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Below is a balanced mutual NDA clause aimed at protecting both parties’ trade secrets while still allowing disclosures reasonably necessary to carry out a joint venture. After the clause, I explain the main legal issues to consider.

Sample Clause: Confidentiality and Trade Secrets

Confidentiality and Trade Secrets

1. Definition of Confidential Information.
   For purposes of this Agreement, “Confidential Information” means any non-public information disclosed by either Party (“Disclosing Party”) to the other Party (“Receiving Party”), whether disclosed before or after the Effective Date, in written, oral, visual, electronic, or other form, that is designated as confidential or that reasonably should be understood, given the nature of the information or the circumstances of disclosure, to be confidential. Confidential Information includes, without limitation, trade secrets, know-how, formulas, methods, processes, designs, specifications, software, source code, business plans, financial information, customer and supplier information, pricing, marketing strategies, research and development, and all analyses, compilations, studies, notes, and other materials prepared by or for the Receiving Party that contain, reflect, or are derived from such information.

2. Exclusions.
   Confidential Information does not include information that the Receiving Party can demonstrate by contemporaneous written records:
   (a) is or becomes publicly available through no breach of this Agreement or other wrongful act;
   (b) was lawfully known to the Receiving Party without restriction on use or disclosure prior to receipt from the Disclosing Party;
   (c) is lawfully received from a third party without breach of any duty of confidentiality; or
   (d) is independently developed by the Receiving Party without use of or reference to the Disclosing Party’s Confidential Information.

3. Use and Protection.
   The Receiving Party shall:
   (a) use the Disclosing Party’s Confidential Information solely for the purpose of evaluating, negotiating, establishing, or performing the joint venture and related transactions contemplated by this Agreement (“Permitted Purpose”);
   (b) protect such Confidential Information using at least the same degree of care it uses to protect its own confidential information of a similar nature, and in no event less than reasonable care;
   (c) not disclose such Confidential Information to any person except as expressly permitted under this Agreement; and
   (d) not reverse engineer, disassemble, decompile, analyze, or otherwise attempt to derive the composition, structure, underlying ideas, algorithms, or trade secret aspects of any Confidential Information, prototypes, samples, software, or other tangible embodiments disclosed by the Disclosing Party, except to the extent such restriction is prohibited by applicable law.

4. Permitted Disclosures for the Joint Venture.
   The Receiving Party may disclose Confidential Information only to its and its affiliates’ directors, officers, employees, legal counsel, accountants, financing sources, prospective investors, subcontractors, consultants, and advisors (collectively, “Representatives”) who have a strict need to know such information for the Permitted Purpose, provided that such Representatives are bound by written confidentiality obligations no less protective than those set forth herein. The Receiving Party remains responsible for any breach of this Agreement by its Representatives.

5. Legally Required Disclosures.
   If the Receiving Party is required by law, regulation, stock exchange rule, subpoena, court order, or governmental request to disclose any Confidential Information, it may do so only to the minimum extent legally required, and, to the extent legally permitted, shall provide the Disclosing Party with prompt written notice sufficient to allow the Disclosing Party to seek a protective order or other appropriate remedy. The Receiving Party shall reasonably cooperate, at the Disclosing Party’s expense, in any effort to limit or prevent such disclosure. Information disclosed pursuant to this Section shall remain Confidential Information for all other purposes.

6. Trade Secrets.
   Each Party acknowledges that the other Party’s trade secrets are valuable proprietary assets. With respect to any information constituting a trade secret under applicable law, the Receiving Party’s obligations under this Agreement shall continue for so long as such information remains a trade secret under applicable law, notwithstanding any other expiration or termination provision of this Agreement.

7. No License or Transfer of Rights.
   Except for the limited right to use Confidential Information for the Permitted Purpose, no license, assignment, transfer, or other right, whether express, implied, by estoppel, or otherwise, is granted to the Receiving Party under any intellectual property right or other proprietary right of the Disclosing Party. All Confidential Information remains the property of the Disclosing Party.

