Lawsikho Blog

What counts as a trade secret? How to legally and practically protect it? And what to do if someone tries to run away with your secret sauce? These are the questions that will be answered in this article. If you are starting a business and you have a valuable asset on your side, then you will know exactly what to do by the end of this article. 

Introduction

Emmanuel used to help his grandmother in her cosy little workspace to make chocolates. He promised his grandmother that he would make this into a business and sell it to everyone because, according to him, everyone deserved to taste his grandma’s recipe. 

And he did just that. Right now, Emmanuel’s business is growing by the minute. It has become a full-blown operation with five production units, a retail presence in various cities across India, and he has also now expanded his business to Europe. 

But here is the thing, Emmanuel is not just another chocolatier. He makes literally the best chocolates ever. His caramel blend is silky smooth with the perfect touch of salt.

There is a method to this magic, a unique process for tempering chocolate, secret ratios in his ganache fillings, and a sourcing strategy that ensures every ingredient is top-grade and fresh.

This is his edge. His unfair advantage in a competitive market. And all of it, formulas, recipes, processes, is a trade secret.

Now, with new hires joining every month, vendors helping scale operations, and interest from investors and retailers abroad, Emmanuel knows he cannot just rely on goodwill and hope for the best. He needs to protect what makes his business special.

Because if that caramel formula walks out the door, so does his brand.

This guide is for businesses like Emmanuel’s, for founders, operators, and legal teams who are sitting on gold (maybe not chocolate gold, but gold nonetheless) and need practical, no-nonsense ways to protect their trade secrets. Whether you are running a tech startup, a D2C beauty brand, or a legal consultancy, if you have got know-how that gives you an edge, it needs protecting.

What qualifies as a Trade Secret?

So what exactly is Emmanuel protecting?

It is not something he has trademarked. It is not patented. And you will not find it written out on his website or in a chocolate-making course. But it is the heart of his business, his method, his know-how, the things that make his chocolates fly off the shelves while others do not even get sampled.

That is the essence of a trade secret.

In India, we do not yet have a dedicated statute governing trade secrets. Unlike copyright or trademarks, there is no Trade Secrets Act that clearly lays down what qualifies as a trade secret and how to enforce protection.

But the law does not leave you hanging entirely.

Indian courts have consistently protected trade secrets through a combination of:

• Contract law (enforcing NDAs and confidentiality clauses),
• Equity (injunctions and breach of confidence claims), and
• Common law principles are borrowed from international jurisprudence.

According to WIPO:

Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed.

A widely accepted definition used by Indian courts is borrowed from Article 39(2) of the TRIPS Agreement – 

Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices (10) so long as such information:

(a) is secret in the sense that 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;

(b) has commercial value because it is secret; and

(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

So Emmanuel’s proprietary chocolate tempering method could very well qualify as a trade secret if he takes steps to keep it confidential.

As of April 2025, the legal framework for trade secrets in India remains unchanged, with no enactment of the proposed “Protection of Trade Secrets Bill, 2024,” recommended by the 22nd Law Commission in March 2024. This draft bill aims to provide a sui generis framework, but its status is still pending. 

What can be a Trade Secret?

So not everything can be a trade secret, but at the same time, the scope is broad and surprisingly flexible. Some examples include:

• Recipes and formulas – Like Emmanuel’s salted caramel ratio
• Manufacturing processes or methods – His unique way of cooling chocolate to retain texture
• Customer lists or vendor databases – That exclusive cocoa supplier he spent months hunting down
• Business strategies or pricing models – How does he decide which cities to launch in next
• Software code or algorithms – If he were running a backend order system with an optimisation feature.

The key is, it is not public, it gives you a competitive advantage, and you have taken steps to protect it.

If you post your formula on your blog, it is not a secret. If your employee manual leaves the office with every intern, that information may not be considered protected in court. But if you keep it on a “need-to-know” basis, have NDAs in place, and document security protocols, then the law is more likely to step in when a breach happens.

Trade secret vs. other forms of IP

Let us also clear up a common confusion.

People often ask: “Why not just patent it?”

Here is the thing: Patents are public. You disclose everything in exchange for monopoly rights for a limited time. But after that, anyone can use your invention.

Trade secrets flip this. You do not disclose anything, and you can potentially protect it forever, as long as it stays secret. I mean, there are other factors too, such as practical risks like reverse engineering, employee turnover, or cyberattacks.

But you get what I am saying, right?

