Confidentiality & Nondisclosure Agreements | Minnesota Contract Attorney

Confidentiality Agreement vs. Nondisclosure Agreement

Confidentiality agreements go by a variety of names including

• non-disclosure agreement (NDA)
• confidentiality agreement (CA)
• confidential disclosure agreement (CDA)
• proprietary information agreement (PIA)
• secrecy agreement
• nondisclosure provision
• nondisclosure clause
• confidentiality provision
• confidentiality clause

These various names all describe the same kind of contract: an agreement “in contract law where parties agree that certain information will remain confidential.” (Non-Disclosure Agreement, Wex Legal Encyclopedia, Cornell Law School) These agreements are creatures of ordinary contract law, not of any name-specific statute. What matters is the actual language of the agreement, because two agreements may share a title yet vary substantially in their terms.

When Are Confidentiality Agreements Used?

Confidentiality agreements appear across everyday business dealings, not just one kind of relationship. Common settings include:

• employment, where a business asks an employee to protect technical information, product plans, customer data, or other proprietary information
• independent contractor and consultant arrangements, where an outside party will see confidential company information
• vendor, supplier, and service relationships that require sharing sensitive operational or pricing information
• evaluating a potential sale, investment, merger, or partnership, where each side reviews the other’s financial and business records
• lending, where a bank or other lender receives confidential financial and operational information

In each setting, the agreement defines what information is protected and how it may be used, so the parties can share what they need to share without losing control of it.

What Does a Confidentiality Agreement Cover?

There is no set list, and no fixed statutory list, of what information can fall under a confidentiality agreement. Because the agreement is a contract, what it protects depends on its own language. Minnesota courts determine and enforce “the intent of the parties,” and where there is a written instrument, that intent is “determined from the plain language of the instrument itself.” Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004).

That makes precise drafting decisive. When a provision is clear and unambiguous, Minnesota courts “should not rewrite, modify, or limit its effect by a strained construction.” Id. A court will not stretch or narrow your agreement’s defined scope when the language is clear, so what you write as confidential (and what you carve out) is what determines coverage.

A confidentiality agreement can have a fixed end date or last indefinitely; nothing in Minnesota law fixes its duration, and the parties set that term themselves like any other contract term. Under Minnesota law, protection for a trade secret persists only so long as the information remains the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Minn. Stat. § 325C.01, subd. 5.

What are the Consequences of Violating a Confidentiality Agreement?

When a confidentiality agreement is broken, the violation is treated as a breach of contract, and Minnesota contract law governs. This holds even when the confidential information also qualifies as a trade secret: the Minnesota Uniform Trade Secrets Act expressly provides that its provisions “do not affect . . . contractual remedies, whether or not based upon misappropriation of a trade secret.” Minn. Stat. § 325C.07(b)(1).

The contract claim is not your only avenue. The same statute preserves “other civil remedies that are not based upon misappropriation of a trade secret” and “criminal remedies, whether or not based upon misappropriation of a trade secret,” so a breach can carry consequences beyond the contract action. Minn. Stat. § 325C.07(b)(2)-(3). At the same time, the Act “displace[s] conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret,” so the contract theory and the statutory misappropriation theory are distinct paths with different rules. Minn. Stat. § 325C.07(a).

When a breach occurs, the non-breaching party may file a lawsuit against the breaching party for relief. In a contract action you must establish (a) the formation of the contract, (b) your performance of any conditions precedent, and (c) a breach by the other party. Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011).

Often an agreement will include a remedy clause, dictating what remedies are available to the non-breaching party. If it does not, the law supplies default remedies: a non-breaching party may recover those damages “sustained by reason of the breach which arose naturally from the breach or could reasonably be supposed to have been contemplated by the parties when making the contract as the probable result of the breach.” Lesmeister v. Dilly, 330 N.W.2d 95, 103 (Minn. 1983).

Minnesota courts may award damages, an injunction, or both. A court “may issue an injunction against a party who has, in violation of an explicit agreement or a common law duty, wrongfully used confidential information or trade secrets obtained from his employer,” and may also award compensatory damages for the harm caused. Cherne Indus., Inc. v. Grounds & Assocs., 278 N.W.2d 81, 88, 90 (Minn. 1979). The remedies are not either/or: in Cherne, the court awarded a permanent injunction together with compensatory damages of $39,322.50, so a defendant can face an injunction on top of a money judgment rather than one or the other. Id. at 90.