8. Return or Destruction.
   Upon written request of the Disclosing Party or upon termination of discussions or the joint venture, the Receiving Party shall promptly return or destroy all Confidential Information, including all copies, extracts, and derivative materials, and certify such return or destruction upon request; provided, however, that the Receiving Party may retain one archival copy for legal compliance purposes and may retain Confidential Information stored in routine backup systems, so long as any retained materials remain subject to this Agreement until destroyed in the ordinary course.

9. Equitable Relief.
   Each Party acknowledges that unauthorized use or disclosure of Confidential Information, particularly trade secrets, may cause irreparable harm for which monetary damages may be inadequate. Accordingly, in the event of any actual or threatened breach of this Agreement, the Disclosing Party shall be entitled to seek injunctive relief, specific performance, and other equitable remedies, in addition to any other rights or remedies available at law or in equity.

10. No Obligation to Proceed.
    Nothing in this Agreement obligates either Party to enter into or continue any joint venture, transaction, or business relationship, and each Party reserves the right to discontinue discussions at any time, subject to the confidentiality obligations set forth herein.

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Key Legal Considerations

1. Mutuality and fairness

Because this is for a joint venture, the clause should be mutual, meaning both parties are protected equally. If one side will disclose much more sensitive information, the agreement may still be mutual but include tailored protections for especially sensitive categories.

2. Clear definition of “Confidential Information”

A strong clause should cover:

• information marked confidential, and
• information that is confidential by its nature, even if not marked.

This avoids losing protection for oral or informal disclosures. For oral disclosures, some parties add a requirement that the disclosing party confirm confidentiality in writing within a certain period.

3. Trade secrets need stronger and longer protection

Trade secrets are not just ordinary confidential information. They usually require:

• secrecy,
• economic value from that secrecy, and
• reasonable efforts to maintain secrecy.

A key point is that trade secret obligations often should last as long as the information remains a trade secret, not merely for a fixed 2- or 5-year confidentiality term.

4. Permitted disclosure must be narrow but practical

In a joint venture, some disclosure is necessary. The clause should allow disclosure to:

• employees,
• affiliates,
• professional advisers,
• lenders or investors,
• subcontractors or consultants,

but only on a need-to-know basis and only if they are bound by confidentiality obligations. This balances operational reality with protection.

5. Required legal disclosures

The clause should account for disclosures required by:

• court orders,
• subpoenas,
• securities laws,
• regulatory demands.

Important safeguards include:

• notice to the disclosing party where legally permitted,
• limiting disclosure to only what is necessary,
• cooperation in seeking confidential treatment or protective orders.

6. Purpose limitation

The receiving party should be allowed to use the information only for the joint venture purpose, not for unrelated commercial advantage, competitive use, or independent exploitation. This is especially important when the parties may also be competitors.

7. Residuals and memory issues

Some agreements include a “residuals” clause allowing use of information retained in unaided memory. That can seriously weaken trade secret protection. In most trade secret-sensitive joint ventures, parties should approach residuals clauses cautiously or avoid them entirely.

8. Reverse engineering restrictions

If prototypes, software, technical materials, or samples will be shared, include an express prohibition on:

• reverse engineering,
• decompiling,
• testing to derive formulas or processes.

This can be crucial to protecting technical trade secrets.

9. Return, destruction, and backup carve-outs

A practical clause should require return or destruction, but also recognize that:

• legal departments may need one archival copy,
• backup tapes and automated systems may retain data temporarily.

Those retained copies should remain confidential and not be used for any business purpose.

10. Remedies and enforceability

Trade secret misuse can cause harm that is hard to quantify. The agreement should preserve the right to seek:

• injunctions,
• specific performance,
• damages where available.

Be aware that enforceability may vary by jurisdiction, especially for clauses that are too broad or vague.

11. Interaction with intellectual property ownership

An NDA does not by itself decide who owns:

• improvements,
• joint developments,
• inventions,
• derivative technology.

In a joint venture, you should separately address:

• ownership of pre-existing IP,
• ownership of jointly developed IP,
• license rights,
• commercialization rights.

This is often one of the most important issues in the overall deal.

