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SECRETS THAT FACILITATE TRADE: NAVIGATING THE TRADE SECRETS PROTECTION MECHANISMS IN INDIA

August 15, 2025

*Mr. Atriyo Bhattacharya

INTRODUCTION: INSIGHTS INTO THE BUSINESS OF SECRETS

Confidential information of any kind is often used as a defence to restrict access to the ingredients behind a particular product or service. These pieces of information can be termed as a “secret” for the purpose of trade, in other words, a “trade secret”. Citing the protection under these little “secrets,” commercial establishments often tend to conceal their confidential information that allows them to maintain a monopoly. Trade secrets are a form of intellectual property (hereinafter, ‘IP’) comprising confidential information that can be sold or licensed. Various multinational organisations, like Kentucky Fried Chicken (KFC), Coca-Cola, etc., have resorted to trade secrets to protect their Intellectual Property Rights (hereinafter, ‘IPR’). The North American Free Trade Agreement (NAFTA) states under Article 1711 that a trade secret is anything valuable, that might not be widely known but actively protected.

This leaves us with a few questions that the article aims to address in due course. Does the protection of trade secrets solely monopolise the confidential information in the hands of a few corporations, leaving little room for healthy competition? Or does it act in the interest of the nation by encouraging innovation and incentives for the business crowd? Why do corporations prefer trade secret protection over patents and other IPR protection? These are a few underlying questions determining the degree of protection “trade secrets” require. In the Indian context, trade secrets lack any statutory protection. The legal frameworks like Indian Contract Act,1872 and the common law Principles of Equity, primarily govern the protection. Hence, there lies an opportunity to rethink India's legal framework for keeping a balanced approach in the protection of trade secret.

This article aims to critically analyse the problems of protecting trade secrets in two parts. Firstly, this article will analyse the pros and cons of the current legal framework for protecting trade secrets in India. Secondly, it discusses the potential benefits and challenges of introducing a new legislation governing trade secrets in India.

HOW DO WE CLASSIFY A SECRET AS A “TRADE SECRET”?

The Trade-Related Aspects of Intellectual Property Rights (hereinafter, ‘TRIPS’) Agreement has laid down a broad qualification criterion to prevent the unauthorised disclosure of information under Article 39(2) of the Act. The criteria are as follows: First, the information must be confidential in nature—meaning it is not generally known or readily accessible to individuals within the relevant industry or business sector. Second, it must possess commercial value. Third, reasonable steps must be taken by the lawful controller of the information to maintain its confidentiality. As a party to the TRIPS Agreement, India is internationally obligated to comply with its provisions. Accordingly, it must be given effect under Article 253 of the Indian Constitution, read with Entry 13 of the Union List in the Seventh Schedule. The Bombay High Court, in the case of Bombay Dyeing and Manufacturing Co. Ltd v. Mehar Karan Singh, 1958 AIR 328 (SC), laid down the following criteria to classify information as a trade secret:

  • How widely known the information is (internally and externally).
  • Precautions taken by the holder to maintain secrecy.
  • Competitive and financial value of the information that the holder possesses.
  • The cost and effort invested in developing it.
  • Difficulty for others to replicate.

Trade Secrets lack any formal classification system. Unlike the classification of trademarks under different classes or classification of Patent-by-Patent Examiners, no such classification system has been developed by the World Intellectual Property Office (WIPO), USPTO, the EPO. The EU Directive on Trade Secrets, the Chinese Anti-Unfair Competition Law and the Defend Trade Secrets Act in the US are all silent on the classification of Trade Secrets.

WHAT IS THE PREVALENT LEGAL FRAMEWORK FACILITATING PROTECTION OF TRADE SECRETS?

