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nondisclosure agreement (NDA)

A nondisclosure agreement—also known as an NDA, a confidentiality agreement, or a confidential disclosure agreement (CDA)—is a legally enforceable contract between persons or entities who want to share confidential, proprietary information with each other without the other party or parties to the agreement (1) using the information shared for a purpose other than the intended purpose (as defined in the NDA) or (2) sharing the confidential, proprietary information with persons or entities who are not parties to the NDA.

Nondisclosure agreements are generally interpreted and enforced according to the contract law of the state where one or both parties are located, and may governed by the law of the state the parties’ agreed to in a choice of law provision in the NDA.

In Texas, nondisclosure agreements (NDAs) are recognized and enforceable contracts that are used to protect confidential and proprietary information. They are governed by Texas contract law, which requires that the agreements meet certain criteria to be legally binding, such as having a lawful purpose, mutual consent, and consideration. The parties to an NDA must agree not to use the shared information for any purpose other than the one intended and specified in the agreement, and not to disclose it to any third party not involved in the agreement. If a party breaches an NDA, the other party may seek legal remedies, which can include damages or an injunction to prevent further breaches. Additionally, the parties can specify within the NDA that the laws of a particular state will govern the agreement, even if that state is not Texas. This is known as a 'choice of law' provision and is generally respected by Texas courts as long as the chosen state's laws do not contradict Texas public policy.

Texas Statutes & Rules

Federal Statutes & Rules

Defend Trade Secrets Act of 2016 (18 U.S.C. § 1836)
This federal statute is relevant to NDAs as it provides a federal cause of action for trade secret misappropriation, which can be a concern addressed within an NDA.

The Defend Trade Secrets Act (DTSA) allows an owner of a trade secret that is misappropriated to bring a civil action in federal court. Misappropriation includes the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means, or the disclosure or use of a trade secret without consent by a person who used improper means to acquire the trade secret or at the time of disclosure, knew or had reason to know that the trade secret was derived from or through a person who had used improper means to acquire it. The DTSA does not preempt state law, so it acts in conjunction with state-level trade secret protections. Under the DTSA, a trade secret is defined broadly to include all forms and types of financial, business, scientific, technical, economic, or engineering information that the owner has taken reasonable measures to keep secret and that derives independent economic value from not being generally known. The DTSA also provides for remedies such as injunctions and damages for the actual loss caused by the misappropriation and for any unjust enrichment.

Economic Espionage Act of 1996 (18 U.S.C. § 1831-1839)
This statute is relevant to NDAs as it criminalizes the theft or misappropriation of trade secrets, which is often the type of information protected by NDAs.

The Economic Espionage Act (EEA) makes it a federal crime to steal or misappropriate trade secrets with the intent or knowledge that the offense will benefit a foreign government, foreign instrumentality, or foreign agent. The EEA also criminalizes the theft of trade secrets that are related to or included in a product that is produced for or placed in interstate or foreign commerce, with the intent to convert the trade secret to the economic benefit of anyone other than the owner. The EEA defines a trade secret similarly to the DTSA and includes a range of information, such as formulas, patterns, compilations, programs, devices, methods, techniques, or processes. Violations of the EEA can result in severe penalties, including imprisonment for individuals and fines for individuals and organizations. The EEA also allows for civil remedies, such as injunctions and damages, for violations of the act.

Uniform Trade Secrets Act (UTSA) - Adopted by various states
While not a federal statute, the UTSA is relevant as it has been adopted in some form by most states and provides a framework for the protection of trade secrets, which are often the subject of NDAs.

The Uniform Trade Secrets Act (UTSA) is a model law drafted by the Uniform Law Commission to provide a legal framework for the protection of trade secrets. It has been adopted in various forms by the majority of U.S. states. The UTSA defines trade secrets and provides a cause of action for their misappropriation. Under the UTSA, a trade secret is information that derives independent economic value from not being generally known or readily ascertainable by others and is the subject of efforts to maintain its secrecy. Misappropriation includes the acquisition, disclosure, or use of a trade secret by someone who knew or had reason to know that the trade secret was acquired through improper means. The UTSA allows for both injunctive relief and monetary damages, which can include actual losses, unjust enrichment, and in cases of willful and malicious misappropriation, exemplary damages and attorney's fees.