In March 2024, Apple accused one of its former engineers of leaking sensitive information to third parties, including details about unreleased products. This was a breach of the company's Non-Disclosure Agreement (NDA), which the engineer signed before working there.

After nearly a year of legal proceedings, the ex-employee issued a public apology, and Apple dropped its charges.

The ex-employee may have walked away with a warning, but not everyone gets that kind of luck.

So, what happens if you break an NDA?

There’s a plethora of repercussions, whether you’re an individual or a business organization.

In this guide, we'll discuss all the details, including how you can legally get out of an NDA and how to enforce it when someone else is in the wrong.

Also read: The Ultimate Guide to NDAs

TLDR: Here are major points covered in this article:

• Breaking an NDA isn’t usually a crime, but it can attract criminal charges if its connected to illegal activities or government contracts.
• Breaking an NDA can result in financial penalties, loss of reputation, job loss, and other far-reaching consequences.
• You can legally exit an NDA by getting written permission, proving the info you want to share isn’t confidential, or challenging the NDA in court.
• If someone breaks your NDA, you can enforce it by issuing a cease-and-desist letter, suing, or reaching an agreement with them. If accused of violating an NDA, consult a lawyer, avoid quick responses, and attempt to resolve the issue before litigation.
• Request a free demo to see how SpotDraft can help you draft, review, and manage effective NDAs.

Is it a crime to violate a Non-Disclosure Agreement?

A Non-Disclosure Agreement (NDA) is a civil contract. So, breaking one is generally not considered a criminal offense. If you violate an NDA, the other party (usually an employer or business partner) can sue you for damages or try to get an injunction to stop you from disclosing more sensitive information.

However, there are a few scenarios where breaking an NDA can lead to criminal penalties:

• If a court issues an injunction to stop breaching an NDA, and you violate this order, it can translate into contempt of court claims, which can lead to criminal charges.
• If you break an NDA related to a government or military contract, it may be construed as espionage or a national security violation.
• You could face criminal penalties if you leverage information protected by an NDA to facilitate illegal activities like insider trading.

Requirements for a valid NDA

An NDA is a legal contract that exists for one primary purpose: to protect trade secrets, intellectual property, and other confidential information. But for an NDA to actually hold up in court, it needs to meet the following requirements:

1. The NDA must spell out what both parties consider confidential. Is it a customer list? Product ideas? Prototypes? Etc. You should also clarify what isn’t confidential to avoid confusion.
2. Make sure the agreement clarifies who's sharing the private information (the disclosing party) and who's getting access to it (the receiving party). For added protection, include a non-use policy so that even if there's a leak, you can stop third parties from benefiting from the disclosure.
3. The NDA must explain what can and cannot be done with the confidential information.
4. It must explain how long the recipient must keep this information undisclosed.
5. It must outline penalties for anyone who breaks the NDA agreement.
6. The NDA must highlight which state or country’s law will apply in case of disputes and where legal proceedings will take place.

Source: J.D. Houvener via LinkedIn

Penalties for violating an NDA

If you break an NDA (or any legally binding contract for that matter), the aggrieved party can take legal action against you. If the court finds you guilty, you could face severe penalties, including but not limited to:

#1 Financial damages

If the breach leads to any form of monetary loss, the court may order you to provide financial compensation to the aggrieved party for lost business opportunities, customers, or competitive advantage. You might even be held responsible for the costs of fixing the damages.

#2 Liquidated damages

Some NDAs contain a section outlining the penalty for breaches. You may be required to pay a few thousand dollars or hundreds of thousands, depending on the importance of the information and the potential impact of a breach.

Note that this is different from financial damages as it is “predetermined” within the contract. Financial damages aren’t fixed but are determined by the court after assessing the financial impact of the contract breach.

#3 Legal costs

In some cases, the court may hold you responsible for paying all legal fees associated with the litigation, for yourself and the aggrieved party.

Also read: What is a Unilateral Non-Disclosure Agreement (NDA)? (+ Free Template)

Consequences of violating an NDA

Breaking an NDA doesn't always end with legal penalties. Your career, reputation, and even relationships might take a hit, the moment you make a decision like that.

#1 Employment termination

Companies take NDA violations seriously. You could lose your job if you're caught disclosing NDA-protected information to unauthorized parties. In some industries, this single act might make it harder to land a new job.

#2 Reputational damage

Whether you're a business owner or an employee, you don't want to be known as someone who violates NDAs. Once your reputation takes a hit, word spreads fast. Employers may hesitate to hire you, clients may avoid working with you, and business partners may cut ties.

In today’s business world, where trust is everything, one NDA breach can follow you for years, and gaining back your credibility will be back-breaking work.

#3 Loss of business opportunities

Businesses want to work with individuals and firms they can trust with confidential information. Breaking an NDA could sever existing business relationships and even make it difficult to land future deals.

Once your reliability becomes questionable, potential investors and collaborators may hesitate to work with you, ultimately limiting your growth and opportunities in the industry.

#4 Loss of competitive advantage

As a business, if you get caught leaking confidential information either intentionally or through negligence, you risk losing your competitive edge.

Competitors will have a field day poaching your existing customers, business partners, and clients. This can set your business back years or even force it out of the market altogether.

Source: Jamal E. Jackson via LinkedIn

How to get out of an NDA

Let’s say you suddenly feel an NDA is too restrictive and unfair. Or perhaps, your situation has changed, and now you want to get out of the NDA.

How do you go about it? Here’s what you can do.

#1 Review the terms thoroughly

Before you assume you’re stuck, go back and read the fine print. Many NDAs have time limits, check to see if yours has already run its course.

