The ‘Other IP Right’: Is It Time to Codify the Indian Law on Protection of Confidential Information?

Published date01 July 2018
Date01 July 2018
Subject MatterArticles
The ‘Other IP Right’: Is It
Time to Codify the Indian
Law on Protection of
Confidential Information?
Prashant Reddy T.1,2
Countries across the world are increasingly turning their attention to trade secret
law, either enacting new laws or amending existing laws. As India faces similar
calls to enact new laws to protect trade secrets, it is necessary to take stock
of existing Indian law on protection of confidential information. As of now India
protects confidential information either through contracts or under the equitable
duty of confidence. Any codification exercise will however have to keep in mind
several factors like the impact of a new law on employee mobility, competition,
protecting free speech, ensuring procedural safeguards for defendants and insulat-
ing employees from any possible abuse of the criminal justice system. This article
attempts to look at all these issues from an Indian perspective.
Confidential Information, Trade Secrets, Breach of Confidence, National IP Policy
Trade secret protection has rarely featured on the national agenda in India, save for one
instance in 1977 when a socialist government demanded that Coca-Cola hand over the
formula for its famous cola drink.1 Rather than disclose its formulae, which the com-
pany considered a trade secret, Coca-Cola chose to withdraw from India, re-entering
the market only a decade later, after a new government was voted into power.2
1 Sanjoy Hazarika, ‘Coke Proposal Challenged in India’ (New York Times, 5 February 1989)
html> accessed 21 April 2017.
2 ibid.
Journal of National
Law University Delhi
5(1) 1–21
2018 National Law
University Delhi
SAGE Publications
DOI: 10.1177/2277401718787951
Assistant Professor, National Academy of Legal Studies & Research (NALSAR), Hyderabad, India.
External Fellow, Applied Research Centre for Intellectual Assets & the Law in Asia (ARCIALA),
School of Law, Singapore Management University (SMU).
Corresponding author:
Prashant Reddy T., Assistant Professor, National Academy of Legal Studies & Research (NALSAR),
Hyderabad, India.
2 Journal of National Law University Delhi 5(1)
A lot has happened since 1977. India opened up its national economy in 1991
to foreign investment and trade. It became a member of the World Trade Agreement
(WTO) and signed the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS) in 1994.3 While the issue of pharmaceutical patents was the most
contentious point of negotiation for India, it did have other issues of disagreement
with the TRIPS agenda. Trade secrets was one such issue. In one of its early commu-
nications pertaining to the negotiations related to TRIPS, the Indian government
argued that ‘trade secrets cannot be considered to be intellectual property rights’.4
Rather, it argued that the enforcement of secrecy and confidentiality ‘should be
governed by contractual obligations under the relevant provisions of appropriate
civil law’, and not by IP law.5 This submission was in line with its domestic legis-
lation. Notwithstanding India’s principled objection, trade secrets became a part of the
final text of TRIPs. Article 39, in particular, imposed an obligation on contracting
states to provide the means to protect ‘secret information’ that has ‘commercial
value’ from disclosure without the consent of the persons who have maintained
the secrecy of such information. Although India enacted new laws and amended
existing laws to meet its obligations under TRIPs, it did not enact any new laws
on the issue of trade secret protection. This likely meant that the Indian govern-
ment considered its existing laws sufficient to comply with the requirements
of Article 39 of TRIPs.
In the last decade, trade secrets, or as it is known in India, protection of
confidential information, has come back on the government’s agenda on three
different occasions. The first was in 2008, when the Department of Science &
Technology (DST) of the Government of India, proposed a legislation called the
National Innovation Bill, 2008 that amongst other things, would have created a
statutory legal regime to protect confidential information.6 That Bill disap-
peared from the agenda without even being introduced in Parliament. The second
time was in 2015 when the United States Trade Representative (USTR), after a
round of trade talks between the Indian and American governments, put out a
press release stating that both governments were ‘committed to strong protection
of trade secrets’ and that they had ‘agreed to deepen cooperation on trade
secrets’.7 Prior to these talks, the USTR had occasionally prodded India, in
annual Special 301 reports, to provide an ‘effective system’ for protection
3 Agreement on Trade-Related Aspects of Intellectual Property Rights (15 April 1994) TRT/
WTO01/001 .
4 Communication from India, ‘Standards and principles concerning the availability scope and use of
Trade-Related Aspects of Intellectual Property Rights’ (Negotiating Group on Trade Related Aspects
of Intellectual Property Rights, including trade in counterfeit goods: Multilateral Trade Negotiations
The Uruguay Round, (10 July 1989) MTN.GNG/NG11/W/37
English/SULPDF/92070115.pdf> accessed 21 April 2017.
5 ibid.
6 Shamnad Basheer, ‘India Unveils “National Innovation Act”’ (SpicyIP, 1 October 2008)> accessed 21 April 2017; National
Innovation Act, 2008 17~~Draftin
novationlaw.pdf> (PRS India) accessed 21 April 2017.
7 India and United States, ‘Joint Statement on the Trade Policy Forum’ (USTR, 2016)
Statement-TPF> accessed 21 April 2017.
Reddy T. 3
against unauthorised disclosure of confidential information.8 A few months
after the trade talks were held, the newly announced National Intellectual
Property Rights Policy, 2016 of the Government of India, made a brief mention
of the phrase ‘Protection of Trade Secrets’ in the section dealing with the future
legislative agenda9 and the same was welcomed by the USTR in its Special 301
Report published in 2015.10 The policy was, however, entirely bereft of any
substantial debate on the shape of the future legislation. As of today, the govern-
ment has not published any white paper on the issue and academic scholarship
on the issue of trade secret protection is sparse.
In this backdrop, the aim of this article is to survey the Indian law regarding
protection of confidential information, starting from its origins in English law,
and provide a policy framework to conduct future discussions.
The Origins: Protection of Confidential Information
under English Law
When India won its independence from the British in 1947, it retained, for most part,
the judicial institutions and legal framework created by the British during the course
of their rule over India. Indian courts continued to cite English law, recognising
remedies in common law and equity. India’s approach to confidential information
is no exception to this general trend, making it necessary to start this discussion
with a recap of how English law on the point has evolved.
Confidential information under English law is protected under both common
law and equity, which evolved as different legal systems in England. The main differ-
ence between both legal systems is the nature of the remedy that was granted. The
common law courts dealt with torts and contractual disputes, where they only had the
power to grant damages to compensate for any loss or injury suffered due to
the defendant’s conduct.11 The courts of equity were created later in order to deal
with cases where damages were not an adequate remedy. The courts of equity had a
lot more flexibility in fashioning legal remedies.12 The typical remedies that could
be granted by a court of equity, were either an injunction that would restrain the
defendant from certain conduct or a decree for specific performance, where the
8 Office of the United States Trade Representative, ‘2013 Special 301 Report’ (United States Trade
Representative, May 2013) 39
301%20Report.pdf> accessed 8 June 2018. The Special 301 Reports get their name from The Trade
Act 1974, s 301 that requires the USTR to prepare annual reports identifying the nature of IP protection
provided by America’s trading partners.
