DO YOU NEED AN NDA?

2026-10-21 · for founders & owners · 14 min read · endothermal systems

Aknazar Arysbek, founder — biomedical engineer (MSc, Tufts University). LinkedIn ↗

The short answer to Non Disclosure Agreements

In BladeRoom v. Emerson, the Ninth Circuit read one NDA under English law and held that its confidentiality duties ended two years after signing. Does an NDA protect an idea, then? It protects information that can be proved to have been shared in confidence, not the idea itself. The protection ends when the contract ends or the secrecy measures lapse.

This page describes US law as of October 2026, with the European Patent Office as the one foreign comparison. Law outside the US differs.

What an NDA covers

An NDA covers the information its definition names as confidential, minus the information its exclusions remove. The discloser is the party that shares the information, and the recipient is the party that receives it.

Federal law treats an idea and specific information differently. The Copyright Act states: "In no case does copyright protection ... extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery" (17 U.S.C. 102(b)). Trade-secret law protects information, including "designs, prototypes, methods, techniques, processes," that has value because it stays secret (18 U.S.C. 1839(3)). Tax Track v. New Investor World (7th Cir. 2007, Illinois law) refused to protect "the concept of leveraged life insurance," a widely known concept.

An NDA gives no ownership of an idea. It does not stop independent development of the same idea, and it does not protect what is or becomes public.

Non-disclosure and non-use are separate duties. A non-disclosure clause bars the recipient from telling others; a non-use clause bars the recipient from exploiting the information itself. In Aronson v. Quick Point Pencil (1979), the Supreme Court noted in passing that a recipient who exploited a design "in breach of that confidence" would have "risked legal liability." In Kara Technology v. Stamps.com (Fed. Cir. 2009), the discloser pleaded the NDA's use and retention paragraphs as separate breaches. Drafting practice treats an NDA that says only "keep confidential" as weak on use; the sources read give no decision on that wording.

A one-way NDA binds the recipient only, and a mutual NDA binds both parties. No court or agency source read for this page addresses the choice. Drafting practice watches for a "mutual" label on one-sided definitions.

Ownership depends on the words of the NDA. In SiOnyx v. Hamamatsu Photonics (Fed. Cir. 2020), an NDA gave the discloser rights to intellectual property "in, or arising from" the shared information. As summarized in a Vorys law-firm alert (we did not read the opinion), patents moved to the discloser as a result. The alert gives the holding as "ownership operates based on contract."

In drafting practice, the services agreement or its intellectual-property clause settles who owns what a firm designs. That includes an invention the firm's engineer makes during the work. In the same practice, the NDA covers the first conversations, and the services agreement is signed before the work starts.

Why trade-secret law is more important

Trade-secret law protects specific information that the discloser took "reasonable measures" to keep secret (18 U.S.C. 1839(3)). An NDA is one piece of evidence of those measures, and the statutes do not mention NDAs. The federal Defend Trade Secrets Act (DTSA) asks for "reasonable measures." California asks for efforts "reasonable under the circumstances" (Cal. Civ. Code 3426.1(d)(2)). Texas asks for "reasonable measures under the circumstances" (Tex. Civ. Prac. & Rem. Code 134A.002(6)(A)).

In the cases we found, a confidentiality undertaking helped, but it was neither necessary nor sufficient. In Rockwell Graphic Systems v. DEV Industries (7th Cir. 1991, Illinois law), piece-part drawings went to vendors under confidentiality agreements and legends. The court reversed summary judgment for the defendant, because reasonableness is usually a question for the jury.

Sharing with someone who owes no duty ends the protection. The Supreme Court stated the principle in general terms in Ruckelshaus v. Monsanto (1984), a case about a regulatory submission. "If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished." The duty need not come from a written contract. Kewanee Oil v. Bicron (U.S. 1974), as quoted in Chicago Lock v. Fanberg (9th Cir. 1982), covers secrets confided "under the express or implied restriction of disclosure or nonuse."

