Do NDAs Hold Up in Court in Minnesota?

How does Minnesota law treat an NDA?

Minnesota treats an NDA as a contract, so a valid NDA is legally binding, and NDAs are still legal after the 2023 noncompete ban. To enforce one, you prove the same elements as any breach of contract claim, and Minnesota’s noncompete ban does not stand in the way, because the statute defines a noncompete to exclude a nondisclosure agreement.

In Lyon Financial Services, Inc. v. Illinois Paper & Copier Co., 848 N.W.2d 539 (Minn. 2014), the Minnesota Supreme Court stated those elements: “(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to his right to demand performance by the defendant, and (3) breach of the contract by defendant.” The noncompete statute adds: “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).

Your NDA can protect information that is confidential without being a trade secret. In Cherne Industrial, Inc. v. Grounds & Associates, Inc., 278 N.W.2d 81 (Minn. 1979), the court wrote: “A trial 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.” When the information is also a trade secret, MUTSA does not take the contract claim away; the act does not affect “contractual remedies, whether or not based upon misappropriation of a trade secret” (Minn. Stat. § 325C.07).

What does a court need to see before it enforces an NDA?

A court needs to see a formed contract: an agreement with definite terms and something of value exchanged for the promise, a definition of the confidential information specific enough to give notice, and, for an NDA that “by its terms is not to be performed within one year,” a signed writing.

Consideration. Timing matters for employees. In National Recruiters, Inc. v. Cashman, 323 N.W.2d 736 (Minn. 1982), recruiters accepted their jobs, started work, and only then were told to sign a noncompete. The Minnesota Supreme Court held: “Where such a covenant is not ancillary to the initial oral employment contract, it can be sustained only if supported by independent consideration.” That case involved a noncompete, not a stand-alone NDA. I suggest pairing an NDA signed mid-employment with a real new benefit, such as a raise, bonus, or promotion, because the court reasoned that “An addition to that agreement would require independent consideration.”

A definition that gives notice. In Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890 (Minn. 1983), departing employees had signed confidentiality agreements, but in the employer’s trade secret claim the court found the agreements “too vague to apprise the employees of specific” secrets and held they created no duty of confidentiality. The court quoted the rule that “[T]he employee is entitled to fair notice of the confidential nature of the relationship and what material is to be kept confidential.” Your contract’s own definition decides what “confidential information” means in your NDA. The closest statutory definition is the trade secret definition in Minn. Stat. § 325C.01, subd. 5: “information, including a formula, pattern, compilation, program, device, method, technique, or process,” that derives independent economic value from not being generally known and is the subject of reasonable secrecy efforts. An NDA may reach further than that, to pricing, customer information, or internal plans, so long as the definition tells the signer what is in and what is out. The form section below lists the definitions and exclusions I suggest.

A signed writing. Minnesota’s statute of frauds bars an action on “every agreement that by its terms is not to be performed within one year from the making thereof” unless the agreement or a memorandum of it, “expressing the consideration, is in writing, and subscribed by the party charged therewith” (Minn. Stat. § 513.01).

Where the NDA sits matters too. When a business owner launching a referral network asked me whether to use a stand-alone NDA, I advised building the confidentiality terms into each participant agreement, because those terms can then be tailored to each relationship: what information is protected, for how long, and what happens when the relationship ends. A stand-alone NDA still fits the talks before an agreement, when you share the business model before anyone has signed on.

How can I amend an existing NDA?

You amend an NDA the same way you made it: both parties agree to the change. I suggest a short written amendment that names the original agreement, states each change, and is signed by both parties. A signed writing answers the statute of frauds, and it proves the new terms if a dispute comes later.

When the amendment adds new obligations for a current employee, such as a broader definition or a longer term after the employee’s duties expand, the Cashman consideration rule applies again, so I suggest pairing the amendment with a real new benefit, such as a raise, bonus, or promotion, and reciting it in the amendment.

Can minors sign NDAs?

A minor can sign an NDA, but Minnesota law has long let a minor disaffirm, or undo, a contract made while under age, so a teenager’s signature is a weaker promise than an adult’s. Minnesota defines a “Minor” as “an individual under the age of 18” (Minn. Stat. § 645.451, subd. 2).