9 Department of Industrial Policy and Promotion, ‘National Intellectual Property Rights Policy’
(DIPP, 12 May 2016) [3.8.4]
National_IPR_Policy_08.08.2016.pdf> accessed 21 April 2017.
10 United States Trade Representative, ‘2015 Special 301 Report’ (United States Trade Representative,
April 2015) 46 accessed
8 June 2018.
11 Graham Virgo, The Principles of Equity and Trusts (1st edn, OUP 2012) 5-8.
12 ibid.
4 Journal of National Law University Delhi 5(1)
defendant was ordered to specifically perform a task or an order for disgorgement
of profits.13 Since courts of equity and common law courts were separate systems of
law, litigants had to choose one of the two courts while seeking relief. Eventually,
with the enactment of the Judicature Act 1873-75, both courts were merged, although
the nature of the remedy that could be granted by the court depended on whether the
cause of action lay in common law or equity.14
The remedies granted under equity were originally limited to non-monetary
remedies such as injunctions and specific performance. After the enactment of
Lord Cairns’ Act, courts of equity could grant damages in lieu of injunctive relief.15
The reason this power was given to courts of equity was because injunctive relief
was discretionary and if a court was denying injunctive relief, the plaintiff would have
to go back to a common law court to seek damages. To save the plaintiff the trouble
of going back to a common law court, Cairns’ Act gave courts of equity the power
to grant damages. However, if the court found no basis to grant equitable injunctive
relief (for instance, in case of laches) damages could also be denied.16 This is unlike
common law damages which are a standalone right.17 The other monetary remedy
that can be granted in equity is an account of profits whereby the profits made by
the defendant can be disgorged and transferred to the plaintiff. The disadvantage
of this remedy is that the profits of the defendant may not equal the damage suffered
by the plaintiff. In India today, civil courts can grant remedies under common law
and equity. However, it is still necessary to understand this difference between
common law and equity because both systems of law provide different ways to
protect confidential information.
Under common law, if there is a contractual relationship that mandated con-
fidentiality, there is no doubt that a party in breach of the contractual obligation
would be liable for damages and possibly an injunction. However, in certain
contractual relationships, such as master-servant relationships or modern day
employer-employee relationships, English courts have implied a ‘duty of fidel-
ity’ between both parties.18 While the precise contours of this duty are not clear,
it does include a duty to not disclose confidential information, regardless of
whether such a duty is mentioned in the terms of the contract.19 In some cases,
the duty of fidelity can morph into a fiduciary duty, where the employee is
required to put the employer’s interests ahead of his own.20 A breach of confi-
dence under the duty of fidelity can result in a legal action for damages suffered
13 ibid.
14 Judicature Act 1873-75, ss 24-25.
15 Chancery Amendment Act 1858, s 2.
16 Virgo (n 11) 725.
17 David Capper, ‘Damages for Breach of the Equitable Duty of Confidence’ (1994) 14(3) Legal
Studies 313.
18 Andrew Frazer, ‘The Employee’s Contractual Duty of Fidelity’ (2015) 131(1) LQ Rev 53; Nichol
v Martyn (1799) 2 Esp. 732.
19 ibid.
20 ibid. Some commentators have argued that the duty of fidelity is actually a misreading of established
duty of fiduciary accountability; Robert Flannigan, ‘The [Fiduciary] Duty of Fidelity’ (2008) 124
LQ Rev 274.
Reddy T. 5
due to sharing of the confidential information and also an injunction to restrain
the further spread of the confidential information.
Under equity, information disclosed under the duty of confidence is protected
from further disclosure even if there is no contract between both parties. Thus, if any
information is handed over in confidence to another, the recipient owes a duty to
maintain the confidentiality of the information received and not disclose it or derive
any benefit from it without prior permission.21 The oft cited judgment on this issue,
is that of the Court of Appeal in the case of Saltman Engineering Co Ltd &
Others v Campbell Engineering Co Ltd.22 This case presented the first instance
where a court held the duty of confidence to exist even in the absence of a contract.
In the pertinent part, the Court held:
I find as a fact, without hesitation, that there was a contract; but, contract or no contract,
the Defendants got those drawings into their hands knowing, or knowing shortly
afterwards, that they belonged to Saltmans, that they were obviously confidential
matter, and they knew that they had got them into their hands for a strictly limited
The issue was examined in greater detail by the Court of Appeals in a series of
judgments in the sixties: Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd,24 Seager v
Copydex Ltd 25 and Coco v AN Clark (Engineers) Ltd.26 The facts in all three cases
were similar. In each case, the plaintiff had come up with a new innovation and
initiated negotiations with the defendant for manufacturing the same. In the
Seager and Coco cases, the negotiations with the defendants broke down and
there was no contract between both parties. It was however alleged that the
defendants used the information, disclosed to them in confidence, to develop their
own products. The facts of the Terrapin case were different in that a contract did
exist between the plaintiff and the first defendant for manufacture of the product.
The first defendant then disclosed the product to a group company which started
benefiting from it without permission from the plaintiff with whom it had no
contractual relationship.
21 William Van Caenegem, Trade Secrets & Intellectual Property: Breach of Confidence,
Misappropriation & Unfair Competition (Wolters Kluwer Law and Business 2014) 75-84.
22 [1948] 65 RPC 203.
23 ibid 216.
24 [1960] RPC 128.
25 [1967] RPC 349. The plaintiff had invented a patented carpet grip. The plaintiff held negotiations in
confidence with the defendant for marketing of the product. During the negotiations the plaintiff also
disclosed an alternative carpet grip to the defendants. The defendants then manufactured their own
version of a carpet grip, subconsciously using confidential information disclosed by the plaintiff. The
court ordered the defendant to pay damages.
26 [1968] F.S.R. 415. The plaintiff had designed a new moped engine and sought the cooperation of
the defendant in manufacturing the engine on a large scale. The negotiations eventually fell through
and the defendant decided to manufacture its own engine. The plaintiff claimed that the defendants
were trying to use his design without compensating him. The defendants denied that it was using
the plaintiff’s design. The court denied an interim injunction but ordered the defendant to maintain
accounts till a trial on the point concluded.
6 Journal of National Law University Delhi 5(1)
The cause of action for all three lawsuits was the breach of the equitable
duty of confidence. As per the Court of Appeals, the three requirements to establish
the ‘breach of confidence’ are as follows:
(a) that the information disclosed was of a confidential nature; (b) that it was commu-
nicated in circumstances importing an obligation of confidence & (c) that there was an
unauthorised use of the information.27
A point that perhaps deserves clarification at this stage is that, notwithstanding
some early confusion, the English approach towards confidential information
does not equate information to property unlike some other jurisdictions, such
as the US, where trade secrets are treated as property.28 The reason for this
approach under English law is the fact that the ‘cause of action’ in all these
cases is improper disclosure where a duty of confidence has been breached.
