India’s Trade Secret Regime: Assessing Legal Gaps with Reference to Generic Medicines in the Pharmaceutical Sector

Introduction

India’s pharmaceutical industry has become known worldwide as a trustworthy source of low, cost medicines, of which generic drugs have been the main driver. Patent law has been the main focus of pharmaceutical, related intellectual property debates, but the generic medicines sector has a different narrative. Generic pharmaceutical companies’ biggest treasures are not patents on inventions but trade secrets, especially processes, formulations, regulatory data, and manufacturing efficiencies.

These kinds of know, how are kept as trade secrets. But, in contrast to patents, trademarks, or copyrights, trade secrets in India are not accorded a separate legal regime. The protection remains divided, indirect, and largely dependent on agreements and the judgment of the courts. As the pharma industry becoming more complex, globally interconnected, and innovation, driven, this gap in the law has become quite significant. This article deals with trade secret protection in India with a focus on the pharma and generic drug sectors.

The document starts with an analysis of existing legislation and identifies the deficiencies of the current legal framework while also taking into consideration the industry’s evolving needs and different international practices. Furthermore, it emphasizes the importance of securely integrating trade secrets as a part of the intellectual property rights system in India.

Trade Secrets in the Context of Generic Pharmaceutical Innovation

Generic pharmaceutical innovation works under a different legal and commercial framework compared to originator companies. Originator companies typically use patents that protect products and give them market exclusivity. On the other hand, generic manufacturers are not covered by patents. The competitiveness of generics is driven by factors such as process efficiency, bioequivalence, regulatory compliance, and large, scale production with quality preservation. In this case, trade secrets mainly concern:

• Manufacturing processes and process optimizations
• Formulation techniques improving stability and bioavailability
• Analytical and validation methods
• Regulatory dossiers and compliance strategies
• Supply chain and sourcing information for active pharmaceutical ingredients

Most of this information is either not patentable under Indian law or is kept deliberately outside the patent system to avoid disclosure. Its economic value is derived entirely from secrecy. After disclosure, the competitive advantage is lost forever.

For the generic medicines sector, therefore, trade secrets are not supplementary intellectual property assets. They are the primary form of protection for innovation and commercial differentiation.

Existing Legal Protection of Trade Secrets in India

India has no specific law for trade secrets. The protection is mainly through the laws of contracts, equitable principles, and judicial precedents relating to breach of confidence. In a few instances, courts have, through injunctions, prevented the use of confidential information and enforced non, disclosure obligations. Yet this approach has several intrinsic deficiencies. Protection through a contract is limited to the parties to the agreement and provides few measures against the illegal activities of a third party. Protection through judicial proceedings is very much dependent on the interpretation of the facts, which is the reason for the inconsistency of the results and the uncertainty of the enforcement.

There is no legal definition of a trade secret or a codified standard for misappropriation, nor a uniform framework for remedies. Trade secret cases rely heavily on injunctive relief, which is often delayed and therefore, less effective in practice. In the pharmaceutical sector, where time sensitive information can have a huge impact on market entry and pricing, such delays make the legal remedies practically void.

Structural Limitations of the Current Regime for Pharmaceuticals

Every shortcoming of India’s trade secret protection regime becomes glaringly evident if one just takes the realities of the pharma industry into account. For one, the production of drugs is steadily becoming heavily dependent on digital systems, outsourced services and collaborations across borders. Pharma companies share confidential information with contract manufacturers, research organisations, consultants and regulatory service providers.

The present legal framework does not adequately cover this spreading of access. Secondly, the mobility of employees in the pharmaceutical sector has increased significantly. Scientists, quality professionals, and regulatory experts frequently change jobs between competing firms. In the absence of legal protections, it is a challenge both from a legal and practical point of view, to ensure that confidentiality obligations are respected. Third, the regulatory procedures impose pharmaceutical companies to disclose a large amount of data to the authorities.

Although this is important for public safety, the lack of clear legal protection against misuse or unauthorised disclosure of such data creates an additional layer of vulnerability. For generic manufacturers who work on very thin margins, these kinds of structural weaknesses are a direct threat to business sustainability and thus, they discourage long, term investment in process innovation.

Why the Existing Legal Approach Is No Longer Sufficient

The current system represents a time when industry development was at a slower pace, supply chains were less complicated, and legal disputes were mostly local. The global pharmaceutical industry today is too big and complex to still be based on those assumptions.

India’s desire to move up the value chain with complex generics, biosimilars, and exports to high, compliance markets is dependent on the protection of confidential know, how. If there is not a predictable and enforceable trade secret regime, companies may decide not to invest in advanced manufacturing technologies or may choose to move the research activities that are of high value to another country. In addition, as Indian pharmaceutical companies partner more and more with foreign companies, the lack of strong trade secret protection in India turns into a disadvantage for them. International partners frequently require a level of legal certainty that is similar to that in their own countries.

