Published On: 28th October 2025
Authored By: Rafiya Tabassum
Presidency University, Bangalore
ABSTRACT
The rapidly evolving global economy, coupled with accelerated technological advancements, has heightened the tension between employee mobility and the imperative to protect innovation through trade secrets. This research paper examines the multi-dimensional nature of trade secrets as indispensable business assets, encompassing both technical know-how and commercially sensitive information, and investigates how organizations can uphold confidentiality in the face of cyber threats, insider risks, and increasingly collaborative, digitally driven workflows. It critically evaluates India’s fragmented legal framework spanning contracts, equity, the IT Act, the Indian Contract Act, and competition laws against global standards, analyzing enforcement challenges, judicial interpretations, and landmark case law, while highlighting the growing role of courts in technology-enabled misappropriation cases. Particular attention is paid to the economic and strategic significance of trade secrets, their advantages and limitations compared to patents, and the necessity of implementing reasonable secrecy measures to qualify for protection. The study also explores the ethical and policy dilemmas arising from balancing knowledge restriction with dissemination, fair competition, and barriers to market entry. Recent developments, including the proposed Protection of Trade Secrets Bill, 2024, the judicial recognition of confidentiality clubs, and the adoption of advanced digital security protocols, are evaluated for their potential to enhance India’s trade secret regime. Comparative insights from the United States, European Union, and other international jurisdictions are incorporated to illustrate best practices, emerging enforcement trends, and approaches to harmonizing employee rights with organizational interests. The paper concludes with policy and managerial recommendations emphasizing adaptive legislative reforms, robust internal protocols, technological safeguards, and awareness initiatives that foster a culture of confidentiality while promoting employee mobility and career growth, ultimately optimizing innovation outputs, strengthening competitiveness, and ensuring sustainable knowledge-driven economic growth in India and globally.
Keywords: Employee Mobility, Trade Secrets, Confidential Information, Proprietary Knowledge, Intellectual Property (IP) Protection, Non-Disclosure Agreements (NDAs), Non Compete Clauses, Confidentiality Agreements, Innovation Protection, Knowledge Transfer, Knowledge Dissemination
INTRODUCTION
In an era characterized by rapid technological advancements and an increasingly dynamic global economy, employee mobility has become both a catalyst for professional growth and a complex challenge for organizations striving to protect their intellectual assets. Trade secrets, encompassing a wide array of confidential business information including technical know-how, processes, strategies, and commercial data, represent a critical source of competitive advantage and innovation for companies across industries. However, the movement of employees between firms exposes these valuable assets to risks of unauthorized disclosure and misappropriation, thereby threatening the very innovation that drives economic progress.
This paper explores the delicate balance between fostering employee mobility essential for knowledge dissemination and career advancement and ensuring robust protection of trade secrets to safeguard innovation. In particular, it examines how confidentiality obligations and legal mechanisms can be effectively employed to prevent the exploitation of sensitive information amid the increasing complexity of collaborative workflows, cyber vulnerabilities, and insider threats.
Focusing on India as a case study, the paper investigates the current fragmented legal landscape where trade secret protection is primarily governed by a combination of contractual agreements, common law principles, and ancillary provisions from statutes such as the Indian Contract Act, the Information Technology Act, and competition laws. The absence of a dedicated statutory framework has generated significant challenges in enforcement and consistency. Recent policy developments, including the 2024 proposed Protection of Trade Secrets Bill, judicial recognition of confidentiality arrangements, and enhanced digital security practices, are critically analyzed in light of global best practices from the United States, European Union, and other jurisdictions.[1] Moreover, the growing integration of artificial intelligence and data-driven technologies has further heightened concerns around protecting proprietary algorithms, data sets, and digital infrastructure, making trade secret safeguards indispensable in contemporary innovation ecosystems.
By synthesizing interdisciplinary insights and comparative legal perspectives, this paper aims to delineate a comprehensive framework that simultaneously respects employee rights and promotes corporate confidentiality. The study underscores the urgent need for legislative reform, heightened organizational awareness, and practical safeguards as India and other economies navigate the complexities of innovation protection in the digital age and globalized workforce environment.