The Minnesota Supreme Court stated the rule for a minor’s contract in Berglund v. American Multigraph Sales Co., 135 Minn. 67, 160 N.W. 191 (1916). A 19-year-old, then a minor, bought business equipment on an installment contract, returned it, and after coming of age disaffirmed the contract and sued for his payments. For a contract “free from any fraud or bad faith and otherwise reasonable, fair and a provident contract for the infant,” the court held that “the latter may recover back what he has parted with, but must restore what he has received in the way of benefits.” It also put the burden on the adult side: “The one dealing with an infant is charged with the burden of proving that the contract was in all respects fair and reasonable, not tainted with fraud, undue influence or over-reaching on his part.” The court directed judgment for the buyer for most of what he had paid. That case involved a purchase contract, not an NDA.

If you hire employees under 18, I suggest treating their NDA as a reminder of the rules rather than your main protection, because they may be able to walk away from it. Limit what minors can access, mark confidential material, and train them on it. Trade secret law does not depend on a signed contract in the same way. MUTSA reaches a person who knew or had reason to know the knowledge was “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use” (Minn. Stat. § 325C.01, subd. 3).

What is the difference between a PIA and an NDA?

A proprietary information agreement (PIA) is an employee agreement that usually combines confidentiality promises with an assignment of inventions and other work product to the employer, while an NDA covers confidentiality alone. The labels are not legal categories: a court reads what each clause says. The difference matters in Minnesota because an invention assignment carries a statutory notice requirement that a plain NDA does not trigger.

Under Minn. Stat. § 181.78, an employee’s duty to assign inventions “shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time,” and which does not relate directly to the employer’s business or to its “actual or demonstrably anticipated research or development,” or result from the employee’s work for the employer (subd. 1). A provision reaching such an invention “is to that extent against the public policy of this state and is to that extent void and unenforceable.” When an employment agreement “contains a provision requiring the employee to assign or offer to assign any of the employee’s rights in any invention to an employer, the employer must also, at the time the agreement is made, provide a written notification to the employee” describing that exclusion (subd. 3). If your PIA includes an invention assignment, I suggest attaching that written notice to the agreement itself, because the statute requires it “at the time the agreement is made.”

The confidentiality part of a PIA follows the same rules as any NDA on this page, including the noncompete ban’s exclusion of nondisclosure agreements, described under how Minnesota law treats an NDA.

How long does an NDA last, and is a perpetual NDA enforceable?

An NDA lasts as long as its own terms say, because it is a contract. Many NDAs set a fixed term for the confidentiality promise, often measured from each disclosure or from the end of the relationship. Others keep the promise in force until the information becomes public. The noncompete ban does not shorten an NDA’s term, because the ban’s definition excludes nondisclosure agreements (Minn. Stat. § 181.988, subd. 1). One limit applies to every term: as the next sections explain, an NDA cannot keep secret what has already become general knowledge or public.

For trade secrets, Minnesota ties protection to the secret’s life rather than to a calendar. Under Minn. Stat. § 325C.02, “an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.” That is the reason many NDAs use two terms: a fixed period, such as a few years, for ordinary business information that goes stale, and protection for as long as the information remains a trade secret for formulas, source code, and similar material.

Duration and scope work together. A long or open-ended term is easier to defend when the definition is narrow and names specific categories, and a broad definition paired with no end date invites the argument that the NDA reaches information no one could reasonably keep secret. I suggest matching each category of information to the term it needs, stating the purpose for which the recipient may use it, and keeping the standard exclusions in the form section below.

When does the noncompete ban reach an NDA?

The ban reaches a clause in an employee agreement entered into on or after July 1, 2023, that restricts work in one of the three ways the statute lists. Outside the exceptions for the sale or dissolution of a business, that clause is void even inside a document titled “Nondisclosure Agreement.” Minnesota defines a covenant not to compete by what it restricts after employment ends.

Under Minn. Stat. § 181.988, subd. 1, a covenant not to compete “means an agreement between an employee and employer that restricts the employee, after termination of the employment, from performing”:

• “work for another employer for a specified period of time”
• “work in a specified geographical area”; or
• “work for another employer in a capacity that is similar to the employee’s work for the employer that is party to the agreement.”

The same definition leaves out more than NDAs: “A covenant not to compete does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer” (subd. 1).

Subdivision 2 provides that “Any covenant not to compete contained in a contract or agreement is void and unenforceable.” The same subdivision protects the rest of the agreement: “Nothing in this subdivision shall be construed to render void or unenforceable any other provisions in a contract or agreement containing a void or unenforceable covenant not to compete” (§ 181.988, subd. 2). It also makes a covenant “valid and enforceable” when it “is agreed upon during the sale of a business” or “is agreed upon in anticipation of the dissolution of a business.” The ban reaches only newer agreements: “This section is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date” (Minnesota Session Laws 2023, chapter 53, article 6, section 1).

