INTELLECTUAL PROPERTY RIGHTS

• Intellectual property (IP) is a term referring to a number

of distinct types of legal monopolies over creations of
the mind, both artistic and commercial, and the
corresponding fields of law. Under intellectual property
law, owners are granted certain exclusive rights to a
variety of intangible assets, such as musical, literary, and
artistic works; discoveries and inventions; and words,
phrases, symbols, and designs. Common types of
intellectual property include copyrights, trademarks,
patents, industrial design rights and trade secrets in
some jurisdictions.
• Although many of the legal principles
governing intellectual property have evolved
over centuries, it was not until the 19th
century that the term intellectual property
began to be used, and not until the late 20th
century that it became commonplace in the
United States.
• Financial incentive
These exclusive rights allow owners of
intellectual property to reap monopoly profits.
These monopoly profits provide a financial
incentive for the creation of intellectual
property, and pay associated
research and development costs.
• Economic growth
The legal monopoly granted by IP laws are
credited with significant contributions toward
economic growth. Economists estimate that
two-thirds of the value of large businesses in
the U.S. can be traced to intangible assets. "IP-
intensive industries" are estimated to produce
72 percent more value added per employee
than "non-IP-intensive industries".
• Economics
• Intellectual property rights are temporary state-enforced
monopolies regarding use and expression of ideas and information.
• Intellectual property rights are usually limited to non-rival goods,
that is, goods which can be used or enjoyed by many people
simultaneously—the use by one person does not exclude use by
another. This is compared to rival goods, such as clothing, which
may only be used by one person at a time. For example, any number
of people may make use of a mathematical formula simultaneously.
Some objections to the term intellectual property are based on the
argument that property can only properly be applied to rival goods
(or that one cannot "own" property of this sort).
 Trade Marks Act, 1999
• A ‘trade mark’ is a very important and valuable asset of a
company in a market oriented economy. The Act is designed to
protect this valuable property.  Customers identify a product
by its trade mark. Value and importance of trade mark
increases as business grows. Trade Marks Act, 1999 is enacted
(in place of earlier 1958 law) with an intention to protect rights
of trade marks of business. It is a self-contained and
comprehensive code to deal with both the civil and criminal
law relating to trade and merchandise marks. Procedures and
forms are prescribed in Trade Mark Rules, 2002.
• The 1999 Act has not yet been made effective.
• Trade Mark under Common law as well as Trade Mark
Act - Protection to Trade Marks was first introduced in
India in 1940. Prior to that, the law relating to trade mark
was based on common law. At common law, right to
property in trade mark was in the nature of monopoly
enabling the holder of the said right to restrain others
from using the trade mark. The trade mark had to be
distinctive.
• After passing of the Act, registration of trade mark is
provided. However, registration of trade mark is not
compulsory.
• What is a ‘Trade mark’ - Trade mark means a mark
capable of being represented graphically and which is
capable of distinguishing the goods or services of one
person from those of others and may include shape of
goods, their packaging and combination of colours and
• (i) a registered trade mark or a mark used in relation to
goods or services for the purpose of indicating or so as to
indicate a connection in the course of trade between the
goods  or services, as the case may be, and some person
having the right as proprietor to use the trade mark.
• (ii) a mark used or proposed to be used in relation to goods or
services for the purpose of indicating or so as to indicate a
connection in the course of trade between the goods or services, as
the case may be, and some person having the right, either as
proprietor or by way of permitted user, to use the mark, whether
with or without any indication of the identity of that person (i.e.
proprietor or registered user). - - It also includes ‘certification trade
mark’ or ‘collective mark.
• Mark can be in respect of goods or services. It should be capable of
distinguishing the goods or services of one person from those of
others. The mark should indicate a connection in the course of trade
between the goods or services and some person having the right to
use the mark.
• USE IN COURSE OF TRADE - If mark is not used ‘in course of
trade’, the protection is not available. e.g. ‘Red Cross’ or ‘Ashok
Pillar’ is not used in course of trade. It cannot be a ‘trade mark’,
though protection may be available under some other law.
