Tata Consultancy Services is an Indian based multi-national IT company headquartered in Mumbai. It is a part of the Tata Group and having nearly 400,875 associates, representing 143 nationalities in over 46 countries. Recently, Simonelli Innovation LLC, a privately held consulting firm from Texas, USA filed a suit against TCS.

Facts in Brief: On 11 June 2014, Simonelli and Tata America International Corp (TAIC) agreed to co-develop a “prototype factory and co-innovation model” where TCS was to provide prototyping services to the clients. The agreement expressly allowed TCS to use the IP and trade secrets of the US firm in projects under the ‘Alliance Agreement’ that would mutually benefit both the companies. In a suit filed by Simonelli Innovation LLC, in the Texas Court, the company has alleged that TCS and TAIC have used wrongful methods to obtain Simonelli’s Client database and consulting offering solutions, and increased revenue without prior information to Simonelli, which according to Simonelli is in direct violation of the Alliance Agreement. Simonelli claims to have invested the money and time to develop its own methodology and expertise, which is a trade secret according to the Defend Trade Secrets Act.

Since the case has only just been filed at the Texas Court, the true facts of the case will unfold with the unveiling of evidence during the trial. The question to be thought about is – Can a database created of the Clients’ constitute an Intellectual Property under Trade Secrets? A further thought: If an employee of a company leaves and joins a competitor and at the same time takes with him the Database of his ex-company’s suppliers and clients will this constitute a violation of Confidential Information and Trade Secrets?

Recently, the Indian Patent Office denied registration for Application number 4668/DELNP/2007 filed on 18/06/2007. The device applied for registration is a U shaped couples vibrator named ‘we vibe’ produced by a Canadian based company ‘Standard Innovation Corporation’. The IPO stated that, the device applied for registration outlines its distinguishing features, however, such features depend on the anatomy of the users and therefore cannot be considered ‘novel’. Another ground for objection raised by the IPO for denying the patent application was on moral grounds under section 3(b) stating that ‘adult toys are not considered useful or productive. Mostly these are considered to be morally degrading by the law’.

As per section 3(b) of the India Patent Act,

What are not inventions. -The following are not inventions within the meaning of this Act

“ an invention, the primary or intended use or commercial exploitation of which, could be contrary public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment”.

The product under question was successfully patented in Australia, Canada, China, Europe, Hong Kong, Mexico and the United States of America.

In India, section 292 of the IPC prohibits all articles, books, pamphlets which are ‘deemed to be obscene’ in nature and are likely to affect the morality of the public. Moreover, in order to regulate obscene content via the internet, section 67 of the Information Technology Act, 2000 prohibits publishing or transmitting obscene material in electronic form and also confers a punishment which includes 3 years of imprisonment and fine extending to Rs.5 Lakhs.

It is interesting to note that countries and states such as Thailand (part of prohibited items list), Vietnam (Vietnam Customs), Maldives (Maldives Customs), Alabama, USA (Anti-Obscenity Enforcement Act, 1998), the sale and possession of sex-toys is criminalized as it is considered to harm the morality of persons.

“Do you solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, so help you God?” a question we’ve heard time and again in multiple courtroom dramas. Commonly known as the Oath, this is a mandate for a person testifying in the Court of Law or submitting an affidavit (as per The Oaths Act, 1969). If a person defies such a mandate by lying under Oath, it amounts to a crime called ‘Perjury’ in addition to ‘Contempt of Court’.

Perjury is an act, where a person produces false evidence with complete knowledge of such evidence being false before the Court of Law in an attempt to deceive or mislead the court and lead to miscarriage of justice. Lying in an affidavit will also amount to Perjury since an Affidavit is a truthful submission made before the Court of Law under Oath. In case, the crime of Perjury has taken place, the Court has every right to disregard such falsely produced evidence/affidavit and serve such person with a punishment. Perjury is a serious criminal offence which attracts Section 193 of the IPC.

Contempt of Court is referred to an offense of being disobedient or discourteous towards a Court of Law and/or its officers in the form of behavior that opposes or defies the authority, justice and more specifically the dignity of the court. The Contempt of Courts Act, 1971, provides for Contempt in the face of Supreme Court or High Court under Section 14. This Section empowers the Court to initiate a suo moto action against the person involved in the act of contempt.

In the recent judgment, Louis Vuitton Malletier vs Mr. Omi and Anr., a Trademark Infringement matter, the Delhi High Court witnessed the case of a false affidavit produced in the Court of Law by the Defendant. The petitioner Louis Vuitton Malletier, a highly reputed company, filed a suit for permanent injunction restraining infringement of trademark, copyright, passing off, dilution and tarnishment, damages, etc. against the Respondents. During the proceedings of the case, it was brought to light by the Investigating officer that the affidavit sworn by the Defendant was incorrect and false and in fact the Defendant had attempted to mislead the Court. The Court then relied upon its power under Section 14 of the Contempt of Courts Act, 1971 and disregarded the false affidavit. The Court further sentenced the defendant to one month of simple imprisonment in addition to imposing a fine of Rs.2000/-.

