NDA (Non-Disclosure Agreement)
A Non-Disclosure Agreement (NDA) is a confidentiality contract under which one or more parties agree not to disclose or use confidential information received, on pain of contractual and, where applicable, statutory sanctions.
Definition
The Non-Disclosure Agreement, or confidentiality agreement, is a contract under which one party (the disclosing party) shares with another (the receiving party) information designated as confidential, on the condition that the receiving party will not disclose or use it for purposes other than those defined. It may be one-way or mutual. Its validity in France and the United States rests on the precision of the definition of the covered information, on the duration of the obligation and on the existence of effective enforcement mechanisms. The NDA layers contractual protection on top of statutory trade-secret regimes (the French Trade Secrets Act of 30 July 2018 and the DTSA in the United States).
In plain English
The NDA is the most widely used, and most poorly drafted, instrument in business law. Many executives sign downloaded templates that do not hold up in France or in the United States. Three pitfalls kill an NDA. First: an overly broad or vague definition of confidential information, which becomes unworkable in court. Second: a default perpetual duration, rejected by U.S. courts (New York case law typically caps duration around 5 years) and criticized by French courts as unbalanced. Third: unrealistic penalty clauses or jurisdiction provisions that contradict each other. A well-drafted NDA fits in 4 to 6 pages, precisely identifies the subject matter of the exchange, sets a bounded duration (3 to 5 years depending on the industry) and selects a governing law consistent with the nature of the information exchanged.
RWM transatlantic case study
For a French startup pitching a U.S. investor or industrial partner, we structure a bilingual NDA around four key elements. First, a listing-based definition: source code, customer data, technical parameters, business plan, rather than a generic catch-all such as "any information". Second, a DTSA Notice provision (18 U.S.C. § 1833(b)(3)) flagging U.S. whistleblower protections, a precondition to recovering exemplary damages. Third, a jurisdiction clause selecting either Paris or Delaware depending on the commercial balance of power, consistent with the chosen governing law. Fourth, realistic carve-outs: information already public, already known, independently developed or disclosed pursuant to a court order. On cost, an FR-U.S. NDA drafted once becomes a reusable template. We systematically avoid fixed-amount penalty clauses, which French courts may reduce (article 1231-5 of the French Civil Code) and which do not land well before a U.S. judge.
Points to watch
- Listing-based definition rather than generic, otherwise voidable for vagueness.
- Bounded duration of 3 to 5 years, except for trade secrets, where an unlimited duration clause is tolerated.
- DTSA Notice provision required to recover exemplary damages in the United States.
- Jurisdiction and governing law must be consistent, otherwise forum non conveniens motions.
- An NDA does not replace an IP assignment: it is passive protection, not a transfer of rights.