Patent Versus Trade Secret Conundrum

  1. Introduction
    Inventors often face difficulty while choosing a protection regime for their inventions which simultaneously ensures a competitive edge. The two equally confusing options fulfilling this purpose are – trade secrets and patents. An invention covered under patents law would enable the patentee to commercially exploit his invention for a set period of 20 years. Post the set period, the invention would fall into public domain and the patentee would hold no rights to make any party liable for utilizing or exploiting the invention. On the other hand, trade secret law provides no such specific timeline and ensures protection only till the information is not discovered by the public. Both the regimes place different weight on the disclosure of information into the public domain. Patent law necessitates such disclosure of information at the time of application to create a balance between the innovator’s right to recoup its cost of innovation through monopolization of the patented product for a set period and also the right of the public to access the information post the patent period when the same falls into public domain. Trade secret places importance on safeguarding the said information against disclosure or use by a person other than the proprietor as the use or disclosure of the same at any point in time would take away the competitive edge of the proprietor. The Delhi High Court recently, in the matter titled Prof. Dr. Claudio De Simone and Another v. Actial Farmaceutica SRL and Others,[1] faced a similar dilemma, wherein the Plaintiff claimed Know-How over an expired patent.
  2. Facts of the case
    Professor Dr. Claudio De Simone had developed a formulation named “De. Simone Formulation” (“the formulation”) and the same was patented in US in the year 1998. Prof. Simone claimed that the know-how, strain selection and blending ratio of the formulation were trade secrets and he was also the sole owner of the same. Before the expiry of the patent in 2015, Dr. Simone entered into two different agreements with VSL Pharmaceuticals, Inc. (“Defendant”). The first agreement was the patent license agreement which was to be valid and subsisting throughout the duration of the patent. The second agreement was a Know-How agreement which guaranteed the commercialization of the formulation post the expiry of patent. The Defendant used to market the formulation under the trademark VSL#3. Subsequently, after the expiry of the abovementioned patent, the Plaintiff terminated the agreement with the Defendant and started selling the formulation under the brand name VISBIOME and VIVOMIXX. The Defendant started to pass off formulation of other companies under the trademark VSL#3. The Plaintiff approached the Court seeking permanent injunction against the activities of the Defendant.
  3. Issue
    An especially important issue came forward for consideration “whether trade secret can be claimed in a product where the patent of the same has expired?” Simply put, whether patent law allows registration of a product without the disclosure of the know-how which would later allow others to make the earlier patented product.The Court answered the question in negative after analyzing various provisions of the Patents Act, 1970.
  4. Analysis
    Firstly, Section 7 of the Patents Act, 1970 titled “Form of Application” requires every patent application to be accompanied by a “provisional or a complete specification.” The “Contents of Specification” as specified under Section 10 of the Patent Act, 1970 requires the specification to describe the invention, starting from a title which is sufficiently indicative of the subject matter to which the invention relates.[2] The complete specification shall also–

    “(a) Fully and particularly describe the invention along with its operation or use and the method by which it is to be performed,
    (b) Disclose the best method of performing the invention which is known to the applicant and for which he is entitled to claim protection.
    (c)End with a claim or claims defining the scope of the invention for which protection is claimed.
    (d) Be accompanied by an abstract to provide technical information on the invention.”[3]

    The above mentioned position is further strengthened by Section 25(g) of the Patent Act, 1970 which permits “Opposition to the Patent” if “the complete specification does not sufficiently and clearly describe the invention or the method by which it is to be performed”.[4] In essence, any invention protected under the Patent Act, 1970 shall fully and particularly describe the invention and the best method of performing the same.

    Secondly, Section 84 of the Patent Act, 1970 titled “Compulsory Licences”, empowers the Controller of Patents, to grant a compulsory license in favour of a person other than the patentee or any other person, whom the patentee has permitted to work the patent even without the consent of the patentee if such a request is made by the person seeking the compulsory license. Simultaneously, Section 92 of the Act also empowers the Controller to issue compulsory licenses, suo-moto. This issuance is valid if the same is done pursuant to a notification issued by the Central Government in cases where there is either a “national emergency” or “extreme urgency” or in cases of  “public non-commercial use”.[5] However, it is to be noted that “compulsory licence” can be issued only against a Patent and not against the Know-How for manufacture of a product.

    Lastly, the right of patentees to an injunction is implied under Section 48 of the Patents Act, 1970. The court has rightly held that injunction can only be invoked under the above mentioned provision as there is no statutory provision restraining a person from commercially exploiting the know-how of an invention.[6]
  5. Conclusion
    The Court dismissed the case on the ground of no cause of action for the relief claimed. However, the Court held that Plaintiff had no subsisting patent protection in India and since the patent based in US has expired, the innovation, is now in the public domain and the Defendants cannot be restrained from manufacturing the product in spite of the Know-How Agreement. The contrary would amount to judicial creation of an extra-statutory monopoly for perpetuity in the invention and would defeat the purpose of Patent Law.

    In conclusion, the order of the Court, by negating the know-how in this matter, has recognized the following –
  1. A utilitarian purpose is to be served wherein the good of many must be given precedence over the good of one, so as to enable technological development leading to societal advancement.
  2. The Order provides access to useful information which helps in avoiding wasteful duplication of effort and multiplication cost.[7]
  3. The Order also acts as inspiration/ incentive for further inventions which would lead to the technological advancement of the nation.[8]
  4. The Order has noted that “…the plaintiffs have no subsisting patent protection in India and since the patent based in US has expired, the innovation as noted above, is in public domain. Hence the claim for trade secret protection falls and the defendant cannot be restrained from manufacturing the product inspite of the Know-How Agreement…”. The Court here has helped in clarifying that an invention enjoying patent protection in one jurisdiction cannot enjoy the protection accorded by trade secret in any other jurisdiction as the information would be laid out in the public domain.

[1]Claudio De Simone and Ors. vs. ActialFarmaceutica SRL. and Ors. CS (OS) 576/2019.
[2] Section 10(1) of the Patent Act, 1970.
[3]Section 10(4) of the Patent Act, 1970.
[4]Section 25(g) of the Patent Act 1970.
[5] Section 92 of the Patent Act, 1970.
[6]Supra 1.
[7] VK Ahuja, Law Relating to Intellectual Property Rights, LexisNexis, 3rd Edition.
[8]Id.

About Namrata Dubey 1 Article
Namrata Dubey is a part of the Telecom, Media and Technology law team at Saikrishna and Associates. She focusses on IP litigation and advisory services for the firm’s clients.

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