Where the confidential information qualifies as a trade secret, Minnesota law adds a statutory remedial scheme on top of ordinary contract damages and an injunction. Under the Minnesota Uniform Trade Secrets Act, you may obtain:

• Injunctive relief against actual or threatened misappropriation, which may continue for a reasonable period to eliminate the misappropriator’s commercial advantage. Minn. Stat. § 325C.02. The statute is direct: “Actual or threatened misappropriation may be enjoined.” Minn. Stat. § 325C.02(a). That reaches even threatened conduct, a remedy stronger than what a plain contract breach typically offers.
• Compensatory damages for both your actual loss and the unjust enrichment not captured by that loss, or, in lieu of those, a reasonable royalty. Minn. Stat. § 325C.03(a). Where neither actual loss nor unjust enrichment is readily provable, damages “may be measured by imposition of liability for a reasonable royalty for a misappropriator’s unauthorized disclosure or use of a trade secret,” so recovery is not limited to provable actual loss. Minn. Stat. § 325C.03(a).
• Exemplary damages of up to twice the compensatory award for willful and malicious misappropriation. Minn. Stat. § 325C.03(b).
• Reasonable attorney’s fees to the prevailing party in cases of bad faith or willful and malicious misappropriation. Minn. Stat. § 325C.04.

A Federal Drafting Requirement: The Whistleblower-Immunity Notice

If your confidentiality agreement governs the use of a trade secret or other confidential information and runs to an employee, federal law imposes a drafting requirement you cannot skip. Under the Defend Trade Secrets Act of 2016, any such agreement entered into or updated after May 11, 2016, must include notice of the whistleblower immunity codified at 18 U.S.C. § 1833(b)(1)-(2). 18 U.S.C. § 1833(b)(3).

The notice announces a real protection. An individual “shall not be held criminally or civilly liable under any Federal or State trade secret law” for disclosing a trade secret that is made in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or that is made in a sealed court filing. 18 U.S.C. § 1833(b)(1). The obligation is not limited to W-2 employees: for this purpose, “the term ’employee’ includes any individual performing work as a contractor or consultant for an employer,” so your agreements with contractors and consultants must carry the notice too. 18 U.S.C. § 1833(b)(4). You may satisfy the requirement by cross-referencing a separate policy document that sets out your reporting policy for a suspected violation of law. 18 U.S.C. § 1833(b)(3).

Leaving the notice out does not make the agreement unenforceable, but it costs you remedies. An employer that does not comply “may not be awarded exemplary damages or attorney fees” under the DTSA in a trade-secret action against an employee who was not given notice. 18 U.S.C. § 1833(b)(3).

Where are Confidentiality Agreements Found in Minnesota Statutes?

Because confidentiality agreements are entered into freely as contracts, general contract law governs, and there is no Minnesota statute dedicated to the creation or breach of confidentiality (nondisclosure) agreements. They appear in the Minnesota Statutes in essentially one place: as a carve-out from the state’s 2023 ban on noncompete agreements. That statute provides that “[a] covenant not to compete does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information.” Minn. Stat. § 181.988, subd. 1(a).

This distinction matters, and it is easy to get wrong. Minnesota now makes most covenants not to compete void: “Any covenant not to compete contained in a contract or agreement is void and unenforceable.” Minn. Stat. § 181.988, subd. 2(a). (That ban applies to contracts and agreements entered into on or after July 1, 2023; the applicability date lives in the enacting session law, Laws 2023, ch. 53, art. 6, § 1, not in the codified section.) Confidentiality agreements are expressly excluded from that ban, so they remain valid, enforceable contracts even though noncompetes generally are not. Do not assume the noncompete ban reached your NDA; it did not. The same subdivision likewise excludes a “nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer,” which remain enforceable as ordinary contracts. Minn. Stat. § 181.988, subd. 1(a).

The trade-secret information a confidentiality agreement protects is the separate exception that a Minnesota statute does govern. The Minnesota Uniform Trade Secrets Act, Minn. Stat. ch. 325C, defines a trade secret and misappropriation, supplies statutory remedies, and expressly preserves contractual remedies, so the agreement is enforced under contract law while the underlying trade secrets are protected under chapter 325C, the two regimes operating side by side. Minn. Stat. ch. 325C.

On the contract side, Minnesota courts treat the Restatement (Second) of Contracts as persuasive, not binding, authority, and apply its provisions when they are consistent with Minnesota law. One provision bears directly on conditions in a confidentiality or employment agreement: the Minnesota Supreme Court has recognized that under Restatement (Second) of Contracts § 229, when a party’s failure to satisfy a contract condition (such as a return-of-property or compliance clause) would cause a disproportionate forfeiture, a court may excuse that non-occurrence “unless its occurrence was a material part of the agreed exchange.” Restatement (Second) of Contracts § 229; see Capistrant v. Lifetouch Nat’l Sch. Studios, Inc., 916 N.W.2d 23, 24 (Minn. 2018) (agreeing that section 229 applies to prevent a disproportionate forfeiture).