India does not have any statutory framework for legislative protection of trade secrets. If we must attribute any such protection, the prevalent protection is very minimalistic. The Protection Mechanism of Trade Secrets is covered under the Indian Contract Act, 1872 (hereinafter, ‘ICA’), the common law jurisprudence of Principles of Equity, the Information Technology Act, 2000, and the Bhartiya Nyaya Suraksha (BNS), 2023. The Indian Contract Act, 1872, will only be applicable in the case of an existing contract between the parties (oral or written) or at the time of employment at the workplace. In the absence of a contract or if the contract between the parties violates Section 10 of the ICA, the protection of trade secrets on a contractual basis gets compromised.

Section 27 of the Indian Contract Act declares any agreement that is in restraint of trade, exercising a lawful profession, or business of any kind to be void. However, it is subject to the exception of an agreement between buyer and seller of goodwill. In the case of Ambiance India (P) Ltd. v. Naveen Jain, 2005, 122 DLT 421, the Delhi High Court addressed the issue whether an agreement that bars an employee from working with the firm's clients for a period of two years violates Section 27 of ICA and Section 41(e) of the Specific Relief Act? The plaintiff prayed for an injunction restraining the defendant from misusing confidential information and trade secrets that the defendant acquired during the course of employment. The defendant allegedly violated a contract by approaching a major client (M/s. Indigo Orient Limited) before resigning and persuading them to open an office in India. The plaintiff argues that this caused wrongful loss to him, and he wants to prevent the defendant from utilizing trade secrets or interacting with its clients. The court acknowledged that any agreement which bars an employee from disclosing any information acquired during the course of employment is not void but ceases to be operative once the employer-employee relationship has ended. However, the plaintiff may sue for damages even after the cessation of the employment agreement for the breach of a “technical know-how or a peculiar mode or method of business adopted by an employer which was unknown to others,” in essence, a “trade secret.”

To a larger extent, the common law principle of equity shapes India's protection mechanism of trade secrets. The principle of equity is applied to ensure that a breach of confidential information does not cause losses and unsolicited gains. The Delhi High Court, in the case of John Richard Brady & Ors v. Chemical Process Equipment P Ltd & Anr (AIR 1987 Delhi 372), acknowledged that the dual foundation of protection of trade secrets is based on equitable principles of law and common law contract enforcement against breach. In addition, the Information Technology Act, 2000, under Section 66B, Section 66C, Section 66D, and Section 72 addresses computer-related offences and breach of confidentiality and privacy. Although not specifically intended, it indirectly applies to the Protection of Trade Secrets. Further, recourse can be sought under Section 318 and Section 319 of the Bhartiya Nyaya Sanhita, 2023, dealing with provisions for cheating and misappropriation and attributing criminal liability for unauthorised disclosure of trade secrets.

CHALLENGES IN THE CURRENT LEGAL FRAMEWORK FOR TRADE SECRETS PROTECTION:

The 22nd Law Commission, under the chairmanship of former Justice Rituraj Awasthi, pioneered a report on trade secrets and economic espionage. The report recommended introducing sui generis legislation to protect trade secrets in India. It emphasises whistleblower protection, compulsory licensing, government use, and public interest considerations. As part of its recommendations, the report includes a draft of "The Protection of Trade Secrets Bill, 2024”, which is yet to be passed in Parliament. The bill clarifies that trade secrets do not enjoy monopoly rights or property-like status, even though they are considered intellectual property under the TRIPS Agreement. Instead, they are protected through principles of unfair competition, misappropriation, and breach of confidence. The bill explains trade secrets as confidential information with economic value, protected by reasonable protection measures, whose disclosure can cause harm to the holder. It excludes employee-acquired skills and whistleblower disclosures. The broader definition adopted in the bill is an extension of Article 39(2) of TRIPS.

Further, the lawful acquisition methods comprise independent discovery, reverse engineering, observation, and legal or contractual compliance. The bill provides trade secret owners with rights to use, disclose, contract, and license their secrets under confidentiality agreements and sue in civil actions for misappropriation. However, the owners are required to take reasonable measures to protect their secrets and adhere to labour and contractual laws. It also provides for compulsory licensing, enabling the government to reveal trade secrets in extreme circumstances such as national emergencies, public health emergencies, or national security, similar to Section 100 of the Indian Patents Act, 1970. Misappropriation is described as unauthorised access, unfair use or disclosure of trade secrets, contract violations, equitable relief, criminal liability, freedom of speech, the Right to Information Act or confidentiality, receiving illegally acquired information. There are exceptions for whistleblowing and in-good-faith disclosure to unveil illegal activities, professional malpractice, or vindicate the public interest.