This stands true notwithstanding the fact that English judges sometimes
employ terminology such as ‘owned’, ‘proprietary’ etc while describing informa-
tion in cases dealing with a breach of confidence. There are three consequences
of this approach.
The first consequence is that the plaintiff in such cases is not required to establish
any ‘special’ or ‘commercial’ significance of the information. It will suffice to demon-
strate that the information has a quality of confidence to it. Hence, this doctrine can
even be extended to cases involving personal information as evidenced in the early
case of Duchess of Argyll v Duke of Argyll.29
The second consequence of not treating information as property is that it
limits the option against the third parties who may have acquired the confidential
information from a party which had breached the confidence of a person who
disclosed the information with certain conditions. If English law treated such
information as ‘property’, it would be relatively easy to pursue actions against
a third party despite there being no privity with such third party. However, since
English law does not treat information as ‘property’, the third party could be held
liable under equity only if it can be shown that such third party acted in concert
with the party who breached the confidence of the first party which shared the
information under confidence.30
The third consequence of not using the property framework to theorise confi-
dential information, is that it precludes the use of legal provisions meant to penalise
crimes against property in the Indian Penal Code (IPC). This aspect of the debate
may appear to be prima facie absurd, but the fact of the matter is that the provisions
in the IPC on crimes against property are quite commonly invoked in cases involving
disputes over confidential information. This issue will be discussed in more detail
later in the article.
27 ibid 419-423.
28 Jennifer E Stuckey, ‘The Equitable Action for Breach of Confidence: Is Information Ever Property?’
(1981) 9(2) Sydney Law Review 402.
29 [1967] Ch 302.
30 Caenegem (n 21) 77.
Reddy T. 7
A Survey of Indian Litigation to Protect
Confidential Information
Since Indian law is based extensively on English law, it should come as no surprise
that Indian law protects confidential information either under contract law or under
an equitable duty of confidence. Indian litigation on the point can be categorised into
four categories.
The first category is where there is no contract between both parties and the
cause of action is based on a combination of breach of confidence owed under equity
and copyright infringement under the Copyright Act, 1957. There appear to be rela-
tively few judgments in this category.
The second category involves disputes between employers and employees.
These cases constitute a bulk of the litigation on the issue of confidential information
and usually involves an assessment of whether negative covenants in a contract
are void as a consequence of Section 27 of the Indian Contract Act, 1872.
A third category of cases are those where injunctive relief is sought against
journalists publishing confidential information, despite the journalist receiving
the information from other sources who may or may not owe a duty of confidence
to the plaintiff. There is only one precedent on this point but it is an important case
because it explores the intersection between the fundamental right to free speech
and the equitable duty of confidence.
A fourth category of cases are criminal complaints filed under the Indian Penal
Code, 1860 and the Information Technology Act, 2000. The maintainability of most
of these cases is suspect as will be discussed in detail below.
A survey of important precedents in each category will help identify the
issues of importance that need to be considered by policymakers during any
codification exercise.
The first Category: Breach of Confidence in Absence
of a Contractual Arrangement or Privity
One of the first reported Indian judgments on the breach of the equitable duty of con-
fidence is that of John Richard Brady v Chemical Process Equipments Pvt Ltd, 31
which was decided by the Delhi High Court in the year 1987. The plaintiffs had
developed a new product and while the patent was pending, they shared the information
in confidence with the defendants as a part of negotiations to contract the latter for
manufacturing the product. While the negotiations failed to result in an agreement,
the defendants were later found to be manufacturing a similar product. Therefore, the
plaintiffs sued for both copyright infringement and a breach of confidence under
equity. Citing relevant English precedent such as Saltman Engineering, along
with one prior Indian judgment,32 the Delhi High Court made a prima facie deter-
mination that the defendants had received the information under a duty of
31 AIR 1987 Delhi 372.
32 Konrad Wiedemann GmbH v Standard Castings Pvt Ltd [1985] (10) IPLR 243.
8 Journal of National Law University Delhi 5(1)
confidence and that they had breached that obligation by using the information with-
out the permission of the plaintiff. Hence, an interim injunction was granted pending
trial to restrain the use of the information on grounds of equity and copyright
While the Brady case dealt with the issue of technology, there are other cases
where the Bombay High Court and Delhi High Court have applied the same
principles in context of scripts for movies or television series that were shared
by script-writers with producers under a duty of confidence. These cases usually
combine breach of confidence with copyright infringement.
One of the first judgments on this point is that of Zee Telefilms Ltd & Film &
Others v Sundial Communications Pvt Ltd 33 which was decided by the Bombay
High Court. The plaintiff in this case had shared with the defendants, in confidence,
a detailed concept note, character sketch, detailed plots of each episode for a
TV series. Although both parties failed to enter into a contract, the plaintiff discov-
ered that the defendant was later launching a television series that was very similar
to the one described in the concept notes shared with the defendants. While the
Bombay High Court found no subsisting contract between both parties, it granted
the plaintiff an interim injunction on the grounds of breach of confidence and
copyright infringement by the defendants. This judgment has served as a precedent
in other similar cases with similar facts.34
As with the Brady case, this judgment too based its conclusions on a line of
English precedents starting with Saltman Engineering to establish an equitable
duty of confidence. Thus, Indian law on the point bears a strong similarity to the
English law on the issue of equitable duty of confidence and follows the same test
established by English courts.
A point to be noted at this stage is that Saltman, Brady and Zee Telefilms all
dealt with facts where although there was a lack of contract, there were negotiations
between both parties thereby establishing some form of privity. As is the case
under English law, the duty of confidentiality under Indian law also extends to
scenarios where there is no privity between both parties. The Zee Telefilms judgment
makes this clear when it states that the ‘the obligation of confidence rests not only
on the original recipient, but also on any person who received the information
with knowledge, acquired at the time or subsequently, that it was originally given
in confidence’.35
A case on these lines, which is currently pending trial, is the case
of Vestergaard Frandsen A/s & Ors v M Sivasamy & Ors.36 This lawsuit
was instituted in 2007 before the Delhi High Court and has been pending
for more than a decade. This case is part of a transcontinental dispute between
the Vestergaard Frandsen group and its former employees/consultants and
third parties in multiple jurisdictions including the UK, Denmark, France and
33 (2003) 3 Mah LJ 695. An earlier judgment on similar lines by a Single Judge of the Delhi High Court
is Anil Gupta & Anr v Kunal Das Gupta & Ors AIR 2002 Del 379.
34 Urmi Juvekar Chiang v Global Broadcast News Ltd (2007) 6 AIR Bom R 240.
35 Zee Telefilms (n 33) [10].
36 CS (OS) No. 599 of 2007 before the High Court of Delhi.
Reddy T. 9
India.37 The main cause of action in that case was the breach of contract and
breach of confidence by former employees/consultants who passed on the
information to Indian manufacturers who had no privity of contract with the
plaintiff.38 The court in that case did grant an ex-parte interim injunction
against all the defendants, including the defendants who received the informa-
tion from the former employees who received the information in confidence
from the plaintiff. This order is however not likely to be considered a strong
precedent since it is an interim order that was delivered ex-parte and with very
sparse reasoning.
