What relief is available for breach of a non-disclosure or confidentiality agreement?
Companies frequently enter non-disclosure agreements, or “NDAs,” to protect their trade secrets and other proprietary information. Such agreements require the recipient to agree that, in exchange for disclosure of proprietary information, they will not share or otherwise use that information except as explicitly permitted. If the recipient violates that agreement, the company that disclosed the information has several potential remedies.
Because an NDA is a contract, the typical contractual remedies are available. A defendant that breaches an NDA can be ordered to pay money damages to compensate for the losses the breach has caused. Those damages can be measured in terms of the loss in value of a trade secret, lost profits, or any increased costs attributable to the breach.
The terms of the NDA may allow for the recovery of additional losses, too. Ordinarily, a plaintiff is responsible for paying his own legal fees. However, NDAs frequently include provisions that permit a winning party to recover attorneys’ fees and expenses from the opposing party.
A plaintiff can also frequently pursue an injunction as a remedy for breach of an NDA. An injunction is a court order prohibiting the defendant from further disclosing or using the proprietary information or trade secret that was the subject of the NDA. NDAs often state that use of information in violation of their terms constitutes “irreparable harm” to the party disclosing the information. Irreparable harm is required for an injunction and this language in the NDA makes obtaining one easier for the disclosing party.
Depending on the circumstances, a plaintiff may be able to recover punitive damages for breach of an NDA. As the name suggests, punitive damages are intended to punish wrongful conduct to deter others from behaving similarly. They provide additional money beyond the amount necessary to compensate the plaintiff’s loss. Whether punitive damages are available depends on the terms of the NDA and the applicable law. Generally, a plaintiff must show conduct that is so egregious it warrants punishment, such as fraudulently entering an NDA with no intention of honoring its obligations.
When an NDA has been breached, the disclosing company should consult experienced counsel about how best to enforce its rights. Early analysis of the NDA and the breach can determine what relief is available and identify the best strategies for obtaining it.
To learn more about trade secrets and related business disputes, go to www.mololamken.com and follow us on LinkedIn. “Brilliant lawyers with courtroom savvy” – Benchmark Litigation. Copyright MoloLamken LLP 2022.