Introduction

A Non Disclosure Agreement commonly referred to as an NDA is a legally binding contract entered into between parties usually between an employer and employees or business associates to safeguard confidential information. Under such an agreement the receiving party undertakes not to disclose misuse or exploit any confidential information shared during the course of employment or business dealings except for the agreed purpose and duration.

In simple terms one party shares sensitive business technical or product related information with another party and in return the receiving party agrees to maintain confidentiality for a specified period of time.

Trade secrets constitute an important form of intellectual property. They include confidential business information that derives commercial or economic value from not being generally known and which is subject to reasonable efforts to maintain secrecy. Such information may be sold or licensed and typically includes formulas designs drawings processes technical know how and proprietary methods known only to a limited group within an organisation.

Judicial Precedents

John Richard Brady and Others v Chemical Process Equipment Private Limited and Another 1987

John Richard Brady an American medical engineer was the President and Managing Director of Fometa Overseas SA Castellana Madrid Spain. He developed an innovative system for growing green fodder for cattle throughout the year even under adverse climatic conditions. The system involved cultivating grass in a controlled indoor environment using specific techniques to protect and accelerate growth.

After extensive research and experimentation Brady developed an advanced Fodder Production Unit and applied for patent registration in India. He owned the drawings and designs of the Fodder Production Unit and retained exclusive rights over their reproduction in both two dimensional and three dimensional formats.

In order to manufacture and export the unit from India Brady established two companies namely Fometa Machine Private Limited and Sanjeevani Fodder Production Private Limited. For manufacturing the thermal panels required for the functioning of the unit Brady engaged Chemical Process Equipment Private Limited. To enable proper manufacturing Brady shared confidential drawings designs and technical specifications with the defendant company under a strict confidentiality agreement.

Subsequently Brady cancelled all orders placed with the defendant after discovering defects in the panels supplied. Thereafter senior officials of the defendant company visited Brady’s production unit in Goa and allegedly copied confidential formulas and technical information. Brady became aware of this conduct through his employees.

In November 1985 Chemical Process Equipment Private Limited launched its own fodder production unit under the name Pushti falsely claiming it to be their original innovation. Aggrieved by these actions Brady initiated legal proceedings alleging breach of trust breach of confidentiality and infringement of intellectual property rights.

Arguments of the Plaintiff

The plaintiff contended that the defendant’s fodder production unit was entirely based on confidential information disclosed solely for the purpose of manufacturing thermal panels. It was argued that the defendant breached the confidentiality agreement and committed breach of trust.

The plaintiff further submitted that the defendant unlawfully converted the plaintiff’s two dimensional drawings into a three dimensional machine thereby infringing copyright. It was also asserted that the defendant’s machine was deceptively similar in appearance and design but inferior in quality.

The plaintiff invoked the jurisdiction of the Delhi High Court under Section 62 subsection 2 of the Copyright Act 1957 on the ground that the defendants advertised their products in Delhi. It was further stated that the plaintiff held copyright protection for the product in several countries and that no patent authority had rejected the application.

Arguments of the Defendant

The defendants denied any breach of copyright or confidentiality. They argued that the plaintiff was not the only entity manufacturing fodder production units and that several international companies were engaged in similar activities based on hydroponic principles.

It was contended that the plaintiff did not provide complete drawings or designs but only limited information necessary for manufacturing the panels. The defendants further argued that although the machines appeared similar there were differences in technical functioning and internal design.

The defendants also challenged the jurisdiction of the Delhi High Court contending that the plaintiff neither had a production unit nor carried out any economic activity in Delhi.

Final Judgment

The Court held that the machines manufactured by both parties were substantially similar in appearance and design. The differences pointed out by the defendants were considered minor and insignificant. The defendants failed to establish that their designs were independently created or materially distinct from those of the plaintiff.

The Court observed that unauthorised use of confidential information amounts to breach of confidence. It further noted that the promotional materials used by the defendant were substantially similar to those of the plaintiff.

Applying settled legal principles the Court concluded that unauthorised commercial exploitation of confidential drawings designs and technical information constitutes violation of intellectual property rights and trade secrets irrespective of intention.

Accordingly the Court held that the defendant had breached the confidentiality agreement misused trade secrets and committed copyright infringement.

Conclusion

Judicial decisions consistently demonstrate that misuse of confidential information whether intentional or negligent amounts to breach of confidence and breach of trust. Even in the absence of a specific statute governing trade secrets in India courts have extended protection through contract law equitable principles and common law doctrines.

Non Disclosure Agreements play a crucial role in safeguarding proprietary business information and Indian courts have actively upheld the rights of innovators and creators against unfair commercial exploitation.

About author:

Giridhar Dangi is a BBA LL.B. student at Ramaiah Institute of Legal Studies, Bangalore.