In the world of business, few secrets are as coveted—or as fiercely guarded—as Coca-Cola's legendary recipe. This fizzy concoction has not only quenched thirst across the globe for over a century but also laid the foundation of a corporate empire. The true magic of Coca-Cola lies not just in its taste but in its closely held trade secret. A trade secret is the unsung hero of intellectual property—an invisible asset that can build empires, just like it did for Coca-Cola.

A trade secret refers to confidential business information that provides a company with a competitive edge. This can be a recipe, a formula, a method, or even a business strategy that is unknown to the public. Their indefinite lifespan sets trade secrets apart from patents—so long as they remain secret. Once disclosed, however, they lose their legal protection. Coca-Cola's formula has never been patented for this very reason. Instead, the company has relied on secrecy and robust internal policies to keep its recipe out of competitors' hands for over 138+ years.

In India, there is no particular statute which deals with trade secrets as they are protected by laws which are principles of Common Law. The courts enforce the protection of trade secrets through contracts, including, but not limited to, non-disclosure agreements and confidentiality clauses. Indian law recognizes the importance of protecting confidential business information and classifies it under the "principle of equity" and "breach of trust." Interestingly, India does not have a separate Trade Secrets Act. Instead, the protection of trade secrets primarily arises from various sections of the Indian Contract Act of 1872. Indian courts, in several cases, have relied on Section 27 of the Indian Contract Act, which restricts trade after the termination of an employment or business relationship if such restrictions protect confidential information.

The United States has a more defined framework for protecting trade secrets. Under U.S. law, trade secrets are safeguarded by the Defend Trade Secrets Act (D.T.S.A.) of 2016 and the Uniform Trade Secrets Act (U.T.S.A.), which most states have adopted. Both these acts provide for the civil prosecution of trade secret misappropriation and ensure that companies can seek remedies, including injunctions, damages, and even punitive damages in cases of wilful misconduct.

Unlike patents, which require public disclosure of an invention in exchange for protection, trade secrets thrive on confidentiality. This means Coca-Cola's formula will never be seen in a patent registry. Instead, it is locked away in a vault and figuratively through complex security protocols and agreements that prevent disclosure.

A BRIEF ABOUT COCA-COLA and ITS HISTORY

The inventor of Coca-Cola, Dr. John Styth Pemberton, developed this drink in 1886. Since then, the drink has broken all records and is a leading soft drink in the industry with a net operating revenue of $ 33.0B, as reported in 2020, and is sold in more than 200 countries . Coca-Cola is also the "worldwide partner of the Olympic and Paralympic Games" for Paris 2024. The brand has also consistently maintained its sustainability goals by engaging in sustainable sourcing practices and trying to reduce carbon emissions across its value chain. The brand also created limited edition drinks and cookies as a team-up between Coca-Cola and Oreo . Even after having a pool of soft drinks and even healthy options available in the market, most people prefer the unique taste of Coca-Cola. The brand offers a variety of drink brands ranging from sparkling soft drink brands, sports, water, tea, and coffee brands, and juice, plants-based, juice, and value-added dairy brands.

Pemberton, a medicine inventor who struggled with a morphine addiction, developed Coca-Cola using a secret blend of coca leaves, known for their stimulating properties, and African kola nuts, which contain caffeine. Initially, he marketed it as Pemberton's French Wine Coca, a knockoff version of the very famous Mariani wine liked by Queen Victoria—his wine, created by a Corsican entrepreneur, combined cocaine with low-quality Bordeaux. However, when Atlanta enforced Prohibition in 1886, Pemberton reimagined his drink as a non-alcoholic "temperance drink" and named it Coca-Cola, a title suggested by his bookkeeper.

Meanwhile, Bradham, a former medical student, entered the market in 1893 with a beverage designed to treat indigestion. His formula included pepsin, a digestive enzyme derived from pigs' stomachs. Originally called "Brad's Drink," it was renamed Pepsin Cola in 1896 and then Pepsi-Cola in 1898 .

