The Core of Trade Secret Protection in TRIPS: Analyzing Article 39(2)

When a business guards its secret formula, a proprietary algorithm, or a confidential client list, what exactly makes that information legally protectable under international law? The answer lies in Article 39(2) of the TRIPS Agreement – a compact but foundational provision that defines the conditions under which “undisclosed information” qualifies for protection and specifies what kinds of conduct count as violations. For law students studying intellectual property in the international context, unpacking this provision is essential. It is the bedrock of trade secret law as an international standard.

The broader framework: where Article 39(2) sits 🔗

The TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights), administered by the WTO, came into force in 1995. It was a landmark moment for intellectual property because, for the first time, trade secrets – referred to in the Agreement as “undisclosed information” – were formally recognised as a category of intellectual property deserving international protection. Before TRIPS, trade secrets fell within the broader, somewhat inconsistent domain of unfair competition law.

Article 39 is placed under Section 7 of Part II of TRIPS, titled “Protection of Undisclosed Information.” It has three paragraphs. Paragraph 1 sets the general obligation for WTO member states to protect undisclosed information consistent with Article 10bis of the Paris Convention, which deals with unfair competition. Paragraph 2 – the focus of this post – lays out the specific eligibility criteria for trade secret protection and the scope of the right. Paragraph 3 deals separately with undisclosed test data submitted to government regulators for pharmaceutical and agrochemical product approvals.

What Article 39(2) actually says 🔗

The text of Article 39(2) grants both natural and legal persons the ability to prevent information lawfully within their control from being disclosed to, acquired by, or used by others without their consent – but only when that unauthorised conduct occurs in a manner contrary to honest commercial practices, and only as long as the information satisfies three cumulative conditions.

These three conditions together form what is widely regarded as the international standard for defining a trade secret. Every element must be satisfied; the absence of any one disqualifies the information from protection under TRIPS.

The three criteria dissected 🔗

1. Secrecy – Article 39(2)(a) 🔗

The first condition is that the information must be secret – meaning it is not, as a body or in the precise configuration and assembly of its components, “generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question.” Two important qualifications follow from this language.

First, secrecy under TRIPS is relative, not absolute. As WIPO’s Guide to Trade Secrets and Innovation clarifies, information can be known to more than one person – for instance, multiple employees within a company, or a business partner bound by a non-disclosure agreement – and still qualify as secret, as long as it remains unknown to competitors or others in the relevant industry. The test is not “does only one person know this?” but rather “is this information inaccessible to the relevant commercial circles?”

Second, the phrase “in the precise configuration and assembly of its components” is significant. Even if individual elements of a trade secret are publicly known, the specific combination or arrangement may itself be secret. For example, a pharmaceutical company’s formulation process might combine known chemicals in a proprietary ratio that is not publicly documented – that ratio can still qualify as a trade secret.

2. Commercial value because of secrecy – Article 39(2)(b) 🔗

The second condition requires that the information must have commercial value because it is secret. This is a direct causal link – the value must derive from the secrecy itself, not merely coexist with it. If the information would have the same utility and market value even after being disclosed, it does not meet this standard.

This criterion serves a practical purpose: it filters out information that is confidential but commercially insignificant. Academic commentary on this point notes that private personnel data or internal administrative records, though confidential, typically would not satisfy this criterion because their commercial value does not depend on their secrecy. On the other hand, a manufacturing process that gives a company a cost advantage over competitors derives its entire commercial relevance from the fact that rivals do not know it – this clearly satisfies the condition.

The WIPO guide also notes that commercial value can be lost over time. If a secret formula becomes redundant due to technological change, or the information enters the public domain, the commercial value from secrecy disappears – and so does the protection.

3. Reasonable steps to maintain secrecy – Article 39(2)(c) 🔗

The third condition is that the information must have been subject to reasonable steps, taken by the person lawfully in control of the information, to keep it secret. This places a positive obligation on the trade secret holder. It is not sufficient to simply possess valuable, non-public information – the holder must actively take measures to preserve its confidentiality.

What counts as “reasonable” is deliberately flexible under TRIPS, as the provision itself says “under the circumstances.” As Herbert Smith Freehills Kramer explains, the steps expected will vary based on factors like the value of the information, the size and resources of the business, and the nature of the secret itself. Keeping source code confidential requires different measures than protecting a chemical recipe. Typical protective steps include non-disclosure agreements (NDAs) with employees and contractors, restricted access protocols, confidentiality clauses in technology transfer agreements, and internal policies designating information as proprietary.

Crucially, the standard does not require that secrecy be successfully maintained at all times – only that reasonable efforts were made. A sophisticated cyberattack that bypasses strong security measures does not retroactively strip information of trade secret status if the holder had taken contextually appropriate precautions.

The “honest commercial practices” standard and Footnote 10 🔗

Article 39(2) does not grant an exclusive, property-style right over information. Unlike a patent, which gives the holder the right to exclude others from the invention regardless of how they came to know it, trade secret protection under TRIPS is triggered only when unauthorised use, disclosure, or acquisition occurs in a manner contrary to honest commercial practices. This is the provision’s limiting principle.