The second Category: Employer – Employee Disputes
and Restraint of Trade
Most litigation in India on the point of confidential information has arisen in
the context of employer-employee disputes. These cases will usually turn
on the language of the contract. However, as explained earlier, even if the
employment contract lacks a specific contractual clause on the issue of confi-
dentiality, English courts have implied a duty of fidelity into the arrangement
between the employer and employee. A handful of Indian judgments do refer
to this implied common law duty of fidelity but do so only in passing.39 In several
other cases, plaintiffs appear to have argued breach of confidence despite
there being a contractual relationship with their employees. The existence of
a contractual agreement should ideally preclude the need to invoke the equitable
duty of confidence. Yet, this confusion between contractual duty of confiden-
tiality and equitable duty of confidence is reflected in several judgments.40
As explained earlier, this confusion can have implications for remedies that can
be ordered by the court. For example, if the plaintiff claims the breach of an equi-
table duty of confidence, then delay or laches on part of the plaintiff can be grounds
for the court to deny equitable relief.
The major point of litigation in most employer-employee litigation on the issue
of confidential information is whether non-compete clauses can be invoked by the
court to restrain employees from joining the competition on the grounds that
37 For information regarding litigation in the UK, see Vestergaard Frandsen A/S (now called MVF 3 ApS)
and Others v Bestnet Europe Limited and Others [2013] UK SC 31.
38 Vestergaard Frandsen A/s & Ors v M Sivasamy & Ors CS (OS) No. 599 of 2007 before the High Court
of Delhi (Order 2 April 2007)
accessed 27 May 2018.
39 GRV Rajan v Tube Investments of India Ltd (1995) 1 LW 274; Polaris Software Lab v Suren
Khidwadkar (2003) 3 Mad LJ 557; BLB Institute of Financial Markets Ltd v Ramakar Jha (2008)
154 DLT 121; Bombay Dyeing and Manufacturing Co Ltd v Mehar Karan Singh (2010) 7 Mah LJ 48;
Independent News Service Pvt Ltd v Anurag Muskaan (2013) 199 DLT 300; Le Passage to India Tours &
Travels Pvt Ltd v Deepak Bhatnagar; Hi-Tech Systems & Services Ltd v Suprabhat Ray & Ors (2014)
209 DLT 554.
40 Escorts Const Equipment Ltd & Anr v Action Const Equipment P Ltd & Anr AIR 1999 Del 73;
Diljeet Titus v Alfred A Adebare & Ors (2006) 130 DLT 330; Bombay Dyeing and Manufacturing
Co Ltd v Mehar Karan Singh (2010) 7 Mah LJ 48.
10 Journal of National Law University Delhi 5(1)
confidential information may be divulged. A typical case will involve an employer
seeking an injunction restraining a former employee from either setting up their
own business or joining a competitor. The contention in each of these cases is that
the employee has gained confidential information during the course of employment
and it would be in violation of both the ‘confidentiality’ clause and the non-
competition clause of the employment contract to use such confidential information
for their own benefit. Employees will usually argue that Section 27 of the Contract
Act, 1872 voids any restrictive covenant in the contract. The text of Section 27 is
reproduced below:
27. Agreement in restraint of trade void – Every agreement by which any one is
restrained from exercising a lawful profession, trade or business of any kind is to
that extent void.
Exception: One who sells the goodwill of a business may agree with the buyer to refrain
from carrying on a similar business, within specified local limits, so long as the buyer
or any other person deriving title to the goodwill from him, carried on a like business
therein, provided that such limits appear to the Court reasonable, regard being had to
the nature of the business.
A literal interpretation of the clause makes it clear that any clause restraining a
former employee from joining a competitor or setting up his own business is
void. However, the judicial interpretation of this clause by the Supreme Court in
Niranjan Shankar Golikari v The Century Spinning & Mfg Co41 throws up some
complexities. In this case, the appellant was in the employment of the respondent
and had been imparted special training in certain manufacturing methods.
The employment contract was for a term of five years and contained both trade
secrecy and non-compete clauses. Clause 17, which was the non-compete clause
prohibited an employee who resigned, from setting up or joining any competing
business for the original period of the contract. The clause also required the
employee to pay liquidated damages and reimburse the company for the cost of
the training. In this case, the term of the contract was from March 1, 1963 to
March 1, 1968. The employee, however, resigned from the company on October 31,
1964 after receiving his training and was to join a competitor. The employer
sued for damages and an injunction restraining the defendant from joining its
competitor till 1968 as mentioned in Clause 17. The trial court, the High Court
and the Supreme Court all agreed that the former employee could be restrained
from joining the competitor until 1968 which was when the original employ-
ment contract would expire and that Clause 17 did not qualify as an unreasonable
restraint under Section 27 of the Contract Act. More importantly, the Supreme
Court also endorsed the reasoning of the lower courts that an injunction against
joining the employment of the competitor was the only effective way to restrain
the employee from disclosing to the competitor the ‘special processes’ and ‘special
machinery’ that were taught to the employee during the course of his employment
with the respondent.
41 1967 AIR 1098.
Reddy T. 11
This interpretation is contentious for two reasons. First, it seems to presume
that Section 27 applies only after the original term of the contract rather than
soon after its termination by either party. Second, the court presumes, that the
employee is certainly going to breach his contractual duty of confidence
while working for a competitor. This need not happen in all cases since it is
possible for the employee to work for competitors without divulging confidential
information. If there is indeed evidence of a breach of confidence, the law provides
for a different remedy.
More interesting is the fact that other courts, including other benches of
the Supreme Court, when faced with similar facts, have been reluctant to follow
the line of reasoning provided by the court in Golikari. For instance, the conclusion
in the Golikari case has been distinguished by a subsequent judgment of the
Supreme Court in the case of Superintendence Company of India v. Krishna
Murgai.42 In this case, the minority concurring judgment distinguished negative
covenants during the course of employment from negative covenants after
employment. The judgment reasons that while the former are permissible,
the latter are most certainly void in the eyes of the law. Applying the rationale to
the Golikari case, it would have meant that the non-compete would operate
against the employee only during the course of his employment and not after his
resignation from employment.
More interestingly, there also appears to be some reluctance amongst High
Courts to follow this binding precedent of the Supreme Court in Golikari. Some
High Courts have simply refused injunctions to restrain employees from joining
competitors, on the grounds that injunctions are a discretionary remedy. Others
courts have cited the minority concurring judgment of the Supreme Court in the
Krishna Murgai case to deny injunctive relief.
In one such judgment, the Calcutta High Court held the following while discussing
a non-compete clause in the context of the Golikari judgment:
43. At its inception, therefore, the five year period to work for a single employer is a
good clause. Nobody can say at the inception that the employee will not work all five
years actually with the same employer.
