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India – Enforcing Confidential Information

Confidential information relating to any enterprise may be in the form of any business formula, process, R&D capabilities, client related or operational information, that ought to be protected as a trade secret. Any breach in handling such confidential information violates the IP rights of the concerned party and has been pursued through the courts on many occasions. The Delhi High Court has deliberated on the misuse of confidential information relating to industrial drawings and the grant of permanent injunction to restrain the same in case of Action Construction Equipment vGulati Industrial Fabric P. Ltd.IA no 10073/2006 IN CS(OS) no 1740/2006.

Action Construction Equipment has filed a request for permanent injunction against misuse of confidential information, an ex parte order for which had already been passed in 2006. The company makes tower cranes and infrastructure construction equipment for the government and other business and exports its products to many countries in the Middle East. The R&D department of the company had been developing and designing products that were also certified by the Ministry of Defence, Atomic Energy and Steel Authority of India as being quality products.

Gulati Industrial Fabric approached the plaintiffs for supply of the fabricated components of the Tower crane. At this point Action Construction gave industrial drawings of the key components to them for exclusive manufacture and supply to the plaintiffs only. The notice accompanying the drawings stated: “This drawing is the property of ACE. It is furnished to you for development purposes only and is to be returned to ACE upon request. Unauthorised use of the drawing and duplicating or making product as per our drawing without our permission or any other misuse is not permitted.” This meant the maintenance of secrecy was expected through this agreement.

However, Action Construction Equipment’s business was adversely affected by the attempt of Gulati Industrial Fabric to pass off sub-standard goods as coming from Action Construction Equipment to gain market share. Thereafter, they also started fabricate components. This was  unacceptable to Action Construction Equipment, who filed a suit for permanent injunction, alleging; misappropriation of industrial designs, breach of trust and contract and violation of confidentiality of the industrial designs through misuse. The manufacture of parallel components under the name Omega was also contrary to the contract between the parties.

During the proceedings, Gulati Industrial Fabric raised the issue that Action Construction Equipment did not own a copyright in those drawings, as they had also copied them from a third party, which the plaintiffs admitted. Hence, the cranes were an item of public domain, made by a number of manufacturers around the country. However, the claims of misappropriation of drawings and breach of contract for confidentiality remained. Since the ex parte interim order was in place, the court examined the evidence put before it. The evidence was found by the court to be not cogent; hence the defences were left to be determined at the trial. Thus, the application for interim injunction was allowed, which was made permanent, without interfering with the ex parte order.