The meaning of this phrase is defined in Footnote 10 of the TRIPS Agreement, which specifies that it covers at least the following:

• Breach of contract – violating a confidentiality or non-disclosure agreement
• Breach of confidence – misusing information shared in a relationship of trust, even without a formal contract
• Inducement to breach – encouraging another person to violate their confidentiality obligations
• Acquisition by third parties with knowledge or gross negligence – where a third party receives trade secret information knowing, or having clear reason to know, that it was obtained through improper means

The word “at least” in the footnote is important – it sets a floor, not a ceiling. WTO member states are free to extend protection to other forms of dishonest conduct. The footnote also expressly includes third-party liability: a company that acquires trade secret information from a competitor’s former employee – knowing or recklessly ignoring that the employee was bound by confidentiality obligations – can itself be held liable. This extended liability was new to many legal systems when TRIPS came into force.

Reverse engineering and independent discovery, however, are not covered. Because Article 39(2) only prohibits conduct contrary to honest commercial practices, a competitor who independently develops the same formula or who analyses a product to deduce the process behind it has not violated any TRIPS obligation. This is a fundamental distinction between trade secret protection and patent protection.

Article 39(2) does not create exclusive rights 🔗

A common misconception is that TRIPS trade secret protection functions like a patent. It does not. As the WIPO guide makes clear, trade secret holders under TRIPS do not enjoy exclusive rights – they only have the possibility of preventing others from using, disclosing, or acquiring their information through dishonest means. Two companies can independently hold the same information as a “trade secret” simultaneously. Neither can sue the other simply for knowing the same thing. The protection is relational and conduct-based, not property-based in the traditional IP sense.

There is also no mandatory registration and no fixed term of protection. A trade secret can theoretically last indefinitely – as long as it meets the three criteria in Article 39(2). The moment the information becomes generally accessible, or the commercial value from secrecy evaporates, or the holder stops taking reasonable steps to protect it, the protection ends.

India’s position under Article 39(2) 🔗

As a WTO member that signed the TRIPS Agreement, India is bound by the obligations in Article 39. However, India has no dedicated trade secrets statute. Protection is instead drawn from a patchwork of legal tools: breach of confidence under common law, non-disclosure agreements under the Indian Contract Act, 1872, and criminal breach of trust provisions under Sections 405-409 of the Indian Penal Code.

Indian courts, including the Delhi High Court in John Richard Brady & Ors. v. Chemical Process Equipment P Ltd & Anr. (AIR 1987 Delhi 372), have protected trade secrets through principles of equity and breach of confidence. The Calcutta High Court in Dr. Sudipta Banerjee v. LS Davar and Company recognised remedies including injunctions, return of confidential information, and compensation.

Acknowledging the gap, the 22nd Law Commission of India issued its 289th Report on Trade Secrets and Economic Espionage on 5 March 2024, and proposed the Protection of Trade Secrets Bill, 2024. The Bill’s proposed definition of a trade secret closely mirrors the three-pronged test in Article 39(2) – information not widely known, commercially valuable due to secrecy, and protected through reasonable steps – with the addition of a fourth element: that disclosure would cause likely damage to the holder. The Bill is recommendatory at this stage; it remains for Parliament to decide whether to enact it into law. If passed, it would be India’s first standalone legislation aligned with its TRIPS obligations under Article 39.

Why the structure of Article 39(2) matters 🔗

The architecture of Article 39(2) reflects a deliberate policy choice. By tying protection to a conduct-based standard (honest commercial practices) rather than a registration-based or exclusivity-based regime, TRIPS preserves space for competition, innovation through independent research, and the free movement of general employee know-how. At the same time, it ensures a minimum threshold of protection across all WTO member states, preventing businesses from being left without recourse when their genuinely confidential, commercially significant information is obtained through betrayal or deception.

For Indian law students, this provision is also a lens through which to understand the gap between international obligations and domestic implementation – a recurring theme in Indian IP law – and the direction in which legislative reform is now heading.

What do you think? Given that Article 39(2) requires only “reasonable steps” and does not specify any minimum standard, how should courts determine what is “reasonable” for a small startup versus a large corporation? And with India still lacking a dedicated trade secrets statute, do you think the Protection of Trade Secrets Bill, 2024 adequately captures the spirit of Article 39(2), or does it go further than what TRIPS actually requires?

References

1. https://www.wto.org/english/docs_e/legal_e/27-trips_04d_e.htm
2. https://www.wto.org/english/tratop_e/trips_e/ta_docs_e/modules7_e.pdf
3. https://www.wipo.int/web-publications/wipo-guide-to-trade-secrets-and-innovation/en/part-iii-basics-of-trade-secret-protection.html
4. https://dc.law.utah.edu/cgi/viewcontent.cgi?article=1399&context=scholarship
5. https://www.hsfkramer.com/insights/2025-10/protecting-what-matters-how-to-secure-and-monitor-your-trade-secrets
6. https://www.researchgate.net/publication/271803941_Protection_of_Undisclosed_Information_Commentary_of_Article_39_of_the_Agreement_on_Trade-related_Aspects_of_Intellectual_Property_Rights_TRIPS
7. https://www.azbpartners.com/bank/trade-secrets-india/
8. https://www.anandandanand.com/news-insights/trade-secrets-2025/
9. https://www.obhanandassociates.com/blog/law-commission-proposes-a-draft-bill-on-trade-secrets-for-india/