44. Suppose the clause also contains another term, like in the Golikari case, that in case
of leaving employment midway, the employee will still not work with a competitor for
the rest of five years. Is that a good clause? How can that not be a good clause because
the Supreme Court granted injunction in the Golikari case?
45. Our respectful answer to these questions is that the clause is bad and against the
express words of Section 27 insofar as it prevents the employees from working with a
competitor even after leaving the first employment. But this clause does not taint the
whole clause, i.e. if the employee is working with an employer, he will work with that
employer only. This is clarified by the words of Section 27 that the bad clause is only
‘to that extent void’.43
42 1980 AIR 1717.
43 Electrosteel Castings Ltd v Saw Pipes Ltd & Ors (2005) 1 CHN 612.
12 Journal of National Law University Delhi 5(1)
In other words, the court held that a non-compete restriction during the course of
employment was quite different from a non-compete restriction that operates
after employment had been terminated. The latter, in the court’s opinion, would
certainly be void under Section 27. On the basis of the above reasoning, the High
Court declined to restrain the former employees from joining a competitor and justi-
fied its departure from Golikari on the grounds that injunctions were equitable
remedies that were subject to the discretion of the court. On the issue of grant of an
injunction to restrain the former employees from disclosing confidential information
after joining employment of the competitor, the court declined to do so, reasoning that
‘there is no practical way of enforcing it or proving that they are divulging their
know-how, as they will all be working with the first respondent in its privacy’.
This does not preclude the institution of action for breach of confidence if
there is evidence to establish that the employee has in fact breached a contractual
duty of confidence.
Similarly, other High Courts too have ignored the holding in the Golikari case.
In a case where the Delhi High Court was faced with a request for an injunction
restraining a former employee from using confidential customer lists, the court
relied on the minority judgment in Krishna Murgai to refuse an injunction, stating
in the pertinent part that ‘once it is held that in the guise of a confidentiality clause,
the Plaintiff is attempting to enforce a covenant in restraint of trade, the same must
be held to be void’.44 There are other such judgments where High Courts simply
ignore the Golikari judgment and fall back on the judgment in Krishna Murgai to
deny injunctions restraining former employees.45
There are however judgments where courts have ruled the other way and
granted injunctions.46 On the rare occasion such injunctions are granted, they are
usually quite narrow. For example one judgment of the Bombay High Court dealing
with the demand for an injunction restraining a former director of the plaintiff,
from disclosing any information discussed during board meetings, concluded that
‘the Defendant cannot be injuncted from disclosing those plans…. if he carried them
“in his head”’.47 The court did how restrain the employee from disclosing specific
information pertaining to certain deals.
The important takeaway from the above discussion is the split in Indian juris-
prudence on the use of non-compete clauses to issue pre-emptive injunctions
restraining former employees from joining the competition due to the possibility
of them violating a duty of confidence. The Supreme Court was leaning towards
such pre-emptive injunctions but the Calcutta High Court, the Delhi High Court
44 Stellar Information Technology Pvt Ltd v Rakesh Kumar & Ors CS (Comm) 482 of 2016 before the
High Court of Delhi.
45 In American Express Bank Ltd v Ms Priya Puri 2006 (110) FLR 1061, the Court declined to restrain
the defendant-employee from using confidential customer lists.
46 In Fairfest Media Ltd v ITE Group Plc (2015) 2 CHN 704, the Court granted an injunction
restricting defendant-employees from sharing any confidential information received from the plaintiff.
In Homag India Pvt Ltd v Ulfath Ali Khan & Anr M.F.A.No.1682/2010 C/W M.F.A.No.1683/2010
(CPC) before the Karnataka High Court, the Court restrained the defendant from competing with his
former employer using confidential information disclosed by his former employer
47 Bombay Dyeing and Manufacturing Co Ltd v Mehar Karan Singh (2010) 7 Mah LJ 48 [61].
Reddy T. 13
and the Bombay High Court are clearly not in favour of such an interpretation.
This jurisprudential split needs to be addressed legislatively.
The third Category: The Intersection Between Breach of
Confidence and the Fundamental Right to Free Speech
As mentioned earlier in this article, the equitable duty of breach of confidence extends
beyond the person to whom information is disclosed in confidence. The Bombay
High Court in the Zee Telefilms case is quite clear on this point, and it is also
backed by English precedent. This duty, however, can sometimes conflict with the
fundamental right to free speech and expression enshrined in Article 19(1)(a)
of the Indian Constitution. This conflict between the duty of confidence and the
fundamental right to free speech presented itself before the Delhi High Court in a
case involving sensitive commercial information. A point that must be kept in mind
while reading this judgment is that fundamental rights can typically be enforced only
against the State and its instrumentalities. In this particular case, the plaintiff was
partly owned by the government and hence, it was possible for the defendant to assert
his fundamental right to free speech under Article 19(1)(a) of the Constitution of India.
The results may have been different if the plaintiff was a purely private concern.
In the case of Petronet LNG Ltd v Indian Petro Group & Anr,48 the plaintiff
was a corporation in the business of marketing and selling oil (in which
the government had 50% stake) and the defendant was a journalist running
a website dedicated to providing news and market intelligence on the oil sector.
The plaintiff alleged that the defendant was publishing confidential information
pertaining to its ongoing commercial negotiations with other players in the
market and sought an injunction restraining the defendant from publishing
such information. There was no mention of how the defendant was getting
access to the plaintiff’s confidential information and it was not the case of
the plaintiff that it has disclosed to the defendant the information in confidence.
The important question of law at issue in this case was whether the duty of
confidentiality could extend to a journalist who received confidential information,
knowing very well that the source who had shared the information was under a
duty of confidence and was disclosing the information in breach of such duty?
English courts have answered this question in the positive with the caveat that the
duty of confidence could be outweighed by the public interest in having the infor-
mation published.49 The Delhi High Court drew on these English precedents to
hold that a similar duty existed in India. In the context of confidential information
of commercial value, the court reasoned that:
… [I]n the cases of corporations and businesses, there could be legitimate concerns
about its internal processes and trade secrets, marketing strategies which are in their
48 (2009) 158 DLT 759.
49 Duchess of Argyll v Duke of Argyll 1962 SC (HL) 88; Douglas v Hello! Ltd [2001] QB 967; HRH
Prince of Wales v Associated Newspapers Limited 2007 (2) All ER 139; Campell v Mirror Group
Newspapers Ltd [2004] UKHL 22; Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109.
14 Journal of National Law University Delhi 5(1)
nascent stages, pricing policies and so on, which, if prematurely made public, could
result in irreversible, and unknown commercial consequences.50
The High Court then makes it clear that the duty of maintaining confidentiality
will have to be balanced with the fundamental right to free speech and expression.
If the larger public interest justified the publication of such material, an injunction
would not be granted by the court. It states in the pertinent part:
This Court, while recollecting the judgment of the Supreme Court in S. Rangarajan,
Virendra, Rajagopal as well as that of the US Supreme Court in Sullivan, is of the
opinion that the public interest in ensuring dissemination of news and free flow of
ideas, is of paramount importance. The news or information disclosure of which
may be uncomfortable to an individual or corporate entity but which otherwise
fosters a debate and awareness about functioning of such individuals or bodies,
particularly, if they are engaged in matters that affect people’s lives, serve a vital
public purpose.
