INTELLECTUAL PROPERTY RIGHTS AND CONFIDENTIALITY IN MOONLIGHTING: LEGAL IMPLICATIONS

Authored By: AKSHADA VISHNUDAS

Bharata Mata School of Legal Studies, Aluva

ABSTRACT

The rising trend of moonlighting, where employees engage in secondary employment outside their primary job, has significant legal and ethical concerns in India’s evolving employment landscape. This article explores the intersection of Intellectual Property Rights (IPR) and confidentiality obligations within the context of moonlighting. It analyses the extent of risk of an employer’s proprietary rights and confidential information colliding with employees taking up additional assignments, often with competing or unrelated organizations.

Drawing upon relevant statutory provisions, judicial precedents, and case studies, the article highlights key issues such as ownership of IP created during secondary employment. It also evaluates the legal remedies available to employers and the rights of employees under Indian law, balancing individual autonomy, and corporate interests. The study concludes by suggesting the need for clear regulatory frameworks and well-drafted employment policies to address the growing legal complexities of moonlighting in a digitally connected economy.

INTRODUCTION

In August 2022, the Indian IT sector found itself at the centre of a legal and ethical debate when Wipro’s Executive Chairman Rishad Premji publicly condemned moonlighting as “cheating”, after the company terminated several employees for taking up parallel jobs with competitors without disclosure[1]. This incident triggered nationwide discourse on the boundaries of employment obligations, confidentiality, and intellectual property (IP) ownership.

As the modern workforce increasingly explores freelancing, remote gigs, and dual employment, especially in the technology and creative industries, the traditional employer-employee relationship is undergoing a radical shift. The implications of moonlighting on intellectual property rights and confidentiality obligations raises pressing legal concerns including the unauthorized use of proprietary knowledge, client databases, source codes, or other confidential assets belonging to the primary employer. The risk of employees misappropriating intellectual property or breaching confidentiality clauses while engaging in secondary jobs, often in competing firms or similar domains, can lead to serious legal consequences. The absence of a clear legislative framework on dual employment and evolving interpretations by courts adds to the uncertainty for both employers and employees.

From a legal standpoint, intellectual property created during the course of employment typically belongs to the employer. Provisions under the Copyright Act, 1957, the Patents Act, 1970, and Trade Secrets laws (under the broader umbrella of common law and contractual protections) form the foundation for such ownership claims. Confidentiality obligations often find their place in employment contracts and company policies. However, with the emergence of flexible work models and side hustles enabled by technology, the enforcement and clarity of such protections are increasingly being tested[2].

The issue gains further complexity as Indian courts have not adopted a uniform stance on moonlighting. While some judgments lean in favour of protecting business interests and upholding restrictive covenants, others emphasize employee rights, especially when no conflict of interest is proven. In this context, the intersection of intellectual property rights and confidentiality in moonlighting raises fundamental questions: Who owns the intellectual output created during side employment? Can employers prevent employees from engaging in any secondary work? How enforceable are confidentiality and exclusivity clauses, especially in the absence of statutory backing?

THESIS STATEMENT

This article aims to critically examine the legal framework governing intellectual property and confidentiality in the context of moonlighting in India. It seeks to analyse statutory provisions, case laws, and contractual principles that shape the rights and liabilities of employers and employees. It evaluates whether existing legal mechanisms are adequate to address the emerging challenges of dual employment and to suggest reforms or policy recommendations that strike a balance between innovation, autonomy, and corporate protection.

RESEARCH METHODOLOGY

This article adopts an analytical approach to examine the legal issues arising at the intersection of intellectual property rights, confidentiality obligations, and moonlighting in India. To develop a comprehensive understanding of the subject, the following sources and methods were employed:

Statutory Analysis: Relevant provisions from Indian legislation such as the Copyright Act, 1957, Patents Act, 1970, Trade Marks Act, 1999, Information Technology Act, 2000, and principles of contract law under the Indian Contract Act, 1872 were studied to understand the legal framework governing intellectual property and confidentiality.
Case Law Review: Key judgments by Indian courts- High Courts and the Supreme Court, were analysed to examine how courts have interpreted employment obligations, IP ownership, confidentiality clauses, and dual employment.

The methodology is aimed at not only understanding the black-letter law but also analysing its effectiveness in addressing the practical challenges posed by moonlighting in a rapidly changing professional environment. This approach helps in formulating balanced recommendations that are both legally sound and practically viable.

