Determines which jurisdiction's laws apply to interpret and enforce the NDA. Critical because trade secret protections, restrictive covenant enforcement, and available remedies vary significantly by state.
A governing law clause (also called "choice of law") specifies which state's or country's laws will be used to interpret the NDA and determine the rights of the parties. This is separate from where disputes will be heard (venue/forum), though they're often addressed together.
This matters because:
Trade Secret Definitions: What qualifies as a trade secret varies by state. Some states have broader definitions than others.
Non-Compete Enforcement: California essentially bans non-competes, while Texas and Florida enforce them more readily. If your NDA includes non-solicitation provisions, the governing law matters enormously.
Remedies Available: Different states have different rules about injunctions, damages, and other remedies.
Contract Interpretation: How courts interpret ambiguous language varies by jurisdiction.
The governing law is distinct from federal law (like the Defend Trade Secrets Act), which applies nationwide regardless of what state law you choose.
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State Comparison for NDAs
Different states offer different advantages and disadvantages for NDA enforcement:
State
Trade Secret Protection
Non-Compete Enforcement
Best For
Delaware
Strong (UTSA adopted)
Moderate - enforces reasonable restrictions
Neutral Ground
New York
Strong (UTSA adopted)
Moderate - requires showing of harm
Neutral Ground
California
Strong (UTSA adopted)
Virtually unenforceable
Receiving Party
Texas
Strong (UTSA adopted)
Pro-enforcement with reasonable limits
Disclosing Party
Florida
Strong (UTSA adopted)
Very pro-enforcement
Disclosing Party
Massachusetts
Strong (UTSA adopted 2018)
Limited - garden leave required
Receiving Party
Illinois
Strong (UTSA adopted)
Moderate - requires adequate consideration
Neutral Ground
Note: Most states have adopted some version of the Uniform Trade Secrets Act (UTSA), providing baseline consistency for trade secret claims. The Defend Trade Secrets Act (DTSA) provides a federal cause of action available regardless of state law choice.
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Why This Clause Matters
Substantive Rights: The governing law affects what rights you actually have. Some jurisdictions provide more robust protections than others.
Predictability: Knowing the applicable law helps you structure your compliance program and understand your obligations.
Restrictive Covenant Validity: If the NDA includes non-solicitation or non-compete provisions, the governing law likely determines their enforceability.
Statute of Limitations: Different states have different time limits for bringing claims. Trade secret claims typically have 3-5 year limitations depending on the state.
Conflict of Laws: Even with a choice of law clause, mandatory local rules may override the chosen law in some circumstances.
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Clause Versions
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of laws principles that would require the application of the laws of any other jurisdiction.
Both parties agree that Delaware provides a well-developed body of commercial law appropriate for agreements of this nature.
Notwithstanding the foregoing:
(a) Questions regarding the validity, protection, and enforcement of trade secrets shall be governed by the Defend Trade Secrets Act of 2016 (DTSA) to the extent applicable, and the trade secret laws of the jurisdiction where the relevant trade secret originated;
(b) The enforceability of any non-solicitation or non-competition provisions against an individual shall be governed by the laws of the state in which such individual is principally employed, regardless of the governing law chosen herein; and
(c) Nothing in this clause shall prevent either party from seeking injunctive or other equitable relief in any jurisdiction where such relief may be available.
Each party consents to the personal jurisdiction of the state and federal courts located in Delaware for any action arising out of or relating to this Agreement, provided that such consent does not waive any objection to venue based on inconvenient forum.
Note: This balanced version chooses a neutral jurisdiction (Delaware), preserves federal trade secret rights, carves out employee restrictive covenants for local law, and maintains flexibility for injunctive relief while preserving inconvenient forum objections.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of [Your State], without regard to its conflict of laws principles.
Jurisdiction and Venue. Each party agrees that any dispute arising under or relating to this Agreement shall be resolved exclusively in the state or federal courts located in [Your County, Your State], and each party hereby consents to the personal jurisdiction and venue of such courts.
Carve-Outs. Notwithstanding the foregoing:
(a) Either party may seek injunctive or other equitable relief in any court of competent jurisdiction as may be necessary to protect such party's rights or property pending final resolution of any dispute;
(b) The enforceability of any restrictive covenants applicable to individuals shall be governed by the laws of the state in which such individual resides or is principally employed;
(c) Neither party waives any defense based on forum non conveniens, personal jurisdiction, or improper venue; and
(d) Federal law claims, including claims under the Defend Trade Secrets Act, shall be governed by applicable federal law and may be brought in any court of competent jurisdiction.
Attorneys' Fees. Each party shall bear its own costs and attorneys' fees in any dispute, except as otherwise required by law.
Why this favors you: Uses your home state's laws and courts, preserves forum non conveniens defense, respects local employee protection laws, maintains flexibility for emergency relief, and avoids one-sided fee shifting.
Governing Law and Exclusive Jurisdiction
This Agreement shall be governed exclusively by and construed in accordance with the laws of [Their State], without regard to its conflict of laws principles, and irrespective of the location of either party's principal place of business or the location where this Agreement is signed or performed.
The laws of [Their State] shall apply to ALL matters arising under or relating to this Agreement, including without limitation:
(a) The interpretation and enforceability of all provisions;
(b) The definition and protection of trade secrets and Confidential Information;
(c) The enforceability of any non-solicitation, non-competition, or similar restrictive covenants;
(d) The calculation and recovery of damages; and
(e) The availability of injunctive and other equitable relief.
Each party irrevocably:
(i) Submits to the EXCLUSIVE jurisdiction of the state and federal courts located in [Their City, Their State] for all purposes relating to this Agreement;
(ii) WAIVES any objection to such jurisdiction or venue, including any objection based on forum non conveniens, inconvenient forum, lack of personal jurisdiction, or improper venue;
(iii) WAIVES any right to a jury trial in any action arising under this Agreement;
(iv) Agrees that service of process may be effected by registered mail to the address set forth herein; and
(v) Agrees that any judgment obtained in [Their State] may be enforced in any jurisdiction where the other party has assets.
The non-prevailing party in any dispute shall pay all attorneys' fees, costs, and expenses incurred by the prevailing party.
Warning - Highly aggressive: Forces you to litigate in their jurisdiction, waives all venue and forum objections, applies their law to ALL issues including employee restrictions, waives jury trial, allows worldwide judgment enforcement, and includes one-sided fee shifting. Creates significant practical barriers to both enforcement and defense.
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Quick Tips
1
Prefer Neutral Ground: Delaware and New York are commonly accepted as neutral jurisdictions with well-developed commercial law.
2
Carve Out Employee Issues: Non-solicitation and non-compete provisions should be governed by where employees work - courts often apply local law regardless of what the contract says.
3
Preserve Injunction Flexibility: Don't agree to exclusive venue if it prevents you from getting emergency injunctions where needed.
4
Know Your Non-Compete State: If you have employees in California, Massachusetts, or other states that restrict non-competes, understand what provisions are enforceable.
5
Remember Federal Law: The DTSA provides a federal trade secret claim that works alongside state law, regardless of governing law choice.