Drafting practice adds marked documents and a dated log of what went to whom. No statute we read requires either, and both count only as evidence of reasonable measures.

Why NDAs fail in practice

Courts enforce an NDA as a contract. A claim needs a contract, the discloser's own performance, a breach, and damages (Oasis West Realty v. Goldman, Cal. 2011). Six points of failure recur in the cases and sources: exclusions, independent development, term, careless handling, proof, and cost.

Courts apply the exclusions as written. In Convolve v. Compaq (Fed. Cir. 2013, California law, nonprecedential), the NDA excluded six kinds of information. They were information the recipient already had, public information, third-party information, independent work, disclosures required by law, and disclosures approved in writing. Oral disclosures needed a designation at the time and a memo within 20 days; the plain language "unambiguously requires" the memo, the court held. The recipient won where no memo existed and where the substance was already public. In Kara, the discloser also had to show that the information fell inside the definition and outside the exclusions.

Independent development and reverse engineering are lawful. In Kewanee, the Supreme Court wrote that trade-secret law "does not offer protection against discovery by fair and honest means." It named "independent invention, accidental disclosure, or ... so-called reverse engineering" as examples. The DTSA (18 U.S.C. 1839(6)(B)), California (Cal. Civ. Code 3426.1(a)), and Bonito Boats v. Thunder Craft (U.S. 1989) agree.

A contract can change the result for reverse engineering. Texas treats it as proper "unless prohibited" (134A.002). The Federal Circuit enforced a shrink-wrap ban on it over one dissent (Bowers v. Baystate, 2003), a contested result.

An NDA's term can end the protection against its recipient. BladeRoom Group v. Emerson Electric (9th Cir., amended December 21, 2021) applied English law to paragraph 12 of an NDA. The court held that the paragraph "unambiguously terminated the NDA and its confidentiality obligations two years after it was signed." The jury had found $10 million in lost profits and $20 million in unjust enrichment, and the district court added $30 million in punitive damages. The Ninth Circuit vacated those findings and ordered a new trial: nothing showed whether the breach, and so the misappropriation, happened during or after the two years. The case is not a final holding that the secrets were lost, and no retrial outcome was found.

The rules on open-ended terms vary by state. A Wisconsin federal court treated an employment NDA with no time limit as unenforceable under Wis. Stat. 103.465 (Friemuth v. Fiskars Brands, 2010). The opinion reports carve-outs for trade secrets, which we did not read in full. IDX Systems v. Epic Systems (7th Cir. 2002) found no Wisconsin authority applying that statute to supplier-user NDAs. In a preliminary-injunction ruling, a Massachusetts federal court wrote that "Riley's own expectations of maintaining its trade secrets were time limited" (DB Riley v. AB Engineering, 1997); the reasoning is contested. We found no statute that caps the length of an NDA between two companies, and we did not survey every state.

Careless handling defeats the claim even where some agreements were sought. In Tax Track (Illinois law), a memo went to 600 to 700 people, and confidentiality agreements were sought from at most 190. The court held that "No reasonable jury could find ... reasonable efforts" and held the agreement unenforceable on those facts.

The discloser keeps the burden of proof. Sargent Fletcher v. Able Corp. (Cal. Ct. App. 2003) concerned an aircraft refueling hose-reel control. The jury found that the defendant had access to a trade secret but did not use it. The court refused to shift the burden of proof: once the discloser makes a credible case, the defendant needs only evidence of independent development. The rule varies by state.

The DTSA, California, and Texas give three years from discovery to sue for misappropriation (18 U.S.C. 1836(d); Cal. Civ. Code 3426.6; Tex. Civ. Prac. & Rem. Code 16.010). Contract limitation periods are separate and set by each state.

A breach opens several remedies, and none is automatic. Under the DTSA, a court can order an injunction and award actual loss plus unjust enrichment, or a reasonable royalty (18 U.S.C. 1836(b)(3)). For willful and malicious misappropriation it can add exemplary damages up to 2 times and award fees, and fees also follow bad faith. Contract remedies survive beside the trade-secret statutes in California (Cal. Civ. Code 3426.7(b)(1)) and Texas (Tex. Civ. Prac. & Rem. Code 134A.007(b)).

