For many California companies, non-disclosure agreements, or NDAs, are the first safeguard when sensitive information needs to be shared. Startups use them when courting investors. Established firms rely on them to protect pricing models and customer lists. In Los Angeles, where entertainment, technology, and design collide, NDAs often appear before a pitch, a prototype handoff, or a vendor meeting.
The complication is that California courts do not treat every NDA as enforceable on sight. The state has a strong policy favoring open competition and employee mobility. If a confidentiality clause quietly operates like a non-compete, the contract can fall apart in litigation. That is why NDA disputes surface regularly in the context of business litigation in Los Angeles, especially when a former insider joins a competitor or launches a new venture. California Business and Professions Code section 16600 sets the tone by voiding contracts that restrain a lawful profession or trade.
This guide walks through how judges analyze NDAs, where parties stumble, which remedies are realistic, and how to draft or litigate these agreements with California’s standards in mind.
Why NDAs Become Flashpoints in California
On paper, an NDA is not a non-compete agreement and should not be used as a non-compete. It is a promise not to disclose or misuse specific confidential or proprietary information. In practice, the line can blur between non-compete and non-disclosure of protectible data. If a contract defines confidential information so broadly that it covers almost anything an employee learns or knowledge the employee brought with them to the employer, the restraint can look like a de facto non-compete. California courts apply Section 16600 strictly and have rejected attempts to create exceptions outside the statute. The state’s appellate decisions drive that point home and reaffirm the statute’s broad protection of lawful work.
The result is a recurring pattern. Companies file suits to stop a leak or to recover losses. Defendants respond that the NDA is overbroad or vague, or that it conflicts with the state’s policy against contracts that restrain employment or trade. A court then examine scope, purpose, and the real-world effect of the promises at issue.
The Enforceability Test California Courts Apply
California courts do not automatically enforce an NDA. They look at substance and scope and applicability of the NDA to the facts at issue. The analysis commonly turns on three questions that also align with trade secret law.
First, how precisely does the contract define confidential information? Clauses that track specific categories, such as source code, technical specifications, customer lists that are not public, or pricing formulas tied to competitive value, fare better than catch-all or generalized language that sweeps in everything related to the business.
Second, does the contract protect information that qualifies as a trade secret under the California Uniform Trade Secrets Act (the “CUTSA”)? Trade secrets must derive independent economic value from not being generally known and must be subject to reasonable steps to keep them secret. Courts look to these statutory elements when deciding if an NDA is protecting a lawful interest rather than restraining general knowledge or skill.
Third, what is the real effect of the agreement on someone’s ability to work or even compete against the employer? If the NDA is so broad that a former employee cannot use general experience in the industry, courts are likely to decline enforcement under Section 16600.
A useful illustration is how courts treat sweeping confidentiality terms in employment agreements that operate as restraints on lawful work. Analysis of appellate court opinions show why confidentiality cannot become a backdoor non-compete.
Disputes That Commonly Reach the Courthouse
In contested NDA cases, familiar arguments recur. Plaintiffs allege disclosure or misuse of covered information, often pairing a contract claim with CUTSA misappropriation. Defendants argue the agreement is overbroad, that the information was already public, or that it falls within general skill and knowledge. Many cases straddle employment and commercial law, particularly when a move to a competitor is involved, which is why Section 16600 and CUTSA often appear side by side in the briefing. California’s recent line of cases on restraints tied to employment mobility underscores how provisions framed as non-solicitation or confidentiality can fail if they restrict lawful work.
Remedies Judges Actually Award
When a California court finds a valid NDA and a breach or a threatened misuse of trade secrets, the available relief tends to follow CUTSA’s structure.
Injunctions are central. Courts can stop actual or threatened misappropriation and can maintain an injunction while the information remains a trade secret. The order can extend for a period beyond the loss of secrecy to neutralize any unfair commercial advantage gained from the misuse.
Damages follow two tracks. A plaintiff can pursue actual loss, for example lost profits, and unjust enrichment that was not already counted in those losses. When neither measure is provable, courts can impose a reasonable royalty for the period during which use could have been prohibited.
Attorney’s fees are possible but limited to specific circumstances. If a claim of misappropriation is made in bad faith, if a motion to terminate an injunction is made or resisted in bad faith, or if willful and malicious misappropriation exists, the prevailing party may recover reasonable fees and costs. Courts apply those standards carefully and often analyze both objective speciousness and subjective bad faith when fees are sought against a claimant.
Drafting Pitfalls That Undercut Enforcement
Many NDAs fail long before trial because of drafting choices that conflict with California policy.
Overbroad definitions of confidential information are the most common problem. Language that labels virtually everything an employee learned, observed, or heard as confidential is a red flag. Courts read those terms as restraining lawful work rather than protecting specific secrets, which invites Section 16600 challenges. Opinions scrutinizing sweeping confidentiality terms show why a one-size-covers-all clause can collapse.
