📋 Overview: NDA Breach and Trade Secret Misappropriation

When someone violates a non-disclosure agreement (NDA) or misappropriates your trade secrets, California law provides powerful remedies. You may have claims under both contract law (for breaching the NDA) and the California Uniform Trade Secrets Act (CUTSA) if the disclosed information qualifies as a trade secret. This guide helps you understand your rights and craft an effective demand letter.

When to Use This Guide

Use this guide if someone has:

🔒 Breached an NDA

Disclosed confidential information in violation of a signed non-disclosure agreement

🔑 Misappropriated Trade Secrets

Acquired, disclosed, or used your trade secrets through improper means

💼 Former Employee Disclosure

Ex-employee shared proprietary information with a competitor or new employer

🤝 Business Partner Breach

Partner, vendor, or consultant violated confidentiality obligations

Types of Confidential Information Protected

📊 Trade Secrets Under CUTSA

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Under California Civil Code Section 3426.1, a trade secret is information that: (1) derives independent economic value from not being generally known to the public or competitors, and (2) is subject to reasonable efforts to maintain its secrecy. This can include formulas, patterns, compilations, programs, devices, methods, techniques, or processes.

Examples: Customer lists with unique information, manufacturing processes, software source code, chemical formulas, pricing strategies, marketing plans, and business methods.

📄 Contractual Confidential Information

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An NDA can protect information beyond what qualifies as a trade secret. The parties can define "Confidential Information" broadly in the agreement to include any proprietary information shared during the relationship.

Examples: Business plans, financial projections, strategic initiatives, personnel information, vendor relationships, and any information marked as confidential under the agreement.

💻 Intellectual Property

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NDAs often protect information that may also be subject to patent, copyright, or trademark protection. Disclosure before filing a patent application can destroy patent rights, making NDA enforcement especially critical.

Examples: Inventions before patent filing, unpublished creative works, proprietary software, and branding strategies.

👍 What You Can Recover

  • Injunctive relief - Court order stopping further disclosure or use
  • Actual damages - Lost profits and other economic harm caused by the breach
  • Unjust enrichment - Profits the breaching party gained from misuse
  • Reasonable royalty - If actual damages are hard to prove
  • Exemplary damages - Up to 2x actual damages for willful misappropriation
  • Attorney fees - Available for willful misappropriation or bad faith claims

⚠ Statute of Limitations

California has strict time limits for filing NDA breach and trade secret claims:

  • CUTSA claims: 3 years from discovery of misappropriation (Civil Code 3426.6)
  • Written contract breach: 4 years from breach (CCP 337)
  • Oral contract breach: 2 years from breach (CCP 339)

See our guide on California breach of contract statute of limitations for more details.

🔍 Evidence: Proving Disclosure and Damages

Gather these documents and evidence to support your NDA breach and trade secret misappropriation claims.

Proving the Breach

📄 NDA and Contract Documents

  • ✓ Signed NDA with all exhibits and amendments
  • ✓ Employment agreement with confidentiality provisions
  • ✓ Definition of Confidential Information in the agreement
  • ✓ Term and survival provisions of the NDA

📩 Evidence of Disclosure

  • ✓ Emails, texts, or messages showing disclosure
  • ✓ Documents or files sent to unauthorized parties
  • ✓ Witness statements from those who received information
  • ✓ Competitor products showing use of your secrets
  • ✓ IT forensics showing file access or copying

🔒 Trade Secret Status

  • ✓ Documentation of economic value of the information
  • ✓ Evidence of secrecy measures (passwords, access controls)
  • ✓ Confidentiality markings on documents
  • ✓ Employee training on confidentiality
  • ✓ Limited access policies and enforcement

💰 Damages Documentation

  • ✓ Lost sales or contracts due to disclosure
  • ✓ Competitor gains attributable to your information
  • ✓ Cost to develop the misappropriated information
  • ✓ Licensing or royalty comparables
  • ✓ Expert valuation of trade secrets

Proving Improper Means (CUTSA)

🔒 Theft or Bribery

Physical or electronic theft of documents, files, or data containing trade secrets

💻 Unauthorized Access

Hacking, exceeding authorized computer access, or bypassing security measures

👤 Breach of Duty

Disclosure by someone with a duty of confidentiality (employee, contractor, partner)

💬 Inducing Breach

Encouraging or assisting another to breach their confidentiality obligations

🔒 Preserve Digital Evidence

If you suspect an employee or contractor has misappropriated trade secrets, immediately:

  • Preserve all computer and device logs showing file access
  • Review email and cloud storage accounts for unauthorized transfers
  • Check USB and external device connection logs
  • Consider engaging a digital forensics expert
  • Issue a litigation hold to prevent evidence destruction

💰 Remedies Available

California law provides comprehensive remedies for NDA breach and trade secret misappropriation, including both injunctive relief and monetary damages.