Also, look at the language of the NDA. If it is too broad or vague, you might have a chance to argue your way out. A lawyer can help you ascertain whether or not the NDA can be challenged on such grounds.

Next, read through the conditions for termination. Some NDAs allow you to get out under certain conditions. For instance, if the information covered in the NDA has become publicly known, it isn't your responsibility anymore.

Also read: How to Review Non-Disclosure Agreements (NDAs)

#2 Get the other party’s permission

This is the most straightforward way out: just ask. If you feel the NDA no longer serves a purpose, you can talk with the other party to release you from it in writing.

This is common in business deals that don’t move forward or partnerships that end on good terms.

#3 Prove the information isn’t confidential

You may reliably argue that the NDA doesn't apply to what you want to say if you can prove that the details you wish to disclose are:

• Public domain (already available online, in news reports, or industry discussions).
• Things you knew before signing the NDA.
• Independently discovered by someone else.

#4 Challenge the NDA in court

In extreme cases, you might have to slug it out in the court. Not all NDAs are enforceable, and there are a few grounds to challenge them.

For instance, if the NDA stops you from working in your industry, it can be construed as an unfair restriction. If the NDA can be connected to illegal activity, you’ll have an easy way out.

Also, you might have a case if you can prove that you signed the NDA under pressure or without enough time to review it.

Also read: Clickwrap NDA: Everything you Need to Know

How to enforce an NDA

Imagine waking up to the news that one of your suppliers has just leaked your unreleased product specs, manufacturing costs, and supply chain details to a third party.

Now your competitors know your manufacturers and have a rough idea of what you pay them. 

This is a mess that no business ever wants to deal with. But in a situation like this, what should be your next line of action?

“Core to any strategy to maintain trade secrets is ensuring you have several key agreements in place and that you regularly review and update those documents as circumstances warrant.  First, courts will want to see such agreements in place as part of its analysis of whether the company took the proper steps to maintain confidentiality.”

‍~ Sterling Miller via CEO and Senior Counsel for Hilgers Graben PLLC
Trade Secrets and Protecting Your Company

#1 Gather all the evidence you can

Before you take any major action, start by confirming the situation and gather all the evidence you can about the breach of the NDA.

Double-check your NDA’s terms, and identify what was leaked, who leaked it, and who now has access to the leaked information.

If you can, document everything: emails, messages, or anything that proves the breach happened. The more evidence you have, the stronger your position will be.

#2 Contact the perpetrator

After gathering your evidence, reach out to the person or company responsible. Find out if the leak was an accident, and if it was intentional, find out what their motivation was.

If the violation was unintentional, you might be able to resolve things quickly with a warning or a formal cease-and-desist letter. But if it’s clear that the breach was intentional and harmful, you’ll need to take stronger action.

#3 Evaluate the damage

How much harm has the breach caused? Has the leaked information put your business at serious risk, or is it something you can control? 

Depending on the severity of the impact, you may need to run a thorough damage control procedure. This could mean renegotiating contracts, securing new suppliers, or revamping your overall business strategy.

In extreme cases, you may need to issue a statement to reassure your customers, clients, and partners.

#4 Consider legal action

If the breach led to serious damages, you may need to take the violator to court.

If found guilty, the court may issue an injunction to stop the breacher from doing more damage. You can also get them to pay for any monetary damages you’ve suffered as a result of the breach.

If you included a non-use policy in your NDA, you can also go after the third parties that benefited from the disclosure.

#5 Strengthen future NDAs

Regardless of the outcome of your damage control procedures, you need to substantially minimize the chances of future breaches.

Revisit your NDA policies and tighten up any loopholes that may pose an issue. Add more stringent penalties, get more specific about what’s confidential, and include a non-use policy if you haven’t done that before.

Also read: NDA vs. Confidentiality Agreement

How to respond to an NDA violation claim

Assuming you’re on the wrong side of an NDA violation claim. How should you respond?

#1 Don’t respond immediately

The first rule is to never issue a quick response, especially in writing. Anything you say could be used against you. Just stay calm and avoid discussing the matter with anyone except your legal counsel.

Your goal at this stage should be gathering evidence and planning a good response. 

#2 Consult your lawyer

Your lawyer has more insight about cases like this than you do. So it’ll be wise to rub minds with them. Let them analyze the NDA you’ve been accused of breaching.

They’ll try to find ways to defend you or proffer solutions that’ll give you an easier way out. This can mean proving that the NDA was vague or too restrictive. With better research, they might find a way to prove that the information you shared was already public knowledge or fell under an exception in the agreement.

#3 Try to reach a resolution

If possible, work with your lawyer to settle things before they deteriorate into a full-blown legal faceoff. Many times, the aggrieved party is more concerned about safeguarding their confidential information than fighting with you.

Your lawyer can help craft a response that clears up any misunderstandings, pushes back on weak claims, or finds common ground. If you did slip up, there may still be ways to fix things, like reaffirming your commitment to confidentiality, agreeing to certain corrective actions, or negotiating a fair settlement to keep things from worsening.

Source: Gabriel Shaoolian via LinkedIn

Is breaking an NDA worth it?

Considering the potential aftermath of breaking an NDA, it’s rarely worth the risk. If you feel an NDA is too restrictive or unfair, your best bet is to reach a mutual resolution with the other party.

This will save you the trouble of dealing with public scrutiny, legal battles, and complicated damage control.

Want to learn how you can draft, review, and manage NDAs with AI-powered technology? Click here to request a demo with SpotDraft.

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