Before we move on, let us look at something interesting. The Coca-Cola formula has never been patented. It is a trade secret that has lasted over 130 years.

Is Coca-Cola the greatest trade secret of all time? 

Well, it could be. 

In the late 1800s in Atlanta, Georgia, a pharmacist named John Pemberton mixed up a syrup that, when diluted with carbonated water, became a refreshing drink. But what started as a pharmacy experiment quickly became a global empire, thanks in large part to a decision that has defined Coca-Cola for over a century: they never patented the formula. But why?

Because patents expire, usually after 20 years. And once it expires, your invention becomes public domain.

Coca-Cola made a strategic call: they would rather protect it through secrecy than disclose it through patents. And that is how the most famous recipe in the world became the best-kept secret in business.

And how did they do this?

You would think it is just a formula, right? Sugar, caffeine, some herbs and acids. But the key was not just what it was, but how fiercely it was guarded.

This is not just about protection, it is branding. Coca-Cola turned their secrecy into a myth, and that myth became part of its brand identity.

And there is more. In 2006, a Coca-Cola employee named Joya Williams tried to sell the company’s confidential information to Pepsi. She sent a letter to Pepsi offering to sell trade secrets, including a new product prototype and internal strategy documents.

To Pepsi’s credit, they immediately reported it to the FBI. The Bureau set up a sting operation, caught Williams and two others attempting to sell documents and product samples for $1.5 million, and all three were arrested and convicted.

What is the takeaway?

Even with the best internal systems, trade secret theft can and does happen. But if your contracts are solid, your documentation is clear, and your policies are enforced, you can fight back and win.

And in Coca-Cola’s case, they did not just win the legal battle. They walked away with their trade secret intact and a PR victory for how seriously they take protection.

Why this matters for Indian businesses

You might be wondering, what does this American corporate legend have to do with my business in India? 

Coca-Cola did not win because of U.S. law. They won because they built a fortress around their idea. That fortress included clearly defined confidential information, controlled access, legal agreements, and employee training.

Also, have a zero tolerance approach to breaches. 

So for Emmanuel, the same rules apply. The laws in India may differ, but the mindset required to protect your trade secrets does not.

Coca-Cola is still dominating global markets 130+ years later, not because of what is in it, but because of how it was protected.

But keep in mind that U.S. laws (e.g., Defend Trade Secrets Act of 2016) are more developed than India’s. Strategies like vault storage may be less practical in India due to legal and cultural differences. 

So in Emmanuel’s case, even if he could patent parts of his process, doing so would mean disclosing it to the world. Instead, he has chosen to keep it under wraps and guard it with strict internal controls and contracts.

That is the path of a trade secret.

Lifecycle of a Trade Secret

Trade secrets are not born with a label on them.

When Emmanuel first stumbled on the perfect ratio for his caramel centre, it was just an idea scribbled on a coffee-stained notepad. No legal form. No contract. No warning signs that said “This is confidential.” But that is how most trade secrets begin, quietly, informally, as the result of experimentation, instinct, and a lot of trial and error.

What transforms them into legally protectable trade secrets is how you manage them across their lifecycle.

Stage 1: Creation 

The first challenge in managing trade secrets is identifying what actually qualifies. Emmanuel did not know at first that his sourcing method (which involves bidding at a niche co-op in South India before the beans hit mainstream exporters) was a competitive advantage.

But once his competitors started asking questions at trade shows, it clicked.

So, what is the best practice? Businesses should conduct a Trade Secret Inventory. This is a systematic review of processes, tools, formulas, contacts, or strategies that give them a competitive edge and are not publicly known.

Ask yourself questions like:

• Is this information unique to us?
• Do we gain an advantage because others do not have it?
• Is it documented, and can it be isolated?

Once the answer is “yes,” it is time to protect it.

Stage 2: Protection 

This is where Emmanuel got serious.

He stored his core recipes and sourcing methods in an encrypted digital folder with restricted access. He issued NDAs to new hires. His production unit was divided into separate teams, one for tempering, another for filling, so no one person had access to the entire process. Even interns signed confidentiality undertakings.

Protection is where a trade secret starts getting teeth.

Key measures include:

• Legal protections: NDAs, confidentiality clauses in employment contracts, vendor agreements
• Administrative measures: limiting access, maintaining audit logs
• Physical and digital security: passwords, access restrictions, cloud folder controls

Courts in India place a strong emphasis on this stage. If you have not taken reasonable efforts to keep it secret, do not expect the court to treat it like one.

