DPIIT Revisits a Dedicated Trade Secrets Law, Weighing Whistleblower Protection Against Compliance Burden

The news

New Delhi, September 25. India will soon begin consultations with industry, including start-ups, on provisions to protect whistleblowers and enforce contracts as it revisits the drafting of a trade secrets law, The Economic Times reports. The Department for Promotion of Industry and Internal Trade (DPIIT) has begun consultations on a dedicated law to protect unpatented inventions currently covered by contract law. A trade secret is commercially valuable information, such as a formula, a process, a customer list or source code, that a business keeps confidential rather than publishing in a patent. At present, trade secrets are protected through a combination of court precedents and legislation, chiefly the Indian Contract Act, 1872, which gives recourse when a non-disclosure agreement is breached, sensitive information is exposed or private information is disclosed inappropriately. Officials said some start-ups and industry participants raised concerns about a higher compliance burden, contract enforcement and the balance between trade secret protection and whistleblower rights. The fear is that a strict secrecy law could silence an insider who exposes wrongdoing. “There is a thinking in some parts of the government that no separate law is needed to ensure contract fulfilment and the extant Indian Contract Act, 1872, can be amended to achieve that aim but industry has concerns,” an official said. “While some startups have concerns about a higher compliance burden under a new law, some established firms have issues about how the contracts will be fulfilled,” the official added. The US, the UK, Japan, China and the EU already have dedicated laws. An intellectual property expert told the paper that such a law could include a digital timestamp proving that the owner and the regulator held a specific piece of confidential data at an exact date and time without revealing its contents, with the government maintaining a repository of such documents. The law could be simple, without detailed compliance requirements or return filings, the expert said. A trade secret grants no legal monopoly; it guards against unauthorised disclosure, improper use or acquisition of confidential information. Unlike patents, copyright and trademarks, which are limited to a fixed period, trade secrets can be protected in perpetuity so long as confidentiality is maintained. The syllabus link is GS3 on intellectual property rights and the start-up ecosystem.

Static syllabus linkage

1. TRIPS Article 39 obliges India to protect undisclosed information but not to write a separate statute. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) deals with “undisclosed information” in Article 39. It requires members to allow persons to prevent information lawfully in their control from being disclosed, acquired or used by others without consent in a manner contrary to honest commercial practices. The information qualifies if it is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it secret. Article 39 also protects test data submitted to regulators for approval of pharmaceutical and agricultural chemical products against unfair commercial use. TRIPS leaves each member free to choose the legal method, so India’s reliance on contract and equity is not itself a violation.
2. India protects trade secrets through contract, equity and a few scattered statutes. Indian courts protect confidential information through claims for breach of contract under the Indian Contract Act, 1872, and through the equitable action for breach of confidence, which applies even without a contract when information is imparted in confidence. Section 27 of the Contract Act makes agreements in restraint of trade void, so post-employment non-compete clauses are generally unenforceable, while confidentiality obligations can be enforced. Courts grant injunctions under the Specific Relief Act, 1963 to stop misuse. There is no criminal offence of trade secret theft as such, and there is no statutory definition of a trade secret.
3. The Law Commission has recommended a standalone trade secrets law. The 22nd Law Commission of India, in its 289th Report on trade secrets and economic espionage submitted in 2024, recommended a separate law on the subject and attached a draft bill. It proposed a statutory definition of trade secrets, civil remedies such as injunctions and damages, and exceptions including disclosure in the public interest. The report treated a dedicated statute as a way to give certainty to businesses and to align India with practice in major economies. Its recommendations are advisory and require legislation to take effect.
4. India’s whistleblower law covers public servants, not private employees. The Whistle Blowers Protection Act, 2014 provides a mechanism to receive complaints of corruption or wilful misuse of power against public servants and to protect those who make such disclosures, with the Central Vigilance Commission as a competent authority for many cases. It does not cover disclosures by employees of private companies about corporate wrongdoing. An amendment bill introduced in 2015 to restrict disclosures touching national security and other sensitive matters was not enacted. The National Intellectual Property Rights Policy, 2016, anchored in DPIIT, set the aim of a strong and effective IPR framework and brought all IP laws under a single department.

Why UPSC loves this

1. GS3 asks about IPR, innovation and the start-up economy. The syllabus includes issues relating to intellectual property rights. Mains has asked about India’s IPR regime, the balance between patents and access to medicines, and the conditions for innovation. A trade secrets law is a fresh angle: it protects innovators who choose not to patent, which is common in software and process industries.
2. Prelims tests the architecture of IP protection. UPSC has asked about the terms of patents and copyright, geographical indications, TRIPS provisions and the National IPR Policy. The distinction between a trade secret, which lasts as long as secrecy holds and gives no monopoly, and a patent, which is published and lasts 20 years, is a classic statement-type question.
3. The ethics paper tests whistleblowing and loyalty. GS4 has asked about whistleblowing, conflicts between organisational loyalty and public interest, and corporate governance. A trade secrets law with a public-interest exception is a concrete example of how law tries to reconcile confidentiality with accountability.

Analysis

1. The real case for a law is certainty, not new rights. Indian courts already protect confidential information through contract and equity, so a statute would not create protection from nothing. What it would add is a definition, predictable remedies and a clear list of exceptions. A start-up negotiating with a large investor or a foreign partner can then point to a statute rather than a line of judgments that vary across High Courts. The officials who say the Contract Act could simply be amended miss that breach of confidence reaches third parties who never signed a contract, which contract law alone cannot do well.
2. Whistleblower protection is the test of whether the law protects innovation or secrecy. A trade secrets law without a clear public-interest exception could let a company sue an employee who reports unsafe drugs, falsified emissions data or financial fraud. India’s whistleblower statute protects only those who report on public servants, so private-sector employees have no general shield. The law should say plainly that disclosure of wrongdoing to a regulator or the police is not misappropriation. The counter-view from firms is that a broad exception invites employees to leak and later claim to be whistleblowers; the answer is to protect disclosure to authorities, not to the press or competitors.
3. The start-ups’ fear of compliance is well founded and points to a light design. The expert’s suggestion of a simple law without return filings recognises that small firms cannot afford compliance departments. A registration-style regime would also defeat the point of secrecy, since trade secrets are valuable precisely because nobody registers them. The timestamp repository is useful as optional proof of possession at a date, not as a condition for protection. If the law makes protection depend on paperwork, large firms will benefit and start-ups will be left behind.
4. Employee mobility is the hidden stake. Section 27 of the Contract Act makes post-employment non-compete clauses largely void, which keeps India’s labour market for skilled workers mobile and has helped its technology sector. A trade secrets law must not become a back door to non-competes by treating general skill and experience as secrets. The line drawn in mature systems is that an employee may use general knowledge but not specific confidential information. Getting that line right protects both firms and the careers of workers.
5. Economic espionage and national security raise the stakes beyond commerce. Confidential know-how in semiconductors, defence components and pharmaceuticals is a strategic asset, and theft by foreign actors is a security concern. A civil-only regime offers weak deterrence against organised espionage. There is an argument for a criminal offence for serious, deliberate theft, but criminal provisions invite misuse in ordinary commercial disputes. A calibrated law would reserve criminal sanctions for wilful theft for the benefit of foreign entities, leaving ordinary disputes to civil remedies.

Administrator's brainstorm