Mutual Non-Disclosure Agreement (California)

CALIFORNIA MUTUAL NON-DISCLOSURE AGREEMENT

A Two-Way NDA Governed by California Law

CALIFORNIA-SPECIFIC PRACTITIONER NOTES

Mutual NDAs executed for evaluation of California transactions should comport with the California Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code §§ 3426 et seq., and California's strict prohibition on post-term non-compete and customer non-solicitation restrictions under Cal. Bus. & Prof. Code § 16600. Where either party is or employs California-resident individuals, drafters must also observe the Silenced No More Act (SB 331), Cal. Gov. Code § 12964.5, and Cal. Civ. Code § 1670.11.

California courts broadly preempt common-law claims that overlap with trade secret misappropriation under K.C. Multimedia, Inc. v. Bank of America, 171 Cal. App. 4th 939 (2009), so drafting should rely on CUTSA as the primary cause of action rather than on common-law misappropriation, unfair competition, or conversion theories.

Under Brown v. TGS Management Co., LLC, 57 Cal. App. 5th 303 (2020), overbroad "confidentiality" provisions that function as back-door non-competes may be invalidated under § 16600 — so this template avoids any restriction on a party's general knowledge, skill, and experience.

1. PARTIES

This Mutual Non-Disclosure Agreement (this "Agreement") is made as of [__/__/____] (the "Effective Date") between:

Party A: [________________________________], a [________________________________] with principal offices at [________________________________]

Party B: [________________________________], a [________________________________] with principal offices at [________________________________]

Each party may act as either a "Discloser" or a "Recipient" of Confidential Information in connection with their evaluation of [________________________________] (the "Permitted Purpose"). In consideration of the mutual exchange of Confidential Information, the parties agree as follows.

2. DEFINITIONS

2.1 "Confidential Information" means any non-public information disclosed by a Discloser to a Recipient in any form (written, oral, electronic, or visual) that (i) is marked or identified as confidential, (ii) a reasonable recipient would understand to be confidential from its nature and the circumstances, or (iii) qualifies as a "trade secret" under Cal. Civ. Code § 3426.1(d).

2.2 "Trade Secret" means information that (a) derives independent economic value, actual or potential, from not being generally known to or readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy, in accordance with Cal. Civ. Code § 3426.1(d).

2.3 "Representatives" means a party's employees, officers, directors, consultants, attorneys, accountants, and financial advisors who have a specific need to know Confidential Information for the Permitted Purpose and who are bound by written obligations of confidentiality at least as protective as this Agreement.

2.4 "Misappropriation" has the meaning given in Cal. Civ. Code § 3426.1(b), including acquisition by improper means, and disclosure or use without express or implied consent by a person who acquired the information under circumstances giving rise to a duty of secrecy.

3. MUTUAL CONFIDENTIALITY OBLIGATIONS

3.1 Use Limitation. Each Recipient shall use the Discloser's Confidential Information solely for the Permitted Purpose, and not for the benefit of itself or any third party.

3.2 Non-Disclosure. Each Recipient shall hold Confidential Information in strict confidence and shall not disclose it to any person other than its Representatives without the Discloser's prior written consent.

3.3 Standard of Care / Reasonable Secrecy Efforts. Each Recipient shall use at least the same degree of care to protect the Discloser's Confidential Information that it uses to protect its own confidential information of like importance, and in no event less than reasonable care. Each party agrees that its protective measures shall be designed to support, not undermine, the other party's "reasonable efforts to maintain secrecy" element under Cal. Civ. Code § 3426.1(d)(2).

3.4 Security Measures. Each Recipient shall implement reasonable administrative, physical, and technical safeguards to prevent unauthorized access to or disclosure of Confidential Information, including access controls, encryption at rest where feasible, and written confidentiality undertakings from Representatives.

3.5 Compelled Disclosure. If a Recipient is required by subpoena, civil discovery, court order, or regulatory request (including requests under the California Public Records Act, Cal. Gov. Code § 7920.000 et seq.) to disclose Confidential Information, it shall, to the extent legally permitted, provide the Discloser with prompt written notice and cooperate in seeking a protective order under Cal. Code Civ. Proc. § 2025.420 or equivalent relief. The Recipient shall disclose only the minimum portion legally required.

4. EXCLUSIONS FROM CONFIDENTIAL INFORMATION

The obligations of confidentiality do not apply to information that the Recipient can demonstrate by contemporaneous written or electronic records:

☐ (a) was rightfully known to the Recipient without obligation of confidentiality before receipt from the Discloser;
☐ (b) is or becomes publicly available through no wrongful act of the Recipient;
☐ (c) is rightfully received from a third party without a duty of confidentiality; or
☐ (d) is independently developed by the Recipient's personnel without use of or reference to the Discloser's Confidential Information.