Thus, reform is no longer a theoretical exercise. It has become a practical necessity for sustaining India’s competitive position in the global pharmaceutical market.

Comparative International Approaches to Trade Secret Protection

A comparative study vividly points out the considerable disparity of India’s domestic law from international standards. Trade secret is a separate kind of intellectual property under federal law in the US. The Defend Trade Secrets Act gives clear cut definitions, money damages, and speedy injunctive relief, and thus it is a very effective tool for technology and other related sectors such as the pharmaceutical industry. The European Union has introduced a harmonized regime through its Trade Secrets Directive. The Directive aims to balance the protection of confidential information with the freedom of labour mobility and the public interest. This kind of framework guarantees legal certainty and uniformity to the member states. Over the last few years, China has progressively enhanced its regulations on trade secrets to recognize their importance in the growth of advanced manufacturing and technology, heavy industries. Compared with these two jurisdictions, India’s reliance on common law and contracts appears to be insufficient and poorly coordinated with global best practices.

Trade Secrets as an Integral Component of Intellectual Property Rights

Trade secrets form a vital, yet largely overlooked, part of the intellectual property rights system. While patents are meant to protect inventions that are disclosed, trade secrets are aimed at protecting those aspects of the business that involve less known commercially viable knowledge. Both have distinct but complementary functions.

On one hand, patents protect products and molecules in pharmaceuticals, while trade secrets keep processes and the know, how of the operations confidential. In the generics medicines industry, where patent protection is either very limited or non, existent, trade secrets are often the main source of intellectual property that companies hold.

A coherent IPR framework should certainly recognize this connection. Enhancing the protection of trade secrets is not a negative factor to patent law or a barrier to public access to medicines. On the contrary, it helps to keep fair competition going as it prevents the illegal taking of confidential know, how and at the same time permits the lawful reverse engineering.

It would be consistent with these concerns of promoting innovation, industrial growth and easing of doing business if India also recognised trade secrets more explicitly in its IPR policy.

The Case for a Standalone Trade Secrets Law in India

A dedicated trade secrets statute would greatly clarify, standardize, and make more enforceable a field that is currently regulated by scattered legal principles.

Such a law should start by giving a clear, cut definition of trade secrets. It should set the standards for what constitutes misappropriation and provide effective civil remedies. It should also guarantee the provision of a quick relief in the meantime. Furthermore, it should also weigh the advantages of protection against the freedom of employees to change jobs as well as the public interest, especially in the pharmaceutical field.

For manufacturers of generic medicines, a statutory framework would go a long way in alleviating legal uncertainty. It would also strengthen investor confidence and thus, facilitate the flow of fresh ideas in the manufacturing of medicines rather than just copying the existing ones.

Impact on the Generic Medicines Sector

A strong trade secrets framework would help India consolidate its position as a worldwide hub for both generic and complex pharmaceutical products. Firms will be inclined to invest more in world, class production systems, compliance infrastructure, and process innovation.

Besides that, it would be a catalyst for cross, border partnerships and technology sharing as collaborators will be assured that their confidential information will be safeguarded by law. Above all, it will give the Indian generic drug makers the freedom to compete with the rest of the world based on their cost, effectiveness and quality rather than being at the risk of their trade secrets being unlawfully taken.

Conclusion

Trade secrets have been the hidden base of the Indian pharmaceutical industry, especially in the generic medicines sector. Though the current legal provisions offer some protection, they have become insufficient for the size, intricacy, and worldwide connectivity of the pharmaceutical business.

It would be a far, sighted and essential reform to acknowledge trade secrets by a separate law and linking them strongly to the intellectual property rights system in India. This move would help innovation, make the industry more competitive, and keep India as a trustworthy supplier of affordable medicines globally.

Author: Muskan Gupta, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD. 

References

1. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 UNTS 299 (1994).
2. R Gopalakrishnan, Confidential Information and Trade Secrets in Indian Law (Oxford University Press 2017).
3. Justice B N Srikrishna Committee, Report of the Committee of Experts on a Data Protection Framework for India (Government of India 2018).
4. American Law Institute, Restatement (Third) of Unfair Competition (ALI Publishers 1995).
5. Defend Trade Secrets Act of 2016, Pub L No 114–153, 130 Stat 376 (United States).
6. European Parliament and Council, Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure [2016] OJ L157/1.
7. Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 (CA).
8. John Richard Brady v Chemical Process Equipments Pvt Ltd AIR 1987 Del 372 (Delhi High Court).
9. Prabuddha Ganguli, Intellectual Property Rights: Unleashing the Knowledge Economy (McGraw Hill Education 2018).