California Non-Disclosure Agreement

The California Non-Disclosure Agreement (NDA) is a legal contract used for preventing valuable information from being shared with third (3rd) parties, or used to negatively undermine the party that initially shared the information. It can be used in a wide range of scenarios to protect information from being exposed, including discussing a potential business merger, pitching technology to a potential investor, or hiring an employee that will have access to highly secret (and valuable) information. Being an official form, it can be used in the court of law to receive compensation from any damages that resulted from the leaked secret(s).

What is a California Non-Disclosure Agreement?

California Non-Disclosure Agreement is a document used for securing confidential information commonly discussed in business interactions. Although the document has come under fire for being used by some as a means for unjustly keeping people “quiet” about an individual or company’s wrongdoings, the contract is an essential tool in a company’s arsenal. When it is used properly, this document allows for productive deliberation without the fear that the secrets disclosed will be used against the company or person sharing the information.

To provide an example of how the legal instrument can be used, imagine there is a new tech company called “ABC” that is pitching a breakthrough product to a panel of investors. The investors would need considerable confidential information before deciding whether the product garners their money.

However, unless there is an NDA in place, there would be nothing stopping the investors from using the information to their advantage or leaking it. While doing so would endanger the tech company’s (soon to be) advantage in the market in the process, there would be no repercussions for their actions. Whereas, if ABC requires the investors to sign an NDA before hearing their pitch, the NDA would protect their information by legally restricting the investors from sharing it with anyone not specifically listed in the contract.

Trade Secret Law

In 1979, the Uniform Trade Secrets Act (UTSA) was enacted to make trade laws more universal between all of the states. The majority of states adopted the law, although its interpretation varies from state to state. The following list highlights California’s Uniform Trade Secrets Act broken down section by section:

  • § 3426: The Act’s title
  • § 3426.1: Gives the definitions for commonly used legal terms
  • § 3426.2: States when an injunction can be issued
  • § 3426.3: When damages can be recovered
  • § 3426.4: Attorney’s fees
  • § 3426.5: States the court will do all in its power to preserve the trade secret(s) if litigation occurs
  • § 3426.6: The timeframe an individual has to bring up a case of misappropriation
  • § 3426.7: Relation with other California laws
  • § 3426.8: Implies the California version of the UTSA is meant to be similar to the general UTSA
  • § 3426.9: Severability clause
  • § 3426.10: Title 5 does not apply to misappropriation before January 1st, 1985
  • § 3426.11: Relation to other subdivisions/sections