A preliminary injunction needs a likely irreparable injury, a likely win, a favorable balance of equities, and the public interest (Winter v. NRDC, U.S. 2008). A clause that calls money damages inadequate does not control the injunction question in that case (Baker's Aid v. Hussmann Foodservice, 2d Cir. 1987, a noncompete case).

A suit is slow, and its cost is unknown. We found no usable figure for the cost of suing on an NDA. The surveys are paywalled, and no source gives a figure for small cases. Lex Machina's January 29, 2026 press release counts over 1,500 new federal trade-secret filings in 2025. It reports a median of 1,124 days to trial for cases that reached trial in 2023 to 2025, and about 65% resolved by likely settlement. These counts cover trade-secret cases, not suits on an NDA alone.

When there is no NDA

Without an NDA, the result depends on whether another duty of confidence existed and whether the discloser took steps against that recipient. In Incase v. Timex (1st Cir. 2007, Massachusetts law), a design was shown to a firm. The trial court found no confidentiality agreement, no marking, no precautions, and no notice of secrecy. The appeals court wrote that keeping work "private from the world is not sufficient; discretion is a normal feature of a business relationship. Instead, there must be affirmative steps to preserve the secrecy of the information as against the party against whom the misappropriation claim is made." Judgment for the recipient was affirmed under Massachusetts law, which sets a demanding standard.

An oral duty can be enough. In Learning Curve Toys v. PlayWood Toys (7th Cir. 2003, Illinois law), a small toy maker gave its only prototype to a somewhat larger toy company. The two had an oral understanding that it was confidential. The court said the small company "might have done more," but the jury could find its reliance reasonable given the parties' size, sophistication, and industry. The result was fact-bound.

Idea-submission law can protect an idea through a bargain made before disclosure. In Desny v. Wilder (Cal. 1956), the California Supreme Court quoted Justice Traynor's dissent in Stanley v. Columbia Broadcasting System: "The policy that precludes protection of an abstract idea by copyright does not prevent its protection by contract." An implied contract needs a disclosure clearly conditioned on payment, and a recipient who knew the condition before hearing the idea. The court added: "The idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power."

Other states set other tests. In New York, novelty to the buyer can supply consideration (Apfel v. Prudential-Bache, N.Y. 1993; Nadel v. Play-By-Play Toys, 2d Cir. 2000). Under Texas law, a federal appeals court listed novelty, disclosure in confidence, and use as the elements (Capital Films v. Charles Fries, 5th Cir. 1980). Kleck v. Bausch & Lomb (W.D. Tex. 2000), a district court decision, binds no other court. In it, a promise not to use or disclose "until or unless a later written agreement" was "at best an 'agreement to agree.'"

A lawyer owes confidentiality by rule. The USPTO rule states: "A practitioner shall not reveal information relating to the representation of a client unless the client gives informed consent" (37 C.F.R. 11.106(a)). ABA Model Rule 1.6 states the general rule, and each state adopts it with varying wording. By our inference, an NDA is conceptually redundant in a consultation with a lawyer.

A bare idea, shared with no bargain and no secrecy steps, gets no copyright protection and little under trade-secret or idea-submission law, on the sources read. The sources prepared for this note give no measure of how often shared ideas are taken.

NDA versus patent

A confidential sale can still start the US on-sale bar, and an NDA fixes no priority date. In the US, an inventor's own disclosure made one year or less before the effective filing date is not prior art (35 U.S.C. 102(a)(1), (b)(1)(A)). That grace period does not exist at the European Patent Office (EPO).

The EPO uses absolute novelty: everything made available to the public before the filing date counts against the application (EPC Art. 54). The EPO treats a disclosure as non-public where a duty of confidentiality existed, judged case by case. An express or tacit secrecy agreement that was not broken keeps the subject matter non-public (EPO Guidelines G-IV 7.2.2). Article 55 excepts only evident abuse and recognized exhibitions, within six months. The same guidelines list "the sale of parts for serial production" among situations that may indicate no secrecy. Other countries were not surveyed.

