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Texas Non-Disclosure Agreement Requirements

If a restraint tied to a Texas NDA turns out to have unreasonable limits, Section 15.51(c) of the Covenant Not to Compete Act gives a court the power to reform them down to something reasonable and enforce the covenant as reformed, though only through injunctive relief, not damages, for the period before reformation.

Introduction

If a restraint tied to a Texas NDA turns out to have unreasonable limits, Section 15.51(c) of the Covenant Not to Compete Act gives a court the power to reform them down to something reasonable and enforce the covenant as reformed, though only through injunctive relief, not damages, for the period before reformation. A Non-Disclosure Agreement in Texas is an ordinary contract in which one or both parties agree to keep specified information confidential, but if a confidentiality clause or a companion covenant is broad enough to function as a restraint on someone's ability to work, Section 15.50 requires it to be ancillary to or part of an otherwise enforceable agreement made at the same time, and to contain only reasonable limits on time, geographic area, and scope of activity restrained. Section 15.52 makes this framework exclusive, stating that it preempts other law, including common law, so Texas courts do not fall back on a free-floating reasonableness test the way most states do. Trade secrets shared under a Texas NDA are separately protected by the Texas Uniform Trade Secrets Act (Civil Practice and Remedies Code Chapter 134A), and a misappropriation claim generally must be filed within three years of when the misappropriation was discovered or reasonably should have been, a deadline set not inside the trade secrets chapter itself but in the state's general limitations statute, Section 16.010, which also treats an ongoing misappropriation as one continuous claim rather than a series of new ones. Unlike California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah, and Washington, Texas has no statute carving an employee's own-time inventions out of an assignment clause, so an invention-assignment provision in a Texas NDA is governed by ordinary contract law rather than a statutory limit.

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Key Things to Know

  1. 1

    Trade secret protection runs through the Texas Uniform Trade Secrets Act (Civil Practice and Remedies Code Chapter 134A), separate from whatever the NDA itself says.

  2. 2

    Texas's Covenant Not to Compete Act (Business and Commerce Code Section 15.50) makes a restraint on someone's ability to work enforceable only if it is ancillary to or part of an otherwise enforceable agreement made at the same time, and only to the extent its time, geographic area, and scope limits are reasonable. Section 15.52 makes this the exclusive law on the subject, preempting the common-law reasonableness test most other states still rely on.

  3. 3

    If a covenant tied to a Texas NDA is ancillary to an otherwise enforceable agreement but its limits are too broad, Section 15.51(c) directs the court to reform the covenant down to something reasonable and enforce it as reformed, though the promisee can recover only injunctive relief, not damages, for any breach before reformation.

  4. 4

    A trade secret misappropriation claim in Texas generally must be filed within three years of when the misappropriation was discovered or reasonably should have been discovered, and an ongoing misappropriation counts as a single claim rather than restarting the clock (Civil Practice and Remedies Code Section 16.010).

  5. 5

    Texas has no statute, unlike California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah, and Washington, that carves an employee's own-time, own-resources inventions out of an assignment clause. An invention-assignment provision in a Texas NDA is governed by ordinary contract law rather than a statutory limit.

  6. 6

    Mutual NDAs, where both sides share confidential information, and one-way NDAs, where only one side does, are both ordinary enforceable contracts in Texas; which one fits depends on whether the exchange runs both directions, like a partnership or acquisition discussion, or one direction, like pitching an investor.

  7. 7

    A Texas court can order injunctive relief to stop an ongoing or threatened breach of a valid NDA, and if the disclosed information also qualifies as a trade secret, the Texas Uniform Trade Secrets Act allows exemplary damages up to twice the actual award for willful and malicious misappropriation proven by clear and convincing evidence.

Key decisions before you file

Before you file a Non-Disclosure Agreement in Texas, a few decisions shape the document: which option to choose and what each one means. The Non-Disclosure Agreement guide walks through them.

Open the Non-Disclosure Agreement guide

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TEXAS NON-DISCLOSURE AGREEMENT

[Party A Name] of [City], Texas and [Party B Name] of [City], Texas (each a "Party") enter into this Non-Disclosure Agreement as follows.

  1. Purpose. This Agreement supports [describe business purpose], under which either Party may disclose Confidential Information to the other for evaluation or performance of that purpose.

  2. Definition of Confidential Information. "Confidential Information" means anything a Party discloses that is marked confidential or that the circumstances would lead a reasonable person to treat as confidential, incorporating the trade secret definition in the Texas Uniform Trade Secrets Act (Civil Practice and Remedies Code Section 134A.002): information deriving independent economic value from not being generally known or readily ascertainable, that its owner has taken reasonable measures to keep secret. Excluded: anything discoverable through proper means, such as independent development or reverse engineering; anything the receiving Party already held; anything that becomes public without its fault; and anything a third party discloses without breaching its own duty.

