Tech companies heavily rely on intellectual property and trade secrets. Most of them stick to some data breach prevention frameworks, including a confidentiality clause in an NDA (non-disclosure agreement). A software NDA outlines confidentiality terms and consequences of unauthorized disclosure within software development projects.
An NDA provides a legal basis to hold the disclosing party accountable in case of a breach. When a confidentiality clause is breached, you get the tool to address that breach and reduce damages. See how to activate that tool ⬇️
How to Enforce a Non-Disclosure Agreement
Acting quickly according to the plan below demonstrates your commitment to protecting your intellectual property and sends a strong message to all parties about the seriousness of confidentiality.
1. Confirm the Breach
- Identify the Source and Confidentiality Status
Determine who was responsible for the breach of the confidentiality clause. Trace the flow of information to establish whether it was intentional, accidental, or due to carelessness. Verify that the data is properly covered by the NDA. For instance, if the information was already public or not explicitly marked confidential, it may not qualify.
- Gather Evidence
Collect all relevant emails, documents, witness statements, and any other materials that demonstrate how the breach occurred and its consequences. This evidence base will be your trump in case of a legal proceeding.
- Review the NDA Terms
Examine the specific terms of the non-disclosure agreement to understand the obligations of each party and any provisions related to breaches. Look for clauses that outline remedies or penalties for violations, as well as any procedures for resolving disputes.
2. Access the Extent of Damage
It’s a good idea to start by evaluating whether the breach has harmed the customers’ trust or the brand image. If the leaked information affects clients or partners, it could lead to third-party claims, adding another layer of potential impact.
Next, it’s reasonable to quantify any financial losses, such as lost revenue, diminished competitive advantage, or costs related to damage control efforts. Litigation to enforce NDAs can be prohibitively expensive, especially for startups.
You also need to know if the breach has exposed cybersecurity vulnerabilities or compromised key strategies.
3. Consult Legal Counsel
An attorney experienced in contract law can consult you on your legal rights, potential remedies, and the best approach for your situation. For instance, if you have to assess the enforceability of the NDA under the applicable jurisdiction. Some jurisdictions may have stricter limitations on the scope or duration of NDAs.
4. Send a Cease-and-Desist Letter
If you believe that a breach has occurred, your attorney may recommend sending a cease-and-desist letter to the offending party. This letter:
- formally requests that they stop disclosing or using your confidential information;
- may serve as a precursor to further legal action if necessary.
5. Consider Mediation or Arbitration
Many NDAs mandate resolving disputes through mediation or arbitration instead of litigation, which can be more cost-effective and quicker than going to court.
6. File a Lawsuit if Necessary
If informal resolutions fail, you may need to file a lawsuit against the breaching party. Your attorney will help you prepare your case, which may seek damages for any losses incurred due to the breach or injunctive relief to prevent further disclosures.
Steps to Prevent a New NDA Breach
To minimize the risk of breaches occurring in the first place, it’s crucial to implement strategies that ensure all parties involved adhere to NDA terms.
1. Take Organizational Measures
- Clear Communication
Make sure everyone knows their responsibilities under the NDA before they sign it. Offer training or materials that explain what confidential information is and how to take care of it.
- Strong Onboarding and Offboarding Processes
During onboarding, ensure employees sign NDAs and confidentiality clauses. During offboarding, retrieve all company devices, revoke access to systems, and remind departing employees of their obligations.
- Regular Audits
After a non-disclosure agreement is signed, continue monitoring compliance through regular check-ins with involved parties about their understanding of confidentiality obligations and any challenges they may face in adhering to them.
2. Use Technology Safeguards
- Encryption and Limited Access
Secure sensitive data with encryption and restrict access to key individuals. Regularly audit access logs to detect suspicious activity.
- Secure Collaboration Tools
Use tools with built-in security measures, such as end-to-end encryption for communications and file sharing.
- Data Loss Protection Systems
Implement DLP systems to monitor and prevent unauthorized data sharing or downloads.
3. Rethink NDAs and Confidentiality Clauses
- Include Consequences in NDAs
Clearly outline the consequences of breaching an NDA within the agreement itself. This could involve monetary penalties, legal measures, or dismissal of employees who breach confidentiality agreements.
- Draft Tailored Agreements
Tailor your NDAs to suit the specific needs of each partnership or transaction. For example, distinguish between unilateral and mutual NDAs based on whether one or both parties will share sensitive information.
- Use Comprehensive Clauses
Include clauses that address data handling, storage, and return after termination of the agreement. Consider specifying a duration for confidentiality obligations to avoid enforceability issues
4. Consider Legal Protections Beyond NDAs
- Intellectual Property (IP) Rights
Use patents, copyrights, and trademarks to protect unique creations like software, branding, and innovations. IP protections provide enforceable ownership and can deter misuse.
- Confidentiality Clauses in Employment Contracts
Embed specific confidentiality and non-compete clauses within employment agreements. These can outline stricter rules than standalone NDAs and reinforce consequences for violations.
- Work-for-Hire Agreements
Clearly define who owns the intellectual property developed by employees or contractors. This prevents disputes over who owns an invention, code, or design.
Only about 25% of NDA breaches are successfully litigated. NDAs serve as a strong starting point but aren’t enough alone. Combining them with robust legal frameworks, confidentiality clauses, technical safeguards, and proactive organizational measures ensures comprehensive protection against breaches.