• CAPABLE OF BEING REPRESENTED GRAPHICALLY - Major
requirement is that the mark should be capable of being
represented graphically. Trade mark may be (a) letter mark -
e.g. IBM, Coca Cola etc. (b) Symbol mark - The symbol mark
may be (i) brand name identifying the product or (ii) Logo-
visual depiction of the company and it identifies the company.
e.g. Maharaja of Air India.
• Even shape of goods their packaging and
combination of colours can be a ‘trade mark’.
e.g. liquor bottle packed in a fancy size bottle.
• What is ‘Mark’ - Mark includes a device,
brand, heading, label, ticket, name, signature,
word, letter, numeral, packaging or
combination of colours or any combination
thereof.
• Registration of trade mark - Registration of trade mark is
not mandatory, though highly desirable when stakes are
high. The trade marks are to be registered with
Controller General of Patents, Designs and Trade Marks
who will be Registrar for purposes of this Act. Trade Mark
Registry has been established u/s 5(1) of the Act. Its
offices can be established at different places. Register of
trade Marks will be maintained at Head Office. The
register can be maintained in electronic form. Copy of
Register will be maintained at each branch office of
Registrar.
• Registration does not confer absolute right -
Registration of trade mark does not confer absolute
rights on the owner. The registration of trade mark
under section 28(1) is subject to other provisions of
the Act. Registration of Trade Mark does not confer
any new right to the mark claimed or any greater
right than that already existed. Thus, even if a trade
mark is registered, a ‘passing off’ action can be
initiated against the person who has registered the
trade mark.
• TRADE MARK HAS TO BE DISTINCTIVE - Trade mark
should be such as to distinguish the goods of owner
of trade mark from goods of other persons.
• Registration in case of honest concurrent use - It may
happen that there is honest concurrent use of
identical or similar trade mark by different
proprietors. In such cases, Registrar can grant
registration to both, subject to conditions and
limitations as may be prescribed by Registrar. This
can be done even if one mark was already registered.
• Foreign Trade marks not registered in India
also protected - Foreign Trade marks like
McDonalds, Whirlpool etc. have gained
international recognition. In view of this, such
trade marks can get protection in India under
‘passing off’ action, even if the trade marks
are not registered in India. This is so even if
the trade marks do not have any significant
presence in India.
• Rights conferred by Registration - Registration, if valid,
grants exclusive right to use of trade mark to the
proprietor in relation to goods or services in respect of
which the trade mark is registered, subject to conditions
and limitations prescribed, if any, and subject to other
provisions of thee Act. In case same or similar trade mark
is registered in name of more than one proprietor, they
do not have any right against each other, but have equal
rights against third persons. - - The registration and its
assignments and transmissions are prima facie evidence
of its validity in any legal proceedings [section 31(1)].
• Infringement of Trade Mark - A registered trade mark
is ‘infringed’ when a person other than registered
proprietor or a person using by way of permitted use,
uses in course of trade, in following cases -
• USE DECEPTIVELY SIMILAR MARK - Use of a mark
which is identical with or deceptively similar to trade
mark in relation to goods or services in respect of
which the trade mark is registered and in such a
manner as to render the use of the mark likely to be
taken as being used as a trade mark.
• LIKELY TO CAUSE CONFUSION BECAUSE OF
IDENTITY/SIMILARITY - Use which, because of identity or
similarity with registered trade mark and identity or
similarity of goods or services covered by registered trade
mark, is likely to cause confusion on the part of public.
• USE EVEN ON DISSIMILAR GOODS - Use of identical or
similar registered trade mark on goods which are not
similar, if the mark has reputation in India and use of the
mark without due cause is taking undue advantage or is
detrimental to the distinctive character or repute of the
registered trade mark.
• USE AS TRADE NAME - Use of registered trade mark as a
trade name or name of business concern or part of name
of his business concern dealing in goods or services in
respect of which the trade mark is registered.
• APPLYING TRADE NAME ON LABELS OR PACKING GOODS -
Unauthorised use the trade mark on material intended to
be used for labeling or packing of goods, as a business
paper or for advertising goods or services.
