Authored By: Poulomi Pramanik
Sarsuna Law College, Bankura University
Introduction
Why is KFC so different in taste from its competitors? The answer lies not just in cooking techniques, but in its famous “11 herbs and spices” formula — a classic example of a trade secret that has been protected for decades. Unlike patents, which require public disclosure, trade secrets derive their value from remaining confidential. This distinct feature highlights the importance of legal mechanisms that protect such information, particularly in jurisdictions like India where a dedicated statutory framework remains absent.
The absence of a dedicated legal framework for trade secrets in India has long created uncertainty for businesses and innovators, placing the country at a comparative disadvantage internationally. Growing concerns over economic espionage, cross-border data theft, and investor confidence prompted a re-evaluation of the existing legal landscape. Combined with India’s international obligations under the TRIPS Agreement, these concerns led the Law Commission of India to examine the issue, resulting in its 289th Report (2024).1
What Is a Trade Secret?
“Trade secrets refer to undisclosed information that is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it confidential.”2 To understand what distinguishes trade secrets from patents, trademarks, or copyright, one needs to check whether:
- It is confidential in nature — that is, not generally known or readily accessible;
- It has commercial value, deriving economic benefit from its secrecy; and
- Reasonable steps have been made to maintain that secrecy, such as non-disclosure agreements (NDAs), internal access controls, and similar measures.
A further notable point is that trade secrets require no registration, unlike patents, trademarks, or copyright. They also have unlimited duration, lasting for as long as secrecy is preserved. However, trade secrets are inherently vulnerable to misappropriation — once disclosed, protection may be irretrievably lost.3
Common examples of trade secrets include manufacturing processes and formulas (such as the KFC recipe or Coca-Cola’s formula), source code, customer databases, pricing strategies, and business methodologies. In India’s rapidly growing start-up and technology ecosystem, such information frequently represents a company’s most valuable — and most legally exposed — asset.
Current Legal Framework, Legislative Gaps, and Case Analysis
In India, trade secrets do not enjoy protection under a specific codified statute. The most common method of safeguarding confidential information is through contractual arrangements — such as non-disclosure agreements, employment contracts, and confidentiality clauses in commercial agreements — supplemented by common law equitable principles and select provisions of existing legislation not originally designed for this purpose. The principal frameworks currently available are as follows.
A. Indian Contract Act, 1872
The strongest protection currently available derives from contract law under the Indian Contract Act, 1872.4 Companies typically protect their confidential information through:
- Non-Disclosure Agreements (NDAs);
- Employment contracts; and
- Confidentiality clauses in commercial agreements.
A breach of these terms — including the unauthorised disclosure of confidential information — is treated as a breach of contract and remains, in practice, the most used and effective legal route available in India.
However, Section 27 of the Indian Contract Act significantly limits the enforceability of post-employment non-compete clauses. This was reaffirmed by the Delhi High Court in Varun Tyagi v. Daffodil Software Pvt Ltd (2025).5 In that case, an employee who left his employer and joined a client organisation was restrained by a Trial Court from taking up the new position, on the basis of confidentiality obligations he had signed. The Delhi High Court overturned this order, holding that preventing a person from working in such a manner contravenes Section 27 of the Act and impinges upon the fundamental right to livelihood under Article 21 of the Constitution. The Court made clear that while employees must honour confidentiality obligations even after leaving employment, this alone cannot justify blocking future employment. Any alleged misuse of confidential information must be specifically proved in court.
B. Information Technology Act, 2000
The Information Technology Act, 2000 is India’s primary legislation governing electronic records, cybercrime, and digital data protection.6 It penalises unauthorised access to computer systems and data theft. Section 43 of the IT Act, 2000 deals with civil liability for damage to computer systems and data, while Section 66 addresses computer-related offences such as hacking and the dishonest extraction of data. In the context of trade secrets, this legislation becomes relevant when confidential business information is stored, transmitted, or accessed electronically.
However, in American Express Bank Ltd v. Priya Puri (Delhi HC, 2006), the Court held that trade secrets and confidential information are primarily protected through contractual obligations and equitable principles, not general statutes. It declined to treat employee data and business information as automatically protected under broader statutory regimes.7 As these cases illustrate, IT law alone cannot substitute for properly drafted confidentiality agreements.