Injunctive Relief

🔒 Stopping Ongoing Disclosure

Under Civil Code 3426.2, courts may issue injunctions to:

  • Prevent disclosure - Prohibit the defendant from disclosing trade secrets to others
  • Prevent use - Prohibit the defendant from using trade secrets in their business
  • Require return - Order return or destruction of documents containing trade secrets
  • Affirmative relief - Require defendant to take steps to prevent further harm

Injunctions can extend beyond the life of the trade secret to eliminate unfair head start or commercial advantage.

Monetary Damages

Damage Type Description
Actual Damages Lost profits directly caused by the misappropriation. Requires proving causation and calculating the economic harm you suffered.
Unjust Enrichment Profits the defendant gained from using your trade secrets, not duplicative of actual damages. Available even if you cannot prove lost profits.
Reasonable Royalty If actual damages and unjust enrichment are hard to prove, courts may award what a willing buyer would pay for the trade secret.
Exemplary Damages Up to 2x actual damages for willful and malicious misappropriation under Civil Code 3426.3(c).
Contractual Damages Liquidated damages specified in the NDA, if enforceable under California law.

Attorney Fees

✅ Fees for Willful Misappropriation

Courts may award reasonable attorney fees if misappropriation was willful and malicious (Civil Code 3426.4)

✅ Fees for Bad Faith Defense

Available if defendant resisted injunction in bad faith or made frivolous arguments

⚠ Fees Against Plaintiff

Defendant may recover fees if plaintiff brought trade secret claim in bad faith

📄 Contractual Fee Provision

If the NDA includes an attorney fee provision, the prevailing party may recover fees for contract claims

📊 Sample Damages Calculation

Example: Customer List Misappropriation by Former Employee

Lost profits from diverted customers $350,000
Defendant's profits from using customer list $175,000
Cost to develop customer relationships $85,000
Compensatory damages $610,000
Exemplary damages (2x for willful conduct) $1,220,000
Attorney fees (if willful) $150,000
POTENTIAL TOTAL RECOVERY $1,980,000

💡 TRO and Preliminary Injunction

In urgent cases, you can seek a Temporary Restraining Order (TRO) immediately upon filing suit, followed by a preliminary injunction hearing within weeks. California courts frequently grant injunctive relief in trade secret cases to prevent irreparable harm. The demand letter can set the stage by documenting the urgency and threatened harm.

📝 Sample Language

Copy and customize these paragraphs for your California NDA breach demand letter.

Opening Paragraph
This letter constitutes a formal demand on behalf of [COMPANY NAME] regarding your breach of the Non-Disclosure Agreement dated [NDA DATE] and misappropriation of trade secrets in violation of the California Uniform Trade Secrets Act, Civil Code Section 3426 et seq. We have evidence that you have disclosed and/or used [COMPANY NAME]'s confidential and proprietary information in violation of your contractual and statutory obligations.
NDA and Relationship Background
On [DATE], you entered into a Non-Disclosure Agreement with [COMPANY NAME] in connection with [DESCRIBE RELATIONSHIP - e.g., your employment as a software engineer / our discussions regarding a potential business partnership / your engagement as a consultant]. Under Section [X] of that Agreement, you agreed to maintain the confidentiality of all Confidential Information and not to disclose or use such information except as authorized by [COMPANY NAME]. The Agreement expressly covers [DESCRIBE CATEGORIES - e.g., customer lists, pricing information, product designs, source code, and business strategies].
Description of Breach
We have obtained evidence that on or about [DATE], you [DESCRIBE SPECIFIC BREACH - e.g., transmitted confidential customer data to your new employer / disclosed our proprietary manufacturing process to a competitor / used our trade secret algorithms to develop a competing product]. Specifically, [PROVIDE DETAILS OF EVIDENCE - e.g., email records show you forwarded files containing our customer database to your personal email account on your last day of employment / a former colleague at your new company informed us that you shared our pricing models / your new product clearly incorporates features that could only have been derived from our proprietary designs].
Legal Claims - CUTSA
The information you disclosed and/or misused constitutes trade secrets under California Civil Code Section 3426.1. This information derives substantial independent economic value from not being generally known to our competitors and we have taken reasonable measures to maintain its secrecy, including requiring NDAs, limiting access, and implementing security protocols. Your conduct constitutes misappropriation under Civil Code Section 3426.1(b), entitling [COMPANY NAME] to injunctive relief, actual damages, unjust enrichment, and exemplary damages up to twice the amount of compensatory damages for willful and malicious misappropriation.
Legal Claims - Contract Breach
Your conduct also constitutes a material breach of the Non-Disclosure Agreement. Under California law, [COMPANY NAME] is entitled to recover all damages caused by your breach, including lost profits, consequential damages, and, pursuant to Section [X] of the Agreement, reasonable attorney fees and costs incurred in enforcing its rights. The four-year statute of limitations for written contract claims provides ample time to pursue these claims.
Demand for Relief
[COMPANY NAME] hereby demands that you take the following actions within [14/30] days of this letter:

1. Immediately cease all disclosure and use of [COMPANY NAME]'s Confidential Information and trade secrets;

2. Return or destroy all documents, files, and materials containing or derived from [COMPANY NAME]'s Confidential Information, and provide written certification of such return or destruction;

3. Identify all persons or entities to whom you have disclosed Confidential Information;

4. Pay damages in the amount of $[AMOUNT] representing our actual damages and your unjust enrichment from the misappropriation;

5. Provide written assurance that you will comply with all confidentiality obligations going forward.
Consequences of Non-Compliance
If we do not receive a satisfactory response by [DEADLINE DATE], [COMPANY NAME] will have no choice but to pursue all available legal remedies, including but not limited to: (1) filing a lawsuit for trade secret misappropriation under CUTSA and breach of contract; (2) seeking a temporary restraining order and preliminary injunction to immediately halt your unauthorized use and disclosure; (3) pursuing exemplary damages of up to twice the compensatory damages for your willful and malicious conduct; and (4) seeking recovery of attorney fees under Civil Code Section 3426.4. We are also evaluating whether your conduct constitutes criminal trade secret theft under California Penal Code Section 499c or federal law.

Time is of the essence. Every day of continued misappropriation increases your liability and [COMPANY NAME]'s damages.
Preservation Notice
This letter also serves as formal notice to preserve all documents and electronically stored information relating to [COMPANY NAME], its Confidential Information, the Non-Disclosure Agreement, and your employment or relationship with [COMPANY NAME]. You are legally obligated to preserve this information and any destruction, alteration, or concealment of relevant evidence may result in adverse inferences, sanctions, and potential criminal liability for spoliation.

🚀 Next Steps

What to do after sending your NDA breach demand letter.

Expected Timeline

Days 1-7

Recipient receives letter and consults with legal counsel

Days 7-14

Initial response - compliance, negotiation offer, or denial

Days 14-30

Settlement negotiations or preparation for litigation

If They Don't Comply

  1. Seek Emergency Injunctive Relief

    If ongoing misappropriation threatens irreparable harm, immediately file for a TRO and preliminary injunction in California Superior Court. Courts regularly grant emergency relief in trade secret cases to prevent further disclosure.

  2. File a Lawsuit

    Prepare and file a complaint for trade secret misappropriation under CUTSA and breach of contract. Include claims against any third parties who received or are using your trade secrets with knowledge of the misappropriation.

  3. Conduct Expedited Discovery

    Seek early discovery to identify the scope of disclosure and preserve evidence. Subpoena the defendant's new employer or business partners if they received the misappropriated information.

  4. Consider Federal Court

    The Defend Trade Secrets Act (DTSA), 18 U.S.C. 1836, provides a federal cause of action for trade secret misappropriation if the trade secret is related to a product or service in interstate commerce. Federal court may offer procedural advantages in some cases.

⚠ Act Quickly to Preserve Rights

  • Injunctions: Delay may defeat emergency relief - courts expect prompt action
  • Evidence: Digital evidence can be deleted or modified quickly
  • Damages: Ongoing disclosure increases harm and complicates damages proof
  • Statute of limitations: Clock may be running on older disclosures

Need Legal Help?

Trade secret and NDA cases require swift action and specialized expertise. Get a 30-minute strategy call with a business litigation attorney to evaluate your case and discuss next steps.

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