Key Takeaways

  • A government NDA (non-disclosure agreement) protects confidential data shared between contractors and federal agencies, but its enforceability can be limited if not properly authorized.
  • Only contracting officers or authorized representatives can legally bind the government to an NDA — agreements signed by unauthorized employees may not be enforceable.
  • Contractors should clearly define what constitutes confidential information and include exceptions (e.g., publicly available data, disclosures required by law) to strengthen protection.
  • Marking sensitive data appropriately and limiting its distribution are essential steps for preserving trade secret status under federal law.
  • Violations of a government NDA can lead to civil penalties, termination, or criminal liability, but remedies may vary based on the type of disclosure and applicable federal statutes.

A government non-disclosure agreement, or NDA, is a contract created to prevent the revelation of an invention to other people. If an inventor or owner files an NDA for their product and another party copies or uses the product as its own, the inventor can take legal action for a breach of contract. An NDA offers protection for inventors and owners because it is separate from a patent and isn't subject to patent defenses.

As long as a person has “apparent authority," they can attach a corporation to an NDA without the board of directors needing to give that person direct authority to do so. An example of this is a person tasked with choosing processors for a computer company. That person has “apparent authority” to sign an NDA for a new processor design that locks the corporation into the terms of the NDA.

When a contracted worker does business with the federal government, they are typically required to sign an NDA. On occasion, the contractor may have their own NDA to protect their trade secrets. When contractors sign NDAs with the government, it isn't with a specific government employee. Rather, the agreement is between the contractor and the entire government.

Federal laws that protect a government employee's disclosure of trade secrets outweigh a contractor's own NDA. However, a contractor can still use the law to protect their own trade secrets.

Trade Secrets and Federal Law

Any kind of financial, business, technical, economic, engineering, or scientific information is considered a trade secret under law. This also includes things like:

  • Compilations
  • Designs
  • Formulas
  • Patterns
  • Codes
  • Processes
  • Prototypes
  • Techniques

Trade secrets can be tangible or intangible. It doesn't matter how a trade secret is stored or compiled. A trade secret can be physical or digital and can take the form of either an image or a piece of writing.

In order to be considered a trade secret by federal law, the owner must have taken reasonable steps to protect the secrecy of the information, there must be real value that comes from keeping the information secret, and the information can't be accessed easily by the public through standard means.

Understanding Government NDA Requirements

When entering into contracts with federal agencies, businesses must understand that a government NDA is not the same as a typical private-sector non-disclosure agreement. These agreements are shaped by federal procurement laws and regulations, which can override or limit standard contractual terms.

One critical distinction is that only a contracting officer (CO) or a duly authorized representative can legally bind the federal government to an NDA. If a contractor signs a confidentiality agreement with someone lacking that authority — such as a program manager or technical representative — the NDA may not be enforceable against the government. This means that even if the document is signed, it might “not be worth the paper it’s written on” if the proper authority is absent.

Additionally, a government NDA should:

  • Define confidential information precisely, including technical data, trade secrets, and proprietary business information.
  • Identify exclusions such as information already in the public domain, independently developed data, or information required to be disclosed under law.
  • Specify duration of confidentiality obligations, which often must align with federal contract terms or statutory requirements.

Finally, contractors must proactively mark and control access to their confidential information. Failure to do so can lead to a loss of trade secret status, even with an NDA in place.

Proprietary Code and Federal Law

Although federal law doesn't provide a definition of proprietary code, the term is explained in the Federal Acquisition Regulation. If a contractor has a genuine proprietary interest in data that comes from a private investment, they are given protection for the data. Proprietary interest is considered a property right or a real economic interest.

The protection is in place to avoid endangering the contractor's commercial position, which could also impact the government's ability to use the data. The goal of the regulation is to protect data from being revealed when it is disclosed during the bidding process. All contractors working with the Department of Defense are required to sign an NDA to keep the data secure.

