Are NDAs and Confidentiality Agreements for Business Negotiations Overrated?
Why These Seemingly Protective Documents Might Offer Less Protection Than You Think
In nearly every business negotiation, there’s one document that shows up before the real conversation even starts: the Non-Disclosure Agreement (NDA). Also called Confidentiality Agreements (CDAs), these contracts are supposed to create a safe space for companies to share sensitive information—trade secrets, financials, future plans—without fear of misuse.
But what if NDAs aren’t the bulletproof shields businesses think they are?
NDAs might be overrated, and here’s what companies need to understand before leaning too heavily on them.
1. NDAs Are Hard to Enforce
Most NDA violations don’t make it to court. Why? Because enforcement is expensive, burdensome, and uncertain. Even if you can prove the other party breached the agreement, getting a court to grant meaningful relief—especially quickly—is another matter.
In fast-moving industries like tech or biotech, the damage may be done before the case even begins.
Case in point: BladeRoom Group Ltd. v. Facebook, Inc., No. 5:15-cv-01370 (N.D. Cal. 2018)
In this high-profile case, BladeRoom accused Facebook of misusing confidential information disclosed during acquisition talks to build its own data centers. A jury initially awarded $100 million—but the verdict was later thrown out due to misconduct by BladeRoom’s own attorneys. The point? Even with strong facts and a jury on your side, litigation over NDAs is messy, drawn-out, and uncertain.
2. Proving a Breach Is a High Bar
NDAs often require the disclosing party to prove that specific information was shared, that it remained confidential, and that it was misused. But proving how knowledge was acquired—or that it wasn’t independently developed—can be extremely difficult.
This is especially true when the “confidential information” is an idea or general business concept that’s hard to distinguish from what’s publicly known or commonly understood.
3. NDAs Don’t Cover Everything You Think They Do
Many companies assume an NDA covers every aspect of information shared in a negotiation. But that’s rarely the case.
Oral disclosures may not be protected unless documented in writing shortly after the meeting.
Residuals clauses may allow the recipient to retain and use “ideas” that are remembered—effectively letting them absorb your strategy and move on.
No obligation to proceed clauses can let a party walk away and use the knowledge without committing to confidentiality after a certain time.
4. NDAs Can Lull You Into Sharing Too Much
Because NDAs feel like a safeguard, many companies let their guard down once one is signed. They disclose more than they should, sooner than they should—believing the document will do all the protecting.
But even the best NDA can’t rewind the clock once sensitive data has been absorbed, copied, or mentally retained. In high-stakes deals or competitive industries, that kind of exposure can’t be undone.
5. NDAs Create an Illusion of Control
The real protection for confidential business information isn’t the NDA—it’s who you share it with and how much discretion you use.
Savvy businesses don’t rely solely on paperwork. They stagger disclosures, watermark documents, restrict access, and conduct due diligence on potential partners. In many cases, limiting what you say until a term sheet is signed is a stronger form of protection than an NDA.
So—Are NDAs Useless? Not Quite.
They still serve a purpose:
They set expectations, signaling that you take confidentiality seriously.
They create a legal framework that may deter misuse.
They can support a claim of trade secret protection under laws like the Defend Trade Secrets Act (DTSA).
But if you're treating an NDA as your main line of defense, it probably won’t accomplish what you need. It’s better than nothing, but there are serious advantages to joining The Nada Group, instead of spending countless hours and dollars on NDAs with unpredictable outcomes.
