With the advent of the technological revolution not only has the importance of business sector grown manifold, but the way businesses function and operate has also undergone a sea change. Between the myriad intersections of technology and business, lies the concept of trade secrets.

In this era of relentless competition, protection of trade secrets becomes inevitable, as they can become the difference between the success & failure of any enterprise. Trade secrets are processes, technical know-how, practice, information, etc. which as the name suggests, are not readily available to the public and have a commercial value. Revelation of these secrets would not only entail huge losses, but may also lead to closure of the business enterprises in some cases.

The two fields of Contract law & Trade secrets are virtually distinct and repugnancy between the two is unavoidable. This is reflected by the indiscriminate use of the non-compete clause in contracts. The non-compete clauses in employment contracts, where the departing employees are restricted from competing with the employer or working for a competitor has a serious impact on the mobility and efficacy of the employee.

The Bombay High Court has laid down certain precautions to be taken by the holder of the trade secrets as one of the factors for the information to be classified as a trade secret. Further the rule of thumb is that firms need to take confidentiality measures making it apparent for the observers, so that they treat it as such. If the holder of trade secret shares the secret freely then by the very definition of a secret it loses its trade secret status. However, trade secret owners may evade it by making strategic use of contract law.[1]

By executing a broadly worded non-disclosure agreement and leaving a big room for diverse interpretations, the trade secret owner might get away with the precautionary measure, and still share information freely.

The jurisprudence surrounding confidential information is still nascent. Currently there is no specific legislation on trade secrets. There is also an absence of precise and effective regulations to deal with the exchange of confidential information between businesses. In this context, there is an urgent requirement of a trade secrets legislation which will give teeth to the existing laws, and will pave the way for growth & innovation.

The article has been authored by Varun Gulati


[1] Bombay dyeing & Manufacturing Co Ltd v. Mehar Karan Singh (MANU/MH/0955/2010)

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