Three details change the analysis for an owner. The statute’s “employee” includes “independent contractors” (subd. 1). The ban governs agreements between an employer and an employee, so an NDA between two independent businesses is judged under ordinary contract law. The exception is a company an employer requires an individual to form: “independent contractor also includes any corporation, limited liability corporation, partnership, or other corporate entity when an employer requires an individual to form such an organization for purposes of entering into a contract for services as a condition of receiving compensation under an independent contractor agreement” (subd. 1). One clause in a contract between two businesses falls under a separate statute: between a service provider and its customer, “No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider,” and a provision that does so “is void and unenforceable” (Minn. Stat. § 181.9881, subd. 2), in “contracts and agreements entered into on or after” July 1, 2024 (Minnesota Session Laws 2024, chapter 110, article 2, section 12). When an existing contract carries such a provision, “the service provider must provide notice to their employees of this section and the restrictive covenant in the existing contract that violates this section” (§ 181.9881, subd. 2). That section “does not apply to workers providing professional business consulting for computer software development and related services who are seeking employment through a service provider with the knowledge and intention of being considered for a permanent position of employment with the customer as their employer at a later date” (§ 181.9881, subd. 3). And under the noncompete ban, an employee “who is enforcing rights under this section” may recover “reasonable attorney fees” (§ 181.988, subd. 2), so pressing a clause that operates as a noncompete can cost you the other side’s fees. For the tools that remain, see the protections that remain after Minnesota’s noncompete ban.

What information can an NDA no longer protect?

An NDA cannot make general industry knowledge or publicly available information secret again. The Minnesota Supreme Court in Cherne adopted the rule that “matters of general knowledge within the industry may not be classified as trade secrets or confidential information entitled to protection.”

Timing still matters after information becomes public. In Cherne, former employees took customer lists and used them before the information became generally available, and the court held: “Where the information has, subsequent to the wrongful taking and use, become generally available, the initial conduct is still wrongful and the employer is still entitled to relief for any injury suffered as a result of the wrongful use.”

Your own handling also counts. To be a trade secret under MUTSA, information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy” (Minn. Stat. § 325C.01, subd. 5). In Electro-Craft, the employer lost its trade secret claim for lack of reasonable secrecy efforts; among other lapses, it did not mark technical documents confidential, sent drawings to customers and vendors without special marking, and held public open houses. See reasonable measures to protect trade secrets.

The hardest line is between your results and the other person’s skill. When a former employee asked me where a former employer’s confidentiality claims ended, the answer turned on where the employer’s specific results ended and the general methods and tools of the field, which an employee carries as skill, began. The person’s contractual confidentiality terms could also reach further than trade secret law alone, so the exact contract language had to be read.

What should an NDA form include?

A workable NDA form should cover nine terms. A free template rarely fits your deal as written, so I suggest using this list to check whichever form you start from:

1. The parties and the purpose. Name who discloses, who receives, and the business purpose for which the recipient may use the information.
2. The definition of confidential information. List specific categories, with examples that fit your business, and say whether oral, visual, and electronic disclosures count.
3. The exclusions. Carve out the standard categories listed below.
4. The recipient’s duties. State the standard of care, who inside the recipient may see the information, and that those people must be bound by duties at least as protective.
5. Required and protected disclosures. Permit disclosures required by law or court order, with notice to you where the law allows, and preserve the reports to government agencies described under how whistleblower and other laws limit an NDA.
6. The term. Set the length of the confidentiality promise for each category, as the duration section above explains.
7. Return or destruction. Require the recipient to return or destroy the information, and to certify that it did, when the relationship ends or you ask.
8. Remedies. Include a fee clause, any liquidated damages clause that meets the test in the remedies section, and a clause acknowledging that you may seek an injunction.
9. Governing law and forum. Pick the state whose law applies and where disputes will be decided, as the cross-border section below explains.

For an employee or contractor, add the federal whistleblower-immunity notice or a policy cross-reference, discussed in the trade secret section.

What counts as confidential information in different industries?

The categories that matter differ by industry, so a definition should name the ones that fit your business:

• Technology: source code, algorithms, product roadmaps, and nonpublic data sets.
• Healthcare: patient records, treatment protocols, and research data.
• Finance: client account data, trading or pricing models, and deal terms.
• Manufacturing: product designs, specifications, process settings, and supplier pricing.
• Professional services and media: client lists, unreleased content, and production or project plans.