This position was further confirmed in Zee Telefilms Ltd v. Sundial Communications Pvt Ltd (Bombay HC, 2003), where the Court observed that India has no specific trade secret statute, and that protection consequently rests on contract law and the equitable doctrine of breach of confidence — clearly indicating that existing statutes are insufficient on their own.8
C. Other Statutory Frameworks
The Competition Act, 2002 may be relevant in cases where misappropriation confers an unfair competitive advantage.9 The Companies Act, 2013 governs corporate conduct, internal management, and the duties of directors and employees. While not a dedicated intellectual property law, it indirectly supports the protection of confidential and sensitive business information — notably through the fiduciary duties imposed on directors under Section 166.10 However, neither statute was designed with trade secret protection as its primary objective, and both fall considerably short of providing comprehensive coverage for the range of scenarios that modern businesses face.
This limitation was illustrated in VFS Global Services Pvt Ltd v. Suprit Roy (Bombay HC, 2008), where former employees were accused of taking confidential business information — including client data and operational details — after leaving the company. The Bombay High Court restrained them from using such information and emphasised that confidential data shared during employment cannot subsequently be misused. Notably, the Court relied on confidentiality obligations and fiduciary duties rather than on the Competition Act, 2002 or the Companies Act, 2013 — underscoring once again the limited role of these statutes in trade secret disputes.11
The fragmented nature of India’s trade secret protection regime gives rise to several critical gaps. Courts have approached the concept inconsistently, producing unpredictable outcomes for litigants. As the Delhi High Court noted in Navigators Logistics Ltd v. Kashif Qureshi & Ors (2018), a claimant must clearly identify the trade secret at issue — yet without legislative guidance, this threshold remains ambiguous.12
The Protection of Trade Secrets Bill, 2024: A Critical Analysis
The Protection of Trade Secrets Bill, 2024 is a proposed legislation emanating from the Law Commission of India’s 289th Report. It aims to create a dedicated legal framework for trade secret protection in India — the first of its kind in the country’s legal history. The Bill was introduced in recognition that existing laws, including the Indian Contract Act, 1872, the IT Act, 2000, and the Companies Act, 2013, are insufficient and indirect in addressing modern challenges such as digital data theft, corporate espionage, and cross-border business operations.13
The Bill comprises 13 sections across four chapters. Its key features include:
- A clear statutory definition of trade secrets (information with commercial value that is kept confidential through reasonable steps);
- A statutory right to sue for misappropriation;
- Protection against unauthorised use, disclosure, or acquisition;
- Recognition of whistleblower protection and public interest exceptions; and
- Provision for government use or compulsory licensing in emergency circumstances.14
The Bill also provides clear guidance on what constitutes misappropriation — taking, using, or sharing a trade secret without authorisation — while simultaneously protecting legitimate practices such as reverse engineering (studying a product to understand how it works) and independent discovery.
A further notable feature concerns employee protection. The Bill expressly provides that a worker’s skills, knowledge, and experience gained during employment do not constitute trade secrets, thereby preventing companies from improperly restricting employees from changing jobs.15
The Bill also assigns trade secret disputes to Commercial Courts, enabling faster and more expert resolution of business disputes.
Even so, the Bill contains significant gaps. First, it does not establish a Trade Secrets Registry, which would have allowed companies to officially record their secrets in advance and ease the burden of proving ownership in litigation. Second, it does not adequately address modern technology concerns such as AI-generated confidential information, cloud storage risks, and digital data leaks — issues of considerable importance today. Third, the criminal punishment provisions are comparatively weak. At a time when economic espionage and corporate hacking are growing threats, the Bill does not go far enough in the direction of robust criminal deterrence.
Comparative Analysis with Other Jurisdictions
The United States enacted the Defend Trade Secrets Act (DTSA) in 2016, creating a federal civil cause of action for trade secret misappropriation.16 The DTSA empowers courts to issue injunctions, award compensatory damages, and grant up to double damages in cases of wilful and malicious misappropriation. In exceptional circumstances, courts may also order the ex parte seizure of misappropriated materials. These robust enforcement mechanisms are currently absent from India’s proposed Bill.
The European Union adopted the Trade Secrets Directive in 2016, harmonising trade secret protection across all member states.17 The Directive provides remedies including injunctive relief, corrective measures, and damages. It also incorporates whistleblower protections, permitting lawful disclosure of trade secrets where necessary to expose illegal activity. India’s proposed Bill has adopted a similar approach in this respect.
While the US model prioritises strong enforcement and deterrence, the EU model emphasises harmonisation and balanced protection with built-in public interest safeguards. India’s proposed framework occupies a middle ground. However, this article identifies several key gaps in the proposed Bill when compared to these international models:
- The absence of emergency seizure mechanisms comparable to those available under the US DTSA;
- The lack of a fully harmonised cross-border enforcement structure akin to the EU Directive; and
- Insufficient protections for the digital and AI era.
