Indian Courts have upheld trade secret protection under principles of equity and contractual obligation. Section 27 of the Indian Contract Act,1872 makes this evident due to the provision relating to restrain of trade. This section that is general in its terms, declares all agreements that restrain trade as void. Initially the section was rigid in its invalidation of restrains, however it was enacted when trade was still underdeveloped, and the object of the section was to prevent restraint of trade. Later, by virtue of the implication of the Law Commission of India in 1958 and its recommendation, reasonable restraint came into picture.
SPRINGBOARD DOCTRINE
This doctrine was first used in the case of QBE Management Services (UK) Ltd v Dymoke and other[1]. The Claimant succeeded in obtaining, after an expedited trial, ‘springboard’ relief to restrain three former employees and their financial backer from commencing a competing business. The case is believed to be the first example of springboard relief being granted as final relief on the basis of breach of fiduciary duty and breaches of an employee’s duty of fidelity. In addition to injunctive relief, QBE also recovered damages and indemnity costs.
The Indian courts subsequently adopted this doctrine.
The Delhi High Court in the case of John Richard Brady And Ors v. Chemical Process Equipments P. Ltd. and Anr[2] held that the Springboard Doctrine will be applicable even in absence of Non-Disclosure or any other related agreement. The court opined that the law of trade secrets is not subject to contracts and that the breach of confidential information depends upon the principle of equity that he who receives information in confidence shall not take unfair advantage of it.
The Spring Board doctrine has been explained by the Courts as, “A person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the person who made the confidential communication, and it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.”
The Calcutta High Court in the Fairfest Media Ltd vs Lte Group Plc[3] defined explained springboard as follows: “a person who has obtained information in confidence is not allowed to use it as springboard for activities detrimental to the person who made the confidential communication.”
The rationale behind this common-law doctrine is that when an ex-employee joins a competitor with knowledge of a former employer’s trade secrets, he would inevitably disclose the same to the new employer due to the nature of the new job, and hence, the former employer does not need to wait for an actual or even threatened use of the trade secrets and he could seek legal redress to prevent,
1. the ex-employee from taking up the job with the competitor and
2. the new employer(competitor) from hiring the employee
The Bombay High Court in Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh (2010)[4], held that “Such common-law doctrine would, therefore, apply even to the information which has been published or can be ascertained by the public. Such information cannot be used to the prejudice of the person who gave it without the consent of that person”.
In a recent Judgement, Inphase Power Technologies vs Abb India Limited[5] , the Karnataka High Court opined that on the basis of Spring Board Doctrine, an ex-employee may be injuncted from using the information in his possession and acting in a manner which can be detrimental to the interest of an employer. A company which invests its time, money and manpower in research and development deserves protection against infringement and passing off.
The Spring Board doctrine is the first extra-legislative relief provided in the Indian trade secret regime. Along with the reliefs of compensation, injunction, and penalty; this doctrine provides relief before the potential crime takes place. It is important to understand that India is still poor in legislations ensuring protection of trade secrets. In this faltering state, it is the judiciary that upholds the tethers of trade secret protection.
The need for a proper legislation is imperative for the reason that employers can misuse this doctrine in violation of a former employee’s rights of future employment. This is in gross conflict with the fundamental rights guaranteed under the Indian Constitution as well as the provisions of the Competition Act. Though, confidentiality and non-competition clauses have been upheld by the Indian courts as reasonable restraints to trade (against Section 27 of Indian Contract Act), the same cannot be concretely said about Springboard doctrine. There are cases of a person not getting re-employed in the same industry based on the previous employment contract being unconscionable or excessively harsh or unreasonable or one sided.
Thus, the evolution of Springboard Doctrine into a legislation of trade secret protection is the need of the hour.
[1] [2012] EWHC 80 (QB)
[2] AIR 1987 Delhi 372
[3] [2015] 2 CHN CAL 704
[4] (112) BOM LR 3759
[5] M.F.A No.3009/2016
Are there any defenses to spring board doctrine?