A confidential sale can still bar a US patent. In Helsinn v. Teva (U.S. 2019), a unanimous Supreme Court held that "an inventor's sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under 102(a)." The opinion says nothing about an NDA that covers disclosure alone. In Pfaff v. Wells Electronics (U.S. 1998), a purchase order accepted before the critical date barred a patent although the invention was not yet built. The USPTO's manual, in its pre-AIA text, says "the presence or absence of a confidentiality agreement is not dispositive of the public use issue" (MPEP 2133.03).

In plain terms, a provisional application fixes a priority date. It needs no claims, is not examined, and lapses 12 months after filing; its benefit comes only through a later application (35 U.S.C. 111(b)). The USPTO's page on provisionals states that the 12 months cannot be extended, though a restoration exists for unintentional delay.

The USPTO publishes each application about 18 months after the earliest filing date (35 U.S.C. 122(b)). A request not to publish is allowed only if no foreign filing is planned. The question of a patent before a prototype belongs to invention-help-scams.

The clocks run separately, and each starts from a different event.

The terms of the matter

The table lists thirteen terms, each with its basis: a case, a statute, or drafting practice. "Practice" means the point comes from drafting practice, with no court or agency source behind it.

Liquidated damages must be reasonable, and an unreasonably large amount is void as a penalty (UCC 2-718(1) for goods; Cal. Civ. Code 1671(b)). A federal court gives a valid forum-selection clause "controlling weight in all but the most exceptional cases" (Atlantic Marine v. U.S. District Court, U.S. 2013).

An overbroad NDA can fail entirely. Brown v. TGS Management Co. (Cal. Ct. App. 2020) is an employment case. The court called a definition covering information "used or usable in" the business "strikingly broad." It held the provisions "void ab initio and unenforceable." The court added that the employer could still protect its trade secrets under California's trade-secret statute.

State statutes add other limits. California's section 16600 applies to restraints between businesses under a rule of reason (Ixchel Pharma v. Biogen, Cal. 2020), but that opinion does not mention NDAs. Whether 16600 or 16600.5 reaches an NDA between two companies is open; we found no decision. Washington and Minnesota exclude confidentiality or nondisclosure agreements from the noncompete definitions in their employment laws, each in its own wording (RCW 49.62.010(4); Minn. Stat. 181.988), as of October 2026; the Washington text has a later version. SEC rules bar anyone from enforcing a confidentiality agreement to keep an individual from communicating with the SEC about a possible securities violation (17 C.F.R. 240.21F-17(a)).

Who signs what

The sources show who refuses in writing, not who signs. We found no primary evidence on whether design firms, engineering firms, individual engineers, or contract manufacturers sign NDAs, or why they refuse. Where a firm offers only its own NDA, the terms table earlier on this page applies whichever side wrote the paper.

Five published policies on unsolicited ideas decline confidentiality or review. Solventum does not accept ideas "on a confidential basis." Logitech has "no obligation to keep your submission confidential or proprietary," and submissions become its property. HARMAN treats submissions as non-confidential and non-proprietary and suggests a patent lawyer first. Celebrity Cruises does not review unsolicited ideas, and Quad Lock may publish submissions without compensation. These are five policies we found, not an industry norm; policies from Google, Apple, Lego, and Hasbro were not found.

Y Combinator's archived FAQs from 2010 and 2021 said "No, we won't sign an NDA," and its live FAQ is silent. We could not confirm two claims from competing pages, and both are opinion. "Ninety percent of the projects start with an NDA" is one firm's quote in Digital Engineering 24/7 (2013). "No one in tech will sign an NDA" comes from OneMonth.

A practitioner source on China states that an agreement binds only the parties who sign it. Affiliates and subcontractors therefore sign as well. Employers that bind employees and individual contractors to confidentiality owe them the whistleblower notice in 18 U.S.C. 1833(b). The sources do not cover who inside a firm sees the files.