Conclusion
The Protection of Trade Secrets Bill, 2024 is a commendable and long-overdue proposal. It brings much-needed clarity, aligns India with its TRIPS obligations, and addresses pressing concerns of the business and legal community. India, one of the world’s fastest-growing economies, stands at a critical juncture. Its start-up ecosystem is a global force, and its technology sector is increasingly at the frontier of innovation. Yet the legal framework meant to protect the very knowledge driving this growth remains underdeveloped and fragmented.
The current proposed Bill, though it feels like a dawn after a long night, must be strengthened in four areas to be truly effective: first, the incorporation of provisions specific to digital and AI-generated trade secrets; second, a stronger criminal framework to address economic espionage; third, a mechanism for voluntary registration to aid in evidentiary disputes; and fourth, a clearer cross-border enforcement framework.
The protection of trade secrets is not merely an intellectual property issue. It is an economic imperative — and a signal of India’s seriousness as a global partner in innovation and technology.
Bibliography
A. Table of Cases
American Express Bank Ltd v Priya Puri CS(OS) No 1442 of 2005 (2006) IIILLJ 540 Del (Delhi HC, 24 May 2006)
Navigators Logistics Ltd v Kashif Qureshi & Ors (2018) 254 DLT 307 (Delhi HC)
Varun Tyagi v Daffodil Software Pvt Ltd FAO 167/2025, Neutral Citation 2025:DHC:5015 (Delhi HC, 25 June 2025)
VFS Global Services Private Limited v Suprit Roy (2008) 2 BomCR 446; 2007 (2) CTLJ 423 (Bombay HC, 10 December 2007)
Zee Telefilms Ltd v Sundial Communications Pvt Ltd (2003) 5 BomCR 404; 2003 (27) PTC 457 (Bombay HC, 27 March 2003)
B. Table of Legislation
Indian Contract Act 1872 (Act No 9 of 1872)
Information Technology Act 2000 (Act No 21 of 2000)
Competition Act 2002 (Act No 12 of 2003)
Companies Act 2013 (Act No 18 of 2013)
Defend Trade Secrets Act 2016, 18 USC §§ 1836–1839 (United States of America)
Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure [2016] OJ L157/1
C. International Instruments
Agreement on Trade-Related Aspects of Intellectual Property Rights (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 299 (TRIPS Agreement) art 39
D. Official Reports
Law Commission of India, ‘Trade Secrets and Economic Espionage’ (Report No 289, March 2024) available here accessed 1 May 2026
Law Commission of India, Draft Protection of Trade Secrets Bill 2024 (annexed to Report No 289, 2024)
E. Secondary Sources
Shilpi Mehta Nanda, ‘India: Law Reform Commission Proposes Trade Secrets Should Have Their Own Legislation’ (International Trademark Association, 2024)
World Intellectual Property Organization, WIPO Guide to Trade Secrets and Innovation (WIPO 2023) available here accessed 1 May 2026
Footnote(S):
1 Law Commission of India, Trade Secrets and Economic Espionage (Report No 289, 2024).
2 Agreement on Trade-Related Aspects of Intellectual Property Rights (adopted 15 April 1994) 1869 UNTS 299 (TRIPS Agreement) art 39; World Intellectual Property Organization, WIPO Guide to Trade Secrets and Innovation (WIPO 2023).
3 Law Commission of India (n 1).
4 Indian Contract Act 1872 (Act No 9 of 1872).
5 Varun Tyagi v Daffodil Software Pvt Ltd FAO 167/2025, Neutral Citation 2025:DHC:5015 (Delhi HC, 25 June 2025).
6 Information Technology Act 2000 (Act No 21 of 2000), ss 43, 66.
7 American Express Bank Ltd v Priya Puri CS(OS) No 1442 of 2005 (Delhi HC, 24 May 2006).
8 Zee Telefilms Ltd v Sundial Communications Pvt Ltd (2003) 5 BomCR 404 (Bombay HC).
9 Competition Act 2002 (Act No 12 of 2003), s 3.
10 Companies Act 2013 (Act No 18 of 2013), s 166.
11 VFS Global Services Pvt Ltd v Suprit Roy (2008) 2 BomCR 446 (Bombay HC).
12 Navigators Logistics Ltd v Kashif Qureshi & Ors (2018) 254 DLT 307 (Delhi HC).
13 Law Commission of India, Report No 289 (2024), Draft Protection of Trade Secrets Bill, 2024.
14 Shilpi Mehta Nanda, ‘India: Law Reform Commission Proposes Trade Secrets Should Have Their Own Legislation’ (International Trademark Association, 2024).
15 Law Commission of India, Trade Secrets and Economic Espionage (Report No 289, 2024).
16 Defend Trade Secrets Act 2016, 18 USC §§ 1836–1839.
17 Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure [2016] OJ L157/1.