  3. Obligations. The receiving Party will use Confidential Information only for the Section 1 purpose, guard it with reasonable care, and not share it outside the relationship without written consent, except employees, agents, or advisors who actually require it and are bound to equally protective terms.

  4. Scope Limitation (Texas-Specific). Texas ties any restraint on a Party's ability to compete or work to Business and Commerce Code Section 15.50: enforceable only if ancillary to or part of an otherwise enforceable agreement made at the same time, and only to the extent its time, geography, and scope limits are reasonable and no broader than necessary to protect the promisee's goodwill or business interest. Section 15.52 forecloses any fallback to a common-law test, making this framework exclusive and preemptive. Because this Agreement's mutual exchange of Confidential Information can itself be that "otherwise enforceable agreement," its duties reach only genuine trade secrets and sensitive business information, never a person's general skill or experience, and are not a disguised restraint on future work. A provision later found ancillary but unreasonably broad gets reformed to reasonable limits under Section 15.51(c) and enforced as reformed, with pre-reformation relief limited to an injunction rather than damages.

  5. Federal Whistleblower Notice. Because the Defend Trade Secrets Act conditions exemplary damages and fee-shifting on giving this notice, it appears here rather than in a separate document. Under 18 U.S.C. Section 1833(b), disclosing a trade secret in confidence to a government official or attorney, solely to report or investigate a suspected legal violation, or in a court filing made under seal, carries no criminal or civil liability under federal or state trade secret law.

  6. Term. The confidentiality duties above expire [X years] after disclosure, with one exception: information that fits the trade secret definition in Section 2 keeps its protection for however long it continues to qualify as a trade secret, which tracks Section 134A.003(a-1)'s own rule that a court lifts an injunction once the trade secret itself stops existing.

  7. Return or Destruction. The receiving Party must return all Confidential Information, or destroy it and certify the destruction in writing, within [X days] after the Section 1 purpose ends or after the disclosing Party makes a written request, whichever happens first.

  8. Remedies. Civil Practice and Remedies Code Section 134A.003 lets the disclosing Party enjoin actual or threatened misappropriation, though the order cannot stop the receiving Party from using general knowledge, skill, and experience gained in the relationship. Section 134A.004 adds recovery of actual loss plus the receiving Party's unjust enrichment, and exemplary damages up to double that amount when clear and convincing evidence shows willful, malicious misappropriation.

  9. Governing Law. Texas law governs this Agreement by the Parties' designation. Absent one, Texas courts apply the "most significant relationship" test adopted in Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex. 1984), rather than the older rule tying governing law to the place of signing.

  10. Miscellaneous. This Agreement treats an electronic signature as binding, per the Texas Uniform Electronic Transactions Act (Business and Commerce Code Chapter 322) and the federal ESIGN Act (15 U.S.C. Section 7001). A court finding one provision unenforceable leaves the rest intact. Each Party's promise to guard the other's information is itself the consideration Texas contract law requires.

[Party A Signature] ____________________ Date: __________

[Party B Signature] ____________________ Date: __________

Texas Requirements for Non-Disclosure Agreement

Definition of Confidential Information (Texas Civil Practice and Remedies Code Section 134A.002)

Clearly defines what constitutes confidential information under Texas law, including trade secrets as defined by the Texas Uniform Trade Secrets Act (TUTSA). The definition should be comprehensive to include all proprietary information, business plans, financial data, and intellectual property.

Federal Trade Secret Protection (18 U.S.C. Section 1836)

Acknowledges protection under the federal Defend Trade Secrets Act (DTSA), which provides federal jurisdiction for trade secret misappropriation and allows for civil seizure in extraordinary circumstances.

Exclusions from Confidential Information (Texas Civil Practice and Remedies Code Section 134A.002(4))

Section 134A.002(4) of the Texas Uniform Trade Secrets Act defines 'proper means' as discovery by independent development, reverse engineering unless prohibited, or any other means that is not improper means. Information discoverable through proper means, or otherwise publicly available, independently developed, or rightfully received from a third party without a confidentiality duty attached, falls outside what the receiving Party owes a duty to protect.

Whistleblower Immunity Notice (18 U.S.C. Section 1833(b))

Includes mandatory notice of immunity for confidential disclosure of trade secrets to government officials or attorneys for reporting suspected violations of law, as required by the Defend Trade Secrets Act.

Remedies for Breach (Texas Civil Practice and Remedies Code Section 134A.003)

Civil Practice and Remedies Code Section 134A.003 allows a court to enjoin actual or threatened misappropriation of a trade secret, provided the injunction does not prohibit a person from using the general knowledge, skill, and experience acquired during employment. The injunction terminates once the trade secret ceases to exist, though it may continue for an additional reasonable period to eliminate any remaining commercial advantage from the misappropriation.