Some industries also carry confidentiality duties set by federal law, and an NDA there should match those rules rather than restate them loosely. A health care provider that shares patient information with a vendor needs more than a standard NDA: a covered entity may share protected health information with a business associate “if the covered entity obtains satisfactory assurance that the business associate will appropriately safeguard the information” (45 C.F.R. § 164.502(e)). The contract must “Establish the permitted and required uses and disclosures of protected health information by the business associate” and require the vendor to “Not use or further disclose the information other than as permitted or required by the contract or as required by law” (45 C.F.R. § 164.504(e)). For financial institutions, a third party that receives customers’ nonpublic personal information “shall not, directly or through an affiliate of such receiving third party, disclose such information to any other person that is a nonaffiliated third party of both the financial institution and such receiving third party, unless such disclosure would be lawful if made directly to such other person by the financial institution” (15 U.S.C. § 6802(c)).

Which exclusions belong in an NDA?

The standard exclusion categories remove information from the NDA when it:

• was already public when disclosed, or later becomes public through no fault of the recipient;
• was already known to the recipient before the disclosure, as its records show;
• is independently developed by the recipient without using the confidential information;
• is rightfully received from a third party who owes no duty of confidentiality; or
• is disclosed with your prior written consent.

Disclosures required by law or court order are usually handled as a permitted disclosure rather than an exclusion, so the information stays confidential for every other purpose. These exclusions track what the law protects anyway: the Cherne general-knowledge rule applies whether or not your NDA says so. Writing them in helps your enforcement, because a definition with clear edges gives the signer the “fair notice” Electro-Craft requires, and a sweeping one risks the result there, where the agreements were “too vague to apprise the employees of specific” secrets.

How does the governing law affect an NDA’s definition?

The governing law decides how a court reads the definition, what exclusions it implies, and which trade secret statute fills the gaps. A Minnesota NDA is read under Minnesota contract law, with MUTSA’s trade secret definition in § 325C.01 and the federal definition in 18 U.S.C. § 1839 as the statutory reference points. Another state’s contract and trade secret law can read the same definition differently. If your counterparty insists on its home state’s law, I suggest having the definition reviewed under that law before you sign, because the same words can protect more or less depending on which law reads them.

Does an NDA cover email, messaging, and cloud tools?

Yes, if the definition says so. A well-drafted NDA covers confidential information in any form, including email, messaging apps, shared drives, and cloud tools, and it should not depend on a confidentiality stamp that digital files often lack. Minnesota law also lets you sign the NDA itself electronically: “A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation,” and “If a law requires a signature, an electronic signature satisfies the law” (Minn. Stat. § 325L.07). I suggest adding duties that fit digital information: no forwarding to personal accounts, access only through your systems, and deletion from personal devices when the relationship ends.

How do you protect third-party information received under an NDA?

When you receive a customer’s or partner’s confidential information and need to share it with your own employees or vendors, your NDA with the source usually requires that each of those people be bound by duties at least as protective. I suggest flowing those terms down in writing to every subcontractor and vendor who will see the information, and limiting access to people who need it for the stated purpose. Trade secret law reaches the downstream recipient too: MUTSA misappropriation includes use or disclosure by a person who knew or had reason to know the knowledge was “derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use” (§ 325C.01, subd. 3).

Are NDAs public record?

No. A private NDA is a contract between the parties, and no public office records it. Two settings can make one public. First, when the NDA is filed in a lawsuit, it becomes part of a court record, and “Records of all courts and court administrators in the state of Minnesota are presumed to be open to any member of the public for inspection or copying” (Minn. R. Pub. Access to Recs. of Jud. Branch 2). In a trade secret case, the court can protect the secret by “sealing the records of the action” and other means (Minn. Stat. § 325C.05), and I suggest asking for that protection before you file the confidential material, not after. Second, an NDA with a Minnesota government entity is government data, and “All government data collected, created, received, maintained or disseminated by a government entity shall be public unless classified” otherwise (Minn. Stat. § 13.03, subd. 1). Trade secret information you supply is one such classification: it is classified as nonpublic data under Minn. Stat. § 13.37, subd. 2, when it meets that section’s definition, including that it “was supplied by the affected individual or organization” and is “the subject of efforts by the individual or organization that are reasonable under the circumstances to maintain its secrecy.”

How do whistleblower and other laws limit an NDA?

Minnesota bars an employer from retaliating against an employee for a good-faith report of a suspected legal violation to you, a government body, or law enforcement, and from requiring an employee to keep their own wages secret or acting against an employee for discussing a coworker’s voluntarily disclosed wages. Federal law adds immunity under trade secret law for certain confidential reports, protects communications with SEC staff, and limits NDAs in sexual harassment and assault disputes. Under the SEC rule, enforcing a confidentiality agreement to impede those communications is itself a violation.