To justify an injunction in the nature of a prior restraint on speech in such
cases, the court held that a corporation would have to convince the court that
the news, if published, would threaten its very existence or ‘would gravely jeopardise
a commercial venture’. Although on the facts of the case, the court denied an
injunction after judging the commercial significance of the information in dispute,
the judgment is an important precedent for those seeking to curb the publication
of confidential information.
The Fourth Category: Protecting Confidential
Information under Criminal Law
A less discussed aspect of the trade secret debate in India is the use of criminal
law, primarily against former employees accused of unauthorised disclosure of
confidential information. While it is not possible to secure injunctions under criminal
law, it is possible to get a person imprisoned or at the very least summoned to a
criminal court and put through a long-drawn criminal trial. Given the police’s
reputation for corruption across India,51 the delays associated with civil litigation
and the relative ease of launching a private criminal prosecution under Indian law,
it should not surprise anyone that some employers prefer the route of criminal
prosecution to pressure former employees against joining competitors or setting
up their own ventures. The aim in most such cases is not to secure convictions but
to harass and intimidate.
The two legislations that are most often used to launch criminal prosecutions
in context of confidential information are the Indian Penal Code, 1860 and the
50 Petronet (n 48) [51].
51 Ramachandra Guha, ‘Police Corruption, Past and Present’ (Hindustan Times, 20 December 2014)
s1xMchqzMhq6TYuHMh835N.html> accessed 22 April 2017.
Reddy T. 15
Information Technology Act, 2000. From the few such criminal cases which
have been appealed to the High Courts on issues of procedure (not conviction),
it appears that the following provisions of the Indian Penal Code are often
the basis of filing criminal prosecution with regard to confidential information:
Sections 405,52 408,53 41854 & 420.55
All these provisions relate to offences against property. The criminal breach of
trust under Section 405 seeks to punish a person who has been trusted with property
and who then breaches the trust by misappropriating or dishonestly using that
property. Similarly, Section 408 penalises a clerk or servant who has been trusted
with a master’s property and subsequently breaches that trust. A typical fact scenario
in such cases under Section 408 can be illustrated from a case before the Patna
High Court.56 The accused in the case was a general manager of a company which
filed a criminal complaint against him under Sections 408 and 418 of the IPC
accusing him of sharing confidential information of commercial significance with
competitors. The accused general manager sought to have the complaint quashed
but the High Court declined to exercise its discretionary powers to quash the
complaint before a trial commenced. As a result, the trial court was allowed to
proceed with the case.
In another case before the Bombay High Court where an employer had filed a
criminal complaint under Sections 408 and 420 against two employees who joined
a competitor notwithstanding the non-compete clause in the contract, the High
Court quashed the complaint even before trial.57 The accusation against the former
employees was that they had taken certain confidential documents away from the
employer and that they were also using for the competitor’s benefit the technical
know-how that they had gained during the course of employment. Both acts were
52 Indian Penal Code, s 405. Criminal breach of trust.—Whoever, being in any manner entrusted with
property, or with any dominion over property, dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes of that property in violation of any direction of
law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or
implied, which he has made touching the discharge of such trust, or wilfully suffers any other person
so to do, commits ‘criminal breach of trust’.
53 Indian Penal Code, s 408. Criminal breach of trust by clerk or servant- Whoever, being clerk or
servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with
property, or with any dominion over property, commits criminal breach of trust in respect of that
property, shall be punished with imprisonment of either description for a term which may extend to
seven years, and shall also be liable to fine.
54 Indian Penal Code, s 418. Cheating with knowledge that wrongful loss may ensue to person whose
interest offender is bound to protect.—Whoever cheats with the knowledge that he is likely thereby to
cause wrongful loss to a person whose interest in the transaction to which the cheating relates, he was
bound, either by law, or by a legal contract, to protect, shall be punished with imprisonment of either
description for a term which may extend to three years, or with fine, or with both.
55 Indian Penal Code, s 420. Cheating and dishonestly inducing delivery of property.—Whoever cheats
and thereby dishonestly induces the person deceived to deliver any property to any person, or to make,
alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and
which is capable of being converted into a valuable security, shall be punished with imprisonment of
either description for a term which may extend to seven years, and shall also be liable to fine.
56 Narayan Chandra Mukherjee & Ors v State of Bihar & Anr (2001) 49 (1) BLJR 680.
57 Pramod Son of Laxmikant Sisamkar and Uday Narayanrao Kirpekar v Garware Plastics and
Polyester Ltd and Anr (1986) 3 Bom CR 411.
16 Journal of National Law University Delhi 5(1)
allegedly in violation of terms of the employment contract. The High Court however
quashed the complaints because it found no prima facie evidence to substantiate
either claim.
Apart from the provisions mentioned above, which deal with breach of trust
and cheating with respect to property, employers are known to have also used
Section 381 of the IPC which deals with ‘theft by a clerk or servant of property in
possession of master’. In one such case, an employer sought to prosecute a former
employee for breaching the terms of his employment contract and using the customer
lists of the employer to engage in his own business. The Gujarat High Court quashed
the criminal complaint even before trial on the grounds that customer lists are not
trade secrets or property. It also pointed out that post-employment restraints were
illegal under Indian law and speculated that the employer was trying to use criminal
prosecution to attain a result that was forbidden under contract law.58
Very often, the provisions of the IPC discussed above are clubbed with the
penal provisions of the Information Technology Act, 2000.59 The latter legislation
was enacted to provide for a legal framework to recognise and regulate elec-
tronic transactions and commerce. The mainstay of criminal prosecutions under
the Information Technology Act, 2000 appears to be Section 66. This provision
criminalises the accessing or downloading of information stored on a computer
network without the permission of the person who owns the computer network.
The other provision that is often invoked is Section 72 of the same legislation,
which provides for criminal imprisonment and fines for breach of confidentiality
and privacy in context of electronic records, while Section 72A provides for punish-
ment for disclosure of ‘personal information’ in breach of a lawful contract.
This last provision, strangely does not require the information to be stored on an
electronic medium but given its context, it is likely to be interpreted as applying to
only electronic mediums.
The few judgments on the use of these provisions are usually at the pre-charging
stage and do not really explore the contours of the law in much detail.60 At least
one of these judgments reveals that the provisions of the IT Act were used in conjunc-
tion with the aforementioned provisions of the IPC, to justify a police raid on the
house of the former employee and seizure of electronic storage devices. The main
allegation against the employee being ‘theft of data by way of unauthorised access
to the computer system, network and e- mails of the company’ and ‘wrongful
possession of sensitive and confidential information entrusted to them’.61
58 Hemal R Shah v State of Gujarat Special Criminal Application No. 1171 of 2009 before the High
Court of Gujarat (27 December, 2010).