• USE IN ADVERTISING - Use in advertisement, taking unfair
advantage or is detrimental to its distinctive character or is
against reputation of the trade mark.
• Meaning of ‘deceptively similar’ - A mark shall be deemed to be
‘deceptively similar’ to another mark if it so nearly resembles that
other mark as to be likely to deceive or cause confusion.
• Assignment, transmission and registered user - A trade mark can be
assigned or transmitted. A registered trade mark can be assigned by
registered proprietor to another and to give effectual receipts for
any consideration for such assignment. Registered trade mark can
be assigned or transmitted with or without goodwill of business
concerned, in respect of all goods or services or of only some of the
goods or services. An unregistered trade mark can also be assigned
or transmitted with or without goodwill of business concerned. 
Assignment or transmission shall be registered with registrar.
• Appellate Board - An ‘Intellectual Property Appellate Board’
shall be established by Central Government. The Board will
exercise powers which were exercised by High Court. Matters
presently pending in High Court will also be transferred to the
Board. [However, matters relating to infringement, passing off,
offenses and penalties will continue to District
Court/Magistrate only as at present]
• Infringement -Falsifying trade mark and falsely applying trade
mark is a criminal offense for which punishment can be
imposed by criminal courts. In addition, suit for infringement or
passing off can be filed by aggrieved party. It is a civil action.
The suit is required to be instituted before District Court.
• Distinction between Infringement and passing off -
Unauthorised use of registered trade mark is ‘infringement of
trade mark’. Damages can be claimed under common law also,
even when trade mark is not registered. This is called ‘passing off’
action. - - Thus, in India, trade mark protection is available both
under the statute law and the common law.
• Court’s powers to grant interim reliefs - Courts can grant
damages for wrongful use of a trade mark. However, this takes
time. In the meanwhile, Courts can grant following immediate
reliefs: (a) Interim injunction (b) Anton pillar order - i.e. order for
search and seizure (c) Mareva injunctions i.e. freezing of assets.
•  
 Patents Act, 1970
• Patents Act, 1970 is designed to protect inventions in respect
of manufacture, machine or process of manufacture. On the
other hand, the Copyright Act, 1957 is to protect rights of
artists, authors, producers of films, computer software
owners etc. Patent is exclusive rights granted to the patent
holder, for a limited period, as a reward for creative work
based on his private initiative. ‘Creativity’ is accorded the
status of ‘property’ which can be bought, sold, licensed or
hired like any other commodity. The principle behind patent
protection is that creativity will not get encouragement if it
cannot be protected from pirating or copying.
• Major changes have been made by Patents (Amendment) Act, 2002, which was passed
on 25-6-2002 aligning it to TRIPS in many aspects.
• Highlights are –
• * It provides for uniform protection for 20 years.
• * Appellate Authority is provided. Appeal against order of Controller and Central
Government and application for rectification of register of patents will be to appellate
Board and not to High Court. [However, suit for infringement of Patent or revocation
of patent will lie with Court only]
• * Person other than patent holder to obtain marketing approval from regulatory
authorities within 3 years before expiration of terms of patent
• * Provisions for protection of bio-diversities of traditional knowledge
• * Reversal of burden in case of process patent
• * Procedural simplifications.
• The amendments have not yet been brought into force. However, these have been
incorporated in this write up at appropriate places.
• What is a Patent - Section 2(1)(m) merely states ‘Patent’
means a patent granted under this Act’. - - Thus, word ‘patent’
is not defined under the Act, though what can be patented
and what cannot have been specified. - - A patent, generally
speaking, is a grant from Government, which confers on the
grantee for a limited period of time the exclusive privilege of
making, selling and using the invention for which a patent has
been granted and also of authorizing others to do so.
• Varieties of Patents - Three kinds of patents are granted under
the provisions of the Act: (a) Ordinary patent (b) Patent of
Addition (c) Patent in respect of convention
• International Application - Patents Act allows grant of
patents to persons out of India, on the basis of
international arrangements. Such grant is available only if
there is a convention, treaty or arrangement with the
foreign country for grant of patents on reciprocal basis
i.e., if that country also agrees to grant patents to Indian
applicants. Government has to specify such countries by
issue of notification in official gazette. India has signed
Paris Convention in August 1998. Hence, any country
which is signatory to Paris convention is a convention
country.