PATENTS VS. TRADE SECRETS

Patent and trade secrets are two types of intellectual property rights that safeguard information. Patents protect innovations that meet the criteria for patentability, which include three factors: novelty, involvement of an inventive step, and industrial applicability, while trade secrets can protect both patentable information and other confidential details that provide economic value to the owner. As a result, the same piece of information could be protected under either patents or trade secrets, leading to the dilemma of deciding which form of protection to pursue. Patents include a plethora of industrial sectors, including chemistry, pharmaceuticals, biotech, electrical, food, and related fields, as well as software and telecommunications . On the other hand, trade secrets can cover areas that involve "technical and scientific information," "business and commercial information," and "financial information ." The criteria for protecting information under trade secret is that it should be a piece of confidential information that is generally not known to the public or business, is commercially valuable, and the rightful holder takes reasonable steps to keep that piece of information secret, like using confidentiality agreements for business partners . This has been provided under Article 39 of the TRIPS Agreement. While one can exclude a person from making, using, selling, or importing an invention if protected under patents, the same is not possible under trade secrets, and the business can only seek protection from the misappropriation of its invention/ information.

[Image Sources: Shutterstock]

Now, talking about the trade secret controversy revolving around Coca-Cola, The entire business of Coca-Cola centers around its secret recipe, which is its most valuable and tightly guarded trade secret, stored securely in a vault. Only a select few individuals have access to this formula, and to ensure its confidentiality, they have signed strict Non-Disclosure Agreements (NDAs). "A non-disclosure agreement is a legally binding agreement between parties that requires them to keep certain information confidential. It can also be called a trade-secret agreement or a confidentiality agreement." Certain individuals must know the trade secret to perform their duties or consider investment opportunities. This is why business owners enforce confidentiality agreements, such as Non-Disclosure Agreements (NDAs), to protect their trade secrets and prevent employees or potential investors/partners from misusing or disclosing their business ideas . The formula has an intrinsic value because it is confidential. This is the reason why Coca-Cola decided against patenting the formula. Instead, the company resorted to trade secret protection as an alternative means of safeguarding its competitive edge. The logic behind this choice was that under the Patent Act of 1836, the patent coverage granted would have been for a limited duration of 17 years; subsequently extended to 20 years, whereas, period trade secret could be protected for an indefinite duration. Had Coca-Cola pursued a patent, they would have been required to disclose the formula, and once the patent expired after 20 years, competitors could have easily replicated the drink and sold it at their own price. A patent would have only provided a 20-year monopoly, so Coca-Cola decided to safeguard the formula as a trade secret to secure the company's long-term growth. To this day, the formula remains a closely guarded trade secret in a vault in the U.S.

THE LEGAL BATTLE

Three individuals named Ibrahim Dimson from New York, Edmund Duhaney from Decatur, and Joya Williams from Norcross, Georgia, were charged with the illegal act of theft of Coca-Cola's trade secrets and selling to its primary competitor, PepsiCo Inc. Three of them were arrested and accused of wire fraud for committing the above-mentioned illegal act.

On 1 May 2006, PepsiCo, based in Purchase, New York, had received an official business letter postmarked from Bronx, New York, sent by someone identifying as "Dirk. This individual claimed to be a "top-level employee from Coca-Cola" and offered extremely "detailed and confidential information." PepsiCo promptly notified Coca-Cola and later informed the F.B.I.

On 5 July, F.B.I. made three arrests after an investigation that lasted for nearly two months. This was done when some undercover agent offered $1.5 million to Dirk, offering that he would buy the remaining trade secrets of Coca-Cola. Joya Willams, one of the arrestees, was an administrative assistant in Atlanta. This man had access to "highly confidential corporate information" of the company. Her illicit acts were caught on a company surveillance camera, where she sifted through various files and placed them in her bag. She stole a new Coca-Cola product sample in a container. On verification, the sample matched the company's product, which was under development. The then C.E.O. of Coca-Cola, Neville Isdell, expressed his sadness and said that it is the responsibility of everyone at the company to be vigilant regarding their trade secret as this information is the "lifeblood of the company." Williams was released on a bond of $25,000 following a court hearing, and her family and attorney denied any misconduct, stating she had only taken work home with her. Later, she was sentenced to 10 years of imprisonment.

