What Happens If Someone Breaks an NDA?

What counts as a breach

An NDA is broken when the recipient does something the agreement prohibits, or fails to do something it requires. The most common breaches are:

• Disclosing confidential information to someone who isn’t allowed to receive it, such as a competitor, a journalist or the public.
• Using it for something other than the agreed purpose, like building a competing product or pitching the discloser’s customers.
• Passing it to colleagues or advisers who don’t need to know it, or who aren’t bound by confidentiality.
• Failing to protect it with the care the agreement requires, or refusing to return or destroy it when asked.

What has to be proven

To win a breach of contract claim, the party bringing it generally has to show that there was a valid agreement, that the other side broke it, and that the breach caused harm. In an NDA case, that usually means showing the information was covered by the definition of confidential information and not by one of its exclusions, and that the recipient, or someone it’s responsible for, used or disclosed it.

That second part is often the hard one. Recipients commonly argue that the information was already public, already known to them, received from someone else, or developed independently, and most NDAs exclude all four. Records make the difference: the signed NDA, a log of what was shared with whom and when, and files marked “Confidential.”

The remedies

The main remedies are:

• An injunction: a court order to stop using or disclosing the information. In urgent cases, a court can issue a temporary order early in the case, before the final decision. To get one, a party typically has to show it’s likely to win and will suffer irreparable harm without it. Many NDAs, including FastNDA’s, say up front that a breach may cause irreparable harm and that the discloser may seek an injunction, but the court still decides.
• Damages: money to compensate for the harm the breach caused, such as lost sales or a lost deal. They can be hard to prove, because the value of leaked information is hard to measure. Punitive damages generally aren’t available for a breach of contract alone.
• Liquidated damages: some NDAs set a fixed amount owed for a breach. Courts generally won’t enforce one that works as a penalty rather than a reasonable estimate of hard-to-measure harm, and the rules vary by state. FastNDA’s template doesn’t include one.
• Trade secret claims: if the information is a trade secret, its owner may also have claims under state trade secret law and the federal Defend Trade Secrets Act, whether or not there’s an NDA. Under the federal law, a court can award damages for actual loss and unjust enrichment, or a reasonable royalty, plus up to twice that amount for willful and malicious misappropriation.
• Legal fees: in the US, each side usually pays its own lawyers unless a contract or statute says otherwise. Some NDAs shift fees to the losing party; FastNDA’s doesn’t. The Defend Trade Secrets Act allows fees in some cases, such as willful and malicious misappropriation or a claim brought in bad faith.

Is breaking an NDA a crime?

Generally, no. Breaking an NDA is a civil matter between the parties, and the remedy is a lawsuit, not a prosecution. But some conduct that breaks an NDA can also be a crime in its own right. Stealing trade secrets, for example, can be a federal crime under the Economic Espionage Act, and some states have their own criminal laws on it. Whether to bring charges is up to prosecutors, not the other party.

If someone breaks your NDA

The first steps are mostly about protecting your position:

• Write down what happened, when and how you found out, and save the evidence: emails, posts, documents and screenshots.
• Re-read the NDA: the definition, the exclusions, the term, the governing state and the courts where disputes go.
• Stop sharing anything more with them, and cut off their access to systems, files and data rooms.
• Talk to a lawyer licensed in the governing state before you confront them. A formal written demand, often called a cease-and-desist letter, is a common first step, and a lawyer can tell you whether to ask a court for an injunction.
• Move quickly. Courts consider how fast you acted when judging whether harm is urgent, and deadlines to sue apply. Under the federal trade secret law, it’s three years from when the misappropriation was discovered or should have been; deadlines for contract claims vary by state.
• Be careful what you say publicly. Accusing someone in public before the facts are clear can create problems of its own.

If you’re accused of breaking one

Take it seriously, and don’t ignore a demand letter. Keep every relevant document and delete nothing; destroying evidence once a dispute has started can make things much worse. Read the NDA closely, especially the exclusions, since information you already knew, got elsewhere or developed on your own is typically not covered. Then talk to a lawyer before you respond.

What an NDA can’t stop

Some disclosures are protected whatever an NDA says. Under the Defend Trade Secrets Act, an individual can’t be held liable under trade secret law for disclosing a trade secret in confidence to a government official or a lawyer to report a suspected violation of law, or in a court filing made under seal. SEC rules bar anyone from using a confidentiality agreement to stop people from reporting possible securities violations to the SEC. And under the federal Speak Out Act, nondisclosure clauses agreed to before a dispute arises can’t be enforced in court in sexual assault and sexual harassment disputes involving alleged violations of federal, tribal or state law.

An NDA also doesn’t excuse anyone from complying with a subpoena or court order. Most NDAs, including FastNDA’s, allow disclosures the law requires, with notice to the discloser where the law allows it. State laws add further limits, especially for employees.