Residual knowledge unintentionally retained in the unaided memory of Representatives does not constitute a breach, provided no conscious use of the Discloser's Confidential Information occurs; however, this residuals clause does not grant any license to trade secrets.

5. CALIFORNIA STATUTORY CARVE-OUTS

5.1 DTSA Whistleblower Immunity Notice. Pursuant to 18 U.S.C. § 1833(b), each party is notified that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret made (i) in confidence to a federal, state, or local government official (directly or indirectly) or to an attorney, solely for reporting or investigating a suspected violation of law; or (ii) in a complaint or document filed under seal in a lawsuit or other proceeding.

5.2 Silenced No More Act (Cal. Gov. Code § 12964.5; Cal. Code Civ. Proc. § 1001). Nothing in this Agreement shall prevent any party or individual from disclosing factual information regarding unlawful acts in the workplace, including harassment, discrimination, retaliation, or other conduct prohibited by the California Fair Employment and Housing Act, Cal. Gov. Code § 12900 et seq.

5.3 Cal. Civ. Code § 1670.11 (AB 3109). No provision of this Agreement shall be construed to waive any party's right to testify in any administrative, legislative, or judicial proceeding concerning alleged criminal conduct or alleged sexual harassment.

5.4 California Whistleblower Protection (Cal. Lab. Code § 1102.5). Nothing in this Agreement prevents disclosure of information to a government or law enforcement agency where the individual has reasonable cause to believe the information evidences a violation of law or regulation.

5.5 Government and Regulatory Reporting. Nothing herein limits communication with the U.S. Securities and Exchange Commission, the EEOC, the California Civil Rights Department, the California Labor Commissioner, or any equivalent agency regarding possible violations of law. No party need obtain permission from or notify the other party prior to such communications.

6. ABSENCE OF NON-COMPETE; § 16600 COMPLIANCE

6.1 Bus. & Prof. Code § 16600. The parties acknowledge that Cal. Bus. & Prof. Code § 16600, as amended by AB 1076 and SB 699 effective January 1, 2024, provides that every contract by which anyone is restrained from engaging in a lawful profession, trade, or business is void, "no matter how narrowly tailored," in the employment context, and that only the limited statutory exceptions of §§ 16601, 16602, 16602.5, and 16606.5 are enforceable.

6.2 No Non-Compete or Customer Non-Solicitation. This Agreement contains no post-term non-compete and no customer non-solicitation provisions. Each party retains the unimpeded right to engage in any lawful trade, business, or profession and to solicit customers using information that is not a protected trade secret of the other party.

6.3 Trade Secret Protection Remains Enforceable. Confidentiality and trade secret protection under CUTSA are enforceable notwithstanding § 16600. See Angelica Textile Services, Inc. v. Park, 220 Cal. App. 4th 495 (2013).

6.4 No Restraint on General Skills and Knowledge. Nothing in this Agreement restricts either party from using its general knowledge, skill, or experience in the industry, even where such knowledge was enhanced by exposure to the other party's Confidential Information, so long as no Confidential Information or Trade Secret is actually used or disclosed. Cf. Brown v. TGS Management Co., LLC, 57 Cal. App. 5th 303 (2020).

7. OWNERSHIP, NO LICENSE, AND FEEDBACK

7.1 Ownership. All Confidential Information remains the property of the respective Discloser. No license, express or implied, is granted to any intellectual property other than the limited right to use Confidential Information for the Permitted Purpose.

7.2 Feedback. Either party may voluntarily provide the other with non-obligatory feedback, suggestions, or ideas concerning the Permitted Purpose ("Feedback"), and the receiving party may use such Feedback without restriction, provided that use of Feedback does not relieve it of confidentiality obligations as to the underlying Confidential Information.

8. RETURN OR DESTRUCTION

Upon the earlier of (a) the Discloser's written request or (b) termination or expiration of this Agreement, the Recipient shall within [____] days return or destroy (at the Discloser's election) all Confidential Information and all copies, summaries, and derivative works thereof, and shall certify such return or destruction in writing. A Recipient may retain one archival copy to the extent required by law or professional regulation, provided such retained materials remain subject to this Agreement.

9. REMEDIES; INJUNCTIVE RELIEF

9.1 Injunctive Relief Under CUTSA. Each party acknowledges that any breach or threatened breach of its confidentiality obligations would cause irreparable harm not adequately remedied by monetary damages. Accordingly, the non-breaching party shall be entitled to temporary, preliminary, and permanent injunctive relief under Cal. Civ. Code § 3426.2 and Cal. Code Civ. Proc. § 527, without the necessity of posting a bond beyond the minimum statutorily required.

