Understanding Trade Secrets: From Confidential Information to Know-How

Every business holds information it would rather its competitors never see – a pricing model, a manufacturing process, a carefully curated customer database. But when does that sensitive information cross the threshold from being merely “confidential” to being legally protectable as a trade secret? The answer matters enormously, especially in a country like India, where no dedicated trade secret statute exists yet, and businesses must rely on a patchwork of legal tools to guard their most valuable knowledge assets.

What is a trade secret? 🔗

At its core, a trade secret is any confidential business information that gives a company a competitive advantage precisely because it is not publicly known. According to WIPO, trade secrets are intellectual property rights over confidential information that may be sold or licensed. Unlike patents or trademarks, trade secrets require no formal registration – and can theoretically remain protected indefinitely, as long as secrecy is maintained.

The most cited international benchmark comes from Article 39.2 of the TRIPS Agreement, which India ratified in 1994. It requires protection for “undisclosed information” that satisfies three conditions: the information must not be generally known or readily accessible; it must have commercial value because of its secrecy; and the holder must have taken reasonable steps to keep it secret. These three criteria – secrecy, commercial value, and protective measures – form the foundational test applied by courts across jurisdictions, including India.

In practical terms, trade secrets span a wide range. They include manufacturing processes, chemical formulas, algorithms, strategic business plans, pricing models, customer lists, and marketing techniques. The famous examples – Coca-Cola’s formula and KFC’s recipe – illustrate that even a recipe can be a legally protectable trade secret if the conditions are met.

The legal criteria: what qualifies as a trade secret in India? 🔗

India does not have a standalone trade secret law. However, courts have developed a consistent set of criteria through judicial precedents. The landmark case of Niranjan Shankar Golikari v. Century Spinning and Mfg established that for information to qualify as a trade secret: it must be kept confidential; it must carry commercial utility; and the owner must have taken specific steps to protect its confidentiality. This framework has been consistently followed and expanded in subsequent decisions.

The Bombay High Court went further in Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan Singh (2010), laying down a more granular multi-factor test. The court assessed factors such as how widely the information was known outside the business; how many insiders had access to it; what precautions the holder took to guard it; its competitive value; the effort and resources invested in developing it; and how difficult it would be for others to replicate it independently. This six-factor analysis remains one of the most comprehensive judicial frameworks available in Indian trade secret jurisprudence.

In Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber, the Delhi High Court held that a trade secret is information whose disclosure to a competitor would cause real or significant harm to the owner – and this could extend beyond manufacturing formulas to include customer names and their purchasing patterns. This decision was significant because it widened the scope of what businesses could claim as protectable trade secrets.

Manufacturing secrets vs. commercial secrets 🔗

Trade secrets broadly fall into two categories. Manufacturing secrets relate to production processes – how a product is made, what formula is used, what technical processes give a product its distinctive quality. Commercial secrets, on the other hand, relate to the business side – customer databases, supplier terms, marketing strategies, pricing structures, and business development plans. Both are equally protectable, provided they meet the secrecy, value, and protective-measures criteria.

This distinction is important because the nature of the secret influences how courts assess harm. The unauthorised disclosure of a manufacturing process might allow a competitor to replicate a product; the unauthorised disclosure of a customer list might enable direct solicitation of that business’s clients. Indian courts have recognised both types as capable of generating actionable claims under contract law, common law, and equitable principles.

Trade secrets vs. confidential information: not the same thing 🔗

The terms “trade secret” and “confidential information” are sometimes used interchangeably, but they are legally distinct. As a matter of international law, trade secrets are technically a subset of confidential information. Not all confidential information rises to the level of a trade secret.

The key differentiator is commercial value derived from secrecy. Confidential information may include personal data, internal communications, or administrative records – none of which necessarily give a business a competitive edge. A trade secret, by contrast, must be information whose secrecy is the very source of its economic value. If the information has no commercial significance, it may remain confidential but cannot claim the heightened protection accorded to trade secrets.

Some Indian courts have used the two terms interchangeably, while others have clearly distinguished them. Courts in India have held that trade secrets constitute a subset of confidential information, and that while all trade secrets are confidential, not all confidential information qualifies as a trade secret. The additional hurdle of demonstrating commercial value – and the competitive advantage derived from secrecy – is what separates the two.

Trade secrets vs. know-how: a closer look 🔗

The distinction between trade secrets and know-how is subtle but legally significant, particularly in employment disputes. Know-how refers to the accumulated skills, techniques, and practical knowledge a person develops through experience – the expertise that becomes part of their professional capability over time. Unlike a trade secret, know-how may or may not be confidential, and it does not necessarily belong to any one business entity.

