal (“CCA”), the existence of a trade secret is premised upon an assumption that the information sought to be protected is not readily accessible to others and has an independent economic value. This aspect of a trade secret gives the owners the right to protect the trade secret against others. Factual Matrix: The Commercial Court (“the Court”) had allowed an IA moved by the plaintiffs (Respondents herein), granting a temporary injunction restraining the defendants (Appellant herein) from commercially exploiting the confidential information of the Respondents. The Court also restrained the Appellants from divulging the confidential information they had acquired due to their past relationship with the Respondent. Aggrieved by the absolute and blanket nature of the restraint imposed by the impugned order dated 03.10.2024, the Appellant filed the present CCA. Submissions: The counsel for the Appellant made the following submissions: The impunged order is vague in nature and lacks material particulars. It also curtails the rights of the Appellant to carry on trade or business as guaranteed under Part III of the Constitution, 1950.The Appellants have failed to particularise the confidential information which would form the essential cause of action in the Suit. Furthermore, no trade secret is involved in the manufacturing process of the oil seals. The counsel for the Respondent made the following submissions: The advocate commissioner appointed by the Delhi High Court found several incriminating materials in the premises of the Appellant, including lists of customers, boxes, CDs, etc. This shows that the confidential information and trade secrets of the Respondent were accessed in an unauthorised manner. Analysis of the Court: The bench at the outset noted that the plaint in Suit bearing number COS No. 19 of 2022 is for permanent injunction on the Appellants from breaching the confidential information, unlawful solicitation of clients, unfair competition damages, etc. After perusing a mail sent by the Defendant to BHEL, the Court observes that Defendant No. 2 gained experience while in the employment of Plaintiff No. 2 and requested an order. The Court relied upon various exhibits, including the inventory list of seized goods prepared by the local commissioner. The local commissioner's report comprised documents for Plaintiff No. 2, purchase orders, quality manual, inventory list, etc. The Court concluded that the Appellants have infringed the Respondent's trade secret, for which the local commissioner was appointed. The Appellants are competing with the Respondent's business, i.e., customers, which prima facie shows that the Appellants have infringed on trade secrecy. Therefore, the Court allowed the IA and granted a temporary injunction. The bench observed that 'confidential information' and 'trade secret' must be identified and particularised for any injunction to be granted. These rights are broad-based rights that the Respondent cannot assert vaguely or in a vacuum. On the contrary, to assert these rights, the Respondent must specify and showcase the exact unauthorised use or infringement. Misappropriation of a trade secret entails an improper acquisition, disclosure or use of a trade secret without the owner's consent. Firstly, the plaintiff/owner is required to establish the existence of a valid trade secret, and the plaintiff/owner is required to showcase that they took reasonable steps to protect such a valid trade secret. Secondly, the plaintiff/owner must prove unauthorised acquisition or usage of a trade secret which causes damage to the plaintiff/owner. The proof of duty occurs only when the plaintiff/owner can establish that the infringer was aware of the existence or value of the trade secret but proceeded to use it without authorisation. The bench observes that conditions are premised on the specificity of the trade secret, which must be clearly defined and identifiable. The impugned order does not deal with any aspect of the confidential information which have been infringed by the Appellant. The Court merely relied upon the list of the material seized by the local commission from the premises of Defendant No. 2 to conclude that Respondent had made out a prima facie case for an injunction. The impugned order is silent on the nature of the information or trade secrets upon which the Respondents lay their claims. Lastly, the bench observed that the impugned order is not just vague but is draconian and contrary to the Respondents' constitutional and legal rights to carry or any trade. In the above terms, the bench set aside the impugned order dated 03.10.2024, and allowed the CCA. Case Name: Mr....

Trade Secret Infringement Requires Existence Of Valid Secret Which Owner Took Reasonable Steps To Protect: Telangana High Court

Mohd Talha Hasan

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