59 Abhinav Goyal And Another v M/S Greyb Consultancy Service Ltd CRM-M-36473 of 2011 before
the High Court of Punjab & Haryana at Chandigarh; Nitin Bhaskar Gulve v State of Haryana Crl Misc
No M-27953 of 2011 before the High Court of Punjab & Haryana; Malhotra Rubbers Ltd v State of
Delhi & Ors CC No 184/1/14 before the Delhi District Court.
60 Rajesh Gosain and Ors v State of NCT of Delhi and Or 2016 SCC OnLine Del 592; Manpreet Doad
v State of West Bengal & Ors MANU/WB/0866/2015; Nitin Bhaskar Gulve v State of Haryana Crl
Misc No M-27953 of 2011; Defecto Infotech Pvt Ltd v State of Punjab 2014 SCC OnLine P&H 14496;
Manubhai Murjibhai Varsani v State of Gujarat & Ors MANU/GJ/1322/2014
61 Vijay Govind v State & Anr Crl MC 1635/2013 before the High Court of Delhi.
Reddy T. 17
One of the common problems in most of these criminal cases is the tendency to
equate confidential information to property. However, as mentioned above,
the Gujarat High Court has held that confidential customer lists do not qualify
as property under Indian law, thereby negating the application of those provisions
of the IPC which dealt with offences against property.62
There is little publicly available information on the issue of prosecution and
conviction under these penal provisions but it can be expected that a fair number
of criminal complaints are filed with the intention of increasing costs for former
employees to change jobs or compete with their former employers. This is espe-
cially true if an employer has a relationship with the local police and is unwilling
to spend on civil litigation.
The Direction of a Future Indian Law to Protect
Confidential Information: Reform & Restate
The preceding discussion outlines the substantive Indian law on the issue of
protecting confidential information and the manner in which Indian courts have
interpreted the law to protect confidential information. This brief survey of the
law demonstrates that India does have a rather well-formed body of law on
the issue of protecting confidential information. Given the delays in the judicial
system, the system works well only to deliver interim relief in the form of
injunctions and virtually no case has progressed to the stage of trial and a final
decree where damages can be granted.
The question going forward is whether this body of common law should be
codified into a statute? A codification exercise has the benefit of not only
restating the law to provide more clarity but also offering an opportunity
for reform. An exercise to reform the law should keep in mind certain public
policy objectives.
A few such important policy issues are discussed below:
a. Should confidential information be defined in terms of its commercial
The first point of discussion of any statute aimed at protecting confidential
information is to define what exactly constitutes confidential information.
As explained earlier, Indian courts protect all information disclosed in con-
fidence without assessing the value or quality of the information. There is
typically no independent assessment of whether the information has any
commercial significance.
The one exception in this regard is the Petronet case where the court
adopted a slightly different test when it assessed the commercial significance
of the confidential information while determining whether the defendant
could be restrained from publishing the said information. Even in this case,
the High Court declined to lay down any rigid formula, holding that any
62 Hemal R Shah (n 58).
18 Journal of National Law University Delhi 5(1)
determination ‘would depend on the facts of each case, the nature of the
information, the corresponding content of the duty, and the balancing exercise
to be carried out [with the right to free speech]’ instead.63
In some countries like the US, which have a statutory trade secret law,
the phrase ‘trade secret’ is defined as ‘information that derives independent
economic value, actual or potential from not being generally known’ and which
can be of value to others if such information is disclosed or used.64
The policy question that needs to be resolved is this – should confidential
information be defined as information exchanged in confidence, or should
the law introduce an additional parameter requiring an assessment of the
economic value or worth of such information? Introducing a requirement to
assess the economic value of the information will narrow the present scope
of protection under Indian law and almost certainly exclude information of
a purely personal nature. This may not be advisable given that India lacks a
privacy law and the only remedy for a person seeking to protect his privacy
lies under the equitable duty of confidence. India is contemplating a privacy
law and the nature of that law will certainly influence any future legislation
on the protection of confidential information.65
b. Should confidential information be defined as ‘property’?
This issue of whether confidential information can be defined as property is
one that is rarely discussed by Indian courts. A few judgments have clearly
stated that confidential customer lists cannot be termed as property and thus
refused legal remedies.66 As explained earlier, the consequence of this
conclusion was that legal provisions penalising crimes against property
could not be invoked once confidential information was not defined in
terms of property.67 A detailed discussion on the jurisprudence of trade secrets
as property is beyond the scope of this article. It should however be men-
tioned that most countries do not recognise trade secrets as property.68 India
should thus be careful when tackling this issue legislatively.
c. Protecting employee mobility
As discussed earlier in this article, Indian employers constantly invoke non-
compete clauses in a bid to restrain employees from joining the competition
on the grounds that they may breach confidential information. There is
clearly a conflict between different courts on the enforceability of such non-
compete clauses in light of Section 27 of the Contracts Act. The Golikari
judgment restrained a former employee from joining the competition on the
63 Petronet (n 48) [51].
64 Uniform Trade Secrets Act 1979, s 1(4).
65 ‘India working on robust data protection regime: Law Minister Ravi Shankar Prasad’ (The Hindu Business
Line, 20 October 2017)
data-protection-regime-law-minister-ravi-shakar-prasad/article9916905.ece> accessed 8 June 2018.
66 American Express (n 45).
67 Hemal R Shah (n 58).
68 Tanya Aplin,‘Right to Property and Trade Secrets’ in C Geiger (ed), Research Handbook on Human
Rights and Intellectual Property (Edward Elgar, 2015) 421–437.
Reddy T. 19
grounds that it was the only way to restrain the employee from revealing
trade secrets and that the same was permitted by Section 27 since it was
within the original period of the contract (notwithstanding the fact that the
employee terminated the contract). As explained earlier, several High Courts
are not following the ratio of the Golikari judgment and are declining to
restrain employees, who have terminated their contracts mid-way, from join-
ing competitors. This is because these High Courts interpret the prohibition
against restraint of trade in Section 27 as applying soon as an employee ter-
minates his contract. The logic of the Golikari judgment, that enforcing the
non-compete clause was justified on the grounds that it was the only way to
restrain the employees from sharing trade secrets is flawed. Common law
allows for such pre-emptive or qua-timet actions only in very rare circum-
stances where there is apprehension of an imminent violation of a right.
For example, in context of patent infringement cases, courts sometimes grant
qua timet injunctions in cases where there is clear evidence that a competitor
has secured drug regulatory approval for a drug covered by a valid patent.69
However, this is unlike a situation where an employee is transferring from
one job to another because a mere change of jobs does not make it inevitable
that confidential information will be shared with the new employer.
