Trademarks and Trade Secrets: Know the Difference with Coca-Cola
Though they may include the same word, the two concepts- Trademarks and Trade Secrets- are not alike at all. It is true that both are valuable assets that give your business an edge against rivals in the market. However, their scope of application covers totally different areas. This article analyses the meaning of the concepts, the law regarding them and studies Coca-Cola to better understand the distinction.
In India, trademarks are given protection under the Trademarks Act, 1999. Trademark has been defined under section 2 (ZB) of the Act as, “….a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shape of goods, their packaging and combination of colours.”In simple terms, it includes any colours, symbols, graphic, letters, shapes etc. that give the product a unique identity. There are various classes of goods under which trademarks can be registered. The legal requirements for registering a trademark include graphical representation (in paper form) and the capability to distinguish the goods or services. Owners of unregistered trademarks have limited protection but they can sue third parties for passing off.
Trademarks are in the public domain to help consumers identify the brand and product. They come in handy to create a strong and loyal customer base, and to set the product apart from similar goods.
2. Trade Secrets
On the other hand, in the case of Bombay Dyeing and Manufacturing Co. Ltd. vs. Mehar Karan Singh, citing the Blacks Law Dictionary, the Court defined trade secret as “a formula, process, device or other business information that is kept confidential to maintain an advantage over the competitors. It is the information which includes formula, pattern, compilation, programme, device, method, technique or process, that derives independent economic value from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use.” This basically means that any information that is sensitive to a company’s operation and must be kept confidential for its business interests will constitute a trade secret. The value of the secret is derived from the fact that it is not open knowledge.
Generally, employees in the course of their work are privy to such information so their contracts include clauses to not disclose such private information to competitors during the course of employment and even after it. This is not regarded as restraint of trade under section 27 of the Contract Act, 1872 as was held in the case of Nirajan Shankar Golikari v. The Century Spinning and Mfg. Co.
Though the international legal framework provides for the protection of Trade Secrets such as Article 39 of the Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) Agreement, there is no domestic legislation in India directly protecting these.
3. Coca-Cola: an example of both trademark and trade secrets
To understand the distinction between the concepts better, let us take the example of one of the most valued brands, Coca-Cola. Coca-Cola’s trademark consists of the curved design of the bottle and the phrase ‘Coca-Cola’ written in flowing handwriting. The distinctive logo has set the brand apart from all its competitors. There have been slight changes in it over the years but, the value created by the trademark has been in the form of immeasurably positive customer perception and an iconic status given to logo by popular culture and fan following.
On the other hand, the biggest and most protected trade secret (it is kept in a vault!) of the company has been its recipe for making the drink. The formula is highly guarded information that only select individuals have access to. These individuals have signed iron-clad Non Disclosure Agreements (“NDAs”) to prevent the information from being leaked. The value of the formula is in its exclusivity and thus Coca-Cola has not patented it either.
In conclusion, one must carefully consider the definitions before applying the concepts and seeking possible safeguards accompanying these concepts.