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2017 DIGILAW 992 (MAD)

Trivitron Healthcare Pvt. Ltd. v. Shivram Iyer

2017-04-10

M.M.SUNDRESH

body2017
JUDGMENT : M.M. SUNDRESH, J. 1. Pending the suit for declaration, permanent injunction and mandatory injunction to protect the copy right, trade secret and to prevent the confidential information, these applications have been filed seeking an order of interim injunction. 2. BRIEF FACTS:- 2.1 M/s Kiran Medical Systems Limited was involved in manufacturing of Imaging products and Radiation Protection Apparels (waist). The customers are hospitals and clinics. The waist manufactured are to be used for taking x-rays and those meant for protection to those involved in the said jobs. The specifications are mandatory to be complied with. 2.2 On 14.07.2011, a Share Purchase Agreement was entered into between the plaintiff and the erstwhile Kiran Medical Systems Limited for a stage wise purchase of the shares from all the latter spread over a period of three years. Till the take over by the plaintiff, entire business was to be managed from Mumbai. A merger has taken place vide order of this Court dated 28.04.2015 in favour of the plaintiff. 2.3 The first defendant was the Chief Operational Officer of the plaintiff. The second defendant was the Vice President of the manufacturing unit. The third defendant worked as a General Manager-Production and the fourth defendant was the Vice Person-Sales. After taking over, the management shifted to Chennai. Though the plaintiff claims the existence of a confidentiality and non disclosure agreement said to have been executed by the fourth defendant, the averments would indicate that they are not available. Needless to state that the defendants denied the said factum of execution. The first defendant sent his resignation in the month of January 15th and relieved on 31.03.2015. All along he was working at Mumbai. Thereafter, he joined fifth defendant, who is a competitor in business through the plaintiff on 27.07.2015. The second defendant gave a resignation letter during the first week of February, 2015 and relieved on 28.02.2015. The third defendant, after his resignation on 30.06.2014, joined the services of the fifth defendant on 05.07.2014. The fourth defendant relieved on 24.11.2014. One of the defendants has also subsequently resigned from the fifth defendant. Defendants 2 to 4 have never visited Chennai office. In fact, according to them, the said office was not in existence during their employment. The first defendant has stated to have visited Chennai office only on two occasions. The fourth defendant relieved on 24.11.2014. One of the defendants has also subsequently resigned from the fifth defendant. Defendants 2 to 4 have never visited Chennai office. In fact, according to them, the said office was not in existence during their employment. The first defendant has stated to have visited Chennai office only on two occasions. One at the time of the plaintiff took over the charge and secondly, at the time of giving his resignation. The plaintiff found that the fifth defendant was in possession of all the trade secret and copy right belonging to them and started manufacturing waists. An internal audit was made and in the auditing, one of the files available in Chennai said to have been created on 03.03.2015, in which it was found that defendants 1 to 4 in connivance of each other, started sharing the confidential information relating to the trade secrets exclusively belonging to the plaintiff, which has been used in favour of the fifth defendant. It is the further case of the plaintiff that the confidential information has been used in favour of the fifth defendant by defendants 1 to 4. Thus, the suit is laid for the protection of copy right and trade dress. 2.4 Factually, the fifth defendant has started its production. The cost of the product of the fifth defendant is higher than the plaintiff. 3. Submissions of the learned counsel:- 3.1 The learned counsel appearing for the applicant/plaintiff submits that the information as available in the folder by name “pen drive” constitute a trade dress. It also comes within the purview of a copy right. The plaintiff complied with the mandate of Section 65-B of the Indian Evidence Act, 1872. On fact, there is no dispute that defendants 1 to 4 were the employees of the plaintiff. It is also not in dispute that all of them resigned and joined the fifth defendant. The manufacturing process would involve certain technical intricacies, price mechanism and the customer data. Defendants 1 to 4 were in the know how of these particulars, which are to be classified as confidential and trade secret. The manufacturing activities have started by the fifth defendant only after