Understanding Your Options After an NDA Breach
When someone violates your NDA, the natural first question is: what can I do about it? The answer depends on several factors — the nature of the breach, the terms of your NDA, the jurisdiction, and the type of harm you have suffered. This guide walks through the primary legal remedies available and how to position your NDA for effective enforcement.
Monetary Damages
Actual (Compensatory) Damages
Actual damages compensate you for the financial losses directly caused by the breach. These are the most straightforward type of damages but often the hardest to prove. You must demonstrate:
- Causation — The breach directly caused your financial loss
- Quantification — The specific dollar amount you lost
Examples of actual damages include lost profits from a competitor gaining access to your pricing strategy, reduced company valuation from leaked trade secrets, and the cost of developing replacement technology after proprietary methods were exposed.
Consequential Damages
Consequential damages cover indirect losses that flow from the breach. These might include lost business opportunities, damage to customer relationships, increased cost of operations, or harm to your company's reputation.
Consequential damages can be substantial, but they require a clear causal chain from the breach to the loss. Some NDAs explicitly exclude consequential damages to limit exposure, so check your agreement's terms carefully.
Punitive Damages
Punitive damages are intended to punish particularly egregious conduct and deter future violations. They are not available for ordinary breach of contract claims in most jurisdictions. However, if the breach also constitutes a tort (such as trade secret misappropriation under the Defend Trade Secrets Act), punitive or exemplary damages may be available for willful and malicious conduct.
Under the Defend Trade Secrets Act, courts can award exemplary damages of up to twice the amount of actual damages for willful and malicious trade secret misappropriation. This can significantly increase the financial consequences for an NDA breach involving trade secrets.
Injunctive Relief
Monetary damages alone often cannot adequately address an NDA breach because once confidential information is disclosed, the harm cannot be undone with money. This is where injunctive relief becomes critical.
Temporary Restraining Orders (TROs)
A TRO is an emergency court order that prevents further disclosure or use of confidential information. TROs can be obtained quickly — sometimes within hours — and are crucial for stopping a breach before the information spreads further.
To obtain a TRO, you typically must show:
- Likelihood of success on the merits — Your NDA is valid and a breach has occurred
- Irreparable harm — You will suffer harm that cannot be compensated by money alone
- Balance of hardships — The harm to you outweighs the burden on the breaching party
- Public interest — The TRO serves the public interest (or at least does not harm it)
Preliminary Injunctions
A preliminary injunction provides longer-term protection while the case is being litigated. The standard for obtaining a preliminary injunction is similar to a TRO but involves a fuller hearing where both parties present their arguments.
Permanent Injunctions
If you prevail in the litigation, the court may issue a permanent injunction prohibiting the breaching party from ever using or disclosing your confidential information. Permanent injunctions can also require the return or destruction of all materials containing confidential information.
NDA Language That Supports Injunctive Relief
Many NDAs include a provision acknowledging that a breach would cause irreparable harm and that the disclosing party is entitled to seek injunctive relief without posting a bond. While courts are not bound by such provisions, they can make it easier to obtain an injunction.
Include language in your NDA that the parties acknowledge a breach would cause irreparable harm not adequately remedied by monetary damages, and that the non-breaching party is entitled to seek injunctive relief. This provision significantly strengthens your position when seeking an injunction.
Liquidated Damages
What Are Liquidated Damages?
Liquidated damages are a pre-agreed amount that the breaching party must pay in the event of a violation. They are specified in the NDA itself and eliminate the need to prove actual damages at trial.
When to Use Them
Liquidated damages are particularly useful when:
- Actual damages from a breach would be difficult or impossible to calculate
- You want to simplify enforcement and avoid lengthy damage calculations
- You want to create a clear deterrent against breach
- The parties want certainty about the financial consequences of a violation
Enforceability Requirements
Courts will enforce liquidated damages provisions if they meet two conditions:
- Reasonable estimate — The amount must be a reasonable forecast of damages that would result from a breach at the time the NDA was signed
- Difficult to calculate — Actual damages must be difficult to determine
If the amount is deemed excessive or punitive, courts may strike the provision as an unenforceable penalty. The key is setting an amount that is proportional to the value of the information being protected and the likely harm from a breach.
Attorney's Fees and Costs
Prevailing Party Provisions
Including an attorney's fees provision — where the losing party pays the winning party's legal costs — can be a powerful deterrent against breach and also makes enforcement more economically viable. Without such a provision, each party typically bears its own legal costs, which can make enforcing an NDA prohibitively expensive for smaller businesses.
Fee-Shifting Considerations
Some jurisdictions have specific rules about when attorney's fees can be awarded. In some cases, fee-shifting provisions are enforceable only if they are mutual (both parties are subject to the same provision, not just the receiving party).
Alternative Dispute Resolution
Arbitration
Many NDAs require that disputes be resolved through binding arbitration rather than litigation. Arbitration can be faster, more confidential, and less expensive than court proceedings — all advantages in confidentiality disputes.
Mediation
Some NDAs require mediation as a first step before arbitration or litigation. Mediation is a non-binding process where a neutral third party helps the parties reach a resolution. It is less adversarial and can preserve business relationships.
Strengthening Your NDA's Remedy Provisions
To maximize your enforcement options, include these provisions in your NDA:
- Acknowledgment of irreparable harm — Both parties agree that a breach would cause irreparable harm
- Right to injunctive relief — The non-breaching party can seek injunctions without posting a bond
- Liquidated damages — A reasonable pre-agreed amount for breach
- Attorney's fees — The prevailing party can recover legal costs
- Specific performance — The right to compel the breaching party to fulfill their obligations
- Dispute resolution mechanism — Arbitration, mediation, or litigation, with a specified jurisdiction
Build a Strong, Enforceable NDA
PactDraft helps you create NDAs with robust remedy provisions that give you real enforcement options if a breach occurs. The platform generates agreements tailored to your situation, with clear language about damages, injunctive relief, and dispute resolution. Generate your customized NDA today and ensure your confidential information is backed by meaningful legal protections.