Authored By: Raj Dnyaneshwar Joshi
Modern Law College, Pune
The conflict between trade secrets and composition disclosure is not just a fancy idea, rather it is a battle which directly reflects on our daily life, from that bottle of Coca-Cola to that medicine we took with doctor’s consultation, from googling the recipe of classic margarita pizza to trying to find plastic in the ingredients of Kurkure. All this is either part of trade secrets or composition disclosure. ‘Trade secrets versus composition disclosure’ is not just a conflict between government, production companies etc., it is a battle between intellectual property which shall be saved and right to information. The objective of this article is to provide information regarding trade secrets, compensation disclosure, daily examples to relate to subject, relevant global and Indian laws, and judicial precedents throughout the world to support both ideas in question. Trade secret is a recognized intellectual property and composition disclosure is a core part of patent law which also serves as the information provider for the public. Being part of similar consumer base and field of market, both servers for different areas of market and tend to raise clashes. This article also serves to find common grounds for the coexistence of both of these legal terminologies.
What is trade secret?
Trade secret is defined under TRIPS agreement as, “Information that is secret, has commercial value because of its secrecy, and has been subject to reasonable steps to keep it secret, providing an economic advantage to its holder.”1In essence, trade secret is an intellectual property which has commercial value, and the efforts are been taken to protect that particular information. Merely calling any kind of formula or recipe shall not be considered as trade secrets until, a) substantial efforts are taken to keep it a secret and b) has a commercial value. The question is how can we consider that these measures are being taken into consideration? It could be evaluated through confidentiality agreements by those companies; economic profits directly being reflected or popularity of that particular product because of that formula etc. There are some of the examples which could be considered as most well-known examples in regards trade secrets, secret formula of Coca-Cola and the 11 herbs and spices blend used by KFC. The label of Coca-Cola contains such general ingredients as carbonated water, sugar, caffeine, and caramel color, but the way they are combined and in what amount to create the company signature taste is the secret of the company, the secret that is kept through a high level of internal security and access control. similarly, KFC has nutritional and ingredient lists to comply with, although its proprietary combination of eleven herbs and spices in fried chicken is a secret, so steps such as splitting the recipe into several suppliers and keeping employees in the dark are taken on this matter. The two cases demonstrate that under trade secrets, companies can only give the composition information required either by the regulating or consumer agencies but not the fundamental proprietary aspects that make the product distinct and competitive commercially. This shield enables others not to copy the product so that brand exclusivity and market differentiation could be retained in the long run. In both mentioned examples, i.e. Coca-Cola and KFC 11 herbs, the companies have taken substantial number of efforts to keep the formula a secret and have shown commercial/economic profits which are gained particularly because of that trade secret.
What is composition disclosure?
Composition disclosure is an integral part of patent law to be approved by the government as a patent. Special provisions are prescribed in relevant statutes under respective laws. The most relevant definition could be seen under US law as, “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art … to make and use the same…”2 To explain it further, composition disclosure is a requirement under patent law, not just in USA but in India and other countries as well, even TRIPS agreement prescribes it under patent law. This particular provision is created with taking public welfare into consideration, it could challenge the secrecy which is a requirement under trade secretes as an intellectual property. To elaborate more, we can take a practical example of food and beverage industry, where companies are obliged to disclose information about ingredients and nutritional value of food to meet the requirements and guarantee the safety of consumers. To use an example, a soft drink label will provide a list of ingredients, which includes carbonated water, sugar, caffeine, and flavoring agents, and this just provides the consumer basic information on what they are taking but not the proprietary recipe and the precise proportions. In the same way, active ingredients, excipients, and dose directions of the pharmaceutical products are indicated on packaging or its inserts. These revelations permit regulatory compliance and enable consumers to make wise decisions with the companies having control over how this was exactly formulated or manufactured, retaining their competitive edge. These examples indicate that composition disclosure can bring transparency to safeguard and comply and promote the interest of the people and maintain the commercial secrets.
Judicial perspectives on the matter of trade secrets and composition disclosure.
There are few cases which directly reflected on the topic which is in question here, for example in the matters of public citizen health research group v. FDA3the court ruled that not all data could be protected under trade secrets, if the public health is in question, the right of public to know has more weightage against commercial secrecy. The court did not undermine the importance of trade secret; however, it drew a line for the limits of the same. In this particular case, the court had to weigh two competing forces: a) commercial confidentiality b) public health. Wherein commercial property was considerate towards protecting proprietary formulas and testing data and on the contrary, public health argument was considerate towards ensuring citizens’ access to information and the safety which was in question. Clearly court was in favor of public health argument. However, a contrary case, In Deepa Venkatachalam (2011)4, the Central Information Commission of India was required to balance the Trade Secret protection as found in statute with the public interest in vaccine safety. The applicant was after clinical data through the RTI Act but the respondents effectively claimed the defense of commercial confidence. The Commission believed that was a prejudicial effect on the competitive position of the companies that would result in disclosing formulations and test methodologies. As a result, the information was exempted on the basis of Section 8(1)(d)5, which proved that even in cases concerning the common health, intellectual property rights might still be a stiff obstacle towards complete disclosure.
The conflict of interest is a thin line between trade secrets and disclosure of composition. Trade secrets safeguard proprietary knowledge such as formulas, processes, and methods, that provide businesses with a competitive edge and must be kept secrets, to retain economic value in a business. Composition disclosure, by contrast, is a result of regulatory forces, consumer protection needs, and ethical issues requiring that companies give sufficient information about the contents, structure, or method of use of a product to promote transparency and accountability. This is especially acute in the industries such as pharmaceuticals, food, and biotechnology where disclosure of inadequate information may jeopardize the health of citizens whereas disclosure of excessive information may jeopardize the economic sustainability of operations. Organizations balance such a situation through internal security, selective disclosure and legal agreements that restrict sensitive information access whilst meeting regulatory needs. In concept level, trade secrets and composition disclosure complement one another: trade secrets are considered as motivating more innovation by safeguarding proprietary knowledge whereas composition disclosure involves formalizing people and regulating bodies to know essential product characteristics. Legal systems all over the world are aware of this conflict, and have put in place systems to safeguard proprietary information without sacrificing safety or transparency, and that trade secrets are not an absolute protection. Also, confidential information management is not just formulaic, but includes manufacturing methods, operational processes, and technical expertise, which are precious resources and need protection. It is important that organizations have a strong internal governance, compliance procedures, and risk management measures to avoid unauthorized disclosure to show that protection of intellectual property is a continuous operational obligation. One of the factors which could be taken into consideration is that corporates could understand the requirements of consumer which is to know what they consume, as the companies fulfill this particular requirement through being more transparent, they can attract a consumer base which would be more knowledgeable and loyal in nature. Parallelly, corporation could disclose the ingredients within the product explicitly, while making sure the formula to create the final product stays intact. For example, some companies produce different ingredients and elements in different factories, making it challenging to find exact formula. Finally, the correlation of the trade secrets with the disclosure of the composition highlights the larger fact that commercial innovation, compliance with the regulations, and the welfare of the society are mutually reliant. Balancing between these aspects is a delicate balance between the legal, ethical, and strategic aspects of information disclosure whereby innovation is beneficial as well as the stakeholders, including the consumer, up to the regulators, are capable of knowing that safety and quality standards are maintained. This combination of ideas brings out the fact that proper management of both proprietary and disclosed information is a legal requirement as well as a business strategy, and it is hereby the centrifuge of long-term innovation and sustainable governance.