defendants 1 to 4 have joined. The manufacturing process would involve certain technical intricacies, price mechanism and the customer data. Defendants 1 to 4 were in the know how of these particulars, which are to be classified as confidential and trade secret. The manufacturing activities have started by the fifth defendant only after defendants 1 to 4 have joined. When a skill merges with trade secret, a knowledge acquired through it, cannot be permitted to be used by the erstwhile employee in favour of a third party or on his own. Thus, it requires protection. Even on equity, the plaintiff is entitled for injunction. Section 27 of the Indian Contract Act, 1872, would not apply to such cases. For granting injunction, what is required is that the acquisition and possession of a trade secret in favour of an employee. In support of his aforesaid contentions, the learned counsel has made reliance upon the following decisions. 1. Beyond Dreams Entertainment Pvt. Ltd. and Others vs. Zee Entertainment Enterprises Ltd. and Another, 2015 SCC On Line Bom. 4223 2. Burlington Home Shopping Pvt. Ltd. vs. Rajnish Chibber and Another, (1995) DLT 6 3. Hi-Tech Systems and Services Ltd. vs. Suprabhat Ray and Others, (2015) SCC On Line Cal. 1192 4. John Richard Brady and Others vs. Chemical Process Equipments Pvt. Ltd. and Another, AIR 1987 Del. 372 5. Bombay Dyeing and Manufacturing Co. Ltd. vs. Mehar Karan Singh, (2010) 5 AIR Bom. R 573 6. Amber Sixe and Chemical Company Limited vs. Astbuby J. Menzel, 1912 A. 1297 7. Escorts Const. Equipment Ltd. and Another vs. Action Const. Equipment Pvt. Ltd. and Another, AIR 1999 Delhi 73 8. Desiccant Rotors International Pvt. Ltd. vs. Bappaditya Sarkar and Another, (2009) 112 DRJ 14 3.2 The learned Senior Counsel appearing for the fifth defendant and the learned counsel appearing for defendants 1 to 4 would submit that apart from the suit not being maintainable, even on facts, the plaintiff is not entitled for interim protection. The averments made in the counter affidavit filed by the defendants are not disputed or denied seriously, especially with respect to the dates leading to retirement. Defendants 2 to 4 were never in the picture at the time of creating the alleged folder on 03.03.2015. They never visited the Chennai office. Some of them resigned much before the establishment of the office at Chennai. Defendants 2 to 4 were never in the picture at the time of creating the alleged folder on 03.03.2015. They never visited the Chennai office. Some of them resigned much before the establishment of the office at Chennai. No relief can be granted based upon a self created folder emanated in pursuant to so called Audit Report done at the instance of the plaintiff. The first defendant has visited the Chennai Office only twice, that too, for few hours. He did not do any work there except by making a courtesy call. The first visit was at the time of change of management and the second to hand over resignation. If a file had been created, the same would have been done at Mumbai itself. If there is a connivance, there is no necessity to create a file when the so called trade secret is embedded in the mind in all the activities in which defendants 1 to 4 are involved. There is no confidentiality or non disclosure agreement inter se parties. There is no element of copyright involved. So is the case qua a trade secret and a confidential information. Everything is available in the public domain. The customers are very well known. It is for them to choose the best product. The fact that the product with the fifth defendant is with higher price tag shows its superior quality. The products are not similar as shown to the Court. The plaintiff is trying to get an order in an indirect manner contrary to Section 27 of the Indian Contract Act, 1872. In support of their submissions, reliance has been made on the following judgments. 1. Superintendence Company of India (P) Ltd. vs. Krishan Murgai, AIR 1980 SC 1717 2. American Express Bank Ltd. vs. Ms. Priya Puri, (2006) III LLJ 540 (Del.) 3. Niranjan Shankar Golikari vs. The Century Spinning and Manufacturing Co. Ltd. AIR 1967 SC 1098 4. R. Babu and Another vs. TTK LIG Limited, O.S.A. No. 6 of 2003 dated 1.03.2004 5. G.R.V. Rajan vs. Tube Investments of India Ltd. (1995) 1 LW 274 4. TRADE SECRET:- A trade secret has got an element of uniqueness or exclusivity. It may be a single factor or an idea or a combination of many. It includes manufacturing process, engineering, drawing etc. G.R.V. Rajan vs. Tube Investments of India Ltd. (1995) 1 LW 274 4. TRADE SECRET:- A trade secret has got an element of uniqueness or exclusivity. It may be a single factor or an idea or a combination of many. It includes manufacturing process, engineering, drawing