Trade Secrets In India: Between Judicial Recognition And Legislative Reform

Secrecy Has A Competitive Edge

In today's economy, where intangible assets often outweigh tangible property, information has emerged as the most valuable commodity. From proprietary formulas and manufacturing processes to pricing algorithms and client databases, businesses depend on confidentiality to sustain their competitive edge. Such information, commonly referred to as a trade secret, is not registered as a patent or trademark but derives its value from being kept undisclosed. The Coca-Cola recipe, KFC's blend of spices or the formulation of Maggi Masala illustrate how trade secrets can become the backbone of commercial success.

One of the chief advantages of trade secrets over patents lies in their indefinite lifespan, provided secrecy is maintained. Patents demand disclosure and expire after 20 years, while trade secrets can potentially last forever at little cost, without undergoing formal registration or examination. They also protect a wider variety of information, including data and strategies that would not qualify for patent protection. This flexibility explains why many businesses, particularly in fast-moving sectors like technology and food, often prefer trade secrets to formal intellectual property rights.

India Does Not Have A Trade Secret Legislation

At the global level, Article 39 of the TRIPS Agreement requires member states to protect 'undisclosed information' that is not generally known, derives commercial value from secrecy and is subject to reasonable steps to preserve confidentiality. India, being a WTO member, is bound by this mandate. However, it has yet to enact a stand-alone law on this aspect. Instead, protection rests on contract law, equitable principles and judicial interpretation, leaving the task of enforcement to a patchwork of private arrangements and court rulings.

Indian courts broadly require three conditions for information to qualify as a trade secret: it must not be publicly known, it must carry commercial value and it must be protected by reasonable measures. Businesses that neglect safeguards such as confidentiality clauses, restricted access or employee training may struggle to convince courts of their claim. Judicial protection is contingent not only on the nature of the information but also on the diligence of the claimant in maintaining secrecy.

Robust Protection Through Judicial Rulings

Despite the absence of dedicated legislation, the Indian judiciary has steadily developed a body of principles. In Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd. (1967), the Supreme Court of India recognized the enforceability of confidentiality clauses in employment contracts. Similarly, in Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh (2010), the court emphasized that commercial utility and deliberate secrecy are essential for protection. The judiciary has also invoked the "springboard doctrine," preventing those who misappropriate confidential information from gaining an unfair head start to compete, even if the information later enters the public domain.

Several other decisions chart this evolution. In Anil Gupta v. Kunal Dasgupta (2002) and Zee Telefilms v. Sundial Communications (2003), courts extended protection to television program concepts and formats, affirming that trade secrets are not limited to technical processes but may also include creative ideas with commercial value. Interestingly, in Zee Telefilms, Zee had shared its registered concept for a serial - complete with plots, character sketches, and episodes - with the defendant for potential production. When talks fell through, Zee offered the concept to Sony Entertainment but later discovered that the defendant was producing a similar serial titled using Zee's concept. The overlap caused Sony to withdraw its deal. The court found that, even in the absence of a written confidentiality agreement, a relationship of confidence existed based on the circumstances of the disclosure. It held that the defendant's actions in developing and promoting a near-identical show constituted a breach of confidence and misuse of Zee's confidential material, granting relief to the plaintiff.

A 2024 ruling from the High Court of Delhi - HT Process Controls v. Ankur Gupta & Anr. (2024) was one where HT Process Controls, a manufacturer of robotic systems for LPG cylinder handling, sued its former manager and the latter's new employer for misappropriating confidential information relating to its automatic robotic loading and unloading system. The manager's terms of employment clearly prohibited him from divulging details of trade, technical data, drawings etc. relating to the plaintiff's products that came to his knowledge for carrying out his professional duties. However, he emailed proprietary data and supplier lists to his personal account before resigning and joined a competitor that had opposed HT's patent applications. The court found a prima facie breach of confidence. Granting an ex parte injunction, it restrained both defendants from using or disclosing trade secrets and appointed local commissioners to secure evidence. In Navigators Logistics v. Kashif Qureshi, the court underscored the need for employers to align contractual and legal practices with established confidentiality principles.

Collectively, these decisions highlight the judiciary's willingness to enforce confidentiality obligations and remind businesses of the importance of robust contractual safeguards.

Addressing Gaps

Nonetheless, the absence of a dedicated statute creates real challenges. Current protection depends heavily on private agreements, leaving businesses without well-drafted NDAs or employment clauses more vulnerable. Enforcement is also fragmented - procedural law offers no discovery tools comparable to those available in the U.S. or U.K., making it difficult to prove misappropriation. Weak digital enforcement mechanisms further compound the problem. Further, among MSMEs and startups, awareness of effective protection strategies remains limited.

To address these gaps, the Protection of Trade Secret Bill, 2024 has been proposed. It defines trade secrets as information that is not known or readily accessible, derives economic value from its secrecy and is subject to reasonable protective measures. It also defines misappropriation broadly, covering improper acquisition, unauthorized use and wrongful disclosure of the confidential information. The Bill introduces statutory remedies such as injunctions, damages, account of profits and destruction of infringing material. Procedural reforms include confidentiality clubs, which would restrict access to sensitive evidence during litigation. Significantly, it balances commercial protection with public interest by safeguarding whistleblowers. Specialized commercial forums for faster adjudication are also envisaged. If enacted, the Bill will align India with international standards and boost investor confidence.

Until such legislation is in place, Indian businesses must take proactive steps. This includes identifying and classifying trade secrets, incorporating airtight confidentiality clauses into contracts, limiting internal and external access, and conducting regular audits. Employee sensitization is vital, as insider breaches are often the biggest threat. Swift legal action is equally important, since delay in seeking injunctions can render relief ineffective.

As India positions itself as a hub for innovation and investment, protecting trade secrets is no longer optional but a prerequisite for sustainable growth.

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