LEGAL FRAMEWORK

The legal treatment of moonlighting in India does not stem from a single codified statute but rather from a combination of labour laws, intellectual property statutes, contract law and judicial precedents. This section outlines the relevant legislative and constitutional provisions that govern the legal aspect of dual employment.

1.Employment and Labour Laws

While moonlighting is not explicitly defined in most Indian statutes, certain provisions indirectly regulate or prohibit dual employment:

The Factories Act, 1948[3]: Section 60 of the Act prohibits dual employment in factories, stating that “no adult worker shall be required or allowed to work in any factory on any day on which he has already been working in any other factory.” Although applicable only to factory workers, this provision reflects legislative disapproval of dual employment, especially when it affects efficiency and employer interests.

Shops and Establishments Acts[4]: Various states have their own restrictions on dual employment under these Acts, usually applicable to white-collar or commercial sector employees. For example, the Delhi Shops and Establishments Act requires employers to maintain a record of working hours and employee details, which indirectly limits dual employment.

Industrial Employment (Standing Orders) Act [5]: Model standing orders prescribed under the Act typically bar employees from taking up any other employment that may conflict with the interests of the employer.

2.Contract Law and Confidentiality Obligations

Indian Contract Act, 1872[6]: Employers generally include non-disclosure, non-compete, and exclusivity clauses in employment agreements to prevent moonlighting. While Section 27 prohibits any agreement in restraint of trade, Indian courts have interpreted post-employment restraints narrowly, whereas in-service restraints (such as prohibiting concurrent employment during tenure) are generally considered valid and enforceable.

Fiduciary Duties and Trust Principles: Even in the absence of express clauses, courts have recognized the fiduciary duty of loyalty that binds an employee to act in good faith and in the best interests of the employer during the term of employment.

3.Intellectual Property Laws

Copyright Act, 1957[7]: Under Section 17, the employer is the first owner of any work created by an employee in the course of employment, unless there is a contract to the contrary. This is particularly relevant in cases where employees take up creative freelancing or coding assignments during moonlighting.

Patents Act, 1970[8]: Similar to copyright law, inventions made during employment generally belong to the employer if they are made using the employer’s time, resources, or under contractual obligations. Moonlighting often involves the creation or use of intellectual property (IP), raising questions about ownership and misappropriation.

Trade Marks Act, 1999 [9] and Trade Secrets Protection: Though India does not have a separate trade secrets statute, protection is often enforced through contractual clauses and injunctions under civil law. Misuse of confidential information by moonlighting employees can result in breach of trust and civil liability.

4.Information Technology Act, 2000

Section 72 of the IT Act[10] penalizes breach of confidentiality and privacy by any person who has secured access to electronic records. This provision becomes particularly relevant in cases where employees leak or misuse employer data while working with a competitor during moonlighting.

5. Constitutional Provisions

Article 19(1) (g) [11] of the Constitution guarantees the right to practice any profession or carry on any occupation, trade, or business. However, this right is subject to reasonable restrictions under Article 19(6) in the interest of the general public or for protecting trade secrets, public order, or morality.

Thus, while employees have a constitutional right to engage in multiple employments, employers can impose reasonable restrictions through contracts and policies to protect business interests.

This multi-layered legal framework illustrates that while employees may be free to pursue secondary engagements, they must do so within the boundaries of intellectual property law, confidentiality obligations, and contractual restrictions. The challenge lies in interpreting and enforcing these principles in rapidly evolving work environments, often without specific statutory guidance.

JUDICIAL INTERPRETATION

The Indian judiciary has played a crucial role in shaping the contours of employer-employee obligations in the absence of direct statutory regulation on moonlighting. Though courts have not ruled uniformly on whether moonlighting is inherently illegal, they have laid down clear principles concerning confidentiality, intellectual property rights, and contractual exclusivity. These judgments also offer insights into the scope of permissible restrictions during and after employment, which are critical when evaluating the legal risks of moonlighting.

The case of Wipro Ltd. v. Beckman Coulter International S.A., [12]reflected post-employment conduct. The court underscored that employees owe a continuing duty of confidentiality. It observed that trade secrets and proprietary knowledge acquired during the course of employment should not be misused, regardless of whether the employment relationship still exists. The court granted injunctive relief to protect Wipro’s business interests, signalling that the misuse of confidential information, even without an explicit contractual clause, can attract judicial scrutiny.