Stage 3: The usage

Here is where things get tricky.

Emmanuel’s business started scaling. He brought in a marketing agency, outsourced packaging design, and even explored franchising. Suddenly, parts of his operation and access to sensitive information were in the hands of outsiders.

This is the most vulnerable stage of a trade secret’s life. The temptation to overshare, especially in early-stage collaborations or investor meetings, is real.

So, what should you do? Every external conversation should be preceded by a simple question: “Do we need to share this?” If yes, then an NDA or confidentiality clause must come first.

Keep in mind that there are potential enforceability issues in India, where courts may strike down overly broad NDAs to balance confidentiality with employee rights. So, make sure you have a well-drafted NDA.

Also, consider segmenting information and sharing only the relevant part of the process, use code names or labels in presentations and mark sensitive documents as “confidential”.

Stage 4: Disclosure, exit or breach 

So what happens if someone copies and replicates your recipe or trade secret? Here is the hard truth: Trade secrets are not registered, so if they leak, you cannot just “reclaim” them.

But you can act:

• Send a cease-and-desist
• File for an injunction in civil court
• Claim damages for breach of contract or breach of confidence
• Explore remedies under the IPC or the IT Act for criminal breach

Your success depends on what you did back in the protection stage. Courts will ask:

• Did you mark this info as confidential?
• Was there a contract in place?
• Did the employee have access to the entire process?

Trade secret cases often hinge on these details.

Practical measures to protect Trade Secrets

Let us start with some legal tools. 

The power of a well-drafted NDA

After a painful episode with the head chocolatier, where they tried to leak some of his recipes, Emmanuel did what most business owners only do once they have already suffered a loss: he called his lawyer.

“No more casual hires,” he said. “No more vague promises or email approvals. I want every employee, consultant, supplier, fridge repair guy, to sign a proper NDA.”

His lawyer smiled. “Now you are talking like a business that plans to last.”

A Non-Disclosure Agreement (NDA) is the first and most important line of legal defence when it comes to protecting confidential information.

But here is the kicker: not all NDAs are equal. So, choose according to your business and needs.

Emmanuel’s chocolate empire is expanding. More staff. Bigger production space. A digital CRM system. Even a social media team.

But with that growth comes a new challenge: how do you protect sensitive information without killing collaboration and creativity?

That is where practical trade secret management comes in. This section dives into the operational guardrails that keep your secrets safe, without building walls so high that your business cannot function.

a. Information access control

Who knows what? You need to figure that out. In Emmanuel’s unit, no one person knows everything.

The team that blends ingredients does not know the supplier names. The marketing folks do not know the production process. The packaging vendor does not know what is going inside the box.

This is not overkill; it is need-to-know access control, and it is a cornerstone of trade secret protection.

What should you do?

• Use role-based access for digital files. Tools like Google Drive, Dropbox, or Notion allow you to limit document visibility.
• Disable download/sharing permissions for sensitive docs.
• Keep physical files in locked cabinets or restricted areas.
• For remote teams, set up user-level controls on project management tools like Slack, Trello, or Basecamp.

Courts often look for proof that a business treated the information as secret. If it is freely available to 30 interns and 12 vendors, that argument gets weak.

b. Employee policies & training

Even the best NDA cannot fix ignorance.

When Emmanuel onboarded his 20th employee, he realised people were forwarding supplier emails to personal IDs, using unprotected USB drives, and chatting about process details over WhatsApp.

That is when he introduced a Confidentiality & Data Handling Policy.

It was simple, clear, and part of his HR manual. It covered what counts as confidential and where and how it should be stored. Also, what not to do (e.g., forwarding, downloading, cloud uploads) and finally, the consequences of a breach.

He also added a short quarterly training session to reinforce these rules and share real-world examples.

You can include a short quiz or acknowledgement at the end of training, which shows courts you took active steps to educate employees.

c. Vendor & consultant agreements

Trade secrets are not just at risk from within.

When Emmanuel hired a third-party logistics firm to handle packaging and dispatch, he almost missed a key clause. The contract allowed the vendor to subcontract part of the work. That meant someone Emmanuel did not even know might handle his signature boxes.

Red flag.

Always check:

• Do vendors have their own confidentiality obligations to downstream partners?
• Is subcontracting allowed, and if yes, do the same protections flow downstream?
• Are they required to report breaches or suspected leaks?