The idea of confidential information and trade secrets is fairly new in India. For many people, confidential information is not a part of Intellectual Property and its commercial value is still unexplored.

Trade secrets and confidential information are often used interchangeably but there is a significant difference between the two concepts. Companies generally patent their devices/products but the method/process used to make them is often kept a trade secret. For example, all of us are familiar with Coca-Cola but the process to make it or its ingredients, are a Trade Secret.

On the other hand, confidential information might include information which is vital to a company but has nothing to do with its products or their manufacturing processes. It includes Accounting Statements, Employment Agreements, list of customers/suppliers, trade strategies and the like documents. Such information is vital to companies because if made public, it might impact the company’s growth or can be used by their competitors.

It can be presumed that all trade secrets are confidential information. However, not all confidential information can be considered as a trade secret. A common example, which results in unauthorized disclosure of confidential information, is when a technical person leaves a company and carries information to its competitors.

The Delhi High Court in the case of American Express Bank Ltd. v. Ms. Priya Puri (2006)III LLJ 540 (Del) defined trade secrets as “… formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.”

Theft of confidential information and Trade Secrets in India

Unlike the United States of America where trade secrets have been protected under the statute since 1979, India currently does not have a law in place to protect trade secrets but rather protection is available under other laws such as contract law, copyright law, Designs Act, Information Technology Act and common law. One method of maintaining trade secrets in a company, particularly if the technology is complex, is to divide the technology into different components and allow access to that component to different key personnel on a need-to-know basis.

When comparing the data protection laws with other countries such as European Union’s General Data Protection Regulation (GDPR) and United Kingdom’s Data Protection Act, citizens and enterprises in the European Union and the U.K. enjoy various rights such as high privacy settings by default, so that the data is not available publicly without their consent and such consent can also be revoked at any point in time.

Several countries are recognizing trade secrets as a part of their Intellectual Property regime and India is also making significant development towards the same. India recently approved the National IPR Policy to include the provisions of Trade Secrets in its IP laws and also presented the draft Personal Data Protection Bill, which deals with the protection of the rights of individuals and / or corporations whose personal data is processed by the state / private entities and also provides remedies for unauthorized processing of such data, ensuring an effective legal framework for all IP rights, including protection of trade secrets. The draft Bill takes into consideration various other aspects like foreign investment and the growth rate of IT business in India, thus ensuring an overall development of Intellectual Property laws in India.

Innovation is directly proportional to Research & Development taking place in a country and Patents are a direct result of such innovations.

In the year 2016, patent applications filed by the top 5 nations were as follows:

Patent filings in India since 2010 to 2017 have been as follows:

Observing the table above it can be concluded that the patent filings have not seen a significant increase, in fact the filings have seen a drops and are practically at a standstill. Thus it can be summarized that innovation in India has not grown in spite of the various schemes started by the Government. Moreover, the number of filings taking place in China, compared to that in India, throws a light on the lag in innovations in India. Qualcomm, an American based semiconductor and telecommunications company alone submitted nearly 1,800 patent applications in India, whereas the Chinese company Huawei was ranked number one for filing the maximum number of patents in the European Patent Office, nearing 2,388 patents. Huawei is now expecting to invest between $10 billion and $20 billion in R&D annually in the years to come. Multi-national companies such as Canon Inc. of Japan, Samsung Electronics of the Republic of Korea and Japanese companies including Panasonic, Toshiba and Toyota Jidosha are among the top patent filing companies around the globe. No Indian company is a part of this list.

Where are we going wrong? India spends merely 0.63% of its GDP on R&D, on the other hand, countries such as China spend more than 2% of their GDP on R&D, Korea spends more than 4%, and Germany spends around 3% on R&D.

According to reports, the United States of America produces 95,000 graduate engineers annually, whereas in India there are 3,288 Engineering Colleges recognized by the All India Council for Technical Education (AICTE) which churn out nearly 1.5Million Engineers per year. Among these 1.5 Million Engineers, it has been further reported that, a significant chunk is not employable in research or even in the industry based on their basic degree and the apparent lack of an inquisitive mind. The creamy layer usually chooses a Post-graduation program overseas and is later absorbed into several high profile jobs outside India. This leads us to our next big concern – Quality. The focus in India appears to be on quantity instead of quality. It is imperative for educational institutes and Private Enterprises to focus on R&D in order to bring out not only a qualified individual but also an inquisitive mind among these budding professionals, only then will we be able to have high quality professionals. The Educational institutes need to ensure an application based learning instead of rote learning.

Need of the hour: The Government practice to shield Indian companies has lulled them into a slumber and they appear to remain content in their comfort zones. Instead, a competitive spirit must be instilled in order to promote R&D. This will lead to the recruitment of skilled researchers and stop the brain drain from the country. This would be a step towards innovation, resulting in an increase in Patent applications being filed. This will also help India, currently ranked at the 57th position, to climb up the ladder with respect to the Global Innovation Index (to know more, read our newsletter covering Global Innovation Index, dated August 18, 2018).