12. Duration and survival

Many NDAs impose confidentiality obligations for a fixed term, such as 3 to 5 years. That may be acceptable for general confidential business information, but trade secret obligations should usually survive longer, as reflected in the sample clause.

13. Compliance with applicable law

You should consider:

• the governing law,
• forum/venue,
• local trade secret statutes,
• employee mobility laws,
• data protection/privacy laws if personal data is involved,
• antitrust/competition law concerns if competitors are sharing sensitive market information.

In a joint venture between competitors, information sharing must be carefully limited to avoid competition law problems.

14. Whistleblower and statutory carve-outs

In some jurisdictions, especially the United States, the agreement should avoid restricting legally protected whistleblowing or reporting to government authorities. For U.S. agreements involving trade secrets, consider adding a DTSA whistleblower immunity notice if appropriate.

A common form is to state that nothing in the agreement prohibits a party or individual from reporting possible legal violations to government agencies or making disclosures protected by law.

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Practical drafting tips

For a real joint venture NDA, parties often also add:

• a schedule listing especially sensitive information,
• cybersecurity requirements,
• export control compliance,
• clean-team provisions if the parties are competitors,
• data privacy addenda,
• rules on copying and access logs,
• incident notification obligations for unauthorized access.

Short caution

This is a general sample, not legal advice. NDA enforceability depends heavily on jurisdiction, industry, and the structure of the joint venture. For an actual transaction, a lawyer should tailor the clause, especially regarding trade secret duration, required disclosure procedures, and IP ownership.

If you want, I can also:

1. turn this into a full mutual NDA, or
2. make it more business-friendly or more founder/investor protective.

IMPORTANT DISCLAIMER: I am an artificial intelligence, not an attorney. The following draft is for informational and educational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws regarding trade secrets and non-disclosure agreements vary significantly by jurisdiction (e.g., the Defend Trade Secrets Act in the U.S., the Trade Secrets Directive in the EU). You should consult with qualified legal counsel to tailor this language to your specific situation and jurisdiction.

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Draft Clause: Mutual Confidentiality and Trade Secrets (Joint Venture Context)

Article [X]: Confidentiality and Protection of Trade Secrets

1. Definition of Confidential Information. "Confidential Information" means all non-public information, whether oral, written, electronic, or otherwise, disclosed by one party (the "Disclosing Party") to the other (the "Receiving Party") that is designated as confidential or that, given the nature of the information or the circumstances of disclosure, reasonably should be considered confidential. This includes, but is not limited to, technical data, trade secrets, know-how, research, product plans, business strategies, financial information, and customer lists. Trade Secrets are a subset of Confidential Information and shall include any information that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.

2. Obligations of Confidentiality. The Receiving Party shall: (a) hold all Confidential Information in strict confidence; (b) not disclose Confidential Information to any third party without the prior written consent of the Disclosing Party, except as expressly permitted in Section 3; and (c) restrict access to Confidential Information to those of its employees, contractors, or advisors who have a specific need-to-know for the purpose of evaluating or participating in the Joint Venture (the "Purpose") and who are bound by written confidentiality obligations no less restrictive than those contained herein.

3. Permitted Disclosure for Joint Venture Execution. Notwithstanding Section 2, the Receiving Party may disclose Confidential Information to its affiliates, contractors, or potential investors strictly to the extent necessary to facilitate the formation, operation, or management of the Joint Venture. In any such instance, the Receiving Party remains liable for any breach of this Agreement by such third parties and must ensure such third parties are aware of the proprietary nature of the information.

4. Protection of Trade Secrets. The Parties acknowledge that Trade Secrets require a higher standard of care. The Receiving Party agrees to employ at least the same degree of security measures it uses to protect its own most sensitive confidential information to prevent unauthorized use or disclosure of the Disclosing Party's Trade Secrets. The obligations regarding Trade Secrets shall survive indefinitely until such information ceases to qualify as a Trade Secret through no fault of the Receiving Party.