1. Role of Employee Mobility in Innovation and Knowledge Dissemination
Employee mobility the movement of individuals across organizations, industries, or even countries play a critical role in shaping modern economies. It fosters a natural flow of ideas, skills, and expertise, which are vital for innovation and market competitiveness. When employees transition between firms, they bring with them not only technical competencies and managerial insights but also diverse perspectives that contribute to the cross-pollination of knowledge across industries. This transfer of human capital accelerates innovation, strengthens industry-wide best practices, and enhances overall economic growth. At the same time, employee mobility encourages entrepreneurship, with many start-ups being founded by professionals who gained their expertise while working with established corporations. This phenomenon is particularly visible in technology-driven sectors, where employee movement often sparks the creation of disruptive products and services that reshape markets.
Globally, regions like Silicon Valley in the United States illustrate the benefits of high mobility, where engineers, designers, and entrepreneurs frequently move between companies, leading to rapid advancements in artificial intelligence, software development, and biotechnology. The relatively weak enforceability of non-compete agreements in California is often cited as a major reason for Silicon Valley’s innovative dynamism. In contrast, jurisdictions that strongly enforce non-compete clauses often witness reduced mobility, which can stifle the circulation of talent and slow down knowledge dissemination. For India, where Section 27 of the Indian Contract Act significantly restricts post-employment restraints, the legal environment largely favours employee freedom. This allows professionals to carry their skills and experiences into new ventures, thereby stimulating competition. However, this same framework creates heightened challenges for employers seeking to safeguard trade secrets in the absence of a dedicated statutory mechanism. The risks are particularly evident in industries where confidential data and proprietary processes constitute the backbone of competitive advantage. Employees leaving a firm may inadvertently disclose sensitive information such as algorithms, formulas, or strategic roadmaps, or in some cases, deliberately misuse such information for personal gain or competitive leverage.[2] Moreover, employee mobility can help diffuse emerging technologies and managerial practices across geographic and institutional boundaries, enabling lagging firms to leapfrog older methods and accelerate industrial upgrading. Conversely, overly rigid restrictions on mobility can lead to “brain drain” from smaller firms or regions, concentrating innovation in a few hubs and increasing inequality in economic opportunity. In today’s digital economy, where vast amounts of information can be copied and transferred in seconds, the potential for trade secret misappropriation has grown exponentially. This has placed increasing pressure on organizations to adopt comprehensive confidentiality measures, including well drafted contracts, role-based access to data, employee training, and cybersecurity safeguards.
The central challenge lies in resolving the “knowledge versus secrets” dilemma. While employees cannot be restrained from applying general skills, professional judgment, or industry knowledge they have acquired through experience, businesses argue that certain forms of specialized know-how such as proprietary codes, blueprints, or customer databases should be treated as confidential assets. Courts in India, as well as in other jurisdictions, often struggle to draw this boundary, balancing the protection of employers’ legitimate interests with the constitutional and economic right of employees to pursue their careers. With globalization and cross-border employment becoming more common, this balance has gained further complexity, as divergent legal standards and enforcement mechanisms across jurisdictions complicate trade secret protection.
Thus, employee mobility remains a double-edged sword: it is indispensable for fostering creativity, innovation, and economic growth, yet it simultaneously poses significant risks for organizations that depend on trade secrets to maintain their market position. Finding an equilibrium between these competing interests through legislative reforms, judicial guidance, and organizational safeguards remains one of the most pressing challenges of modern trade secret jurisprudence.
2. Risks of misappropriation when employees shift between competitors
When employees transition from one organization to another, particularly to direct competitors, the risk of trade secret misappropriation becomes a pressing concern. Alongside their general skills and professional expertise, employees often possess access to sensitive business information such as client lists, pricing models, marketing strategies, algorithms, manufacturing techniques, or proprietary processes. While these assets are integral to maintaining a company’s competitive edge, their portability makes them vulnerable to deliberate or inadvertent disclosure in a new employment setting. Even unintentional sharing through routine practices or the application of specialized methods learned in a previous role can amount to unauthorized use of confidential information. Such misappropriation not only undermines the employer’s market position but may also inflict serious reputational damage, loss of investor confidence, and financial harm that can far exceed the cost of the initial research and development investments.
