Context: This Article is based on the news “Law Commission recommends new law to protect trade secrets” which was published in the Indian Express. Recently, the Law Commission Of India in its 289th Report ‘Trade Secrets and Economic Espionage’ recommended a new law to protect ‘Trade Secrets’.

About the Trade Secrets (TS)

• Trade Secrets (TS) are intellectual property (IP) rights on confidential information, which derive value from secrecy and can be sold or licensed.

• Unlike other IP forms, they can be protected indefinitely.

• Key characteristics include the information being commercially valuable due to secrecy, known only to a limited group, and protected through reasonable efforts like confidentiality agreements.

• Types of trade secrets encompass processes to enhance manufacturing efficiency, formulas such as recipes or chemical compositions, databases of customer information, programs for improved information management, and business operations data on logistics, marketing, and pricing.

About the Economic espionage (EE)

• Economic espionage (EE) involves the illegal acquisition of sensitive financial, trade, economic, or technological information through methods like bribery, cyber-attacks, and wiretapping.

• It includes both industrial and commercial espionage.

Essentials of a Trade Secret 

• Secret: It is known by a limited group of people.

• Commercial Value: Derive their value from being kept secret.

• Reasonable steps to be taken by the owner to keep the information secret.

• Ex – Recipe of Coca-Cola beverages etc. 

• Unlike other forms of intellectual property, which are limited in duration, They can be protected indefinitely.

What Are the Issues With Trade Secrets & Espionage laws in India?

• No specific law: Currently, India lacks a specific law for the protection of trade secrets. It is based on equity and common law. Instead, they are safeguarded under the general laws governing contracts, common law, criminal law, and principles of breach of confidence and equity.

• Variation in law to its Application: The legal landscape surrounding trade secrets in India has evolved through case laws leading to variations and inconsistencies in its application.

• In Economic espionage:  It typically involves a foreign State as a party, whereas commercial espionage is between two commercial entities.

How is Trade Secret Law Governed in India?

Trade Secret law in India is mostly governed via common law such as: 

• Section 27 of the Contract Act – Law that bound the parties not to disclose information contrary to the terms of the contract between the parties i.e., NonDisclosure Agreements. 

• Section 405-409 of the Indian Penal Code, 1860 deals with the cases when there is a Criminal Breach of trust.

How Can a Trade Secret Be Protected?

• Non-disclosure agreement (NDA): employees and business partners should sign a non-disclosure agreement that prevents them from disclosing a company’s confidential information.

• Non-compete agreement (NCA): employers should ask employees, contractors and consultants to sign a non-compete agreement to prevent them from entering in competition when their employment/service agreement ends.