The distinction can be illustrated simply: while all trade secrets may include elements of know-how, not all know-how qualifies as a trade secret. A software engineer who learns to write efficient code while working at a company takes that general skill with them when they leave. The specific proprietary algorithm they built for that company, however, is a trade secret that remains with the employer.

This tension is directly relevant in India under Section 27 of the Indian Contract Act, which renders agreements in restraint of trade void and unenforceable. Because courts will not uphold post-employment restrictions that prevent a person from using their general skills and knowledge, employers must clearly demarcate what is a trade secret (belonging to the company) from what is general know-how (belonging to the employee). An overly broad confidentiality clause that seeks to prevent an employee from using their accumulated expertise in any future role is likely to be struck down.

WIPO’s guidance on trade secret litigation notes that courts look at several factors to make this distinction: whether the employee physically took documents or merely retained information in memory; whether the knowledge is specific to that employer’s business or is general industry knowledge; and whether the employee acquired specific proprietary techniques unique to that employer’s operations.

The role of secrecy: why protection measures matter 🔗

A critical point – one that businesses often underestimate – is that trade secret protection is not automatic. The owner must actively maintain secrecy. If an owner cannot demonstrate that they took reasonable precautions, they risk losing legal protection entirely, even if the information was obtained by a third party without permission.

Reasonable protective measures include using non-disclosure agreements (NDAs) with employees and third parties, restricting internal access to sensitive information on a need-to-know basis, marking documents as confidential, and implementing technical and physical security controls. The standard is not perfection – courts do not expect businesses to operate like classified intelligence agencies – but there must be a demonstrable, consistent effort to treat the information as secret.

Indian courts have consistently held that the obligation of confidence can arise implicitly, even without a formal contract, when information is shared in circumstances that make its confidential nature obvious – such as during business negotiations or in an employer-employee relationship. However, formal documentation always strengthens a claim.

India’s evolving legal framework: the Trade Secrets Bill, 2024 🔗

Recognising the fragmented state of trade secret protection, the 22nd Law Commission of India issued a report in March 2024 titled “Trade Secrets and Economic Espionage,” recommending a dedicated sui generis legal framework. The proposed Protection of Trade Secrets Bill, 2024, offers a statutory definition of trade secret aligned with TRIPS: information that is not publicly known, derives commercial value from its secrecy, is subject to reasonable protective steps, and whose disclosure would likely cause damage.

The Bill also introduces important safeguards – including protections for whistleblowers who disclose trade secrets in the public interest, and a remedy against groundless threats of legal action by trade secret holders. Until this legislation is enacted, Indian businesses continue to rely on the Indian Contract Act, 1872, the equitable doctrine of breach of confidence, and judicial precedents to enforce their rights.

The absence of a dedicated law has created practical challenges. Businesses – especially startups and technology companies – often find it difficult to assess what protection they actually have and what steps they must take to enforce it. The proposed legislation aims to provide that clarity and, critically, to improve India’s standing in international trade negotiations where the absence of a clear trade secret law has sometimes been raised as a concern.

What do you think? Given that India still lacks a dedicated trade secret statute, do businesses adequately appreciate the difference between protecting a “trade secret” and merely labelling information as “confidential”? And with the Trade Secrets Bill, 2024 on the horizon, should the law draw a stricter line between protectable trade secrets and the general know-how employees carry with them when they change jobs?

References

1. https://www.wipo.int/en/web/trade-secrets
2. https://www.wto.org/english/tratop_e/trips_e/intel2_e.htm
3. https://www.kanakkupillai.com/learn/trade-secrets-protection-in-india/
4. https://www.ipandlegalfilings.com/trade-secrets-in-india-a-legal-prespective
5. https://www.azbpartners.com/bank/trade-secrets-india/
6. https://kankrishme.com/trade-secret-protection-in-india-a-comprehensive-overview/
7. https://en.wikipedia.org/wiki/Trade_secret
8. https://gowlingwlg.com/en/insights-resources/articles/2023/distinction-confidential-information-know-how
9. https://www.khuranaandkhurana.com/2020/06/09/protecting-trade-secrets-in-india-in-the-absence-of-a-regime/
10. https://www.wipo.int/web-publications/wipo-guide-to-trade-secrets-and-innovation/en/part-v-trade-secrets-in-litigation.html
11. https://www.iusmentis.com/innovation/tradesecrets/
12. https://www.anandandanand.com/news-insights/trade-secrets-2025/
13. https://corporate.cyrilamarchandblogs.com/2024/05/the-22nd-law-commission-report-on-trade-secrets-call-for-a-balancing-act/
14. https://www.worldtrademarkreview.com/guide/india-managing-the-ip-lifecycle/2025/article/practical-guide-protecting-and-enforcing-trade-secrets-in-india-new-bill-the-horizon