The regulation must be followed when trade secrets are given to the government. This applies to trade secrets as well as other items that can be copyrighted, including:

  • Designs
  • Diagrams
  • Software
  • Schematics

Most often, the materials created by employees are owned by the contractor, even under a government contract. If the government wants to use the technology created by a contractor, it can file for a license.

Common Pitfalls and Limitations of Government NDAs

Although a government NDA is designed to protect sensitive data, several pitfalls can render these agreements ineffective if not carefully managed.

  1. Lack of Proper Authority: As noted, NDAs signed by individuals without binding authority — such as engineers, contracting officers’ representatives (CORs), or agency consultants — do not legally obligate the government. Always verify that the signatory has CO authority before execution.
  2. Conflicts with Statutory Rights: Federal whistleblower protections and the Freedom of Information Act (FOIA) can override NDA provisions. Even if an NDA restricts disclosure, the government may still be required to release certain information by law.
  3. Inadequate Confidentiality Measures: Courts and agencies often scrutinize whether the contractor took “reasonable steps” to maintain confidentiality. If sensitive data is shared too broadly or not labeled appropriately, an NDA alone may not suffice.
  4. Undefined or Overbroad Terms: Overly broad definitions of “confidential information” may not hold up under federal scrutiny. It’s important to tailor definitions to specific project deliverables or categories of data.

Contractors can strengthen enforceability by incorporating clauses that address marking requirements, limited distribution, audit rights, and procedures for handling unauthorized disclosures.

Trade Secret Penalties

If a government employee or contractor shares proprietary information, they become subject to three federal laws.

Under the first law, a person who knowingly divulges non-government information is subject to a civil fine of as much as $100,000. This law applies to both government employees and non-employees who access sensitive information. This law is most used during the bidding process and doesn't apply once the contract has been granted.

If a government or non-government employee shares proprietary information that was given to them in confidence, it can result in termination from their position, a fine of up to $1,000, and a year in prison.

If financial information that the government was given custody of is shared, the perpetrator can be subject to civil consequences. The incident is required to be examined by the Office of Personnel Management, which will then advise on the disciplinary action to take against the employees involved.

Enforcement and Remedies Under a Government NDA

Remedies for breaches of a government NDA depend on the nature of the violation and the applicable law. In many cases, direct contractual remedies — such as termination of the agreement or liquidated damages — may be available. However, contractors should understand that sovereign immunity limits certain types of legal actions against the government itself.

Potential enforcement avenues include:

  • Administrative remedies: Breaches by government employees may result in internal disciplinary action, suspension, or removal.
  • Civil actions: Contractors can pursue damages or injunctive relief against third parties or subcontractors who unlawfully disclose protected information.
  • Criminal penalties: Under federal law, intentional theft or unauthorized disclosure of trade secrets can lead to criminal charges, fines, and imprisonment.

Because these remedies can be complex and sometimes limited, contractors should consult counsel when drafting and negotiating NDAs involving federal agencies. Proper legal review ensures that the agreement aligns with procurement laws and maximizes the enforceability of trade secret protections.

Frequently Asked Questions

  1. Who can sign a government NDA on behalf of the federal government?
    Only a contracting officer or someone with explicit delegated authority can bind the government to an NDA. Agreements signed by unauthorized employees may not be enforceable.
  2. Are government NDAs enforceable under federal law?
    Yes, but their enforceability depends on proper execution, compliance with procurement rules, and alignment with federal statutes like FOIA and whistleblower protections.
  3. Can a contractor sue the government for breaching an NDA?
    Sovereign immunity limits certain lawsuits against the government. However, contractors may pursue claims through the Contract Disputes Act or seek remedies against third parties.
  4. How long does a government NDA last?
    The duration varies by agreement but often aligns with the contract term or a specified number of years. It’s essential to clearly state the duration in the NDA.
  5. What happens if a government employee discloses protected information?
    Consequences range from administrative penalties and termination to criminal charges, depending on the severity and nature of the disclosure.

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