The risks are heightened in today’s digital age, where large volumes of confidential data can be transferred with ease through portable devices, cloud storage, or even personal email accounts. Insider threats and cyber-enabled leaks are increasingly recognized as one of the most serious challenges for businesses, as sensitive information can be exfiltrated without leaving obvious traces.[3] Globally, high-profile disputes such as Waymo v. Uber in the United States where an ex-Google engineer was accused of stealing proprietary self-driving car technology highlight how employee mobility can lead to multi-billion-dollar conflicts. Such cases underscore the reality that the greatest threat to a company’s secrets often comes not from hackers outside the organization, but from trusted insiders who depart for competitors.
In India, the challenge is magnified by the absence of a dedicated trade secrets statute, leaving organizations to rely on contractual obligations, equitable principles, and limited statutory provisions under the Indian Contract Act, the IT Act, and competition laws. Courts have repeatedly emphasized that employers must clearly identify and prove the confidential nature of the information,[4] as seen in American Express Bank v. Priya Puri, where the Delhi High Court recognized that customer lists could qualify as trade secrets but declined to impose an absolute restriction on the employee’s future career. This illustrates the judiciary’s cautious approach in balancing business interests with employees’ rights to pursue livelihoods. Proving misappropriation requires not only establishing that the information qualifies as a trade secret but also that the ex-employee used or disclosed it unlawfully a burden that can be extremely difficult without concrete evidence.
Consequently, preventive mechanisms have become indispensable. Well-structured Non Disclosure Agreements (NDAs), confidentiality clauses embedded in employment contracts, post-employment obligations regarding data handling, employee awareness programs, and technical safeguards such as restricted access systems and audit trails serve as the first line of defense. Multinational companies often deploy layered security models, combining legal protections with digital monitoring systems to reduce risks of leakage. For Indian businesses, particularly startups and small enterprises, strengthening internal governance and adopting best practices from international models is essential to mitigate vulnerabilities. Without such proactive measures, the line between an employee’s general skills and an employer’s proprietary assets becomes dangerously blurred, heightening the risk of irreparable damage when employees shift to competitors in highly knowledge-driven markets.
3. The “knowledge vs. secrets” dilemma: what counts as general skills vs. proprietary knowledge
A central issue in balancing employee mobility with trade secret protection is distinguishing between general knowledge and proprietary information. This distinction is critical because it determines the scope of what an employee can freely carry to a new job versus what must remain confidential. General skills encompass an individual’s education, professional experience, problem-solving abilities, and techniques that are part of their career development. These skills form the foundation for professional growth and cannot legally or ethically be restricted, as doing so would impede the employee’s right to pursue their vocation. For example, a software engineer who learns coding best practices at one company is entitled to apply these general skills at another firm.
In contrast, proprietary knowledge refers to specific, confidential, and commercially valuable information that confers a competitive advantage to the organization. This includes trade secrets such as unique formulas, source code, algorithms, business strategies, customer databases, research methodologies, or manufacturing processes. Unlike general skills, proprietary knowledge is protectable because it embodies the intellectual capital and investment of the organization. Misappropriation of such information can result in serious financial and strategic losses for a business, particularly in technology-driven or highly competitive sectors.
Courts often face challenges in drawing a clear boundary between what constitutes general knowledge and what qualifies as a trade secret. Indian jurisprudence generally favours employee mobility, ensuring that individuals cannot be prevented from leveraging the skills and experiences they have developed over time. However, the legal system also recognizes the necessity of protecting clearly identifiable trade secrets.[5] Landmark cases such as Niranjan Shankar Golikari v. Century Spinning & Manufacturing Co. Ltd. demonstrate that courts will enforce restrictions on the use of proprietary information if it can be shown that reasonable measures were taken to maintain its confidentiality.[6] Similarly, in American Express Bank v. Priya Puri, the Delhi High Court acknowledged the proprietary nature of customer information, while balancing the employee’s right to continue employment in the industry.
