In India, the concepts of confidential information, trade secrets, and know-how are critical in the realm of enforcement of restrictive covenants under employment agreements as also under intellectual property (IP) and commercial law, particularly in safeguarding proprietary business assets. While these terms are frequently employed interchangeably in practice, each carries distinct legal connotations and implications. Their respective scope and treatment are examined hereinbelow:
Confidential information
Confidential information refers to any non-public information that is disclosed under an obligation of confidentiality, typically through agreements like non-disclosure agreements (NDAs). It encompasses a broad range of sensitive data, including business plans, customer lists, financial data, or other proprietary information that provides a competitive edge. Unlike trade secrets, confidential information does not necessarily need to have economic value or be used in business operations.
In the landmark English case of Faccenda Chicken Ltd v. Fowler (1986) 1 All ER 617, the position relating to an employee's implied obligations after employment ends was laid down as under:
4) In order to determine whether any particular item of information falls within the implied term so to prevent its use or disclosure by an employee after his employment has ceased, it is necessary to consider all the circumstances of the case. The following matters are among those to which attention must be paid:
- The nature of the employment- Thus employment in a capacity where 'confidential' material is habitually handled may impose a high obligation of confidentiality.
- The nature of the information itself - information will only be protected if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret.
- Whether the employer impressed on the employee the confidentiality of the information.
- Whether the relevant information can be easily isolated from other information which the employee is free to use or disclose.
Trade Secret
A trade secret is a subset of confidential information that is commercially valuable, not publicly known, and subject to reasonable efforts to maintain its secrecy. Examples include formula, pattern, compilation, programme, device, method, technique, manufacturing processes, formulas, or customer data that provide a competitive advantage, which derives independent economic value from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use.
Trade secrets are narrower in scope than confidential information but carry stronger legal protection due to their economic significance. India is also a signatory to the TRIPS Agreement (Article 39), which mandates protection of undisclosed information, including trade secrets, against unfair competition.
The elements which could be identified as a trade secret, although the exact definition may not be possible, were laid down as the following factors:
- The extent to which the information is known outside the business.
- The extent to which it is known to those inside the business i.e. by the employees.
- The precautions taken by the holder of the trade secret to guard the secrecy of the information.
- The savings effected and the value to the holder in having the information as against competitors.
- The amount of effort or money expended in obtaining and developing the information; and
- The amount of time and expense it would take for others to acquire and duplicate the information.
The extent of protection of Trade Secrets and Confidential Information of an employer is seen from the fact that an employer can protect the trade secrets without preventing the use of the employee's own knowledge, skill and experience even if this is acquired during the course of employment. Hence, the test, which has been laid down by Courts in India is that whatever information can be carried by the employee in his head, it may be used by him after his contract expires or in his business thereafter, but all the confidential information including list of customers which cannot be verbatim copied by the employee cannot be used by him to the detriment of his employer.
Delhi High Court in the judgment of In Ambiance India (Private) Ltd. v. Naveen Jain, (122 (2005) DLT 421) has held that written day to day affairs of employment which are in the knowledge of many and are commonly known to others cannot be called trade secrets. It was further held that trade secret can be a formula, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others. It was yet further held that in a business house, the employees discharging their duties come across so many matters but all these matters are not trade secrets or confidential matters or formulae, the divulgence of which may be injurious to the employer and if an employee on account of employment has learnt some business acumen or ways of dealing with the customers or clients, the same do not constitute trade secret or confidential information, divulgence or use of which should be prohibited.
The High Court of Bombay in Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh, (2010 (112) BomLR 375) , held that something which is known outside the business or to those inside the business i.e. the employees and for guarding which no steps have been taken and for developing which no effort or money has been extended, cannot be a trade secret. It was held that a salesman leaving a company and heart surgeon leaving a hospital cannot be prevented from negotiating with the customers or performing a surgery on the premise that they acquired the skill by experience and those skills can be carried with the employee. Thus, the defendant in that case, on amassing information and knowledge with regard to the plaintiff's plan of operation, could not be injuncted from disclosing those plans to the competitor if he carried them in his head and the competitor in the market, could not be taken to be driven by the defendant's disclosure alone.
Therefore, information such as the details of customers, vendors, day to day affairs of employment or routine information or database while potentially known to employees of a business, cannot be deemed proprietary or protected trade secrets unless the confidentiality about it is of economic/business/commercial value. In any employment, every employee would get to know some information without any special effort. Such information can easily be acquired by others through observation, independent canvassing, or minimal effort. All such persons cannot be said to be in knowledge of trade secrets or confidential information and every knowledge of such facts cannot be labeled as trade secret or confidential information.
Know-how
Know-how refers to practical knowledge, skills, or expertise gained through experience, often related to technical or operational processes. Unlike confidential information or trade secrets, it may or may not be confidential. The term encompasses skills or other types of knowledge, typically acquired through experience, that provide an advantage to the person using it or an entity that controls/owns it (similar to trade secrets). It is typically non-patented, tacit knowledge that may or may not be confidential. Unlike trade secrets, know-how does not always require strict secrecy but is valuable due to its utility in business or technical operations. Examples include manufacturing techniques or software algorithms.
Anhad Law's Perspective
In India, confidential information, trade secrets, and know-how are protected through a patchwork of contract law, common law, and equitable principles, supplemented by international obligations like TRIPS. While confidential information is the broadest category, trade secrets require economic value and secrecy, and know-how focuses on practical expertise. Courts in India in a catena of judgments have safeguarded these assets, emphasizing the importance of contractual clarity and reasonable secrecy measures. Businesses must adopt proactive legal strategies to protect these intangible assets in a competitive market.
Originally published on 01 September 2025 on Lexology
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