The famously heard-about and yet unknown secret formula for the very popular consumer beverage, ‘Coca Cola’ has made news time and again for almost the same reason—Is it officially out in public?

This time, yet again, on 11^th February 2011, producers of a weekly public radio show ‘This American Life’ cite from the February 18, 1979 edition of the Atlanta Journal-Constitution, used with permission of the newspaper, of what may be the original recipe for Coca-Cola.

Per the Coca Cola Company, the original recipe is supposedly locked in some vault in Atlanta. And the Company rubbishes uncovering of its zealously guarded secrets!

May be yet another attempt of claim-to-fame, but what is so extraordinary and unusual about this secret that draws attention? Or it is merely ‘human’ to get towed out of curiosity in an attempt to unearth, towards anything which we know is a ‘secret’?

The Coca Cola has protected this formula from falling in public hands since about 125 years. There are numerous other companies shielding their business plans, strategies, techniques, formulae, etc. from falling in the hands of people ready to pounce upon them and make fortunes out of them. And the question is—Is the law helping them in this ordeal?

The Black-letter law In U.S.

The Uniform Trade Secrets Act (UTSA) provides for the definition of trade secret as:

“information, including formula, pattern, compilation, program, device, method, technique, or process that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Remedies provided for misappropriation of trade secrets under UTSA are in the nature of grant of injunctions, damages, and reasonable attorney's fees. However, UTSA is only a model law drafted by the National Conference of Commissioners on Uniform State Laws. In U.S., trade secrets are not protected under federal statutes by law in the same manner as trademarks or patents. Rather, trade secrets are tried to be protected under respective States. It has been adopted by 46 states, the District of Columbia and the U.S. Virgin Islands. Massachusetts, New Jersey, New York and Texas have not adopted the UTSA. Article 39.2 of the TRIPS provides as follows:

“Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices [1] so long as such information:

(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

(b) has commercial value because it is secret; and

(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."

How much does the law help?

Despite having both national and international law in place on the subject, protection of trade secrets is still not carved its niche. One major reason for this remains the nature of the subject matter of protection. Protection hinges primarily on the efforts of the owner of the trade secret. Once it is out from its vault, the damage is irretrievable and unquantifiable.

This for the reason that trade secrets, like patents, present a key element of the innovation process. They could be a product of years put together in research and development process, having involved huge financial and infrastructural investments. The final product of the entire innovation process or any part thereof, however, could be protected as a ‘trade secret’. The owner could either opt for patent protection over his results or conceal the whole or part of it as trade secret.

The advantage which they have over patents is that for protection, they only require to be classified as ‘trade secrets’. However, obtaining a patent protection runs a risk of both the information becoming public and the patent application being rejected on grounds of novelty or non-obviousness. Refusal of patent application may put many years of research and labour to an end, without bringing back any returns, which could otherwise have been secured through the ‘trade secret’ route. Also, unlike patents, the period of protection is not limited. Rather a trade secret owner can enjoy protection for as long as he can keep the secret intact.

Guarding the secret itself for years and years in the interest of a person or company, where power and control are gradually transferred through generations, is not a cake walk. Rigorous efforts are vital to keep pumping life into the ‘secret’, in the sense of reaping continuous benefits out of it.

Cases

There have been instances of espionage pertaining to trade secrets, one of them famously being the case of United States v. Williams [2], which pertained to the Coca Cola trade secret conspiracy investigation and trial. In this case, an assistant to one of senior executive of the Coca Cola Company attempted to trade the secret off, which conspiracy was hatch after much rigorous investigation involving electronic evidence in addition to traditional forms of evidence. The conspirators were brought to trial and convicted.

Similar was case of United States v. Malhotra [3], where an IBM Director of Sales and Business Development, Output Management Services was tried and convicted for misappropriation of cost information trade secrets, using electronic and other evidence.

Companies adopt various means of shielding their secrets, through non-disclosure agreements (NDAs), non-compete clauses, etc. But, as is apparent, these are protectionary clauses. If a trade secret has been acquired via unlawful means as, industrial espionage, its acquirer will probably be subject to legal liability for acquiring it improperly.

Conclusion

However, in this area, because of the peculiar nature of subject matter, if once the damage is done, even the law also cannot repair it. If a patent, copyright or a trademark is infringed, it does not affect the length and force of the rights they afford. However, for a balloon of a precious trade secret, even a small prick, will not only deflate it, but will also make a lot of sound!

As they say in medicine, so we say for trade secrets- ‘protection is better than cure’.

[1] For the purpose of this provision, “a manner contrary to honest commercial practices” shall mean at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition.

[2]526 F.3d 1312 (11th Cir. 2008)

[3]Case No. CR 08-00423 JF (N.D. Ca l. July 11, 2008)