• Whistleblower reports. Minn. Stat. § 181.932, subd. 1 bars retaliation because “the employee, or a person acting on behalf of an employee, in good faith, reports a violation, suspected violation, or planned violation of any federal or state law or common law or rule adopted pursuant to law to an employer or to any governmental body or law enforcement official,” or because “the employee is requested by a public body or office to participate in an investigation, hearing, inquiry.” An injured employee may sue “to recover any and all damages recoverable at law, together with costs and disbursements, including reasonable attorney’s fees” (Minn. Stat. § 181.935). The protection has limits: “The disclosures protected pursuant to this section do not authorize the disclosure of data otherwise protected by law” (subd. 1), and the section “does not permit an employee to make statements or disclosures knowing that they are false or that they are in reckless disregard of the truth” (subd. 3). Subdivision 5 adds: “This section does not permit disclosures that would violate federal or state law or diminish or impair the rights of any person to the continued protection of confidentiality of communications provided by common law.”
• Wages. An employer may not “require nondisclosure by an employee of his or her wages as a condition of employment” (Minn. Stat. § 181.172), and may not “take any adverse employment action against an employee for disclosing the employee’s own wages or discussing another employee’s wages which have been disclosed voluntarily.” The same section does not “permit an employee, without the written consent of the employer, to disclose proprietary information, trade secret information, or information that is otherwise subject to a legal privilege or protected by law,” or “permit the employee to disclose wage information of other employees to a competitor of their employer.”
• Trade secrets reported to the government. Federal law gives immunity under “any Federal or State trade secret law” for a disclosure made “in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney” and “solely for the purpose of reporting or investigating a suspected violation of law” (18 U.S.C. § 1833(b)). “An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The trade secret section below explains what you lose without that notice.
• The SEC. “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement” (17 C.F.R. § 240.21F-17). The rule makes an exception, “other than agreements dealing with information covered by” two SEC provisions “related to the legal representation of a client.”
• Sexual harassment and assault disputes. “With respect to a sexual assault dispute or sexual harassment dispute, no nondisclosure clause or nondisparagement clause agreed to before the dispute arises shall be judicially enforceable in instances in which conduct is alleged to have violated Federal, Tribal, or State law” (42 U.S.C. § 19403). The same section keeps an employer’s right to protect “trade secrets or proprietary information.”
• Concerted activity. Federal labor law gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection” (29 U.S.C. § 157). Its definition of “employee” leaves out “any individual having the status of an independent contractor, or any individual employed as a supervisor” (29 U.S.C. § 152). I suggest drafting employee NDAs so they do not reach that activity, because a clause that does invites a dispute you do not need.

Can an NDA prevent you from testifying?

Not on its own. Under Minnesota’s subpoena rule, the court, not the NDA, decides whether testimony about confidential information is limited. A Minnesota subpoena must “command each person to whom it is directed to attend and give testimony” (Minn. R. Civ. P. 45.01), and “Failure by any person without adequate excuse to obey a subpoena served upon that person may be deemed a contempt of the court on behalf of which the subpoena was issued” (Rule 45.05). When testimony would reveal your confidential information, the protection comes from the court: if a subpoena “requires disclosure of a trade secret or other confidential research, development, or commercial information,” the court “may, to protect a person subject to or affected by the subpoena, quash or modify the subpoena” (Rule 45.03(c)(2)). Minnesota also bars retaliation against an employee who “is requested by a public body or office to participate in an investigation, hearing, inquiry” (§ 181.932, subd. 1).

If your NDA’s signer is subpoenaed, I suggest relying on a clause requiring prompt notice of any subpoena, so you can ask the court for a protective order or sealing before the testimony, rather than on a clause forbidding testimony.

Why do NDA breaches happen?

Most NDA breaches start with ordinary business events rather than theft. The common causes are a signer who never understood what the NDA covered, staff who were never trained on it, a casual conversation or social media post, files forwarded to a personal account for convenience, and turnover, mergers, or reorganizations in which no one reminds departing people of their duties. A breach can also be deliberate, usually when a departing employee or former partner starts a competing business. I suggest addressing the ordinary causes directly: train new signers on what the NDA covers, remind people of it at exit interviews, and limit access to those who need the information.

How do you prove a breach of an NDA?