For manufacturing in China, the larger risk is use, not disclosure. Harris Sliwoski's China Law Blog, a practitioner source, makes that case (2019 and 2024 posts, both modified September 30, 2026). By its account, a factory can use the design itself, sell it to others, or go to the customer direct. The blog's answer is an NNN agreement: non-disclosure, non-use, and non-circumvention. The registered Chinese legal entity signs it, with the company chop and an authorized signatory. By the blog's account, the Chinese text usually (but not always) controls, agreed damages must be defensible, and interim relief is discretionary and may require security.

Chinese statutes set the damages framework. The Anti-Unfair Competition Law, in its 2019 text, defines a trade secret and bars its use in breach of a confidentiality duty (Art. 9). Damages run at actual loss, or 1 to 5 times for malicious and serious infringement, and up to RMB 5 million where loss and gain cannot be determined (Art. 17). The Law has been amended since, and we did not check article numbers or amounts. The Supreme People's Court treats stipulated damages more than 30% above the loss as "generally" excessive (Fa Shi [2023] No. 13, Art. 65). A bad-faith breacher generally gets no reduction.

Enforcement in China is unsettled in the sources. We found no Chinese court decision enforcing or refusing an NNN; practitioners say China-law, Chinese-language contracts are the enforceable form. The New York Convention on arbitral awards has 172 parties, and the US joined in 1970 and China in 1987.

What to do in your situation

The consequences depend on two facts: who receives the information and what stage the product is at. The table gives the consequences at each stage, with practice labeled; it is not a list of requirements.

Common questions

Can an NDA last forever? We found no statute that caps the length of an NDA between two companies, and we did not survey every state. A Wisconsin federal court treated an employment NDA with no time limit as unenforceable, and the trade-secret claim lasts only while the information stays secret.

Is an NDA enforceable in California? Sometimes; the sources address employment only. Brown v. TGS, an employment case, voided an overbroad definition, but the court said the employer could still enforce "a properly drawn confidentiality agreement which preserves an employee's right to compete." Whether California's restraint-of-trade statute reaches an NDA between two companies is open, and no decision was found.

Does an NDA need consideration? The sources prepared for this page do not settle consideration for an NDA between companies. In New York idea-submission cases, novelty to the buyer can supply consideration (Apfel; Nadel).

Does an NDA need a witness, a notary, or a wet signature? The sources prepared for this page set no rules for witnesses, notarization, or electronic signatures. For Chinese manufacturers, a practitioner source names the registered legal name, the company chop, and an authorized signatory.

Can an NDA be signed after the disclosure? The sources prepared for this page do not establish whether an NDA signed later covers what was already shared. Trade-secret law weighs the steps taken against the recipient. In Incase, the lack of steps when the design was shown decided the case.

Can a design firm reuse its own methods on other clients? The sources prepared for this page do not address that reuse. In drafting practice, the services agreement settles that point, and an NDA can move rights when its words say so (SiOnyx).

Is a free template NDA good enough? A template is a contract like any other, and courts hold the parties to its words (Convolve). The terms table on this page lists the clauses that decide the result.

Sources

What we could not verify:

• Whether design firms, engineering firms, individual engineers, and contract manufacturers sign NDAs, and why
• A general practice among investors
• Any court decision on residuals clauses
• Whether California's section 16600 or 16600.5 reaches an NDA between two companies
• The cost of suing on an NDA
• The outcome of the BladeRoom retrial
• Any Chinese court decision enforcing or refusing an NNN
• Whether a provisional application is published
• Reporter citations for Brown v. TGS and the amended BladeRoom opinion, and pin cites for Desny and Aronson
• Whether law outside the US and the EPO follows the same rules
• Whether these questions match what our own clients ask

The claims on this page were checked against the statutes and court opinions cited. Some sources were read in summary rather than in full. No lawyer reviewed this page. It is information, not legal advice.