The Report arrived at this conclusion by extensively analysing the trade secrets protection mechanism in 21 different countries. It was released after extensive consultations with various stakeholders from the judiciary, academia, government, and industry experts. This ensured a balanced and holistic view of the problem.

TRADE SECRET VS OTHER IPR

Every intellectual property right is unique, created to serve a specific purpose, and is not meant to replace each other's overlapping functions. The formula behind the trade secret, the product created, or the process that the trade secret facilitates can be patented (subject to fulfilling the criteria of the ‘NUN’s’ test). However, this is not encouraging for businesses, as patenting involves disclosing the ingredients of the trade secret, which will be available in the public domain after the expiry of the patent (i.e., 20 years from the date of filing). Additionally, the competitors can adopt the trade secrets by making minor technical changes to the ingredients not covered by the law. Due to the lack of sui generis protection for trade secrets, businesses adopt malpractices like evergreening patents to break even and sustain in the market. On the other hand, copyright is granted to the expression of an idea and not to the content per se. Nevertheless, in certain circumstances, as decided in Diljeet Titus v. Alfred A. Adebare, 2006 130 DLT 330, copyright content, for instance, a client list, can be a trade secret. Hence, the principle of authorship and ownership would apply in that circumstance. Lastly, Trademarks refer to unique identification marks capable of being represented graphically. This does not fit into the nature and purpose of a Trade Secret.

CONCLUSION

In conclusion, since India lacks any law for the Protection of Trade Secrets, passing the draft "The Protection of Trade Secrets Bill, 2024 shall be a significant step towards laying the foundations for establishing a robust legal framework. The current protection mechanism for trade secrets is insufficient and has a grave economic impact on Indian businesses. The concerns of monopolising the idea behind the secret can be addressed by taking a balanced approach with sufficient safeguards and scope of registration of new trade secrets. Further, the draft legislation thoughtfully incorporates exceptions for whistleblower disclosures, compulsory licensing, and government use. It acknowledges that trade secret protection cannot be absolute. By allowing whistleblowers to share confidential information in good faith, primarily when it benefits the public, the Bill seeks to balance corporate confidentiality with the ethical duty to reveal wrongdoing. Hence, the parliament must work towards effecting the draft Protection of Trade Secrets Bill, 2024, as proposed by the 22nd Law Commission report and lay the foundation framework at the earliest.

REFRENCES:

  1. WIPO, Trade Secrets, https://www.wipo.int/en/web/trade-secrets (last visited Aug. 8, 2025).
  2. North American Free Trade Agreement (NAFTA), [PDF document], (last visited Aug. 8, 2025), https://www.italaw.com/sites/default/files/laws/italaw6187%2814%29.pdf.
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  16. Indian Contract Act, 1872, § 28.
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  18. Specific Relief Act, 1963, § 41 (India).
  19. John Richard Brady & Ors. v. Chemical Process Equipments P. Ltd. & Ors., AIR 1987 Delhi 372 (Del. H.C.)., AIR 1987 Delhi 372 (Del. H.C.)
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  34. Mr. Diljeet Titus, Advocate v. Mr. Alfred A. Adebare & Ors., 130 DLT 330 (Del. H.C. 2006)

Author:
* Mr. Atriyo Bhattacharya
5th Year, B.B.A. LL.B. (Hons.) Student, School of Law, Christ (Deemed to be University), Bengaluru.

Disclaimer: The opinions expressed in the article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of the Alliance Centre for Intellectual Property Rights (ACIPR) and the Centre does not assume any responsibility or liability for the same.