• What can be patented - Requirements of patent are:
(a) The subject matter should be new. This is test of
‘novelty’. (b) It should be useful. This is test of ‘utility’.
(c) It should be an ‘invention’. It should be non-obvious.
(d) It should be a manner of manufacture, i.e. it should
be capable of industrial application. (e) ‘Vendibility’ test
(i.e. test of marketability) is important - the subject
matter should have commercial purpose. Any invention
which satisfies the definition of the ‘invention’ given in
the Act may be patented.
• Invention means a new product or process
involving an inventive step and capable of
industrial application. . - - ‘Inventive step’
means a feature that makes the invention not
obvious to a person skilled in that art.
‘Capable of industrial application’, in relation
to invention, means that the invention is
capable of being made or used in an industry.
• Life of Patent - Subject to the payment of
prescribed renewal fee within the prescribed
period, the term of every patent granted
under the Act is 20 years from date of filing
the application for patent. [The period was 5
or 7 years for process of manufacture of
food/medicine/drug and 14 years in other
cases, prior to Amendment Act, 2002].
• Rights of a patentee - Patentee has following rights (a) where
the patent is for a product, the exclusive right to prevent third
parties, who do not have his consent, from the act of making,
using, offering for sale, selling or importing for those purposes
that product in India (b) where the subject matter of patent is
a process, the exclusive right to prevent third parties, who do
not have his consent, from the act of using that process, and
from the act of using, offering for sale, selling or importing for
those purposes the product directly obtained from that
process, in India. However, that product should not be such
that no patent can be granted for that product in India.
• Working of patent and compulsory licensing -
The general principle is that patents are
granted to encourage inventions. However,
Patent is for use and not for hoarding or
exploitation.
• Infringement of Patent - Patentee and his agents and licensees
have exclusive rights to make, use, exercise or distribute the
invention in India under section 48. Infringement means
violating the statutory rights of patentee. Innocent
infringement, i.e. infringement without knowledge that a
patent exists does not require payment of damages and a
share of profit. Suit for infringement can be filed only in
District Court. The reliefs that can be claimed are (a) damages
and a share of profit to patentee. (b) Injunction on infringee on
the terms the Court may deem fit [section 108(1)]. Court can
also order that the infringing goods shall be seized, forfeited or
destroyed, as the Court deems fit.
 Copyright Act, 1957
• Copyright is right of artist, author, producer of films etc. who have
created a work by use of their artistic skills. On the other hand,
Patents Act, 1970 is designed to protect inventions in respect of
manufacture, machine or process of manufacture. Copyright Act
has provisions to protect copyrights of foreign work also. This Act
has attained special significance in view of GATT agreement. Under
this international agreement, all signatory nations have to take
steps to protect intellectual property rights (IPRs). It may be noted
that registration of patent is compulsory, while registration of
copyright or trade mark is optional. Rights in a patent can be
availed only if it is registered, but copyrights or rights to trade
mark are available even if the work is not registered.
• Copyright protection is limited to an author’s
particular expression of idea, process and concept in
a tangible medium. However, the law permits fair use.
• Copyright is only in expression of an idea. There is no
copyright in an idea. Copyright protects skill, labour
and capital employed by the author. Its object is to
protect the writer and author from the unlawful
reproduction, plagiarism, piracy, copying and
imitation. Thus, copyright is negative in nature. It is
not a right in novelty of ideas.
• Works in which copyright subsists - Section 13(1) of Copyright Act
provides that copyright subsists in (a) original literary, dramatic,
musical and artistic works (b) cinematograph films and (c) sound
recording.
• Artistic work - ‘Artistic Work’ means (i) a painting, sculpture, a
drawing (including a diagram, map, chart or plan), an engraving or
photograph. It does not matter whether or not any such work
possesses artistic quality and (ii) work of architecture [section 2(c)].