The court in V.F.S. Global Services Pvt. Ltd. v. Mr. Suprit Roy, reaffirmed that in-term restrictions are enforceable for post-employment limits on trade or profession are void under Section 27 of the Indian Contract Act. The court emphasized that employers can impose reasonable conditions during the subsistence of employment to protect their legitimate interests, such as exclusivity and non-compete obligations, especially when the employee has access to sensitive business data. This ruling reinforces the idea that moonlighting can be legally challenged if it occurs during active employment and poses a conflict of interest or breach of loyalty.

A foundational precedent in this context is the Supreme Court’s decision in Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd[13]. The employee challenged the restrictive clause as a restraint of trade, the Court dismissed the argument, holding that Section 27 does not apply to restrictions operative during the course of employment. The Court emphasized that such stipulations are not only valid but necessary to maintain discipline and uphold the employer’s right to fidelity. This case remains pivotal in upholding the legality of in-service restrictions that prohibit dual employment or moonlighting.

In Satyam Infoway Ltd. v. Siffynet Solutions Pvt. Ltd.[14], the issue before the Supreme Court was trademark infringement involving domain names. This case illustrates the judiciary’s recognition of intangible business assets and reinforces the idea that unauthorized use of such assets, including by employees engaging in moonlighting, can be injurious to the primary employer’s commercial interests.

From a comparative perspective, the U.S. case IBM v. Papermaster[15], decided by a New York court in 2008, provides a compelling illustration of judicial efforts to protect intellectual property and confidential knowledge in employment transitions. In this case, Mark Papermaster, a senior IBM executive, left to join Apple Inc., prompting IBM to seek an injunction based on the claim that his new role would inevitably lead to the disclosure of IBM’s trade secrets. The court granted the injunction, reasoning that even if Papermaster did not intend to disclose confidential information, the nature of his new job created a substantial risk of “inevitable disclosure.” This doctrine has influenced employment law globally and underscores how courts can proactively intervene to prevent the erosion of intellectual capital, even in the absence of direct evidence of wrongdoing.

Together, these cases demonstrate a consistent judicial emphasis on balancing the rights of employees to pursue their professions with the legitimate interests of employers in protecting their intellectual property and confidential data. Indian courts have generally taken a contractual and equitable approach, allowing in-service restrictions but hesitating to enforce post-employment restraints. However, the underlying principle remains clear: employees, especially those with access to sensitive data, are held to a higher standard of loyalty, and moonlighting that undermines this standard may trigger legal consequences.

CRITICAL ANALYSIS

The intersection of moonlighting, intellectual property rights, and confidentiality obligations presents a complex and evolving legal challenge in India. While courts have offered valuable interpretations, the current legal framework reveals several gaps, ambiguities, and inconsistencies, particularly in its practical application in the modern digital economy.

One of the most pressing issues is the absence of a specific legal definition or statutory regulation of moonlighting under Indian labour law. Most existing statutes only partially address dual employment and are largely confined to traditional workplaces. With the rise of remote work, freelance economies, and platform-based gig jobs, these laws appear outdated and ill-equipped to handle the nuanced realities of modern employment models. Consequently, much of the legal clarity depends on contractual obligations and judicial interpretation, leading to uncertainty for both employers and employees.

Indian courts uphold in-service restrictions, the enforceability of post-employment clauses (such as non-compete or IP ownership clauses) is severely limited by Section 27 [16] of the Indian Contract Act, 1872, which declares agreements in restraint of trade void. This creates a loophole where employees, after leaving a job, may freely use or build upon intellectual property developed during employment, unless clearly protected by robust contract drafting or the copyright/patent registration process.

Comparatively, foreign jurisdictions offer more structured approaches. In the United States, employers commonly rely on well-defined non-disclosure, non-solicitation, and non-compete agreements, in addition to strong statutory backing for trade secret protection[17]. In India, trade secret protection is mostly enforced through contract law or through equitable doctrines like breach of trust or fiduciary duty without a dedicated Trade Secrets Act like US. The “inevitable disclosure doctrine,” as applied in IBM v. Papermaster, allows courts to prevent employees from taking up competing roles even without direct evidence of IP misuse, provided there is a reasonable threat. While this doctrine is controversial and not adopted in India, it reflects a proactive approach toward IP protection that Indian courts may consider, at least in high-risk sectors like IT, pharmaceuticals, or defines R&D.

In contrast, jurisdictions such as the United Kingdom allow non-compete clauses if they are reasonable in scope, duration, and geographic extent. UK courts also strike a balance by requiring employers to demonstrate that the restriction protects a legitimate business interest, such as confidential information or client relationships. Indian courts have not adopted such a nuanced “reasonableness” standard under Section 27, resulting in an overly rigid interpretation that may no longer be adequate in today’s knowledge-driven economy.