And yes, always have a vendor NDA or a strong confidentiality clause in the master agreement.

d. Marking & handling confidential info

You might think slapping “CONFIDENTIAL” on a doc is overkill. But legally? It helps.

It tells courts you treated the info as sensitive. It warns recipients to think twice before forwarding it. And it backs up your case if a leak happens.

Use watermarks on internal process documents, and you can include “confidential” headers on sensitive emails or pitch decks. Also, document tracking tools (many PDF tools offer version logs and open history)

e. Exit protocols

Trade secrets are most vulnerable when someone leaves, especially a senior employee or key collaborator.

Here is Emmanuel’s employee exit checklist:

• Conduct an exit interview, reminding them of ongoing confidentiality obligations
• Recover all devices, files, and cloud credentials
• Revoke access to internal systems immediately
• Request a written acknowledgement that all confidential information has been returned or deleted

A signed “Post-Employment Confidentiality Reminder” is simple but powerful; it reiterates obligations and helps show intent in court, if it comes to that.

Perfect. Now we come to the part where the rubber hits the road: what if your trade secret is stolen or leaked? What legal options do you have in India, and what actually happens when you try to enforce them?

Legal remedies for Trade Secret misappropriation

What to do when there is a misappropriation?

a. No specific statute, but you still have protection

India does not have a dedicated “Trade Secrets Act.” But that does not mean you are unprotected.

Courts enforce trade secret rights using a mix of:

• Contract law (for NDA and confidentiality breaches)
• Equity principles (breach of confidence)
• Tort law (unlawful interference, unjust enrichment)
• Intellectual property overlaps (in cases where know-how ties into patents or copyright)
• IT Act and Indian Penal Code, in serious breaches

b. Remedies under contract law

If there is a signed NDA or confidentiality clause, this is your strongest weapon. Under section 73 of the Indian Contract Act, you can:

• Claim compensation for any loss suffered due to the breach.
• Seek injunctions to stop further use or disclosure.
• Apply for specific performance, such as returning documents or deleting files.

Keep in mind that section 73 can be used for NDAs, but it is not tailored for trade secrets, and proving quantifiable loss can be challenging. The evidence leans toward courts requiring substantial evidence. Courts look at whether the agreement was enforceable (not overly broad or vague), whether the breach actually occurred and the extent of financial or reputational damage.

c. Breach of confidence

Let’s say Emmanuel never signed an NDA with his ex-employee. Can he still sue?

Yes, under the common law doctrine of breach of confidence, which Indian courts uphold even in the absence of a written agreement, provided the information was clearly confidential, and it was communicated under circumstances implying an obligation of confidence, and also it was used or disclosed without permission.

d. Injunctions: Fastest route to stop the leak

In cases where trade secrets are at risk of immediate misuse (e.g., a product launch by the competing brand), you can seek a temporary injunction under Order XXXIX, Rules 1 & 2, CPC.

In Emmanuel’s case, his lawyer filed a civil suit in the city civil court and got an ex parte ad-interim injunction restraining Velvet Bites from distributing their chocolate until the matter was heard.

This remedy works best if you act quickly and show clear evidence of misappropriation and demonstrate potential for irreparable harm. However, there is a high burden of proof (prima facie case, irreparable injury, balance of convenience), so this is not always easy.

e. Arbitration Clauses in NDAs

If Emmanuel’s NDA had an arbitration clause, he could avoid court altogether. Private arbitration allows for faster resolution, confidential proceedings (critical in trade secret cases) and custom remedies.

Make sure your NDA or employment contract specifies the seat and procedure of arbitration, and consider emergency arbitration clauses to get interim relief quickly.

How courts typically respond

Indian courts are cautious, but responsive.

They require specificity. Vague claims like “she stole my know-how” do not work. You must show what was stolen and how. Courts also look for proactive conduct. If you did not protect the secret, courts may not either.

Also, are you balancing interests? Courts may weigh public interest or fair competition, especially in employee movement cases.

But when businesses show strong internal safeguards, signed agreements, and prompt action, the law is on their side.

Emmanuel’s journey has shown us the risks, the tools, and the remedies. Now it is time to talk strategy, how do you set up your own trade secret management framework, especially as a business in India?

Building a Trade Secret protection system: A checklist

Trade secret protection is not a one-time effort, it is a living, breathing system that evolves with your business. Think of it as both a legal framework and an operational culture. If one fails, the other may not hold up in court.