‘Work of Architecture’ means any building or structure having an
artistic character or design, or any model for such building or
structure [section 2(b)]. Note that a trade mark designed in an artistic
way can be protected under Trade Mark Act (as Trade Mark) as well
as under Copyright Act (as artistic work).
• Dramatic work - ‘Dramatic Work’ includes any piece for recitation, choreographic
work or entertainment in dumb show, the scenic arrangement or acting form of
which is fixed in writing or otherwise; but does not include a cinematograph film.
• Literary Work - The term ‘Literary Work’ includes computer programmes, tables
and compilations including computer databases [section 2(o)].
• Computer programme - It means set of instructions expressed in words, codes,
schemes or in any other form including a machine readable medium capable of
causing computer to perform a particular task or achieve a particular result [section
2(ffc)]. Computer includes any electronic or similar device having information
processing capabilities [section 2(ffb)].
• Musical work - ‘Musical work’ means a work consisting of music and includes any
graphical notation of such work, but does not include any words or any action
intended to be sung, spoken or performed with the music [section 2(p)]. Composer
means a person who composes the work whether or not it is recorded in form of
graphical notation [section 2(ffa)].
• Rights of a copyright owner - As per section
14, Copyright means exclusive right to do or
authorise doing any of the following acts in
respect of a work or any substantial part
thereof (this right is subject to provisions of
the Copyright Act).
• RIGHTS IN LITERARY, DRAMATIC OR MUSICAL WORK - (i)
To reproduce the work in any material form including the
storing of it in any medium by electronic means (ii) to
issue copies of work to the public - this clause does not
apply to copies which are already in circulation (iii) to
perform work in public or communicate to public (iv) to
make any cinematograph film or sound recording (v) to
make translation (vi) to make adaptation of work (vii) to
do, in relation to translation or an adaptation of work,
any of the aforesaid acts mentioned in clause (i) to clause
(vi).
• RIGHTS IN COMPUTER PROGRAMME - (i) To do
any of the acts specified above in relation to
literary work (ii) to sell or give on commercial
rental or offer to sale or for commercial rental
any copy of the computer programme. However,
such 'commercial rental' does not apply in
respect of computer programmes where the
programme itself is not the essential object of
the rental. ]. [proviso to section 14(b)(ii)]
• RIGHTS IN ARTISTIC WORK - (i) to reproduce in any
material form including depiction in two dimensions
from three dimensions or vice versa (ii) to
communicate work to public (iii) to issue copies of
work to the public which are not already in
circulation (iv) to include the work in any
cinematograph film (v) to make any adaptation of
the work (vi) to do in relation to an adaptation of
the work, any of the acts specified in clause (i) to
(iv) above.
• Ownership of Copyright - Normally, author of
work is the first owner (section 17). Author
means (a) author of literary or dramatic work
(b) composer of musical work (c) artist of
artistic work (d) person taking the photograph
(e) producer of cinematographic film or sound
recording [section 2(d)]. Right of author is
subject to some limitations.
• Assignment of Copyright - The owner of copyright can assign the
copyright to a work. Such assignment can be partial or full or subject
to limitations and for limited term or full term. Even rights of future
work can be assigned, but the assignment becomes effective only
when the work comes into existence. [Some leading and popular
authors sell their work at fat price even before it is complete.] After
assignment, the assignee gets rights assigned and balance rights
remain with the assignor (section 18).
• Term of copyright - Normal term of copyright is throughout the
lifetime of author plus 60 years from beginning of calendar year
next following the year in which the author dies. In case of joint
authorship, the author who dies last will be considered (section 22).
 Designs Act, 2000
• This Act was earlier known as ‘Indian Patents and
Designs Act, 1911’. After passing of Patents Act in
1970, the provisions in respect of patents were
removed from this Act, and the Act was re-christened
as ‘Designs Act, 1911’. Designs Act, 2000 has been
passed, and made effective from 11-5-2001.
• The work in respect of registration of designs is
looked after only by Designs Office located within
Patents Office at Kolkata, in respect of all applicants
from India.
