Intellectual Property RightsInterplay between Patents and Trade Secrets

In Claudio De Simone & Ors. Versus Acital Farmaceutica SRL. & Ors.

CS (OS) 576/2019  | 17^th March, 2020

Fact                                                                                                                                                                                         

In the present case, Plaintiff No. 1 was an inventor of a US patent formulation namely; De Simone Formulation. The said formulation is highly concentrated bacterial formulation beneficial for pharmaceutical and dietary indications. In the year 2015, the patent protection in US had expired and the Plaintiff No. 1 did not had any corresponding patent in the territory of India.

It was claimed by the Plaintiff that the blending ratio and strain selection of the formulation was not claimed in the patent rather were maintained as trade secret and confidential information. The Plaintiff no. 1 had entered into a Patent License Agreement with the Defendant No. 3 and thereafter entered into a know-how agreement with the Defendant No. 3 which was to come into effect after the expiration of Patent License Agreement. The said know-how agreement was entered into so as to ensure that Defendant No. 3 may continue manufacturing the formulation after expiry of patent protection as their existed no patent protection in the territory of India.

However, at a later stage, these agreements stood terminated on the ground that the Defendants have been allegedly using the low quality materials for the purpose of manufacturing the formulation to which the Plaintiff didn’t approve of and disagreed to the same.

Pursuant thereof the Defendant No. 4 by adopting reverse engineering mechanism imitated and developed the De Simone Formulation and started advertising and publicizing as similar to the existing bacterial formulation.

Therefore, in order to restrain the defendants from manufacturing, distributing, selling, linking or associating their new bacterial formulation with the De Simone Formulation of the Plaintiff and further to restrain from carrying out test, research, study; the Plaintiff approached the Hon’ble High Court of Delhi seeking permanent injunction.

Issue  

Whether an invention which does not qualify as patented product and has no property right therein, can acquire property rights by the third person entering into an agreement of exchange of Know-How and thus claiming confidentiality.

Discussions and Finding

The Court while discussing the issue in question observed that:

 The said Know-How, without patent being applied for with respect thereto, was in  public domain and by conduct of the defendants the status thereof cannot be changed  and the same cannot be conferred rights as are permitted to be conferred under the  statute i.e. Patents Act, only in accordance with the provisions thereof. The plaintiffs’  case is not of enforcement of contractual rights.”

Therefore, the Court observed that the Plaintiff has not approached this forum for enforcement of contractual obligations. In addition to this, confidential information and trade secrets are not equated as intellectual property in India.

With regard to the contention of the Plaintiff that certain know-how related to the manufacture of the Formulation was not disclosed in the US Patent but was separately protected as know-how and made available to the defendants under terms of confidentiality, the Court observed as under:

  Since the plaintiffs have no subsisting patent protection in India, and since the patent  based in US has expired, the innovation, as noted above, is in public domain. Hence,  the claim for trade secret protection falls and the defendants cannot be restrained    from manufacturing the product, in spite of the Know-How Agreement, as otherwise it would amount to judicial creation of an extra-statutory monopoly for perpetuity in  the invention, in contrast to the scheme of Patent Act, 1970 that seeks to bring an      invention to public domain after the expiry of the term of the patent, and which is   opposed to public interest as well as to judicial discipline.”

The Court in light of the provisions of the Patents Act, 1970 held that the Act requires the patentee to disclose the best method of working the invention. The Court held that if the Plaintiffs had already disclosed the best method of working in the US Patent itself, the method of manufacture cannot be separately protected as know-how.

However, in the present case, the Plaintiff does not have any existing patent in the territory of India and also the patent protection as granted in US had expired, the patent and the process is now in public domain.

Therefore, the Court held that once a patent has been applied for and expired, the “innovation” is now in public domain and no trade secret protection can be claimed thereon. Further, the information claimed to be confidential can be protected as trade secret only if such information is not available in the public domain and is hence unknown to others.

Analysis

It is the law of the land that a patent is a statutory right whereas a trade secret constitutes proprietary information which exists in terms of commercial value. The Indian Courts in numerous cases has granted protection of trade secrets. However, technical know-how is considered as a knowledge that is earned in the course of business. It may or not may be documented but does contribute to net worth of the business and is an important aspect of intellectual property rights which the Court has overlooked.

The Court had at length discussed the method of working a patent and has categorically held that an inventor is free to choose and get its IP protected as a patent or keep it has a trade secret but is not at liberty to protect the same as patent in one jurisdiction and as trade secret in another jurisdiction.