etc. Such a trade secret can exist notwithstanding a protection available under the Copyright Act, Trade Mark Act, Designs Act and Patent Act. A trade secret cannot be defined or restricted to a set of activities or ideas. A copyright is different from a trade secret. However, they can complement each other. That the trade secret gives protection and such protection needs the maintenance of confidential information. A trade secret shall involve sufficiently developed technical intricacies not in the realm of public knowledge. Even an information being partly public and private cannot always be termed as a trade secret and thus, not entitled for confidentiality. A copyright is an act against the World in general while a confidence operates against those individuals which relates to receiving information or ideas in confidence. A copyright has a fixed statutory time limit as against a trade secret involving confidential information. 5. COPYRIGHT-CONFIDENTIAL INFORMATION:- 5.1 The principles governing confidentiality has been dealt with in Saltman Engineering Co. Ltd. vs. Campbell Engineering Co. Ltd. (1948) 65 RPC 203 in the following manner. “If a defendant is proved to have used confidential information, directly or indirectly obtained from a plaintiff, without the consent, express or implied of the plaintiff, he will be guilty of an infringement of the plaintiff's rights. The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document, be it a formula, a plan, a sketch, or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.” 5.2 To constitute a breach, it has to be proved by the plaintiff that its idea was “the springboard” to the devise of the defendants, who breached the confidence. In CMI Centers for Medical Innovation GMBH and Another vs. Phytopharm PLC, (1999) Fleet Street Reports 235 the following factors are found to be the necessary ingredients for the breach of confidence. “CMI Centers for Medical Innovation GMBH and Another vs. Phytopharm PLC, (1999) Fleet Street Reports 235 where the Court held that for a plaintiff to succeed in a breach of confidence action he had to address at least four matters; i.e. (i) he had to identify clearly what was the information he was relying on; (ii) he had to show that it was handed over in the circumstance of confidence; (iii) he had to show that it was information of the type which could be treated as confidential and (iv) he had to show that it was used without his licence or there must be threat to use it. It was added that at interlocutory stage.” 5.3 It is not every breach of confidence would be relatable to a trade secret. In other words, a trade secret and the confidential information are to go along with each other for the plaintiff to succeed. It is based upon the principles of equity to be exercised as a common law remedy on finding a breach of confidence. Therefore, the breach of confidence can be stated to be a cause of action for infringing or violating a trade secret. The element of novelty in a trade secret has to be seen and proved by a party seeking protection. Therefore, the breach of confidence can be stated to be a cause of action for infringing or violating a trade secret. The element of novelty in a trade secret has to be seen and proved by a party seeking protection. As discussed above, there may be a case for protection of a novelty, despite the availability of certain materials in public domain. In such a case, more scrutiny is required by the Court and therefore, the onus becomes heavier on the plaintiff. 5.4 Merely because, an employee, who has learnt or has gained knowledge using his skill, the same cannot be a ground for granting injunction. Thus, a mere confidential information per se also will not be a ground. To put it differently, unless an information is classified as a trade secret or to be treated with some protection being so confidential, the employer is not entitled for it. The following decision along with passage would be apposite. “In Faccenda Chicken Ltd. vs. Fowler, 1986 (1) All ER 617, the Court of Appeal held that the duty of fidelity owed by an employee to a former employer was not as great as the duty implied in the employee's contract of employment and owed during the subsistence of the employment, when use of disclosure of confidential information, even though it did not amount to a trade secret, would be a breach of a duty of good faith and accordingly, confidential information concerning an employer's business acquired by an employee in the course of his employment could be used by the employee after his employment had ceased unless the information was classed as a trade secret or was so confidential that it required the same protection as a trade secret.” “In W.C. Leng and Co. vs. Andrews, 