Here is how Emmanuel systemised it all, and how you can too.

Identify your trade secrets.

Start by mapping what actually counts as a trade secret in your context. Every business has different crown jewels.

For Emmanuel, it was the formulation ratios for his unique chocolate texture, his supplier list (especially the rare cocoa vendor in Tamil Nadu), and seasonal launch strategies and the machine modification blueprint developed in-house

The key is to classify and document what information you consider confidential. Keep this list updated and share it only with trusted internal teams under NDA.

Classify information sensitivity.

Once you have identified trade secrets, not all need to be guarded equally. Create a classification system.

For example:

• Level 1 – Public-facing (e.g., product descriptions)
  Level 2 – Internal use only (e.g., internal reports, SOPs)
• Level 3 – Restricted access (e.g., financial forecasts, HR data)
• Level 4 – Core secrets (e.g., recipes, algorithms, IP-in-development)

Apply controls accordingly. Do not treat your daily team meeting notes the same as your strategic roadmap.

Legal protections at every touchpoint.

This is the part lawyers handle, but you must ensure it is implemented consistently.

• Employees: Include confidentiality and IP clauses in offer letters and employment contracts. For senior staff, add non-solicitation clauses.
• Consultants/vendors: Use NDAs or service agreements with well-defined confidentiality obligations and limits on subcontracting.
• Collaborations & pitches: Use mutual NDAs before sharing sensitive materials with potential partners or investors.
• Exit scenarios: Collect signed acknowledgements during resignations or terminations, confirming all confidential material has been returned or deleted.

Wherever possible, include dispute resolution clauses, and for high-stakes collaborations, consider exclusive jurisdiction clauses to avoid litigation in multiple forums.

Internal policies and culture.

One of Emmanuel’s smartest moves was not legal, it was managerial. He sat his leadership team down and said, “Protecting our ideas is part of your job description now.”

What followed was a formal Confidentiality Policy circulated to all employees, a mandatory onboarding session for new hires about trade secret sensitivity, a simple “Ask Before You Share” rule, if in doubt, confirm whether a document is okay to forward and regular internal audits of document access logs and email trails.

Trade secrets are best protected when everyone sees it as a shared responsibility, not just a compliance checkbox.

Tech infrastructure and digital hygiene.

In a digital-first world, the most common trade secret leaks happen through weak tech infrastructure.

Some of the measures Emmanuel adopted included:

• Using enterprise accounts with access control (e.g., G Suite Business, Zoho One)
• Disabling file download and external sharing for sensitive folders
• Keeping IP development in private Git repositories with restricted access
• Mandating the use of company-provided devices with password protection and regular backups

Businesses should also implement basic protocols:

• Automatic logout after inactivity
• Two-factor authentication (2FA) for emails and cloud systems
• No personal email access for business accounts
• Logging and monitoring software for admin accounts

Response plan for breaches.

Despite best efforts, breaches may happen. Being unprepared can be more damaging than the leak itself.

Your breach response plan should include:

• A designated response team (legal, HR, IT, and leadership)
• A ready breach report template documenting what was accessed, by whom, when, and how
• Immediate revocation of access to systems for the person suspected of breach
• Legal notices sent within 24–48 hours, if warranted
• Internal communication to staff to contain misinformation or fear

Documenting each step you take to investigate and respond helps you in court, especially when seeking injunctions.

Review and audit the system regularly.

Trade secret management is not a one-time effort during onboarding or contract signing. It requires ongoing attention.

Schedule quarterly reviews of access logs and employee exits and conduct annual audits of legal documents to update NDAs, vendor agreements, and contracts. You also need to update training materials and retrain teams as your business evolves, and review your tech stack every 6–12 months for emerging risks.

Even small businesses like Emmanuel’s can set reminders and workflows in tools like Notion, Trello, or even Google Sheets to ensure follow-through.

Conclusion

Trade secrets are not just about protection, they are about ownership. They represent the competitive edge you have built through time, money, sweat, and maybe a little magic. If you do not protect them, someone else might claim them, replicate them, or dilute them.

Emmanuel’s story is not just about chocolates, it is about understanding that a business is more than its products. It is the thinking behind the product, the process that makes it repeatable, and the insights that make it scalable. All of which deserve to be protected with intention.

Whether you are a founder, a general counsel, or a startup advisor, setting up a trade secret management system is not just a legal task; it is a strategic investment in your company’s future.