A nondisclosure agreement and misappropriation of trade secrets

| Apr 12, 2021 | Trade Secret Litigation |

The purpose of a nondisclosure agreement, or NDA, is to protect trade secrets.

If there is a breach of the NDA, the employer harmed may be able to recover unjust enrichment damages due to misappropriated trade secrets.

Remedies available

If a breach of an NDA occurs, the employer who suffers a loss may be entitled to monetary damages as well as punitive damages. In the case of misappropriated trade secrets, the court will base unjust enrichment damages on the amount of profit realized by the breaching party. As explained in the Defend Trade Secrets Act, or DTSA, this means “damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss.”

Liability under the DTSA

Liability for misappropriation of trade secrets under the DTSA can occur in one of two ways: through disclosure or use of a trade secret without the rightful owner’s consent, or through the acquisition of a trade secret by improper means.

Improper means

Under the DTSA, the term “improper means” refers to “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” This is the same definition found in the Uniform Trade Secrets Act of 1979, which addresses the “uncertainty concerning the parameters of trade secret protection” through a uniform trade secret law.

Similarity of evidence

In legal action seeking unjust enrichment damages following an NDA breach,  courts recognize that there may be little direct evidence showing a defendant misappropriated a trade secret. Under the UTSA, the courts have therefore held that a plaintiff may use a “similarity” of evidence to that recognized under copyright law.

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