The rise of digital technology has further complicated the “knowledge vs. secrets” dilemma. Employees often have access to vast amounts of sensitive data stored electronically, making it easier to unintentionally or deliberately transfer proprietary knowledge to competitors. Organizations are increasingly adopting layered safeguards, such as access restrictions, encryption, audit trails, and detailed NDAs, to clearly demarcate which information constitutes a trade secret. Additionally, companies are implementing structured exit interviews, post employment confidentiality agreements, and employee training programs to reinforce awareness of proprietary obligations.
Ultimately, resolving this dilemma requires a careful equilibrium between promoting workforce mobility and protecting corporate intellectual assets. Organizations must clearly identify, document, and protect proprietary knowledge, while employees must be allowed to exercise their general skills and experience. Striking this balance is crucial for fostering innovation, encouraging career growth, and maintaining competitive advantage in the modern knowledge-driven economy.
4. Non-Compete Clauses, NDAs, and Their Enforceability
Non-compete clauses and Non-Disclosure Agreements (NDAs) are primary legal instruments used by organizations to protect their trade secrets and confidential information in the context of employee mobility.[7] In India, the enforceability of non-compete agreements is primarily governed by Section 27 of the Indian Contract Act, 1872, which states that any agreement restraining an individual from engaging in a lawful profession, trade, or business is void, except during the term of employment. This legal framework inherently favours employee mobility, ensuring that professionals are not unduly restricted from pursuing their careers after leaving an organization.
Non-compete and confidentiality obligations can operate at different stages of employment. Pre-employment agreements may include clauses preventing employees from joining competitors immediately or soliciting clients during recruitment. During employment, such clauses often manifest as ongoing restrictions on sharing sensitive information and maintaining professional integrity. Post-employment restraints are more contentious, as they directly conflict with Section 27, making the enforcement of outright restrictions on joining competitors highly limited. Courts generally uphold confidentiality clauses and NDAs post-employment if they are reasonable in scope, time, and geographic limitation, and if they relate specifically to protectable trade secrets rather than general skills.
Confidentiality agreements and NDAs serve as the primary instruments for safeguarding proprietary information. Judicial attitudes in India reflect a careful balance between protecting corporate interests and respecting employee rights. For instance, in Niranjan Shankar Golikari v. Century Spinning,[8] the Supreme Court of India recognized that while employees cannot be restrained from using general skills, organizations could seek protection for well-defined confidential information.[9] Similarly, in American Express Bank v. Priya Puri, the Delhi High Court enforced NDAs protecting customer information while allowing the employee to continue employment in the industry.[10]
In contrast, the United States employs doctrines such as the “inevitable disclosure doctrine,” which allows courts to presume that an employee will inevitably rely on confidential knowledge in a new role, thereby justifying preemptive injunctions against joining competitors. This approach, while protective of trade secrets, is viewed as more restrictive on employee mobility compared to India’s legal framework.[11] The European Union similarly emphasizes proportionality, ensuring that trade secret protections do not unreasonably restrict professional freedom while providing harmonized remedies through the Trade Secrets Directive (2016/943).
With the rise of the knowledge economy,[12] organizations are increasingly combining NDAs, non-compete clauses, and robust internal policies with technological safeguards to minimize risk. Measures such as restricted access to sensitive data, monitoring of digital communications, and employee training programs are essential to ensure compliance. From a policy perspective, striking a balance between enforceability and fairness is crucial: agreements must clearly define the scope of confidential information, be limited in duration, and avoid unduly restricting career progression, thereby protecting innovation without stifling workforce mobility.
5. Challenges of Protecting Trade Secrets in the Digital Era
The digital era has dramatically increased the complexity of protecting trade secrets. Organizations now face threats not only from traditional employee movement but also from cyber theft, insider risks, and collaborative workflows that blur the boundaries of confidential information. Cyberattacks, phishing schemes, and unauthorized data transfers can quickly compromise sensitive corporate data, making even robust legal protections insufficient without accompanying technological safeguards. Insider risks ranging from inadvertent disclosures to deliberate misappropriation by disgruntled employees further exacerbate these vulnerabilities, especially when employees have access to cloud-based storage, collaboration tools, or portable devices that facilitate rapid transmission of confidential information.