Electronic Communications Privacy Compliance (18 U.S.C. Section 2510 through 2522, Electronic Communications Privacy Act)

Ensures compliance with federal laws regarding electronic communications and stored data that may contain confidential information.

Reasonable Restrictions (Texas Business and Commerce Code Section 15.50, 15.51, and 15.52)

Business and Commerce Code Section 15.50 requires that any restraint on lawful trade or work be ancillary to or part of an otherwise enforceable agreement and reasonable in time, geographic area, and scope of activity, no broader than necessary to protect the promisee's goodwill or business interest. Section 15.52 makes this framework exclusive and preempts common law, and Section 15.51(c) directs a court to reform an ancillary but unreasonably broad covenant down to reasonable limits and enforce it as reformed, limiting relief for conduct before reformation to an injunction rather than damages.

Data Privacy Compliance (15 U.S.C. Section 6801 through 6809, Gramm-Leach-Bliley Act, and Texas Business and Commerce Code Chapter 541, Texas Data Privacy and Security Act)

The federal Gramm-Leach-Bliley Act governs data privacy specifically for financial institutions handling nonpublic personal information, so it applies to a Texas NDA only when a Party is such an institution. For confidential information that includes Texas consumers' personal data more broadly, the Texas Data Privacy and Security Act (Business and Commerce Code Chapter 541), effective July 1, 2024, is the more directly applicable state law.

Attorney's Fees Provision (Texas Civil Practice and Remedies Code Section 38.001)

Provides for recovery of reasonable attorney's fees by the prevailing party in a claim on an oral or written contract, which covers a dispute arising from breach of the NDA, consistent with Section 38.001(b)(8).

Frequently Asked Questions

A Non-Disclosure Agreement in Texas is an ordinary contract in which one or both parties agree to keep specified information confidential. It can be mutual, where both sides share confidential information, or one-way, where only one side does. Trade secrets shared under the agreement are also separately protected by the Texas Uniform Trade Secrets Act (Civil Practice and Remedies Code Chapter 134A) regardless of what the NDA itself says.

Only within Texas's specific statutory framework. Business and Commerce Code Section 15.50 makes a restraint on someone's ability to work enforceable only if it is ancillary to or part of an otherwise enforceable agreement made at the same time, and only to the extent its time, geographic area, and scope of activity limits are reasonable and no broader than necessary to protect the promisee's goodwill or business interest. A confidentiality clause in a Texas NDA drafted broadly enough to function as that kind of restraint would be evaluated under this same test.

No. Section 15.52 of the Business and Commerce Code states that the criteria in Sections 15.50 and 15.501 and the procedures in Section 15.51 'are exclusive and preempt other law, including common law.' Texas courts do not apply a separate, judge-made fairness standard; the statute itself is the only test for whether a restraint tied to an NDA or employment agreement is enforceable.

If the restraint is ancillary to an otherwise enforceable agreement but its time, geography, or scope limits are unreasonable, Section 15.51(c) directs the court to reform the covenant down to reasonable limits and enforce it as reformed. The promisee cannot recover damages for any breach that happened before the reformation, only injunctive relief, which gives Texas drafters a real incentive to write reasonable limits from the start rather than counting on a court to save an overbroad clause.

A trade secret misappropriation claim in Texas generally must be brought within three years after the misappropriation is discovered, or after it reasonably should have been discovered with reasonable diligence (Civil Practice and Remedies Code Section 16.010). That section also treats an ongoing misappropriation of the same trade secret as a single claim, so the three-year clock does not restart with each new act of continued use. A separate breach-of-contract claim over the NDA itself follows Texas's ordinary written-contract limitations period.

It can, depending on how the invention-assignment clause is written. Unlike California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah, and Washington, Texas has no statute limiting an employer's ability to require assignment of inventions an employee develops on their own time with their own resources. The scope of what a Texas NDA or employment agreement can require is governed by the contract language itself and ordinary contract law.

It depends on whether confidential information will flow in both directions or only one. A mutual NDA fits a two-way exchange, such as a merger, partnership, or joint-venture discussion where both sides disclose sensitive information. A one-way NDA fits a one-directional exchange, such as pitching a business plan to an investor who is not sharing anything confidential back. Both forms are equally enforceable in Texas; the choice is about which structure matches the actual relationship.

No. A Texas NDA is an ordinary contract, not a formal instrument like a will or power of attorney, so it does not require notarization or witnesses to be valid. It only needs the standard elements of a valid contract: an offer, acceptance, and consideration, along with signatures from the parties being bound.

The non-breaching party can seek injunctive relief to stop an ongoing or threatened disclosure, along with damages caused by the breach. If the disclosed information also qualifies as a trade secret, the Texas Uniform Trade Secrets Act provides an additional, independent basis for relief, including damages for actual loss and unjust enrichment, plus exemplary damages up to twice that amount if the misappropriation was willful and malicious and proven by clear and convincing evidence.