You prove a breach with the signed NDA, evidence of what it made confidential, evidence that the other side received that information under the NDA, and evidence of what they disclosed or used in violation of its terms. Those facts track Lyon Financial’s three elements: formation, your own performance of any conditions, and breach.

Much of the evidence can sit in your own systems: the signed agreement, the files the person could open, download and access logs, emails forwarding documents to personal accounts, and the customers or projects that moved after the person left. I suggest preserving those records as soon as you suspect a breach, before routine deletion schedules run, because a court decides the injunction motion on the record you can show.

Witnesses fill gaps the documents leave. A coworker who heard the disclosure, a customer who was offered your pricing, or a vendor who received your drawings can establish what was shared, with whom, and when. I suggest writing down what each witness saw or heard while the memory is fresh, with dates, and keeping those notes with your evidence file. A witness who is close to the events and whose account matches the documents carries the most weight, and a witness who will not cooperate can be required to testify by subpoena under Rule 45.

Before you send anything, read the NDA for a notice-and-cure step, a forum or arbitration clause, a governing-law clause, an attorney-fee clause, and a clause on injunctions, because each one shapes what you can do next. A demand letter should name the information, the clause, and what you want stopped. I suggest leaving out any demand for silence about a report to a government agency. The SEC rule described under how whistleblower and other laws limit an NDA bars “enforcing, or threatening to enforce, a confidentiality agreement” to impede communication with SEC staff, and § 181.932 bars retaliation regarding an employee’s “compensation, terms, conditions, location, or privileges of employment” for a good-faith report of a suspected violation. For the mechanics of the letter, see how a Minnesota cease and desist letter works.

Proving a breach can require showing the secret to the court. In a MUTSA case, “a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action” (Minn. Stat. § 325C.05).

What happens if confidential information is accidentally disclosed?

Whether an accidental disclosure breaches an NDA depends on the duty the NDA sets. Many NDAs require the recipient to use reasonable care, or the care it uses for its own information; under that wording, a careless slip can be a breach even without intent, while a disclosure despite reasonable care may not be. Trade secret law also reaches the person who receives information by mistake: MUTSA misappropriation includes disclosure or use by a person who, “before a material change of the discloser’s or user’s position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake” (§ 325C.01, subd. 3).

If your information goes out by mistake, I suggest acting the same day: ask the person who received it to return or delete it and confirm in writing, record what was sent and to whom, and check whether your NDA requires notice to the other party. If you were the one who disclosed someone else’s information by mistake, give any notice your NDA requires promptly and help retrieve it, because quick action limits the harm and the damages. Prompt retrieval also helps preserve secrecy, which MUTSA requires be “the subject of efforts that are reasonable under the circumstances.”

What remedies can a Minnesota court award when someone breaks an NDA?

When someone breaks a nondisclosure agreement, a Minnesota court can award money damages for the breach, measured by your loss or, in the right case, by the profits the other side made from your information, and it can order the breach stopped. A liquidated damages clause is enforced only if it meets a two-part test, and attorney fees require a contract clause or a statute.

• Damages and profits. In Cherne, the court explained that “where an employee wrongfully profits from the use of information obtained from his employer, the measure of damages may be the employee’s gain.” The court affirmed an award measured as a share of the former employees’ revenue from contracts with the employer’s customers.
• Liquidated damages. In Gorco Construction Co. v. Stein, 99 N.W.2d 69 (Minn. 1959), the Minnesota Supreme Court stated that the Minnesota rule is “in accord with” the Restatement of Contracts. Under that rule, a sum fixed in advance of breach is not enforceable unless “the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach” and “the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.” The court held the 15% sum in that case failed: “the provision for liquidated damages is in the nature of a penalty and is therefore unenforceable.” See liquidated damages and penalty clauses in Minnesota.
• Attorney fees. Cherne stated the rule: “Generally attorneys fees may not be awarded to a successful litigant absent specific contractual or statutory authority.” I suggest a fee clause in every NDA, because without one each side pays its own lawyers unless a statute provides otherwise.
• Trade secret damages. If the information is a trade secret, MUTSA damages “can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss,” and “If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under paragraph (a)” (Minn. Stat. § 325C.03). For fees, MUTSA provides: “If (i) a claim of misappropriation is made in bad faith, (ii) a motion to terminate an injunction is made or resisted in bad faith, or (iii) willful and malicious misappropriation exists, the court may award reasonable attorney’s fees to the prevailing party” (Minn. Stat. § 325C.04).
• Trade secret injunctions. MUTSA provides that “Actual or threatened misappropriation may be enjoined,” and that “In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order” (Minn. Stat. § 325C.02). The next section covers how a court decides whether to grant one.

