If you break a non-disclosure agreement, the other side can sue you for breach of contract, ask a court to order you to stop, and collect money damages that may include both their actual losses and a preset penalty written into the NDA itself. When the information you disclosed qualifies as a trade secret, federal criminal charges with prison time are also on the table. How bad it gets depends on what you shared, how much harm it caused, and whether the NDA is enforceable to begin with.
The Usual Sequence After a Breach
Litigation is slow and expensive, so the first thing you’re likely to receive is a cease-and-desist letter from the other side’s attorney. It identifies the alleged breach, demands you stop any further disclosure, and usually asks for the return of confidential documents. It also warns you about the remedies the other side is prepared to pursue.
A cease-and-desist letter is not a court order, and ignoring it carries no direct legal penalty. But treating it as background noise is a mistake. If the dispute goes to court, the letter becomes evidence that you were warned and kept going, which can push the damages number higher.
From there, the other side can file a lawsuit for breach of contract. In urgent situations, they can also ask the court for emergency relief within days, before you’ve even filed a response.
What You Could Owe
If the case reaches a judgment against you, the money side comes in layers.
The baseline is compensatory damages, which cover the actual financial harm your disclosure caused. Courts measure this as lost profits, the diminished value of the trade secret or confidential information, or cost increases the other side can trace back to the breach.
Many NDAs also contain a liquidated damages clause, which fixes a specific dollar amount owed for each breach regardless of whether actual losses can be proven. These clauses exist because confidentiality harm is often hard to quantify. In commercial NDAs, liquidated damages of $10,000 to $25,000 per violation are common, though the number varies widely with the stakes.
When the conduct was willful or malicious, punitive damages can be stacked on top. Under federal trade secret law, exemplary damages can reach up to twice the compensatory award for willful and malicious misappropriation.1Office of the Law Revision Counsel. 18 USC 1836 – Civil Proceedings Courts frequently order the losing party to pay the winning side’s attorney’s fees and court costs as well, and in complex trade secret cases those bills can outstrip the underlying damages.
Court Orders Telling You to Stop
Money doesn’t undo a disclosure, so most wronged parties focus their energy on getting a court to shut off any further sharing.
When the situation is urgent, a court can issue a temporary restraining order within days of a filing. To get one, the other side has to show a likely winning case on the merits and evidence of immediate, irreparable harm, such as a former employee actively shopping trade secrets to competitors. After a fuller hearing, the TRO can be converted into a preliminary injunction lasting through trial, and after a final ruling, into a permanent injunction.
Despite the name, a permanent injunction doesn’t always last forever. Neither the Defend Trade Secrets Act nor the Uniform Trade Secrets Act sets a fixed duration, and courts have discretion to put time limits in place.2Rutgers Institute for Information Policy and Law (RIIPL). Do Trade Secret Injunctions Last Forever?
Violating a court injunction is contempt of court. That carries its own fines and potential jail time, entirely separate from the NDA case.
When Breaking an NDA Becomes a Crime
Most NDA disputes stay in civil court, where the worst outcome is writing a large check. But when the information you took qualifies as a trade secret, two federal statutes under the Economic Espionage Act come into play, and the penalties depend on who benefits.
If the stolen trade secret was intended to benefit a foreign government or foreign entity, the charge is economic espionage under 18 U.S.C. § 1831. An individual faces up to 15 years in prison and fines up to $5 million.3Office of the Law Revision Counsel. 18 USC 1831 – Economic Espionage Organizations face fines up to $5 million or three times the value of the stolen secret, whichever is greater.
For domestic trade secret theft with no foreign connection, the charge is under 18 U.S.C. § 1832. Individuals face up to 10 years in prison, and organizations face fines up to $5 million or three times the value of the secret.4Office of the Law Revision Counsel. 18 USC 1832 – Theft of Trade Secrets This is the statute that typically applies when a departing employee downloads a client database or walks out with proprietary formulas for a competitor.
A single act of trade secret theft can trigger both a civil suit and a criminal prosecution at the same time.
Defenses That Can Defeat the Claim
Not every breach allegation holds up. Several defenses can beat or weaken a claim against you.
- The information was already public. An NDA only protects confidential information. If what you shared was publicly available when you shared it, or became public through no fault of yours, there’s nothing left to protect.
- Independent discovery. If you learned the information through your own work, publicly available sources, or reverse engineering rather than through the NDA relationship, you haven’t breached. Contemporaneous documentation of your independent path matters a great deal here.
- Vague or overbroad terms. If the NDA defines confidential information so broadly that it would cover essentially all information in an industry, or fails to specify what’s actually protected, a court may find the agreement unenforceable. Agreements that try to lock up general professional knowledge are particularly vulnerable.
- Court-ordered disclosure. If a court, regulatory agency, or subpoena compelled the disclosure, that generally isn’t a breach. The standard practice is to notify the other party promptly, give them a chance to fight or narrow the order, and disclose only what’s legally required.
When an NDA Cannot Be Enforced Against You
Some disclosures are protected by federal law no matter what the NDA says, and this is where people most often misread their exposure.
An NDA cannot stop you from reporting suspected illegal activity to a government agency. The SEC’s Rule 21F-17(a) prohibits any person or company from taking action to prevent someone from communicating with SEC staff about possible securities law violations, including by enforcing or threatening to enforce a confidentiality agreement. The SEC has actively gone after companies whose NDAs, severance agreements, or compliance manuals contained language that could discourage reporting.5Securities and Exchange Commission. Whistleblower Protections
The Defend Trade Secrets Act adds another layer. Under 18 U.S.C. § 1833, you cannot be held criminally or civilly liable under any federal or state trade secret law for disclosing a trade secret in confidence to a government official or an attorney solely to report or investigate a suspected violation of law. The same immunity covers disclosures made in sealed court filings.6Office of the Law Revision Counsel. 18 USC 1833 – Exceptions to Prohibitions If your employer never mentioned this immunity, that is not unusual, but it exists regardless.
The Speak Out Act of 2022 bars courts from enforcing non-disclosure and non-disparagement clauses in disputes involving sexual harassment or sexual assault, as long as the NDA was signed before the dispute arose. An NDA signed as part of a settlement after the dispute surfaced is treated differently.
How Long the Other Side Has to Sue
A breach claim does not stay viable indefinitely. Every state sets a statute of limitations for breach of contract lawsuits. Most states give the wronged party between three and six years to file; a few allow up to ten. The clock typically starts when the breach occurs or when the other side discovers it, depending on the state. If you are on the receiving end of an allegation and the deadline has already passed, that is a complete defense.