• Design as per Designs Act - Section 2(d) of Designs Act defines that ‘design’
means only the features of shape, configuration, pattern, ornament or
composition of lines or colours applied to any article whether in two
dimensional or three dimensional or in both forms, by any industrial process
or means, whether manual, mechanical or chemical, separate or combined,
which in the finished article appeal to and are judged solely by the eye; but
does not include any mode or principle of construction of anything which is
in substance a mere mechanical device, and does not include any trade mark
defined in section 2(1)(v) of Trade and Merchandise Marks Act or property
mark as defined in section 479 of Indian Penal Code or ‘artistic work’ as
defined in section 2(c) of Copyright Act.
• The Act covers only ‘artistic designs’ and not ‘engineering designs’. Design
cannot be registered under Trade Marks Act as well as under Designs Act.
• Nature of design - Every product has a physical
aspect and a psychological aspect. In consumer's
mind, psychological aspects tend to assume priority.
Design creates a favourable impression on customer,
which induces him to buy the goods.
• Thus, design covers whole body of goods. Design
must be applied to an article, has an appeal to eye
and is novel and original, i.e. eye appeal is very
important. Functional designs are not registrable
under Designs Act.
• Design registration is obtained for novelty in the external
appearance only. The registrable design is not the article itself,
but a feature, an idea or characteristic look applied to an article.
e.g. novel shape of a pager or cellular phone. The design can be
registered only with respect to an article or set of articles.
• The registrable design must be capable of being applied to an
article by an industrial process or means. The article must be
movable. Thus, design of buildings, permanent structures and
naturally occurring unprocessed objects are not registrable.
• Design can be of some article like motor car, wash basin, shoe
etc. It should have individuality of appearance.
• Protection to Designs - The ‘copyright protection’ to the design is for
ten years from date of application of registration of a design. This can
be extended for one further term of five years each (i.e. total fifteen
years), if application is made and necessary fees are paid. [section 11].
‘Copyright’ means the exclusive right to apply a design to any class in
which the design is registered. [section 2(c)].

• Design is registrable only if it is new, novel and not published before. If

it is published before, the novelty is lost. [section 19]. If the designer
has to publish it in exhibition, fashion show etc., he has to inform
Controller of Patents (in Design office) in advance. Application should
be made within 6 months from date of exhibition. Otherwise, the
designer may lose his right for registration of design. [section 21].
 Geographical indication
• A geographical indication (GI) is a name or
sign used on certain products which
corresponds to a specific geographical location
or origin (eg. a town, region, or country). The
use of a GI may act as a certification that the
product possesses certain qualities, or enjoys
a certain reputation, due to its geographical
origin.
• Governments have been protecting trade names and
trademarks used in relation to food products identified
with a particular region since at least the end of the
nineteenth century, using laws against false trade
descriptions or passing off, which generally protect
against suggestions that a product has a certain origin,
quality or association when it does not. In such cases the
consumer protection benefit is generally considered to
outweigh the limitation on competitive freedoms
represented by the grant of a monopoly of use over a
geographical indication.
• Like trademarks, geographical indications are
regulated locally by each country because
conditions of registration such as differences
in the generic use of terms vary from country
to country. This is especially true of food and
beverage names which frequently use
geographical terms, but it may also be true of
other products such as carpets (eg. 'Shiraz'),
handicrafts, flowers and perfumes.
 Provisions of TRIPS
• In 1994, when negotiations on the WTO
Agreement on Trade-Related Aspects of Intellectual Property Rights
("TRIPS") were concluded, governments of all WTO member countries
(151 countries As of August 2007 [update]) had agreed to set certain basic
standards for the protection of GIs in all member countries. There are,
in effect, two basic obligations on WTO member governments relating
to GIs in the TRIPS agreement:
• Article 22 of the TRIPS Agreement says that all governments must
provide legal opportunities in their own laws for the owner of a GI
registered in that country to prevent the use of marks that mislead the
public as to the geographical origin of the good. This includes
prevention of use of a geographical name which although literally true
"falsely represents" that the product comes from somewhere else.
