Sunday, 27 November, 2022
HomeOpinionGoogle, Amazon, Flipkart have all protested. India needs a new trade secrets...

Google, Amazon, Flipkart have all protested. India needs a new trade secrets law

The absence of trade secret legislation in India leads to unnecessary litigation and non-cooperation in ongoing antitrust investigations.

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Amazon and Flipkart approached the Supreme Court in July 2021 to stop the Competition Commission of India from asking for trade-sensitive information in its investigation of the platforms, according to a report by Reuters. Among other things, the CCI asked for details about sellers listed on the platforms as well as copies of their seller agreements. The Amazon-Flipkart case highlights how India’s current approach to trade secret protection leads to unnecessary disputes. India is obligated to protect trade secrets under the Trade-Related Aspects of Intellectual Property Agreement. However, it has not enacted any law on the subject. Therefore, aggrieved parties must approach the courts to enforce protection of trade secrets.

India’s approach to trade secret protection — or rather the absence of clear statutory guidance on the subject — is problematic in the context of legal areas that centre around information retrieval such as competition enforcement. Competition law requires regulators to delve into intimate details about the manner in which businesses function to find evidence of anti-competitive behaviour. On the one hand, these include agreements between parties, which often involve confidentiality obligations but may also encompass stipulations that are anti-competitive. A trade secret, on the other hand, is information that offers a firm a competitive advantage by virtue of its secrecy. It can include technical or commercial information, including lists of vendors and customers. In other words, trade secrets and competition enforcement are at odds with each other.

Also read: Without the privacy and data protection law, India’s regulation of Big Tech will be ad hoc

Are company secrets confidential in competition assessments?

Ordinarily, the tension between trade secrets and competition law would be resolved by guardrails within the competition statute that exempt businesses from disclosing trade-sensitive information to investigative authorities. The Competition Act, 2002, contains such a provision. Section 57 of the law restricts the disclosure of information without the express permission of the entity to whom it pertains. However, the restriction is diluted by a caveat that permits disclosure of information if it complies with the Competition Act or any other valid law. The safeguard against disclosure under Section 57 is further watered down by Regulation 35 of the Competition Commission of India (General) Regulations, 2009, which provides that a party must request the Competition Commission of India to treat certain documents as confidential. Thus, the question of keeping information confidential remains uncertain as discretion vests with the CCI to determine whether a request is legitimate.

The absence of a safety net for trade secrets in competition enforcement is particularly troublesome in the context of the digital economy. The conflict between the competition and trade secrets doctrines reaches its apogee with digital businesses, where information is the core value proposition of the company but may also be relevant to understand key dimensions of antitrust activity. It creates a situation where companies are either compelled to go to the courts, as in the case of Amazon and Flipkart, or not cooperate and pay the penalty for doing so. For instance, in 2014, the CCI fined Google Rs 1 crore for partial non-disclosure of information. The information sought by the CCI included information pertaining to changes in its search algorithm – the most important component of its business.

Google’s non-cooperation with the CCI was likely prompted by a concern about the CCI’s ability to maintain confidentiality. There have been occasions in the past where the regulator failed to keep information confidential. In Lafarge India Ltd vs Competition Commission of India, for instance, the Director General of the CCI, its chief investigating officer, circulated confidential information even though a request for confidentiality had been granted for it to one of the parties to the proceeding.

Also read: Amazon, Flipkart, FB, Twitter’s troubles show Modi govt is creating a protectionist economy

India needs a trade secrets law

The Competition Commission of India recognises the gaps in its confidentiality regime and panoply of litigation prompted by it. In April 2021, it invited comments on a review of the confidentiality regime under Regulation 35 of its General Regulations. Broadly, the amendments enable a party to certify whether making a document public would result in the disclosure of trade secrets. However, they also seek to bring in confidentiality rings, where select representatives of the parties to a proceeding would be able to access unredacted case records. The suggestion follows the practice of the European Commission, which uses confidentiality rings as a negotiated disclosure mechanism to protect the interests of the opposing party, while safeguarding the secrecy of the person providing the information.

However, the European Commission follows narrow conditions for the formation of confidentiality rings, resorting to them only if they are essential to proving anti-competitive behaviour or protecting the rights of a party. Conversely, the CCI follows a much broader and vaguer approach that involves forming a confidentiality ring whenever it considers it necessary or expedient to do so. The move may be perceived as institutionalising a way for businesses to access sensitive data of their rivals. As such, it is unlikely to do much to resolve the issue of litigations against the regulator regarding protection of trade secrets.

The most practical path forward is one that leaves minimal uncertainty about the maintenance of confidentiality of trade-sensitive information. In the short term, the CCI should exempt trade secrets from public disclosure. The position would reflect one taken in other information disclosure statutes such as the Right to Information Act, 2005, which exempts commercial information and trade secrets from being disclosed in RTI requests.

In the long term, the Union government should enact a trade secrets law, which provides clarity on what constitutes a trade secret. A statutory definition for trade secrets would go a long way in minimising the tussle between regulatory authorities and businesses. One definition that may be used as a template is the United States Uniform Trade Secrets Act. It defines trade secrets as information that “derives any actual or potential independent economic value from its confidentiality and cannot be legally ascertained by anyone seeking to profit from its disclosure. The new law should also recognise trade secrets as a form of intellectual property in India. Due to the fragility of trade secrets as a form of intellectual property, and the ease with which they can be misappropriated, it is necessary to afford them greater protection.

The move would be in line with our policy positions as the protection of trade secrets is listed as an objective under the National Intellectual Property Rights Policy 2016. It would also afford a greater sense of security to innovators when competition regulators come knocking on their doors for sensitive information.

The author is a lawyer and works as a consultant at Koan Advisory Group, a technology policy consulting firm. Views are personal.

This article is part of ThePrint-Koan Advisory series that analyses emerging policies, laws and regulations in India’s technology sector. Read all the articles here.

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