Non-disclosure agreements are the most-signed and least-read contracts in business. Because they feel routine, California businesses regularly sign or send NDAs with defects that surface only when it matters — during a dispute, a due-diligence review, or a trade secret case. Here are seven mistakes we see most often, and how to avoid each one.
1. Defining "confidential information" so broadly it means nothing
An NDA that defines confidential information as "any information disclosed by either party" sweeps in lunch orders and public marketing decks. Overbroad definitions cut both ways: they are harder to enforce because a court cannot tell what was actually meant to be protected, and they expose the receiving party to obligations it cannot realistically track. Define the categories that matter — technical data, source code, customer lists, pricing, financials, product roadmaps — and include the standard exclusions: information that is public, already known, independently developed, or received lawfully from a third party.
2. Slipping a non-compete into the NDA
This is the most dangerous mistake in California. Business and Professions Code § 16600 voids contracts that restrain anyone from engaging in a lawful profession, trade, or business, and since 2024, § 16600.5 makes it unlawful for an employer even to attempt to enforce a void non-compete. Section 16600.1 required employers to notify specified current and former employees by February 14, 2024, that such clauses are void. An NDA whose "confidentiality" terms effectively bar a departing employee from working in the industry can be treated as a disguised restraint. Protect information, not market position.
3 and 4. Confusing NDAs with trade secret protection — and getting the time period wrong
Mistake 3 is treating the NDA as a substitute for trade secret rights. An NDA supports — but does not replace — protection under the California Uniform Trade Secrets Act (Civil Code § 3426 et seq.). To qualify as a trade secret, information must derive value from secrecy and be subject to reasonable efforts to keep it secret. Signing NDAs is one such effort; so are access controls, need-to-know limits, and exit procedures. A company that has everyone sign NDAs but leaves its customer database open to the whole staff may find its "trade secret" fails the reasonable-efforts test.
Mistake 4 is the time period. Parties often default to a two- or three-year confidentiality term because it looks reasonable. For ordinary business information, a defined term is fine. But if the disclosed material includes genuine trade secrets, a short fixed term can be read as an agreement that secrecy ends on that date — potentially forfeiting trade secret status afterward. The fix is a carve-out: confidentiality obligations for trade secrets continue for as long as the information remains a trade secret under applicable law.
5. One-way terms in a two-way relationship
A unilateral NDA is appropriate when only one side discloses — say, a founder pitching an investor. But in negotiations, joint ventures, and vendor relationships, both sides usually share sensitive material. Signing the other side's one-way form leaves everything you disclose unprotected. Check which direction the obligations run before signing, not after you have shared your pricing model.
6. No teeth: missing remedies and return obligations
Damages from a confidentiality breach are notoriously hard to quantify, which is why a well-drafted NDA states that a breach may cause irreparable harm and that the disclosing party may seek injunctive relief. Add an attorney-fee clause — in an action on the contract, Civil Code § 1717 generally makes a unilateral clause reciprocal — and a clear obligation to return or destroy materials on request, with certification. Without these, your practical remedy after a breach may be an expensive lawsuit over speculative damages.
7. Treating every NDA as the same document
An NDA for M&A due diligence may need carefully tailored non-solicitation provisions, a standstill discussion, and residuals language reviewed carefully. An employee confidentiality agreement must respect Labor Code § 2870, which limits assignment of inventions an employee develops entirely on their own time without employer resources, subject to statutory exceptions for inventions related to the employer's business or research or resulting from work performed for the employer, and cannot muzzle legally protected disclosures. A vendor NDA should coordinate with the services agreement that follows it so the two do not conflict. Using one template for all three invites gaps. A business contracts attorney can build a small set of NDA forms matched to how your company actually shares information.
Talk to a California business attorney
If you are about to sign an NDA — or you suspect the one protecting your key information has holes — Itkin Law can review or draft it quickly and at a predictable cost. Schedule a free consultation or call (949) 418-2113.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. Facts matter; consult a lawyer about your specific situation.