One of the major legal challenges is the difficulty of proving “reasonable secrecy measures” in court. Indian courts require that the information in question must be clearly identifiable as confidential and that the company took proactive steps to protect it. Courts evaluate the adequacy of these measures when deciding whether to enforce trade secret protections or grant injunctions. For example, courts consider whether access to sensitive data was limited, whether employees were made aware of confidentiality obligations, and whether technical safeguards like encryption or restricted access were employed. The absence of comprehensive statutory guidance makes this assessment case-specific and unpredictable. To address some of these challenges, Indian courts have experimented with innovative mechanisms like “confidentiality clubs”, which allow sensitive information to be shared selectively among parties, lawyers, and experts during litigation without public disclosure. This approach, inspired by practices in patent and technology litigation globally, enables courts to balance the need for judicial scrutiny with the imperative of maintaining secrecy.
Several high-profile technology-enabled misappropriation cases illustrate the gravity of these risks. For instance, in global contexts, cases such as Waymo v. Uber highlighted how digital access to proprietary algorithms and self-driving technology could be exploited by employees transitioning to competitors. In India, cases involving software source codes, proprietary business processes, and client data such as American Express Bank v. Priya Puri demonstrate that even when the information is not physically stolen, its unauthorized use can substantially harm corporate interests.
Additionally, the collaborative nature of modern workflows often involving third-party vendors, consultants, and cross-border teams further complicates trade secret protection. Organizations must now navigate not only internal risks but also the potential for leaks through partnerships and outsourced projects. Protecting trade secrets in this environment requires a multi-layered strategy that combines legal instruments (NDAs, confidentiality agreements), organizational policies (employee training, access controls), and technological safeguards (encryption, audit logs, digital rights management).
6. Balancing Innovation Protection with Employee Rights
Protecting trade secrets while respecting employee mobility presents a significant ethical, legal, and policy challenge. Organizations invest heavily in research and development, proprietary processes, and strategic business information, which form the foundation of their competitive advantage. At the same time, employees have the right to utilize their skills, knowledge, and experience to pursue career growth and professional opportunities. Overly restrictive measures can protect corporate interests but may hinder workforce development, reduce knowledge dissemination, and stifle industry-wide innovation.
The impact of employee mobility differs across organizational contexts. Large corporations often have the resources to implement legal safeguards, technological protections, and structured NDAs, enabling them to enforce confidentiality effectively. Startups and SMEs, however, may lack such infrastructure, leaving them more vulnerable to misappropriation. Yet, mobility can also benefit smaller firms by facilitating knowledge sharing, partnerships, and industry networking that drive innovation and growth.
The Proposed Protection of Trade Secrets Bill, 2024 seeks to address these challenges by providing a statutory framework for trade secret protection in India. The Bill aims to clearly define trade secrets, specify remedies for misappropriation including injunctions and damages and recognize the use of digital safeguards. Importantly, it seeks to balance corporate protection with employee rights, ensuring that lawful career mobility is not unduly restricted while providing recourse for organizations in cases of misappropriation.
Organizations can further safeguard trade secrets through well-defined confidentiality policies, employee training programs, role-based access controls, exit protocols, and carefully drafted NDAs. Fostering a culture of ethical handling of information and awareness of trade secret obligations can reduce the risk of intentional or inadvertent disclosure. Striking this balance promotes innovation, protects corporate assets, and supports employees in responsibly advancing their careers, creating a dynamic ecosystem where both organizational competitiveness and workforce development thrive.
CONCLUSION
Employee mobility and trade secret protection are intricately linked, forming a critical nexus that shapes innovation, organizational competitiveness, and economic growth in today’s knowledge-driven economy. While workforce mobility facilitates the natural flow of skills, ideas, and expertise accelerating innovation, fostering entrepreneurship, and enabling cross industry knowledge dissemination it simultaneously exposes organizations to significant risks of misappropriation, unauthorized disclosure, and competitive disadvantage. This duality underscores the urgent need for mechanisms that protect trade secrets without stifling employee career development or economic dynamism.
