[This post has been authored by SpicyIP intern Kaustubh Chakrabarti. Kaustubh is a second year BA.LLB. (Hons.) student at Hidayatullah National Law University, Raipur.]
Recently, a division bench of the Delhi High Court in Navigators Logistics Ltd vs Kashif Qureshi has provided relief to an appellant whose plaint application was rejected by a single judge bench back in 2018. The single judge bench had relied on Order VII Rule 11 of CPC to reject the plaint holding that there was no clear disclosure of a cause of action. The Appellant was engaged in logistics and freight forwarding services and had filed a suit against his former employees and a competing company alleging that they misappropriated its proprietary data and trade secrets. The Appellant had placed on record the forensic evidence gathered from the computers of the former employees. In addition, documents were filed showing communication between the former employees and the competing company discussing confidential data.
Thus, in this case it is pertinent to determine whether the data in question can be classified as trade secrets or confidential information. If the data does fall under trade secrets, it will be considered as classified information. The former employees contended that the client data is not eligible for copyright protection. Consequently, the single judge bench observed that the Appellant had failed to demonstrate the required level of skill, judgment, and creativity in compiling the list. Moreover, the identity of the author was not disclosed by the plaintiff, which the Court held is essential for claiming copyright ownership. On this, the Court expressly clarified that a juristic person is incapable of being the author of any literary work in which a copyright may exist. It also ruled that customer lists in the logistics and freight forwarding business cannot be automatically deemed confidential as such information is available in the public domain. In a detailed and well reasoned order focusing on the procedural laws, the division bench ruled in favour of the appellant and held that it had been a mistake to dismiss the plaint under Order VII Rule 11 of CPC as a Court cannot examine evidence or the merits of the case when deciding to reject a plaint application. The division bench decision revives the matter and now the matter is listed for framing of issues on March 27.
Trade Secrets Protection in India
The single judge bench had held that for client data to qualify as trade secret, it should possess significant economic, business, or commercial value. In India, there are no fixed criteria to determine what classifies as a trade secret (see here for other posts on the blog dealing with trade secrets). According to the World Intellectual Property Organization, the information should be commercially valuable, be known to limited people and be subject to reasonable steps taken by the owner to keep it secret, to qualify as a trade secret. There are differing High Court opinions as to what may classify as a trade secret. Some refer to commentaries and digests while others evolve their own definitions.
Earlier this year, the Law Commission brought out its 289th report in “Trade Secrets and Economic Espionage,” highlighting the necessity for a dedicated legal framework to protect trade secrets in India (see here for Yogesh’s analysis on the blog). The draft bill includes many key provisions, beginning with a clear definition as to what constitutes trade secrets. Not only are protection of confidentiality mechanisms laid down, but certain exceptions have also been provided for, recognizing the need for balance. These include provisions for whistleblowers acting in public interest, compulsory licensing under specific conditions, etc.
India is also a signatory to The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. While, this agreement does not mention the term ‘trade secrets’, Article 39 talks of protection of undisclosed secrets. India, as of yet, does not have any legislation that specifically deals with the protection of trade secrets. However, there exist certain legal provisions that indirectly affect trade secrets. For instance, S.316 of Bharatiya Nyaya Sanhita is one such provision that provides for Criminal Breach of Trust and punishes any person who dishonestly misappropriates any property he is entrusted with in violation of law, etc. In absence of a specific legislation, Indian courts have followed the English approach of protecting confidential information under both common law and equity such as providing relief through principles like breach of confidence as well as extending protection under statutes like contract law.
Since, in this case the Court was primarily concerned with the admissibility of the plaint, these questions have not been explored yet. However, it has been observed in the past, that courts have blurred these distinct lines of reasoning when extending protection to trade secrets. Only a couple of months before this judgement, for instance, the Delhi High Court was faced with a similar case where this problem was evident. (see here for Prashant’s analysis on that case). Such questions assume importance because a case for a contractual breach, cannot lie against the competitor since there is no contractual relationship between the companies. It would lie only against the former employees. However, if the case is of a breach of confidence, it needs to be proved whether the information has the necessary quality of confidentiality. With the matter now being reverted to the Single Judge, it remains to be seen how it adjudicates this dispute by navigating through these tricky questions. In the coming time, it would also be interesting to see how the interpretation of law evolves to regulate trade secret policy.