How does a court decide whether to order a stop to a breach?

Before trial, a Minnesota court orders a stop through a temporary restraining order or a temporary injunction, which require irreparable harm, security, and the five considerations below; after trial, it can grant a permanent injunction. A clause in your NDA declaring that any breach causes irreparable harm does not decide the question for the court.

The procedure. A temporary restraining order without notice requires that “it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party’s attorney can be heard in opposition” (Minn. R. Civ. P. 65.01), and that “the applicant’s attorney states to the court in writing the efforts, if any, which have been made to give notice or the reasons supporting the claim that notice should not be required.” “No temporary injunction shall be granted without notice of motion or an order to show cause to the adverse party” (Rule 65.02). You must also give security “for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained” (Rule 65.03).

The five considerations. In Dahlberg Brothers, Inc. v. Ford Motor Co., 137 N.W.2d 314 (Minn. 1965), the Minnesota Supreme Court weighed five considerations. They are the parties’ relationship before the dispute, the harm to each side if the injunction is denied or granted, and the likelihood of success on the merits. The last two are public policy expressed in state and federal statutes and the burden on the court of supervising the order.

Irreparable harm. In Cherne, the court quoted the rule that “an inherent threat of irreparable injury may be inferred from the breach of an otherwise valid and enforceable restrictive covenant [not to compete or not to disclose trade secrets], sufficient to invoke at least temporary equitable relief.” St. Jude Medical, Inc. v. Carter, 913 N.W.2d 678 (Minn. 2018) was a permanent-injunction case: to win one, “a party must show that any remedy at law would be inadequate.” There, an employment agreement with a non-disclosure covenant and a noncompete said a breach would cause irreparable injury. The court held the trial court was not bound by that language: “Allowing the terms of private agreements to dictate whether a court must issue an injunction would interfere with a court’s equitable jurisdiction and powers.” It listed when harm may be inferred: “situations where customer good will is at stake, when an employee takes business secrets with an intent to benefit from the secrets, or when a risk exists that the secrets will be disclosed in the subsequent employment and result in irreparable damage.” It added that “such an inference can be rebutted by evidence to the contrary,” and that the employer “must show more than the breach of the restrictive covenant, and it cannot satisfy its burden of proof to support an inference of harm by relying solely on Carter’s departure to work for a competitor.” The employer there proved no disclosure and got no permanent injunction.

For how these motions run, see temporary injunctions in Minnesota commercial cases.

How do trade secret claims work alongside an NDA claim?

When the information is a trade secret, you can bring a MUTSA claim, and possibly a federal DTSA claim, alongside the contract claim. MUTSA counts as misappropriation the “disclosure or use of a trade secret of another without express or implied consent by a person who,” “at the time of disclosure or use, knew or had reason to know” that the knowledge was “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.” In Electro-Craft, the court tied that duty to the employer’s conduct: “Trade secret protection, on the other hand, depends upon a continuing course of conduct by the employer, a course of conduct which creates a confidential relationship.”

The MUTSA claim brings the statutory remedies described above: injunctions under Minn. Stat. § 325C.02 and damages, including exemplary damages for willful and malicious misappropriation, under Minn. Stat. § 325C.03.

MUTSA’s definition of misappropriation appears in Minn. Stat. § 325C.01, subd. 3, and its trade secret definition in subdivision 5 requires that the information derive “independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use,” and that it be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” For examples, see what counts as a trade secret under Minnesota law.

The DTSA lets an owner sue “if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce” (18 U.S.C. § 1836), and “The district courts of the United States shall have original jurisdiction of civil actions brought under this section.” The federal definition requires that “the owner thereof has taken reasonable measures to keep such information secret” (18 U.S.C. § 1839). A DTSA injunction may not “prevent a person from entering into an employment relationship,” and any conditions on that employment must “be based on evidence of threatened misappropriation and not merely on the information the person knows.” Nor may it “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” See when a federal DTSA claim makes sense.

The DTSA notice rule from the whistleblower section matters here: “If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided” (18 U.S.C. § 1833(b)). Notice by “a cross-reference to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law” complies, and the notice rule “shall apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection,” which was May 11, 2016. Both MUTSA and the DTSA also set deadlines to sue, measured from when the misappropriation was or should have been discovered; check the current text of Minn. Stat. § 325C.06 and the federal act for the period that applies to you. The contract claim on the NDA has its own deadline under Minn. Stat. § 541.05, subd. 1, which covers an action “upon a contract or other obligation, express or implied, as to which no other limitation is expressly prescribed.”

