Legal Protection for Trade Secrets : The Indian scenario.

After reading this case analysis, the readers will learn how as per the facts of the case the Delhi High Court did not grant an injunction to the Plaintiff Bank for it failed to establish its sole right and technical know-how over its database.

TITLE

American Express Bank Ltd Vs. Ms. Priya Puri

CITATION

( 2006) IIILJ 540 Del

COURT

High Court of Delhi

JUDGES/QUORUM

Justice A Kumar

DATE OF JUDGMENT

24.05.2006

Introduction

Trade secrets can be defined as formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others. Notwithstanding the TRIPS mandate to protect undisclosed information, jurisdictions across the world have been reluctant in according Intellectual Property (IP) based protection to trade secrets. In India also, unlike other types of IP right, trade secrets are not governed by specific legislation, though Section 27 of the Indian Contract Act of 1872 provides civil remedy up to a certain limit. Thus, protection is mostly dependent on judicial pronouncements where there is no uniformity.

Facts

The facts of the case are as follows: The Defendant was the Head of Wealth Management for the Plaintiff in Northern India when she submitted her resignation to the Plaintiff on 19.09.2005 as a part of the 30 days’ notice period. However, the Plaintiff terminated the services of the Defendant on 10.10.2005. The Plaintiff claimed that during the course of her employment, the Defendant disclosed confidential information to persons not in connection with the business of the company; used confidential information and trade secrets for her own benefit; violated the American Express customer privacy policy; failed to return customer list and details and used the same for personal benefit or for a competitor and violated the intellectual property rights of the plaintiff.

A suit for permanent and mandatory injunction against the Defendant was filed, seeking inter-alia a restrain against the Defendant “from using or disclosing any information and trade secrets relating to the business and operations of the Plaintiff and to not solicit or induce any of the customers of the Plaintiff especially those who are part of the wealth management operation and/or Wealth View programme and from breaching the confidentiality term as per letter of appointment/code of conduct including customers’ privacy principles/policies.” The Plaintiff also sought mandatory injunction against the Defendant to deliver up all the confidential information, data, trade secrets and in particular the customer list of wealth management operations and/or the wealth View programmer/operations of the Plaintiff available with the Defendant or under her control.

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The Delhi High Court rejected the application for injunction on the ground that rights of an employee to seek and search for better employment are not to be curbed by an injunction even on the ground that she has confidential data in the present facts and circumstances.

Issues

The main issues in the case were:

  1. Whether or not a competitor bank can be restrained from dealing with the bank customers on the ground that the bank maintains written record of its customers and their financial portfolios which had been acquired by the competitor bank and so the competitor bank must be restrained even to contact those customers.
  2. Whether or not the Defendants obtained any file containing trade secrets or confidential information.

Summary of court decision and judgement

In totality of the circumstances, the Plaintiff bank failed to make out a strong prima facie case in their favor. Therefore, the plea against the Defendant for getting information about the Plaintiff’s customers illegally and unlawfully and alleging confidentiality about the same, was made as an afterthought to pressurize her to either not leave the Plaintiff or to teach her a lesson and curtail her future prospect for employment.

In the garb of confidentiality, the Plaintiff tried to contend that once the customer of Plaintiff, always a customer of Plaintiff. It is for the customers to decide with which bank to bank with and a bank cannot arrogate to itself the rights to deal with a customer exclusively on the ground that it has created a database of his customers and their financial portfolios.

The averments made by the Plaintiff were not only discredited by the Defendant but their veracity and untruthfulness were also shown to be doubtful. In the given circumstances, it was held that negative covenant in contract restraining employee from engaging or undertaking employment for twelve months after leaving the services of plaintiff was held to be contrary and in violation of Section 27 of the Indian Contract Act, 1872 and injunction was declined. Rights of an employee to seek and search for better employment are not to be curbed by an injunction solely because she has confidential data in the present facts and circumstances.

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The Plaintiff also claimed rights in respect of names, addresses and financial details of customers which were already with the Plaintiff. In order to claim right in the derivative work containing the original material, the Plaintiff is to show adaptation, abridgement, arrangement, dramatization or translation in his work entitling him to have certain rights. The Plaintiff in the present case did not produce any evidence to show any use of the material that was available in public domain, so as to claim exclusive rights over that.

Analysis

It is to be admitted that the judgement resides primarily on questions of facts as to the evidences leading to the disclosure of confidential information and the questions as to the need for protecting such information were completely forgotten. While the factual position as to whether the Plaintiffs had indeed managed to make out a good prima facie case or not is a different issue, the legal stand as to the protection of confidential information, or at the more basic level, a determination as to the boundaries of confidential information, takes several significant steps back when compared to the decision in Diljeet Titus v. Alfred A. Adebare and Ors. and Ms. Seema Ahluwalia Jhingan and Ors. v. Titus and Co. and Ors. curiously passed in the same month as the American Express order.[1]

Conclusion

Though in American Express Bank Ltd. v. Priya Puri, Delhi High Court defined trade secret as formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others. This definition reflects Court’s recognition of the intellectual innovation inherent in trade secrets.  However, the exact scope of protection afforded to trade secrets as a distinct intellectual property still remains unclear in absence of any legislative enactment. This not only jeopardizes their protection in absence of contractual relationship but also obligates the trade secret holder to seek protection under other categories of intellectual property which may not always be possible.[2]

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                                                                                                            –END OF CASE COMMENT–

[1] Shwetasree Majumdar, Breach of Confidentiality – taking a few steps back? Spicy IP, Nov.30, 2006 https://spicyip.com/2006/11/breach-of-confidentiality-taking-few.html .

[2] Priya Anuragini, Treasuring The Secret: Need for IP Based Protection to Trade Secrets in India, Mondaq, 30 Oct.30,2014http://www.mondaq.com/india/x/350736/Trade+Secrets/Treasuring+The+Secret+Need+For+IP+Based+Protection+To+Trade+Secrets+In+India .