1909 (1) Ch. 763 it is stated: - “The doctrine does not mean that an employer can prevent his employee from using the skill and knowledge in his trade or profession which he has learnt in the course of his employment by means of directions or instructions from the employer. That information and that additional skill he is entitled to use for the benefit of himself and the benefit of the public who gain the advantage of his having such admirable instructions. That information and that additional skill he is entitled to use for the benefit of himself and the benefit of the public who gain the advantage of his having such admirable instructions. The case in which the Court interferes for the purpose of protection is where use is made not of the skill which the man may have acquired, but of the secrets of the trade or profession which he had no right to reveal to anyone else - matters which depend to some extent on good faith........” 5.5 In Saltman Engineering Coy. Ltd. vs. Campbell Engineering Coy. Ltd. (1948) 65 R.P.C. 203, the Court dealt with requirement of confidential information. The following passage would be relevant. “47. In the case of Saltman Engineering Coy. Ltd. vs. Campbell Engineering Coy. Ltd. (1948) 65 R.P.C. 203, this principle has been enunciated by Lord Justice Greene M.R. at page 215 thus:- The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document, be it a formula, a plan, a sketch, or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.” “60....The information must be of a confidential nature. As Lord Greene said in the Saltman case at page 215, something which is public property and public knowledge cannot per se provide any foundation for proceedings for breach of confidence. However confidential the circumstances of communication, there can be no breach of confidence in revealing to others something which is already common knowledge. But this must not be taken too far. Something that has been constructed solely from materials in the public domain may possess the necessary quality of being by the application of the skill and ingenuity of the human brain. Novelty depends on the thing itself, and not upon the quality of its constituent parts. But this must not be taken too far. Something that has been constructed solely from materials in the public domain may possess the necessary quality of being by the application of the skill and ingenuity of the human brain. Novelty depends on the thing itself, and not upon the quality of its constituent parts. Indeed, often the more striking the novelty, the more commonplace its components.” “The second requirement is that the information must have been communicated in circumstances importing an obligation of confidence. However secret and confidential the information, there can be no binding obligation of confidence if that information is blurted out in public or is communicated in other circumstances which negative any duty of holding it confidential.” “Thirdly, there must be an unauthorised use of the information to the detriment of the person communicating it.” 5.6 Section 27 of the Indian Contract Act, 1872, prohibits a contract in restraint of a trade. Therefore, such a negative covenant cannot be enforced, though signed during the course of the employment, but after the termination of service. Thus, there is a difference qua enforceability during the course of employment and after termination. This is also on the principle that a covenant in the agreement during employment cannot be extended to a case after termination. The following passage of the decision of the Apex Court in Superintendence Company of India vs. Krishan Murgai, 1980 AIR 1717 is apposite. “Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void. Not a single Indian Decision has been brought to our notice where an injunction has been granted against an employee after the termination of his employment.” 6. With the abovesaid principles of law, let us consider the contentions raised. The basic facts are not in dispute qua the employment of defendants 1 to 4, including their resignation and joining. Thus, prima facie it appears that no reliance can be made on the Internal Audit Report of the plaintiff. The defendants were working at Mumbai, resigned earlier and never visited the Chennai office except the first defendant on two occasions. Secondly, the admissibility, relevancy and proof of folder “pen drive” is a matter to be decided at the time of hearing the suit finally. Suffice it to state that the plaintiff has not produced sufficient evidence on the so called conspiracy qua the defendants. Secondly, the admissibility, relevancy and proof of folder “pen drive” is a matter to be decided at the time of hearing the suit finally. Suffice it to state that