5. Compelled Disclosure. If the Receiving Party is legally compelled (by testimony, subpoena, or governmental regulation) to disclose any Confidential Information, it shall provide the Disclosing Party with prompt prior written notice (to the extent legally permitted) to allow the Disclosing Party to seek a protective order. If a protective order is not obtained, the Receiving Party shall disclose only that portion of the Confidential Information which is legally required and shall exercise reasonable efforts to obtain assurance that confidential treatment will be accorded to such information.

6. Remedies. The Parties acknowledge that monetary damages may not be a sufficient remedy for any breach of this Article. Therefore, the Disclosing Party shall be entitled to seek specific performance and injunctive relief as a remedy for any such breach, without the necessity of proving actual damages, in addition to any other remedies available at law or equity.

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Key Legal Considerations and Explanation

When drafting or negotiating this clause, the following legal concepts are critical to ensuring enforceability and adequate protection:

1. Distinction Between "Confidential Information" and "Trade Secrets"

• The Issue: General confidential information (e.g., a marketing plan) usually has a limited lifespan. Trade secrets (e.g., a proprietary algorithm) can remain valuable forever.
• The Drafting Solution: Section 4 explicitly separates Trade Secrets. It mandates indefinite protection for trade secrets, whereas a general NDA term might expire after 2–5 years. If you lump them together, you risk losing trade secret protection once the general NDA term expires.
• Legal Risk: In many jurisdictions (like under the U.S. Defend Trade Secrets Act), you must demonstrate "reasonable efforts" to maintain secrecy. This clause codifies that effort.

2. The "Need-to-Know" and JV Exception

• The Issue: A Joint Venture requires sharing information with more people than a standard business deal (e.g., JV partners, technical implementers, funding partners). A standard "no third-party disclosure" clause would strangle the JV.
• The Drafting Solution: Section 3 creates a "safety valve." It allows disclosure only to the extent necessary for the JV. Crucially, it maintains vicarious liability. If your contractor leaks the secret, you are liable for the breach. This ensures the Receiving Party vets their own team carefully.
• Legal Risk: Without the "need-to-know" limitation, a party could argue they had the right to share the information with the entire industry under the guise of the JV.

3. Standard of Care

• The Issue: What happens if the Receiving Party is negligent?
• The Drafting Solution: Section 4 requires the Receiving Party to use the same degree of care they use for their own sensitive info (but no less than reasonable care).
• Legal Risk: If you set the standard too high (e.g., "absolute security"), it may be impossible to meet. If too low (e.g., "reasonable care"), it might be lower than how they protect their own data. The "own sensitive information" benchmark is a common, enforceable standard.

4. Compelled Disclosure and Notice

• The Issue: What if a court orders the Receiving Party to hand over the secrets?
• The Drafting Solution: Section 5 requires prior notice. This allows the Disclosing Party to intervene in the court case and argue that the information should remain under seal.
• Legal Risk: Without this clause, the Receiving Party might simply hand over the documents to comply with a subpoena, destroying the secret before the owner can object.

5. Equitable Relief (Injunctive Relief)

• The Issue: Once a secret is out, you can't put it back in the box. Money damages are often hard to calculate regarding lost market advantage.
• The Drafting Solution: Section 6 explicitly acknowledges that injunctions (court orders to stop the behavior) are appropriate.
• Legal Risk: While courts can grant injunctions without this clause, having it in the contract signals the intent of the parties and can streamline the process of getting an emergency court order.

6. Jurisdictional Variance

• Consideration:
  • USA: Focuses heavily on the Defend Trade Secrets Act (DTSA). You must ensure the definition of trade secrets aligns with state and federal statutes.
  • EU: Governed by the Trade Secrets Directive. Requires showing that "reasonable steps" were taken to keep info secret.
  • China: Requires explicit registration or very specific marking of documents in some contexts to be enforceable.
• Action: Ensure the "Definition" section aligns with the governing law of the contract.

7. Exclusions (Not included in draft above but recommended)

• A complete NDA usually includes a section on what is not confidential (e.g., information already in the public domain, independently developed, or rightfully received from another source). Without this, the clause may be deemed overly restrictive and unenforceable in some jurisdictions.