WHERE DOES INDIA STAND ?

As discussed above, regarding trade secrets rules, the Indian Contract Act of 1872, principles of equity, and common law principles are helpful. The D.H.C. in John Richard Brady & Ors vs. Chemical Process Equipment P Ltd & Anr came to conclude that "These rules may, according to the circumstances in any given case, either rest on the principles of equity, that is to say, the application by the Court of the need for conscientiousness in the course of conduct, or by the common law action for breach of confidence, which is in effect a breach of contract."

Black's Law Dictionary definition of Trade Secret was relied on in the case of Tata Motors Limited & Anr vs. the State of Bengal;

"A trade secret is defined 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."

Further, in Bombay Dyeing and Manufacturing Co Ltd v Mehar Karan Singh, the following five elements were drawn for any information to be categorized as a trade secret:

1. The extent to which the information is known outside the business.

2. The extent to which it is known to those inside the business, i.e., by the employees.

3. The precautions taken by the holder of the trade secret to guard the secrecy of the information.

4. The savings affected and the value to the holder in having the information as against competitors.

5. The amount of effort or money expended in obtaining and developing the information; and

6. The amount of time and expense it would take for others to acquire and duplicate the information.

The commercial value that a trade secret holds is present in its secrecy, the competitive and monetary advantage it gives to the proprietor, and not that it is publicly known. Reliance can be placed on points 4,5 and 6 of the Bombay Dyeing case.

PATH AHEAD

With India emerging as a global center of innovation, the requirement for global trade secret protection measures is becoming more relevant as each day goes by. Unlike other nations, there is no standalone law governing the issue of trade secrets in India; rather, trade secrets are protected through the application of common law and contract law such as NDAs. While this approach offers some protection, it is far from adequate in an era where intellectual property is often the most valuable asset of a business. N.D.A.s also need to be treated with high security and caution. No one should be allowed to take them home, leave the document idle on the desk, share it with any client, or even be read or opened in public. A few other methods to secure trade secret information are setting technical passwords where it is stored, using security guards and name badges, and using an internet firewall .

India could consider enacting a specific Trade Secrets Protection Act to address this gap. This law needs to provide a clear definition of a trade secret and its legal protection in the form of civil as well as criminal sanctions against its unlawful appropriation. The law must also prescribe legal actions like injunctions, damages, and other forms of legal punishment for deliberate contravention. In connection with the TRIPS Agreement, India has a legal basis for the alignment of its provisions with international standards through Article 39 of the agreement. Further legal clarity in the event of a disagreement might be provided by establishing a National Trade Secret Registry, which would assist businesses in registering and proving the existence of their confidential information. It's also critical to increase awareness among companies, especially startups. The value of trade secrets and how to safeguard them with strong internal policies, N.D.A.s, and security procedures should be explained to investors and entrepreneurs. This would improve India's competitiveness internationally and help Indian companies in protecting their intellectual property. This will also open the doors to a more secure and innovative economy.

After all, sometimes, the best business advantage is the one the competition will never know.

Author : Anavi Jain, in case of any query, contact us at Global Patent Filing or write back us via email at support@globalpatentfiling.com.

References 

https://www.coca-colacompany.com/about-us/purpose-and-vision.

https://www.coca-colacompany.com/.

COCA-COLA TRADE SECRET CASE by Edward Wei, PPT, World Intellectual Property Organization.

https://www.anejaandaneja.com/blog/how-to-protect-your-inventions-under-the-indian-patent-act.html.

https://www.wipo.int/web-publications/wipo-guide-to-trade-secrets-and-innovation/en/part-iii-basics-of-trade-secret-protection.html#:~:text=In%20essence%2C%20trade%20secret%20protection,as%20well%20as%20financial%20information.

Supra note v.

https://medium.com/@intellectualpropertylawclub/the-coca-cola-meeting-trade-secret-non-disclosure-agreements-and-competition-2f20c7cf3087.

Supra note iii.

https://www.azbpartners.com/bank/trade-secrets-india/.

Supra note iii.