From a practical standpoint, the current Indian framework tends to favour employees’ freedom over employers’ control. While this supports occupational liberty under Article 19(1) (g) of the Constitution, it can undermine innovation, investment, and intellectual property development, especially when the legal infrastructure does not keep pace with technological and economic change. Moreover, the lack of regulatory guidelines leaves it to individual employers to create policies addressing moonlighting, leading to inconsistency and potential unfairness in enforcement.

To address these challenges, reform is essential.

India could consider introducing:

A statutory definition of moonlighting and its permissible limits;
A codified Trade Secrets Act with clear remedies;
Guidelines for reasonable restrictions in employment contracts;
Sector-specific regulations for high-risk or IP-sensitive industries.

These measures would help balance the legitimate interests of employers with the professional freedom of employees, ensuring a more predictable and fair legal environment.

RECENT DEVELOPMENTS

A growing trend in India’s IT sector and broader knowledge economy has seen companies increasingly drafting explicit moonlighting policies, shifting from blanket bans to regulated, consent-based frameworks. Despite concerns in the tech industry, the legislature has not introduced any statutory amendments or bills to explicitly liberalize or prohibit moonlighting.

The recently codified Labour Codes (2020) [18] define “gig” and “platform” workers but remain silent on dual full-time employment, leaving the issue to contractual norms and common law. On the trade secrets front, there’s a positive shift. The 22nd Law Commission[19] proposed a Protection of Trade Secrets Bill, while recent amendments and judicial trends, like recognizing “confidentiality clubs”, are strengthening legal protections for unwritten IP.

In public discourse, Sham Parekh, a software engineer accused of clandestine full-time roles, became a lightning rod in July 2025. His defiant stance, “I love what I do”[20], sparked polarized reactions across tech circles: some praised his ambition, while others condemned the perceived breach of trust. His case reinforced employer vigilance, leading to a surge in background checks: one agency flagged 2,900 dual-employment instances in H1 2025, surpassing the 2,200 cases detected during all of 2024.

Media and HR commentary increasingly frames moonlighting as an ethical gravy area, not illegal per se, but fraught with risks like burnout, divided loyalties, and potential IP misuse. Still, some start-ups and progressive employers argue that “ethical moonlighting”, on-competing, non-conflicting side gigs can foster skill-building, innovation, and employee satisfaction.

CONCLUSION

The increasing prevalence of moonlighting in India, particularly in the IT, creative, and gig sectors, has raised significant legal and ethical concerns surrounding intellectual property rights and confidentiality obligations. Through a doctrinal and judicial lens, this article has highlighted that while existing laws provide some protection to employers, they remain fragmented and insufficient in addressing the complex challenges posed by parallel employment. The lack of statutory clarity on moonlighting, coupled with the limited enforceability of post-employment restrictions under Indian contract law, creates a grey area that is vulnerable to misuse, ambiguity, and litigation.

Comparative legal models, particularly in jurisdictions like the United States and the United Kingdom, offer valuable insights into how reasonable restrictions, trade secret laws, and inevitable disclosure doctrines can create a more structured and predictable environment for both employers and employees. In conclusion, as India transitions into a digitally connected, innovation-driven workforce, the question remains: Can we strike the right balance between safeguarding intellectual assets and empowering individual autonomy? This balance will be critical, not only for legal clarity but also for fostering trust, productivity, and ethical innovation in the modern workplace. Reform is not only necessary, it is inevitable.

Reference(S):

[1] “Wipro found 300 staff working with rivals at same time; moonlighting is violation of integrity: Premji” (September 21, 2022) https://www.thehindu.com/business/wipro-found-300-staff-working-with-rivals-at-same-time-moonlighting-violation-of-integrity-premji/article65918110.ece, accessed 23 July, 2025

[2]Julia Tomassetti,”Power in the employment relationship” (November 19, 2020) https://www.epi.org/unequalpower/publications/the-legal-understanding-and-treatment-of-an-employment-relationship-versus-a-contract/, accessed 23 July 2025

[3]The Factories Act, 1948

[4] The Model Shop and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016

[5] Industrial Employment (Standing Orders) Act, 1946

[6] The Indian Contract Act, 1872

[7] The Copyright Act, 1957

[8] The Patent Act, 1970

[9] The Trademarks Act, 1999

[10]The Information Technology Act, 2000

[11] India Const. art. 19, cl. 1(g)