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  • Anshuman Mishra

Protection of Trade Secrets from Economic Espionage and its Conflict with Competitive Intelligence

Espionage exists in various forms, the broadest classification being War-time espionage and Peace-time espionage. Economic Espionage falls under the gamut of the latter. In general terms, Economic Espionage is the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information, proprietary economic information, or technological information.1 It is also known as “Industrial Espionage” and “Corporate Espionage”.


Irrespective of its ultimate goal, economic espionage is rudimentarily used for gathering information. Economic Espionage can be resorted to by both a country and a corporation. A similar method used for gathering information is called “Competitive Intelligence”. However, Competitive Intelligence is legal and employs ethical means for information gathering. It involves research and analysis of market and external factors affecting Corporations. Both are divided by a thin line comprising of legality and ethics. It is important to be cognizant of the fact that where Competitive Intelligence ends, Economic Espionage begins.


The criteria for determining this has been splendidly laid down by Andrew Crane in his paper “In The Company Of Spies: When Competitive Intelligence Gathering Becomes Industrial Espionage”, as follows:

“Specifically, one might suggest that ethical problems occur when one or more of the following are deemed to have occurred:

  1. The tactics used to secure information are questionable since they appear to go beyond what might be deemed acceptable, ethical, or legal business practice.

  2. The nature of the information sought can itself be regarded as in some way private or confidential.

  3. The purposes for which the information is to be used are against the public interest.

These three tests are not mutually exclusive and, indeed, it is often difficult to disentangle one from another.2

Economic Espionage is majorly used by corporations and countries for the purpose of procuring information to obtain an edge over the competition. Economic Espionage employs various methods to achieve its ends. The major methods are: a) planting a “Mole” or an “Agent” in a rival organization to closely monitor their activities; and b) form counter strategies while stealing information and the other major tool is usage of Cyber methods, which has become one of the most employed methods since the advent of the Internet.

A quintessential instance of a country indulging in Economic Espionage via employing Cyber methods is “Operation Aurora”. It was a barrage of cyber attacks by China based organizations against major U.S based companies like Google, Adobe and McAfee. It was alleged that People’s Liberation Army, the military wing of the Chinese Communist party, had links to these attacks. The attacks were targeted towards stealing intellectual property. The most guarded assets of an organization’s intellectual property are its Trade Secrets.

The subject matter of trade secrets is usually defined in broad terms and includes sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers clients, and manufacturing processes. While a final determination of what information constitutes a trade secret will depend on the circumstances of each individual case, clearly unfair practices in respect of secret information include industrial or commercial espionage, breach of contract and breach of confidence.3


Trade Secrets or Undisclosed Information are given recognition and enforceability under the international law by TRIPS Agreement, 1995. Article 39 of the TRIPS Agreement provides that member states shall protect “undisclosed information” against unauthorized use “in a manner contrary to honest commercial practices” (this includes breach of contract, breach of confidence and unfair competition). The information must not be generally known or readily accessible, must have value because it is secret, and must be the subject of “reasonable steps” to keep it secret.4 Articles 42 to 49 of the TRIPS agreement cover enforcement, requiring that civil judicial proceedings be available to enforce all IP rights and that “confidential information” be protected from disclosure.5


This is the legal facet of the protection extended to Trade Secrets from Economic Espionage. In the U.S, trade secrets are recognized and protected under the Economic Espionage Act of 1996 which accords protection to trade secrets and also prescribes penalty for its violation. Another relevant U.S statute is the Uniform Trade Secrets Act. It principally deals with protection of trade secrets of U.S companies which operate in multiple states.

India has no specific statute dealing with trade secrets or their protection. Indian courts majorly follow the principles of equity and the law of contracts. This approach is based on an antediluvian English case6.


The Delhi High Court, in one of the cases, defined “trade secrets” in 2006 as follows: “A trade secret can be a formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.”7 This definition makes trade secrets easily overlap with other intellectual properties like copyrights or patents. It can be valid in certain cases, however that is not always the case as trade secrets form a completely different category of IP rights. The fundamental difference between trade secrets and patents and copyrights is that the latter have to be disclosed to the world to obtain legal protection for them, whereas a trade secret is undisclosed information which has to be legally protected.

Due to the lack of a specific framework, the courts have to rule only on the basis of precedents, law of contracts and principles of equity. A statute needs to be drafted concerning protection of trade secrets which lays down the specific protection and recognition accorded to them and also the penalty in case of its violation.


The structure of the domestic statute dealing with trade secrets should cover the following fundamental aspects:

  1. An analysis of the Uniform Trade Secrets Act will engender a rudimentary framework regarding the particular terms that require a comprehensive and a particular definition.

  2. The domestic statute so drafted must contain a section expounding acts that constitute an infringement or a disclosure of a trade secret.

  3. The statute must prescribe penalty in different scenarios of disclosure of trade secrets.

  4. The statute must prescribe the relief to be granted to the aggrieved party.

 

By Anshuman Mishra, Rajiv Gandhi National University of Law, Punjab


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