This research demonstrates that trade secrets encompass not only technical know-how, algorithms, and proprietary processes but also commercially sensitive information that is central to a company’s competitive advantage. In India, the absence of a dedicated statutory framework has created enforcement challenges, leaving organizations to rely on contracts, NDAs, non-compete clauses, common law principles, and limited statutory provisions under the IT Act and Indian Contract Act. The study highlights how courts have progressively recognized confidentiality arrangements and implemented innovative mechanisms, such as “confidentiality clubs,” to prevent misuse of sensitive information during litigation while balancing employee rights.
The digital era has intensified these challenges, with cyber threats, collaborative workflows, and remote access dramatically increasing the likelihood of trade secret leakage. Organizations must adopt multi-layered protection strategies combining legal safeguards, technological controls, employee awareness programs, and structured internal policies. Preventive measures including access restrictions, encryption, audit trails, training, and well-defined exit protocols are essential to minimize risks and establish evidence of “reasonable secrecy measures” in case of disputes. [13]
Comparative analysis of international practices, including the United States’ “inevitable disclosure doctrine” and the EU’s Trade Secrets Directive, reveals best practices for harmonizing corporate protection with workforce mobility. India’s proposed Protection of Trade Secrets Bill, 2024, offers a significant opportunity to unify trade secret law, provide clear remedies, define protected information, and enhance legal certainty for both employers and employees. When effectively implemented, these reforms can strike a balance between promoting innovation, maintaining fair competition, and safeguarding employee rights.
In conclusion, sustaining innovation and competitiveness in a globalized economy requires a holistic approach that integrates legislative reform, judicial oversight, organizational governance, and technological safeguards. By fostering a culture of confidentiality, promoting ethical handling of proprietary information, and encouraging responsible knowledge transfer, organizations can mitigate the risks of trade secret misappropriation while enabling employee mobility and career progression. Strengthening trade secret protection in India not only secures corporate intellectual assets but also contributes to a robust, innovation-driven, and globally competitive economy, ensuring long-term sustainable growth and the creation of value for stakeholders across industries.
Reference(s):
[1] Rochelle C. Dreyfuss & Katherine J. Strandburg, The Law and Theory of Trade Secrecy: A Handbook of Contemporary Research 12–15 (Edward Elgar Publ’g 2011).
[2] Thomas Sampson, “Brain Drain or Brain Gain? Technology Diffusion and Learning On-the-Job,” J. Int’l Econ. 90, 162–76 (2013); D. Filson & A. M. Franco, “Spin-outs: knowledge diffusion through employee mobility,” 37 RAND J. Econ. 841 (2006); Frédéric Docquier & Hillel Rapoport, “The Brain Drain from Developing Countries,” in Brain Drain and Development (2009).
[3] Waymo LLC v. Uber Techs., Inc., No. C-17-00939 WHA, 2017 WL 2123560 (N.D. Cal. May 15, 2017).
[4] Am. Express Bank Ltd. v. Priya Puri, 2006 SCC OnLine Del 367, ¶ 71 (Delhi HC).
[5] Niranjan Shankar Golikari v. Century Spinning & Mfg. Co. Ltd., AIR 1967 SC 1098.
[6] Am. Express Bank Ltd. v. Priya Puri, 2006 SCC OnLine Del 367, ¶ 71 (Delhi HC).
[7] Indian Contract Act, No. 9 of 1872, § 27 (Ind.).
[8] Niranjan Shankar Golikari v. Century Spinning & Mfg. Co. Ltd., AIR 1967 SC 1098.
[9] Am. Express Bank Ltd. v. Priya Puri, 2006 SCC OnLine Del 367, ¶ 71 (Delhi HC).
[10] PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995).
[11] European Union, Trade Secrets Directive, 2016/943 (EU).
[12] Elizabeth A. Rowe & Sharon K. Sandeen, Trade Secret Law in a Nutshell 213–18 (2d ed. 2018); Deepika Sharma, Trade Secret Protection in India: Emerging Issues, 57 J. Indian L. Inst. 278, 285–90 (2015).
[13] PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995); Waymo LLC v. Uber Techs., Inc., No. C-17-00939 WHA, 2017 WL 2123560 (N.D. Cal. May 15, 2017); European Union, Trade Secrets Directive, 2016/943 (EU).