• Article 23 of the TRIPS Agreement says that all governments must provide
the owners of GI the right, under their laws, to prevent the use of a
geographical indication identifying wines not originating in the place
indicated by the geographical indication. This applies even where the public
is not being misled, where there is no unfair competition and where the true
origin of the good is indicated or the geographical indication is accompanied
by expressions such as "kind", "type", "style", "imitation" or the like. Similar
protection must be given to geographical indications identifying spirits.
• Article 22 of TRIPS also says that governments may refuse to register a
trademark or may invalidate an existing trademark (if their legislation
permits or at the request of another government) if it misleads the public as
to the true origin of a good. Article 23 says governments may refuse to
register or may invalidate a trademark that conflicts with a wine or spirits GI
whether the trademark misleads or not.
• Article 24 of TRIPS provides a number of exceptions to the protection
of geographical indications that are particularly relevant for
geographical indications for wines and spirits (Article 23). For
example, Members are not obliged to bring a geographical indication
under protection where it has become a generic term for describing
the product in question. Measures to implement these provisions
should not prejudice prior trademark rights that have been acquired
in good faith; and, under certain circumstances — including long-
established use — continued use of a geographical indication for
wines or spirits may be allowed on a scale and nature as before.
• In the Doha Development Round of WTO negotiations, launched in
December 2001, WTO member governments are negotiating on the
creation of a 'multilateral register' of geographical indications.
 TRADE SECRETS
• A trade secret is a formula, practice, process,
design, instrument, pattern, or compilation of
information which is not generally known or
reasonably ascertainable, by which a business
can obtain an economic advantage over
competitors or customers. In some
jurisdictions, such secrets are referred to as
"confidential information" or "classified
information".
The precise language by which a trade secret is defined varies by
jurisdiction (as do the particular types of information that are
subject to trade secret protection). However, there are three
factors that, although subject to differing interpretations, are
common to all such definitions: a trade secret is information
that:
• is not generally known to the public;
• confers some sort of economic benefit on its holder (where this
benefit must derive specifically from its not being generally
known, not just from the value of the information itself);
• is the subject of reasonable efforts to maintain its secrecy.
• The sanctioned protection of such type of information from
public disclosure is viewed as an important legal aspect by
which a society protects its overall economic vitality. A
company typically invests money, time and energy (work) into
generating information regarding refinements of processes
and operations. If competitors had access to the same
knowledge, the first company's ability to survive or maintain
its market dominance or market position and market share
would be impaired. Where trade secrets are recognized, the
creator of knowledge regarded as a "trade secret" is entitled
to regard such "special knowledge" as intellectual property
 Protecting trade secrets
• Trade secrets are by definition not disclosed to the world at large. Instead,
owners of trade secrets seek to keep their special knowledge out of the
hands of competitors through a variety of civil and commercial means, not
the least of which is the use of non-disclosure agreements (NDA) and
non-compete clauses. In exchange for the opportunity to be employed by the
holder of secrets, an employee will sign an agreement not to reveal his or her
prospective employer's proprietary information. Often, the employee will
also sign over rights to the ownership of own intellectual works produced
during the course (or as a condition) of their employment. Violation of the
agreement generally carries the possibility of stiff financial penalties. These
penalties operate as a disincentive to revealing trade secrets. Similar
agreements are often signed by other companies with whom the trade secret
holder is engaged, e.g. with the trade secret holder's vendors, or third parties
in licensing talks or involved in other business negotiations.
• Trade secret protection can, in principle, extend indefinitely and
in this may offer an advantage over patent protection, which
lasts only for a specifically limited period of time. Coca-Cola, the
most famous trade secret example, has no patent for its
formula and has been very effective in protecting it for many
more years than the twenty years of protection that a patent
would have provided. In fact, Coca-Cola refused to reveal its
trade secret under at least two judges' orders.[6] However, the
"down side" of such protection is that it is comparatively easy
to lose (for example, to reverse engineering, which a patent will
withstand but a trade secret will not) and comes equipped with
no minimum guaranteed period of years.