A simple way to avoid the Golikari judgment from being cited as a
precedent is to ensure that a new law expressly overrules the ratio of the
case by clarifying that non-compete clauses cannot be invoked once an
employee terminates an employment contract. Further, any statutory law
should prohibit courts from granting qua-timet injunctions in breach of
confidence actions. This does not stop employers from suing former
employees if there is evidence of the employee actually sharing confiden-
tial information with the new employer.
d. Balancing the right to protect confidential information with fundamental
rights to free speech and expression
One of the significant issues posed by any law aimed at protecting confidential
information is the chilling effect that it may have on free speech. The Petronet
case discussed above is one such example where a corporation sued for an
injunction restraining a journalist from publishing confidential information
pertaining to the plaintiff’s investment. In that case, the court balanced the
confidential information with the right to free speech enshrined in Article
19(1)(a) of the Indian Constitution and declined to grant an injunction since it
did not find the information to be commercially sensitive.70 However,
it should also be noted that the Petronet case will act as a limited precedent
because the plaintiff in the case was partly owned by the government therefore
making it possible for the defendant-journalist to assert his fundamental
right against an instrument of the State.
69 Aparajita Lath, ‘Analysing the Pitfalls of Indian Patent Injunctions based on Fear of Infringement’
(2014) 19 Journal of Intellectual Property Rights 253.
70 Petronet (n 48).
20 Journal of National Law University Delhi 5(1)
Since fundamental rights can usually be asserted only against the State
and not private persons, it is not clear if Indian courts will apply Petronet in
cases involving only private persons or corporations. It would therefore be
advisable to introduce a free speech defence in any codified law that allows
for whistle-blowers or the media to publish confidential information in certain
cases of paramount public importance without facing the threat of damages or
pre-emptive injunctions.71 This would not be an exceptional provision in the
context of trade secret law, since other jurisdictions like the United States
do shield whistle-blowers and journalists from legal action under their
national trade secret laws.72
e. Ensuring adequate safeguards while granting Anton Piller orders
Anton Piller orders derive their name from an English case by that name,
where the plaintiff was allowed to enter the premises of the defendant
without prior notice and under the supervision of a court appointed
commissioner, to search for and preserve evidence that may otherwise
be destroyed by the defendant.73 The defendant in such cases may
decline permission to enter its premises but risk contempt proceedings.
The grant of such orders has spread through several jurisdictions that are
part of the Commonwealth.74 Such orders have been granted on dozens
of occasions in India in lawsuits filed for the infringement of trademark
and copyrights.75 Software companies like Microsoft have been particularly
adept at using such orders to raid large business establishments suspected of
using pirated software.76
The problem with such orders is that they lack adequate safeguards
which, according to anecdotal evidence, leads to an abuse by the plaintiffs.77
These safeguards can make a substantial difference to the outcome of the
case. For example, in the case of software piracy, some software companies
have been known to seize all the computer hard-disks of the defendant in
order to preserve the evidence. However, such a seizure would in effect
freeze the business of the defendant, thereby giving the software company
additional leverage while negotiating a settlement. This practice was remedied
71 For a general discussion on the intersection between trade secrecy and free speech, see Andrew
Beckerman, ‘Prior Restraints and Intellectual Property: The Clash Between Intellectual Property and
the First Amendment from an Economic Perspective’ (2001) 12 Fordham Intell Prop Media & Ent
LJ 1, 57–67; David Greene, ‘Trade Secrets, the First Amendment, and the Challenges of the Internet
Age’ (2001) 23 Hastings Comm & Ent LJ 537.
72 Defend Trade Secrets Act 2016, s 7.
73 Anton Piller KG v Manufacturing Processes Limited [1976] 1 All ER 779.
74 J Berryman, ‘Anton Piller Orders: A Canadian Common Law Approach’ (1984) 34(1) The University
of Toronto Law Journal, 1-25; Anne Staines, ‘Protection of Intellectual Property Rights: Anton Piller
Orders’ (1983) 46(3) The Modern Law Review 274.
75 Prashant Reddy, ‘A Critical Analysis of the Delhi High Court’s Approach to Ex-parte Orders in
Copyright and Trademark Cases (2011) 3 Manupatra Intellectual Property Reports 171.
76 Shamnad Basheer, ‘Ghost Post on IP (Software) Raids: Court sponsored extortion?’ (SpicyIP,
30 March 2009) accessed
23 April 2017.
77 NH Andrews, ‘Abuse of Anton Piller Orders’ (1987) 46(1) The Cambridge Law Journal 50.
Reddy T. 21
to an extent by judicial orders that allowed plaintiffs to only make mirror
copies of the defendant’s hard-disks without seizing them.78
In the context of protection of confidential information, plaintiffs often
make a request for the appointment of advocate commissioners to raid the
premises of a defendant who could either be a former employee or a busi-
ness partner who has access to the plaintiff’s trade secrets. The Delhi High
Court has granted such orders. For example, in the Vestergaarden case, the
Delhi High Court granted an Anton Piller order against a defendant-manufac-
turer with whom the plaintiff did not have a direct contractual relationship
but who was suspected of manufacturing on behalf of the plaintiff’s former
employees who were also defendants in the case.79 A basic perusal of that
order reveals the lack of any significant safeguards.
There is little doubt that Anton Piller orders are required in cases involving
the unauthorised disclosure of confidential information, but given the
extraordinary nature of such orders, they should be subject to strong procedural
safeguards to protect against any abuse. This is all the more important given
the unequal relationships between employers and employees, coupled with
the fact that competitors are usually the target of such orders.
The issue of protecting trade secrets or confidential information is becoming
increasingly important across the world with both the US and the EU enacting new
legislation to protect trade secrets in recent years.80 A relatively recent OECD paper
has claimed that several large and small American businesses ranked ‘trade secrets’ as
a very important form of IP protection.81 This is understandable given that trade secret
protection, unlike patent protection does not involve significant legal costs and is
comparatively easier to administer. It should thus be no surprise that lobbyists from
the American industry are urging the American government to take up the issue of
trade secret protection at all global forums.82 As is evident from this article, India
does have a basic legal framework to protect confidential information but like many
areas of judge made law in India, Indian jurisprudence is not well developed. The time
is ripe for codification of the law and like any other codification process, the govern-
ment should not only restate the law but also use the opportunity to reform the law to
suit Indian peculiarities rather than replicate foreign legislation on the issue.
78 Reddy (n 75) 183.
79 Vestergaard (n 38).
80 Eric Goldman, ‘The New ‘Defend Trade Secrets Act’ Is The Biggest IP Development In Years’ (Forbes,
28 April 2016)
is-the-biggest-ip-development-in-years/#346cfa734261> accessed 6 June 2018; Rembert Niebel, Lorenzo
de Martinis and Birgit Clark, ‘The EU Trade Secrets Directive: all change for trade secret protection in
Europe?’ (2018) 13(6) Journal of Intellectual Property Law and Practice 445.
81 Andre Barbe and Katherine Linton, ‘Trade Secrets: International Trade Policy and Empirical
Research’ (OECD, 5 August 2016)
Secrets%202016-8-5.pdf> accessed 7 June 2018.
82 ‘International Trade Secrets Association Letter’ (IPO, 7 November 2017)
accessed 7 June 2018.

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