Semiconductor Layout-Designs and Trade Secrets

Part A. Layout-designs of integrated circuits

1. Why a separate right

An integrated circuit's layout (the three-dimensional arrangement of transistors and connections on a chip) costs a great deal to design but can be copied cheaply by photographing the chip layer by layer. Patent law rarely fits, because most layouts are not inventive; copyright fits poorly, because the layout is functional. The US created a sui generis right in the Semiconductor Chip Protection Act, 1984. The WIPO Treaty on Intellectual Property in Respect of Integrated Circuits (Washington, 1989) followed, but never came into force. TRIPS Articles 35 to 38 require members to protect layout-designs in accordance with most of the Washington Treaty and add a minimum term of ten years. Section 3(o) of the Patents Act excludes the topography of integrated circuits from patents.

2. The Indian Act

The Semiconductor Integrated Circuits Layout-Design Act, 2000, with Rules of 2001, set up a Layout-Design Registry under the Ministry of Electronics and Information Technology. Its main features:

• Registrable: a layout-design that is original (the result of the creator's own intellectual effort and not commonly known to creators of layout-designs and manufacturers of ICs), distinctive, and capable of being distinguished from other registered layout-designs. A design that has been commercially exploited anywhere for more than two years before the application is treated as not original.
• Term: ten years from the date of filing or from the date of first commercial exploitation anywhere, whichever is earlier.
• Rights: the exclusive right to use the layout-design, and to authorise others; infringement includes reproducing it and importing, selling or distributing it or an IC incorporating it for commercial purposes.
• Exceptions: reproduction for scientific evaluation, analysis, research or teaching, and the creation of a new original layout-design from such analysis (reverse engineering); innocent infringement of a chip acquired without knowledge.
• Offences and civil remedies, and an appellate body (originally the Appellate Board under the Act, now the High Court after the 2021 reforms).

Very few layout-designs have been registered. Chip firms rely on secrecy, speed to market and patents on processes. With the government's semiconductor fabrication schemes since 2021, the Act may become more relevant, and its reverse-engineering exception is the point to discuss.

Part B. Trade secrets

3. Meaning

A trade secret is commercially valuable information, kept secret by reasonable steps, whose value lies in its secrecy: a formula (the Coca-Cola recipe), a process, a customer list, pricing data, source code. TRIPS Article 39(2) requires members to protect “undisclosed information” that (a) is secret in the sense that it is not generally known or readily accessible to persons in the circles that normally deal with it, (b) has commercial value because it is secret, and (c) has been subject to reasonable steps to keep it secret. Protection is against disclosure, acquisition or use “in a manner contrary to honest commercial practices”, which links it to Paris Article 10bis. Article 39(3) separately requires protection of undisclosed test data submitted for marketing approval of drugs and agrochemicals against unfair commercial use.

A trade secret has no fixed term and no registration, but it gives no protection against independent discovery or legitimate reverse engineering. The choice between a patent and secrecy is a business decision: a patent gives a strong but public and time-limited right; secrecy may last indefinitely but can be lost in a moment.

4. Protection in India

India has no trade secrets statute. Protection comes from:

1. Contract. Non-disclosure agreements and confidentiality clauses in employment and licence contracts are enforceable by injunction and damages.
2. Equity: breach of confidence. Indian courts follow the English action. In Saltman Engineering Co. v. Campbell Engineering Co. (Court of Appeal, 1948) Lord Greene required information with the necessary quality of confidence, not public property or knowledge. In Coco v. A.N. Clark (Engineers) Ltd. (1969) Megarry J set three elements: the information has the quality of confidence, it was imparted in circumstances importing an obligation of confidence, and there was unauthorised use to the detriment of the confider. The Delhi High Court applied this in John Richard Brady v. Chemical Process Equipments Pvt. Ltd. (1987), granting an injunction against a defendant who had used confidential drawings of a fodder-production machine supplied in confidence, even without a contract with him.
3. Copyright in documents, drawings and code, where the secret is in a work.
4. Criminal law indirectly: theft, criminal breach of trust and cheating under the Bharatiya Nyaya Sanhita, 2023, and data theft under the Information Technology Act, 2000 (s.43 and s.66).

5. Employees and section 27

Section 27 of the Indian Contract Act, 1872 makes void every agreement by which anyone is restrained from exercising a lawful profession, trade or business. A covenant operating during employment is valid: Niranjan Shankar Golikari v. Century Spinning and Mfg. Co., 1967 INSC 10, upheld a restraint on the employee working for a competitor during the term of his contract. A post-employment non-compete is void: Superintendence Company of India v. Krishan Murgai, 1980 INSC 124. But a court can still restrain a former employee from using or disclosing confidential information, because that protects the secret, not the employer's market. The Delhi High Court drew this line in American Express Bank Ltd. v. Priya Puri (2006), refusing to treat general customer knowledge carried in an employee's head as a trade secret. The general skill and knowledge of an employee are his own (Faccenda Chicken v. Fowler, English Court of Appeal, 1986).

6. Comparative law

• US: the Uniform Trade Secrets Act (1979), adopted by most states; the Economic Espionage Act, 1996 (criminal); and the Defend Trade Secrets Act, 2016, which created a federal civil action and an ex parte civil seizure remedy.
• EU: the Trade Secrets Directive (EU) 2016/943 harmonised the definition (following TRIPS Art 39) and remedies, and expressly permits reverse engineering and whistle-blowing.
• UK: breach of confidence in equity, together with the Trade Secrets (Enforcement, etc.) Regulations 2018 implementing the Directive.

How this is examined

A short note on “protection of trade secrets” or “layout-designs of integrated circuits”, or part of a question on new forms of industrial property. For trade secrets: TRIPS Art 39, the Coco elements, John Richard Brady, s.27 with Golikari and Krishan Murgai, then the US and EU statutes and the Law Commission. For layout-designs: why a sui generis right, the Act's conditions, term and reverse-engineering exception, and TRIPS Arts 35–38.