What happens if you break an NDA?

Explainer
October 28, 2022
min

Non disclosure agreements (NDAs) are among the most common contracts signed by employees and prospective business partners. But how often are they broken, and what happens if you do break an NDA? Let’s find out.

What does ‘breaking an NDA’ mean?

An individual will have broken an NDA if they act in a way that conflicts with the obligations and terms they had agreed to and were legally bound by in the non disclosure agreement they signed. 

Since non disclosure agreements typically prohibit the sharing of classified and proprietary information, disclosing that information to an external party puts you in breach of contract. In other words, you will have violated your NDA.

But what actually happens if you do disclose protected information? What consequences can you expect from breaking a unilateral NDA?

What happens if you break an NDA? 

Well, breaching an NDA is a serious problem. It's an action that can have serious consequences, both personally, and for your company, if you signed with signatory authority.

Unfortunately, this is true whether the NDA breach was intentional or not. Here’s what a typical process looks like if you break an NDA:

1. Investigation 

Upon finding out about the breach of an NDA, the first action most companies take is to launch a formal investigation. This will involve finding concrete evidence about which information was leaked, who it was leaked to, and most importantly, who it was leaked by. 

An early stage of this investigation will also involve reviewing the signed Non Disclosure Agreement to assess whether any breach has occurred at all, based on the contract’s wording. 

The investigation is usually conducted by the HR and legal teams, as well as any relevant security teams within the company if the breach involved gaining unauthorised access to information. 

It can be a lengthy process, but it needs to be a thorough one as accusing an employee or partner or breaking an NDA is also a serious decision. 

2. Assess legal action 

What happens next will depend on the outcome of the investigation. If it could not be proven that an individual did break their NDA, then the company will drop the case. 

However, if there is enough evidence to suggest that a breach did occur and that it can be traced back to one or more individual, the company may decide to make a legal claim.  When assessing a legal claim the individual or company may consider the following things:

  • How serious the breach of confidentiality was (and the impact of it)
  • Whether there are any financial ramifications of the breach
  • Whether the breach was intentional or accidental  
  • Whether it is in the interest of the company to sue 

3. Check for exceptions 

Although the terms contained within an NDA or confidentiality agreement are usually strict, there are some exceptions to non disclosure requirements. What these are depends on the governing jurisdiction and the terms of your NDA.

Examples of this include where the NDA has expired, or where there was criminal wrongdoing. There are also some exceptional circumstances outlined within the Public Interest Disclosure Act that may be relevant. 

While these may support your case if you’ve been found to have breached confidentiality, you should always consult with a lawyer before making the decision to break an NDA. 

In the instance where an exception does apply, you should seek legal advice as to how to rely on this in the event that the offended company or person does pursue legal action.

4. Suing for breach of contract

If the affected party does decide to sue for the violation of an NDA, it’s likely that both parties will need to seek legal advice and enter court proceedings. From there, the courts will assess whether an NDA has been broken and decide on an appropriate remedy. 

What are the remedies for breach of an NDA?

If the affected party is successful in suing the breaching party, it’s likely that they’ll be awarded some kind of compensation for the breach. This will usually be provided in the form of damages or an injunction.

These are called remedies, and more often than not the remedy for a breach will already have been discussed within the contract. If it hasn’t the court will use their discretion to award a remedy instead. 

These remedies can be ordered in various forms, and we’ve listed the main remedies for a breach of an NDA below. 

1. Damages

Damages are the most common form of remedy for NDA breaches. Damages will most likely be awarded if the affected party has suffered some kind of financial loss as a result of the information being disclosed and they can prove that damage to be consequential. 

Alternatively, if the breaching party intended to sell the information, the court can award damages for the breach of an NDA to reflect the sum they would have received. Within the US and under the Defend Trade Secrets Act 2016, it’s possible for the breaching party to also have to pay the claimant’s legal fees, as well as any large exemplary damages. 

2. Injunctions

There will also be instances where an injunction is most appropriate. For example, if an employee doesn’t have the financial means to afford damages. An injunction will prevent the employee from ever sharing the confidential information again in the future, and there may be some additional restrictions on how they access and share information acquired from the company. 

Want to find out more about NDAs?

If you want to find out more about how you can manage NDAs more efficiently, fill in the form below. If you’re looking for a quick and easy way to generate an NDA, check out our free NDA template

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