Proprietary Information Agreement Template for the United States
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What is a Proprietary Information Agreement?
The Proprietary Information Agreement serves as a crucial legal safeguard when entities need to share sensitive information while maintaining confidentiality. This document, governed by U.S. federal and state laws, is commonly used during business negotiations, partnerships, employment relationships, or any situation requiring the disclosure of proprietary information. It establishes clear guidelines for handling confidential information, defines permitted uses, and outlines consequences for breaches, while ensuring compliance with relevant trade secret and intellectual property laws.
Frequently Asked Questions
Is a Proprietary Information Agreement legally binding in the United States?
Yes, a properly drafted Proprietary Information Agreement is legally binding in all U.S. states under federal and state trade secret laws, including the Defend Trade Secrets Act of 2016. The agreement must include essential elements like consideration, mutual assent, and clearly defined confidential information to be enforceable. Courts will uphold these agreements when they contain reasonable scope, duration, and protection measures for legitimate business interests.
Can I still protect my trade secrets if my Proprietary Information Agreement is missing key provisions?
An incomplete agreement significantly weakens your legal protection under U.S. trade secret laws. Missing elements like clear definitions of confidential information, proper duration clauses, or return-of-information provisions can make enforcement difficult in federal court under the DTSA. However, you may still have some protection under state trade secret laws and common law, though it will be much harder to prove and enforce.
How long should a Proprietary Information Agreement last under U.S. law?
U.S. courts generally enforce Proprietary Information Agreements for 2-5 years for most business purposes, though the duration should match the competitive value of the information. Under the Defend Trade Secrets Act, protection can last indefinitely if the information truly remains a trade secret. Perpetual agreements are enforceable but face closer judicial scrutiny, so most practitioners recommend specific time limits with renewal options.
How is a Proprietary Information Agreement different from a Non-Disclosure Agreement?
These terms are often used interchangeably, but Proprietary Information Agreements typically focus specifically on protecting trade secrets and proprietary business information under federal DTSA protections. NDAs can be broader and may cover any confidential information, including personal or non-proprietary data. Proprietary Information Agreements usually include more detailed provisions about competitive use restrictions and return of materials.
How long does it take to prepare a Proprietary Information Agreement?
A basic Proprietary Information Agreement using a template can be completed in 1-2 hours with proper customization for your specific needs and jurisdiction. More complex agreements involving multiple parties, international considerations, or highly sensitive trade secrets may take several days to draft properly. Attorney review typically adds 2-5 business days depending on complexity and the lawyer's availability.
Can I enforce a Proprietary Information Agreement in federal court?
Yes, under the Defend Trade Secrets Act of 2016, you can file trade secret misappropriation claims in federal court if your agreement involves interstate or international commerce. Your agreement should include DTSA whistleblower immunity notice provisions to ensure full federal law compliance. You can also pursue remedies in state court under state trade secret laws, giving you multiple enforcement options.
Should my Proprietary Information Agreement include non-compete restrictions?
Non-compete clauses in Proprietary Information Agreements face varying enforceability across U.S. states, with some states like California generally prohibiting them. Focus on non-use and non-disclosure provisions instead, which receive stronger protection under federal trade secret law. If including competitive restrictions, ensure they are narrowly tailored to protect legitimate trade secrets and comply with your state's specific non-compete regulations.
About the Proprietary Information Agreement
A Proprietary Information Agreement is a legally binding contract that protects your confidential business information when sharing it with third parties. Under United States law, this agreement creates enforceable obligations to maintain secrecy and provides legal remedies if your proprietary information is misused or disclosed without authorization.
When do you need this document?
You need a Proprietary Information Agreement whenever your business must share sensitive information that could harm your competitive position if disclosed. This includes situations like due diligence for potential acquisitions, joint venture discussions, vendor evaluations, or when hiring contractors who will access your trade secrets. Technology companies use these agreements when demonstrating software to potential clients, while manufacturers rely on them when sharing technical specifications with suppliers. Even service providers need protection when discussing proprietary methodologies or client lists with potential partners.
Key legal considerations
Your agreement must clearly define what constitutes confidential information, including trade secrets, financial data, customer lists, and proprietary processes. The scope should be specific enough to be enforceable but broad enough to cover all sensitive materials. Include provisions for marking confidential documents and handling unmarked oral disclosures. Consider the permitted uses of information-whether it's solely for evaluation purposes or if limited implementation is allowed. Address the return or destruction of confidential materials when the relationship ends. Include specific remedies like injunctive relief and attorney fees, as monetary damages alone may be insufficient for trade secret breaches.
Legal requirements in the United States
Under the Defend Trade Secrets Act (DTSA), your agreement must include specific language about whistleblower protections to qualify for enhanced federal remedies. This notice provision is mandatory for agreements with employees and contractors. The agreement must comply with state Uniform Trade Secrets Act provisions, which vary slightly by jurisdiction but generally require reasonable efforts to maintain secrecy. Consider National Labor Relations Act limitations that protect employees' rights to discuss working conditions-your agreement cannot prevent protected communications about wages, hours, or workplace safety. Ensure the duration is reasonable, typically 3-5 years, as courts may reject perpetual confidentiality terms. The agreement should specify governing law and jurisdiction for disputes, and include mutual obligations if both parties will share confidential information.
GOVERNING LAW
Applicable law
This Proprietary Information Agreement is drafted to comply with United States law. Key legislation includes:
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