9.2 Monetary Remedies Under CUTSA. The non-breaching party may also recover:

(a) actual damages and unjust enrichment under Cal. Civ. Code § 3426.3(a);
(b) a reasonable royalty under § 3426.3(b) where actual loss and unjust enrichment are not provable;
(c) exemplary damages up to two (2) times any compensatory award for willful and malicious misappropriation under § 3426.3(c); and
(d) attorneys' fees to the prevailing party upon a finding of willful and malicious misappropriation or bad-faith conduct under § 3426.4.

9.3 Three-Year CUTSA Statute of Limitations. Any CUTSA claim must be brought within three (3) years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered (Cal. Civ. Code § 3426.6). Claims for breach of this written contract are subject to the four-year limitation of Cal. Code Civ. Proc. § 337.

9.4 Cumulative Remedies. All remedies are cumulative and in addition to any other available at law or in equity.

10. TERM AND SURVIVAL

10.1 Term. This Agreement commences on the Effective Date and terminates [____] years later, unless earlier terminated by either party on thirty (30) days' written notice.

10.2 Survival.

(a) Obligations regarding Trade Secrets survive indefinitely, so long as the information continues to meet the definition of a trade secret under Cal. Civ. Code § 3426.1(d).

(b) Obligations regarding non-trade-secret Confidential Information survive for [____] years from the date of disclosure.

11. GOVERNING LAW, FORUM, AND JURISDICTION

11.1 Governing Law. This Agreement is governed by and construed under the laws of the State of California without regard to conflict-of-laws principles.

11.2 Exclusive Forum. The parties submit to the exclusive jurisdiction of the Superior Court of California, County of [________________________________], and the U.S. District Court for the [Northern/Central/Southern/Eastern] District of California, for all actions and proceedings arising out of this Agreement.

11.3 Labor Code § 925 Compliance. If a party to this Agreement is an individual who primarily resides and works in California, Cal. Lab. Code § 925 shall govern enforcement of Sections 11.1 and 11.2. Unless such individual is separately represented by counsel in negotiating this Agreement (as provided in § 925(e)), the choice-of-forum and choice-of-law provisions shall not be enforced to require adjudication outside California or to deprive the individual of the substantive protection of California law.

11.4 Jury Waiver. Each party waives trial by jury to the fullest extent permitted by law. The parties acknowledge that pre-dispute jury waivers are not enforceable in California state courts under Grafton Partners, L.P. v. Superior Court, 36 Cal. 4th 944 (2005); this waiver therefore applies only in federal court sitting in diversity or in arbitration.

11.5 Attorneys' Fees. The prevailing party in any action to enforce this Agreement shall be entitled to reasonable attorneys' fees and costs under Cal. Civ. Code § 1717, and, for CUTSA claims, under Cal. Civ. Code § 3426.4.

12. GENERAL PROVISIONS

12.1 Entire Agreement. This Agreement constitutes the entire understanding of the parties concerning its subject matter and supersedes all prior oral and written communications.

12.2 Amendment. No modification is effective unless in writing signed by both parties.

12.3 Assignment. Neither party may assign this Agreement without the prior written consent of the other, except to a successor in connection with a merger, reorganization, or sale of substantially all assets, provided the successor assumes this Agreement in writing.

12.4 Severability. If any provision is held unenforceable by a California court, the remainder shall remain in effect and the unenforceable provision shall be reformed to the minimum extent necessary to render it enforceable.

12.5 No Implied License; No Agency. Nothing herein creates a partnership, joint venture, or agency between the parties.

12.6 Electronic Signatures. Signatures delivered electronically pursuant to Cal. Civ. Code §§ 1633.1–1633.17 (California UETA) shall be deemed originals.

13. SIGNATURES

PARTY A:

[________________________________]

By: [________________________________]

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

PARTY B:

[________________________________]

By: [________________________________]

Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

Sources and References

• California Uniform Trade Secrets Act, Cal. Civ. Code §§ 3426–3426.11: https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=4.&title=5.
• Cal. Bus. & Prof. Code § 16600 (as amended by AB 1076, SB 699): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600
• Cal. Lab. Code § 925: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=925
• Cal. Gov. Code § 12964.5 (Silenced No More Act / SB 331)
• Cal. Code Civ. Proc. § 1001 (confidentiality limits on harassment settlements)
• Cal. Civ. Code § 1670.11 (AB 3109)
• K.C. Multimedia, Inc. v. Bank of America, 171 Cal. App. 4th 939 (2009) (CUTSA preemption)
• Brown v. TGS Management Co., LLC, 57 Cal. App. 5th 303 (2020) (overbroad confidentiality)
• Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008)
• Angelica Textile Services, Inc. v. Park, 220 Cal. App. 4th 495 (2013)
• Grafton Partners, L.P. v. Superior Court, 36 Cal. 4th 944 (2005)
• California Civil Rights Department: https://calcivilrights.ca.gov/