Trade Secret Protection Measures in India

The protection of trade secrets plays a core role in promoting India’s economic development. Businesses, especially startups and small and medium-sized enterprises, rely on business secrets to create competitive advantages, attract investment, and develop new products and services. The effective protection of this proprietary information not only helps businesses grow strongly but also contributes to the diversification and innovation of the economy. When businesses can protect business secrets, they will be motivated to invest in research and development of new products, improve the quality of products and services. However, the fierce competition in the market, along with the lack of specific and detailed regulations on trade secrets, has facilitated infringements. In addition, the awareness of information security of some businesses and individuals is still limited, leading to the risk of losing important information. Viet An Law would like to guide customers on how to protect trade secrets in India through the article below.

Legal Basis for Protection of Trade Secrets in India

Currently, there is no law or legislation governing the protection of trade secrets in India. However, rights relating to trade secrets are enforced through contract law (Indian Contracts Act, 1872), the principle of fairness, or by suing for breach of trust under common law. The Delhi High Court, in the case of John Richard Brady & Ors v Chemical Process Equipment P Ltd & Anr (AIR 1987 Delhi 372), rendered the following ruling:

“Depending on the specific case, these rules may be applied based on the principles of fairness or by initiating a breach of contract lawsuit. The principle of fairness requires the parties to behave honestly and fairly, while the initiation of a breach of contract is based on a breach of the agreed terms.”

India is also a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Under article 39(2), TRIPs allow members the flexibility to develop legislation to prevent the unauthorized disclosure and use of certain information, provided that this “information” meets the following criteria:

• The information must be confidential, meaning it has not been widely disclosed and is not easily accessible to people working in the field
• The information must have commercial value
• Protected by the owner by reasonable measures to keep it sealed.

Trade Secret Protection Measures in India

• Organizations should clearly classify and define what information is considered a trade secret. Not all company information is eligible for protection as a trade secret, so periodic reviews are essential.
• Organizations should explicitly designate information in physical or digital form as “trade secrets”;
• Access to trade secrets must be closely protected by a system of multi-layered security measures, including physical, technological, contractual and managerial measures. To ensure the safety of trade secret information, employees are not allowed to access or take this information out of the company’s work environment.
• To ensure long-term confidentiality, confidentiality agreements with third parties should clearly state that the confidentiality obligation remains in effect even after the contract ends.
• Protect technology products from the risk of unauthorized copying by implementing technology security solutions to prevent reverse engineering. Reverse engineering is just one of the many ways that trade secrets can be compromised.

Infringement of trade secrets in India

In addition to reverse engineering, other common trade secret breaches in India include:

• Unauthorized Access: Sneaking into a business’s premises, stealing documents, or using technical methods to gain unauthorized access to computer systems to steal information.
• Unauthorized Use: Using confidential information without the owner’s permission to create a competing product or service or disclose it to a competitor.
• Unauthorized disclosure: Disclosure of confidential information to third parties, including employees or business partners, or disclosure of information in the media.
• Bribery: Bribing employees or other stakeholders to steal confidential information.
• Unfair competition: Using confidential information to compete unfairly, for example, lowering selling prices, spreading false rumors about competitors.

Exceptions to the breach of trade secret protection in India

• Independent discovery: If a person develops a technology or process similar to someone else’s trade secret without knowing the existence of that secret, this behavior is generally not considered a violation. However, to prove independent discovery, the person must have clear evidence of his or her research and development.
• Information has become public: If confidential information has been leaked and become common knowledge in the industry, then the use of that information will no longer be considered a violation.
• Use of information to protect legal interests: In some cases, the disclosure of confidential information may be permitted if the purpose is to protect the disclosing person’s legitimate interests, such as reporting violations of the law.
• Legal Requirements: In some cases, the law may require the disclosure of confidential information, such as in criminal investigations or litigation.