Duration deserves careful thought. Here is the precise rule to apply. Open-ended contractual duties tied to non-secret business information draw close scrutiny. By contrast, trade secrets may be protected for as long as the information remains a secret and reasonable steps are maintained to preserve that status. Courts can carry an injunction for an additional period to remove any unfair head start from the misuse. The contract language should reflect this difference, and internal practices should match it.
The line between confidentiality and non-competition must remain clear. If an NDA blocks a former employee from using general skill, training, or experience, it risks being treated as an unlawful restraint under Section 16600. Appellate decisions make clear that courts will not create extra-statutory exceptions to that rule.
Finally, alignment with CUTSA helps in both drafting and litigation. The more closely the contract mirrors the statute’s definition of a trade secret and its focus on reasonable secrecy measures, the easier it is to defend an agreement as protecting a legitimate interest rather than restricting ordinary competition.
Litigation Strategy, From Pleadings To Proof
For plaintiffs, the first priority is to identify the specific information at issue and to show the steps taken to keep it confidential. Policies, access controls, training, and labeling practices are all relevant. Courts want to see that the company treated the information like a secret before the dispute, not only after. Where the information qualifies as a trade secret, plaintiffs should be ready to show economic value and the risk or reality of misuse.
For defendants, the central themes are scope and status. Demonstrating that an NDA covers public information, general skills, or experience usually strengthens a Section 16600 defense. If the alleged secrets were shared broadly without controls, or if the definitions are vague, the plaintiff’s case weakens. Defendants also often challenge remedy theories by pressing whether losses or enrichment are provable and by contesting the duration or breadth of any injunction.
In technical or complex industries, expert testimony can help a court understand the nature of the information, the competitive value, and how a disclosure would play out in the market. California appellate courts have repeatedly considered expert evidence in trade secret disputes where NDAs are part of the factual landscape.
Practical Takeaways for California Businesses
The main lesson from California cases is simple. An NDA is a useful tool, but it is not a stand-alone shield that automatically survives scrutiny. “One-size-fits-all” NDAs should not be used, and companies should regularly revisit their NDA, at least once a year. Contracts that carefully define protected information, tie duties to real secrecy practices, and respect the line drawn by Section 16600 stand a far better chance of holding up in court. California decisions remind us that public policy favors free movement in the marketplace. They also remind us that a label like confidential does not save a clause that restrains lawful work. CUTSA sets out the definitions and remedies that anchor the analysis.
For leaders in Los Angeles, the practical approach is to think beyond the paper. Confidentiality should be reflected in how information is stored, who can access it, how it is marked, and how it is shared with vendors, partners, and contractors. Think about onboarding and offboarding procedures. Think about the categories that truly separate your business from the pack, and describe those categories clearly in the contract. The more the agreement mirrors what the company does in practice, the more credible it looks when a dispute arises.
What To Do If An NDA Dispute Is Already Underway
If a conflict has emerged, step back and evaluate both the contract and any CUTSA claim. Ask what specific information is at issue, what proof you have of secrecy measures, and how the language reads through the lens of Section 16600. Consider whether the requested relief fits the statute. For example, an injunction that tracks the life of a trade secret is more defensible than a broad, indefinite restraint that goes beyond what CUTSA permits. On the damages side, decide early how you will prove actual loss or unjust enrichment, or whether a reasonable royalty theory is the right fit in a narrow window.
Frequently Asked Questions
Are NDAs enforceable in California business disputes?
Yes, but only when they protect legitimate confidential information without restraining lawful work. Courts will not enforce agreements that function like non-competes or that label broad categories of general knowledge as confidential.
How do judges decide what counts as confidential information under an NDA?
They look for specificity and for the hallmarks of trade secret status. Information with independent economic value, kept secret through reasonable measures, aligns with CUTSA and receives stronger protection. Vague, catch-all definitions of “confidential information” invite invalidation.
Do confidentiality provisions ever conflict with California’s policy on non-competition?
They can. If a clause prevents a person from using general skill or experience in a new role, it can be treated as an unlawful restraint under Section 16600 even if the clause is labeled confidential.
What remedies are realistic if an NDA is breached?
Courts may grant injunctions against actual or threatened misuse, award damages for actual loss and unjust enrichment, and in limited circumstances award attorney’s fees. The statutes set the boundaries for each of those outcomes.
How long can contractual confidentiality last?
For non-secret business information, open-ended duties draw close scrutiny. For trade secrets, protection can last as long as secrecy exists, and an injunction can extend briefly to remove any unfair commercial advantage created by the misuse.
Do these rules apply to contractors as well as employees?
Yes. The analysis focuses on scope and effect. An overbroad restraint on a contractor will run into the same Section 16600 problems as an overbroad restraint on an employee. CUTSA’s definitions and remedies apply regardless of the label on the relationship.