DEFINITION

Trade secrets are intellectual property rights (IPRs) that refers to any practice or process of a company that is generally not known outside of the company. In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret. Information considered a trade secret gives the company a competitive advantage over its competitors and is often a product of internal research and development. 

Trade secrets under the WTO are protected primarily through the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) which is one of the key agreements of the World Trade Organization (WTO). 

The TRIPS Agreement doesn’t use the term “trade secrets” explicitly, but it refers to them as undisclosed information. According to Article 39, protection must be given to an Undisclosed information that

1. Is secret (not generally known or readily accessible);
2. Has commercial value because it is secret;
3. Has been subject to reasonable steps to keep it secret.

The unauthorized acquisition, use or disclosure of such secret information by others is regarded as an unfair practice and a violation of the trade secret protection.

What kind of information is protected by trade secrets?

Trade secrets encompass both technical information, such as information concerning manufacturing processes, pharmaceutical test data, designs and drawings of computer programs, pattern, design, formula, recipe, method, financial and commercial information, such as distribution methods, list of suppliers and clients, and advertising strategies.

A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc.

For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can also obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.

How can a trade secret be protected? Legal Tools for Enforcement

Companies should take preventive measures to protect trade secrets against theft or misappropriation through various measures such as

1. Non-disclosure agreement (NDA): employees and business partners should sign a non-disclosure agreement that prevent them from disclosing a company’s confidential information.
2. 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.
3. Robust IT security infrastructure
4. Controlling the accessibility of important documents

Obligation of WTO Members (under TRIPS)
 

Each WTO member must protect trade secrets by preventing:

1. Unauthorized disclosure,
2. Acquisition,
3. Or use of the information in a manner contrary to honest commercial practices (e.g., breach of contract, breach of confidentiality, industrial espionage).

Practical Examples of Trade Secrets
 

1. Formula for any compound or chemical or drink like Coca-Cola
2. Google’s search algorithm
3. Manufacturing processes
4. Client databases
5. Business strategies

Examples of trade secrets in India

1. Coca-Cola India (Beverages) : Though Coca-Cola is a US brand, its secret formula (including for Thums Up, Limca, etc. in India) is treated as a classic trade secret. The formula is not patented, hence kept confidential forever.
2. Asian Paints (Manufacturing/Operations) : Maintains proprietary algorithms for supply chain optimization and paint mixing technologies. Their operational efficiency gives them a market edge, protected as trade secrets.
3. Tata Consultancy Services (TCS) : TCS holds client-specific algorithms, software architecture, and internal process codes as trade secrets. These are not publicly disclosed but are critical for project delivery and competitive advantage.
4. Monsanto India (Now Bayer) – Bt Cotton Technology : Proprietary information regarding genetically modified seeds and farming algorithms. Though patents apply to some parts, the formulae and processes are kept as trade secrets for sustained advantage.
5. Haldiram's or MTR Foods (Food Industry) : Secret recipes, spice blends, and preparation techniques are not patented but are confidentially held and passed within families or top management.
6. Pharmaceutical Formulations (e.g. Dr. Reddy’s, Sun Pharma) : Manufacturing processes, cost-saving synthesis methods, and proprietary drug delivery systems are often held as trade secrets — separate from patented molecules.

ISSUES

1. Trade secrets clause bring data exclusivity which remains confined to few hands in the western countries. Where as the developing countries may require them for their important issues like addressing their public health.
2. Concerns by developing countries about over-enforcement and barriers to innovation.
3. And there are debates around digital trade secrets in the era of AI and data sharing, as a result trade secrets enforcememt is not that easier.

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