The digital world is in a fix with Twitter and Meta (the parent company of Facebook) locking horns over the new-born Threads app. This stand-off based on trade secrets infringement raises qualms about the Indian regulatory framework and the urgent need for national trade secret legislation. Leaving vital trade secret loopholes unaddressed in a technology-oriented regime like India could prove detrimental in light of a conflagration like Twitter alleges. This article delves into the implications of the Twitter v. Threads issue in the Indian context. It highlights the Indian Judiciary’s limitations in handling trade secrets and sheds light on the significance of establishing robust legislation.
The Potential Trade Secret Dispute
Twitter has alleged that the Meta corporation siphoned its engineers in the past few years to unethically access its trade secrets, potentially violating federal and state laws. Such a violation, however complex it seems, has adequate legal remedies in the United States. The Uniform Trade Secrets Act (UTSA) of the United States includes in it the definition of a trade secret (§1) viz Any information (including a program) with independent economic value not generally known or readily ascertainable by others and subject to reasonable efforts to maintain its secrecy. Customer lists and user data, as well as manufacturing details like algorithms, APIs, etc., could fall under the protection of the UTSA. Additionally, this situation may also fall within the definition of commercial theft and misappropriation of trade secrets, especially considering the allegations of utilizing Twitter’s engineers to create Threads, leaving a significant impact of 10 million signups in under 7 hours, which led to a detrimental effect on Twitter’s business.
Fortunately, in the United States, specific remedies exist for trade secret violations under the UTSA and the Economic Espionage Act of 1996. Misappropriation of a trade secret carries a substantial penalty. The implementation of UTSA in the States has shown that seeking a preliminary injunction is possible by placing the burden of proof on the plaintiff, in this case, Twitter. The legislation allows for the imposition of a court-adjudged royalty for the time period of trade secret infringement, resulting in the awarding of general damages. In particularly malicious cases, exemplary damages may also be granted. Thus, if Twitter holds a genuine grievance, it has effective legal machinery in the U.S. to fight its claims but would the same be possible in India? Before delving into the realm of the Indian perspective, it is essential to know why trade secrets are the treasured jewels hidden within an organization, often subject to commercial theft.
The Importance of Trade Secrets
In the 21st Century, as global competition increases, foreign governments and entities devote a share toward industrial espionage. “A trade secret subject matter includes production and operations, engineering and R&D, marketing, finance, purchasing, and management.”The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires a trade secret to comprise secrecy, commercial value, and reasonable efforts to maintain Secrecy (by owner). Trade secrets, together with other forms of intellectual property like patents, copyrights, and trademarks, play a crucial role in driving innovation and economic growth worldwide, contributing to the prosperity of economies across the globe. Trade secrets are part and parcel of corporate growth and sustenance, serving as the recipe behind their massive turnovers every year. What good are the noodles without their secret sauce? Thus, corporations should be able to exercise control over or strategically share inside information, as any other trade secret.
While the current legal framework in India provides some protection for trade secrets, this partial approach may need to be revised when faced with corporate sharks and their complaints. A more robust and comprehensive response from our legal system becomes imperative to safeguard businesses’ valuable proprietary information effectively.
The need for legislation on ‘Trade Secrets in India.’
US$ 475 billion in Foreign Direct Investment is predicted to flow into India over the next five years. To retain this big money and rake in the fruits of these investments, India will need water-tight trade secrets laws that secure confidential information and put to rest the concerns of big corporations on just how secure their secrets will be in the Indian jurisdiction that gives them the cutting edge in the competitive market.
Presently, on the civil side, Section 27 of the Indian Contract Act, of 1872, offers certain protections for traders, but as goodwill, not trade secrets. Goodwill is an intangible asset that reflects a company’s reputation. A trade secret is the proprietary information that fuels this good name and its business.
Besides this, Indian law provides sections in the Information Technology Act, Indian Penal Code, and the exception under the Right to Information Act, for protection against breach of trust. Despite seeming adequate, the existing laws don’t cover the specific trade practices that most companies rely on, nor are they specific to the situation. This explains why trade secret cases rely on judges’ reasoning, leading to inconsistent rulings.
The Judiciary’s Limitations
The challenges arise in defining trade secrets as a “one size fits all” and addressing related issues due to judges’ focus on specific scenarios, which hinders a comprehensive definition. Consequently, this ambiguity may lead to valuable competitive information being excluded from the scope of trade secrets. The court in Ambiance India Pvt. Ltd. vs. Shri Naveen Jain held that business acumen or ways of dealing with clients learned by the defendant due to being employed by the plaintiff would not constitute trade secrets, and hence no legal protection would be offered.
The legal system has acknowledged cases like the Indian Farmers Fertilizer Co-op. Ltd. v. CCE. However, trade secrets, while being a part of intellectual property, are not protected under the Indian legal framework -like patents. The court in Star India Limited vs. Laxmiraj while stating common information is not a trade secret, however, has not stated any guidelines or a standard of proof for determining the type of information that can be labeled as a trade secret. In the case of Emergent Genetics India Pvt. Ltd. Vs. Shailendra Shivam, the court stressed that failing to prove reasonable efforts to protect confidential information risks losing it to rivals without legal recourse causing Indian trade-secret owners to face jeopardy in attempting to prove the ambiguously defined ‘reasonable efforts.’
In Indian jurisprudence concerning trade secrets, judges, on personal discretion, have determined the nature of trade secrets and relevant evidence on a case-by-case basis, lacking codified guidelines. Unlike constitutional and criminal law, trade secrets involve technical complexities beyond an ordinary judge’s expertise. This complexity, combined with varying interpretations, hinders the establishment of a unified system to combat trade-secret violations and promote a competitive Indian trade market. A nuanced and adaptable approach is necessary to balance safeguarding intellectual property and fostering innovation. Besides the Standing Committee on Commerce’s view, in its Intellectual Property Rights Report emphasized that the current framework of protecting trade secrets needs more clarity, the abovementioned cases illustrate the ambiguous nature of trade secret judgments in India and the cry for comprehensive and uniform new legislation.
In light of the Twitter-Thread dispute, the implications for the Indian regime cannot be ignored. A statute defining trade secrets and primarily, setting out effective enforcement procedures and limitations is essential. Presently as per Ritika Private v Biba Apparels Private Limited the burden of highlighting ownership of trade secrets typically lies on the plaintiff. Adopting a clear-cut standard of proof along with relevant penalties and pre-cautions is required. Otherwise, India’s foreign investment and trade could be in a jam as corporations fear stepping onto Indian soil in fear of losing their footing with no way to back up.
 Henry H. Perritt, Jr., Trade Secrets: A Practitioner’s Guide (2d ed. 2006).
Aryan R. Nair
Undergraduate law student in their 3rd year at The National University of Advanced Legal Studies, (NUALS) Kochi. The author is an IP enthusiast and is interested in technology and its intersection with law. Linkedin at https://www.linkedin.com/in/aryan-r-nair2003/
Aadithya J. Nair
Undergraduate law student in their 3rd year at The National University of Advanced Legal Studies, (NUALS) Kochi. The author is an IP enthusiast and is interested in technology and its intersection with law. Linkedin at https://www.linkedin.com/in/aadithya-j-nair-74a387229/.