the plaintiff has not produced sufficient evidence on the so called conspiracy qua the defendants. This Court is of the prima facie view that there is no copyright involved. The plaintiff has neither obtained any protection under the Copyright Act nor entitled to it in law. The basic specifications are available in the public domain. The question as to whether the information as provided under the folder would constitute a trade secret and ideas coupled with confidentiality and thus, a right is created or not leading to a protection is a matter for evidence. There are no sufficient materials for this Court to come to the conclusion at this stage. This is also for the reason that there is an apparent difference between the products and the one belonging to the fifth defendant is priced higher. The contentions regarding the skill and knowledge qua defendants 1 to 4 also cannot be accepted. 7. Firstly, the plaintiff has to establish through evidence that there indeed a trade secret. However, an useful reference can be made to the judgment of this Court in M/s Bajaj Auto Limited vs. M/s TVS Motor Company Limited, 2016 (4) Law Weekly 865, wherein after considering Section 65-A and 65-B of the Indian Evidence Act, it has been held that such an evidence has been looked into only at the time of deciding the suit. 8. Secondly, the existence of the confidential information has to be established in the absence of an agreement to support it. Further, it has also to be proved that such a confidential information is akin to trade secret. The onus is heavily on the plaintiff at this stage which it has not discharged. Otherwise, it will amount to granting an order against defendants 1 to 4 notwithstanding the rigour of Section 27 of the Indian Contract Act, 1872. Every manufacturing process may contain certain distinct elements which by themselves would not constitute a trade secret. It appears prima facie that the materials used by the fifth defendant are not verbatim to some of those being used by the plaintiff. The plaintiff has never claimed to have invented any new trade secret. 9. Every manufacturing process may contain certain distinct elements which by themselves would not constitute a trade secret. It appears prima facie that the materials used by the fifth defendant are not verbatim to some of those being used by the plaintiff. The plaintiff has never claimed to have invented any new trade secret. 9. The protection sought for by the customers also cannot be granted though the learned Counsel appearing for the plaintiff submits that at least some of the important customers will have to be protected. After all, both the plaintiff and the defendants are manufacturing waists. These products are to be used in the medical field. It is for the customers to satisfy themselves on the quality of the product and buy them. The customers are none other than the hospitals and clinics. There are other manufacturers also. There is nothing to come to the conclusion that there exists a contract between the plaintiff and its customers. Therefore, this Court cannot grant an injunction which will have an effect of creating such a contract as it is well open to an intending buyer to lay its hand on a product which it finds better in quality and to its liking. The decisions relied upon by the learned counsel for the plaintiff are not cases in point to be applied in its favour, though they speak about the general law governing the subject. Much reliance has been made on the decision rendered in Hi-Tech Systems and Services Ltd. vs. Suprabhat Ray and Others, (2015) SCC On Line Cal. 1192. The said decision has to be seen in its own context. A finding has been rendered to the effect that during the currency of the employment confidential information has been leaked. Reliance has also been made on the Circular issued by the plaintiff by E-mail dated 04.04.2014, which is prior to the resignation of the employees, showing correspondence with the third party. 10. The learned counsel has made a fervent appeal on equity. It is settled that between law and equity, law has to prevail. Though they can travel on the same channel, there water do not mix always. This Court also does not find any equity in favour of the plaintiff for the reasons aforesaid. The fifth defendant has already started its manufacturing and its products have come into market with the higher price tag. Though they can travel on the same channel, there water do not mix always. This Court also does not find any equity in favour of the plaintiff for the reasons aforesaid. The fifth defendant has already started its manufacturing and its products have come into market with the higher price tag. Hence, the contentions raised are rejected. Applications stand dismissed.