How can you resolve an NDA breach without a lawsuit?

Many NDA disputes end in a negotiated settlement or mediation, usually after a demand letter. If the case goes to court, mediation or another settlement process is likely to come up anyway: under Minnesota’s court rule on alternative dispute resolution, “All civil and family cases are subject to this rule,” with listed exceptions (Minn. Gen. R. Prac. 114.01). The rule defines mediation as “A process in which a Neutral facilitates communication and negotiation to promote voluntary decision making by the parties to the dispute.” Mediation suits NDA disputes because it is private and the mediator can test each side’s case without a public filing.

A settlement can do more than move money. Terms that often resolve NDA disputes include:

• return or destruction of every copy of the information, with a signed certification;
• a forensic check of devices or accounts by a neutral examiner;
• a renewed or tighter confidentiality promise, sometimes with a set payment for any future breach that meets the liquidated damages test;
• a license, when the other side has built something useful and you would rather be paid for its use than stop it;
• a payment schedule, and an agreed court order you can file if the terms are broken; and
• mutual releases limited to the dispute.

I suggest deciding early which of these matters most to you, because stopping the use and getting the information back are usually worth more than a damages figure that is hard to prove.

How are settlements involving NDAs taxed?

The tax treatment of a settlement depends on what each payment is for, and a confidentiality clause in it can change the payer’s deduction in one setting. Federal law denies a deduction for “any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement,” and for “attorney’s fees related to such a settlement or payment” (26 U.S.C. § 162(q)). On the receiving side, gross income excludes “the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness” (26 U.S.C. § 104(a)(2)), which does not describe the business losses at stake in a typical NDA dispute. I suggest stating in the settlement agreement what each payment compensates and having your CPA review the tax treatment before you sign, because the allocation is far easier to set in the agreement than to defend later.

Can you enforce an NDA across states or countries?

Yes, but where and under which law you enforce it should be decided when you sign, through the NDA’s governing-law and forum clauses. A judgment from another state or a federal court can be enforced in Minnesota: “A certified copy of any foreign judgment may be filed in the office of the court administrator of any district court of this state,” and “The court administrator shall treat the foreign judgment in the same manner as a judgment of any district court or the supreme court of this state” (Minn. Stat. § 548.27). A “Foreign judgment” there means one “of a court of the United States or of any other court which is entitled to full faith and credit in this state” (Minn. Stat. § 548.26).

Minnesota limits one choice-of-law move for employees. An employer may not require an employee “who primarily resides and works in Minnesota” to agree to a provision that would “require the employee to adjudicate outside of Minnesota a claim arising in Minnesota” or “deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota,” and such a provision “is voidable at any time by the employee” (Minn. Stat. § 181.988, subd. 3). The subdivision “applies only to claims arising under this section,” the noncompete statute, so by its terms it does not reach a claim on an NDA.

Across countries, enforcement depends on the other country’s courts. Minnesota’s foreign-country judgment act runs one direction: its sections “apply to a foreign-country judgment to the extent that the judgment: (1) grants or denies recovery of a sum of money; and (2) under the law of the foreign country where rendered, is final, conclusive, and enforceable” (Minn. Stat. § 548.56). Whether a Minnesota judgment will be enforced abroad turns on the other country’s law. Arbitration often travels better: “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts in accordance with this chapter” (9 U.S.C. § 201). For an NDA with a party abroad, I suggest a clear governing-law clause, an arbitration clause naming the seat and rules, a carve-out letting you seek an emergency injunction in any court with power over the recipient, and limiting what you share until those terms are signed.

What should a Minnesota owner do before relying on an NDA?

Before relying on an NDA, I suggest confirming a signed agreement, consideration for anyone who signed after starting work, and a definition naming specific information you treat as secret. In an employee agreement entered into on or after July 1, 2023, I also suggest confirming that no clause restricts work in a way Minn. Stat. § 181.988 lists. In Electro-Craft, the employee agreements did not help the employer’s trade secret claim because it “never treated specific information as secret.” Employee and contractor agreements should also carry the federal whistleblower-immunity notice or a cross-reference to a reporting-policy document. Every NDA should have a fee clause, and your records should show you treated the information as secret. When a breach happens, those same terms shape whether you get damages, an injunction, and your fees back.

If you would like me to analyze whether your NDA would hold up, or what a suspected breach lets you recover and stop, email [email protected] with a brief description, and hold the agreement and any confidential documents until an intake and conflict check are complete. For related contract questions, see my Minnesota contracts practice page.