Introduction

The distinction between confidential information and trade secrets varies across jurisdictions, but some core principles apply globally. In the USA, trade secrets are defined and protected by statutes such as the Defend Trade Secrets Act (DTSA) and Uniform Trade Secrets Act (UTSA), while confidential information is broadly governed by contract law through NDAs. The EU harmonizes trade secret protection under the Trade Secrets Directive, with confidential information managed by contract and good faith principles. In England, common law and statutory regulations mirror the EU approach, distinguishing trade secrets as a higher category of confidential information. In South Africa, both trade secrets and confidential information are recognized under common law, with NDAs and reasonable secrecy measures playing a crucial role. Across all these regions, trade secrets represent a legally protected subset of confidential information, requiring economic value and reasonable steps to maintain secrecy, while confidential information is typically broader and contract-based.

Core Distinctions

Confidential Information

• Any non-public information disclosed under a Non-disclosure Agreement (NDA) that the parties agree to keep secret.
• Scope is defined by the contract.

Trade Secrets

• A legally defined subset of confidential information that has independent economic value from secrecy.
• Protected by reasonable steps to maintain secrecy.
• Protection exists under statutory or common law, even outside an NDA.

Jurisdictional Comparison

Practical Implications for NDAs

Confidential Information Clauses

• Typically broad, covering all non-public information disclosed.
• Enforceable only between contracting parties.

Trade Secret Protection

• Exists independently of contract (statutory/common law).
• Misappropriation can lead to civil and sometimes criminal liability.
• Courts scrutinize whether the disclosing party took reasonable steps (e.g., NDAs, access controls, employee training).

Overlap

• NDAs often define “Confidential Information” to include “Trade Secrets.”
• An NDA cannot expand what qualifies as a trade secret—this is determined by law, not contract.

Key Takeaways for Drafting NDAs

• Be precise: Define “Confidential Information” broadly, but carve out exclusions (e.g., public knowledge, independently developed info).
• Highlight trade secrets: Explicitly state that trade secrets are included (if required to be disclosed) and subject to heightened protection. 
• Jurisdictional awareness:
  • In the USA, rely on DTSA/UTSA definitions.
  • In the EU/UK, align with the Trade Secrets Directive criteria.
  • In South Africa, ensure definitions meet common law tests.
• Practical steps matter: Courts in all jurisdictions look for evidence of reasonable secrecy measures—NDAs are necessary but not sufficient.

Conclusion

Understanding the differences between confidential information and trade secrets is essential for effective legal protection and risk management. While confidential information provides a broad contractual shield, trade secrets offer statutory and common law remedies that can extend beyond contractual relationships. For organizations operating across multiple jurisdictions, it is crucial to tailor NDAs and secrecy measures to local legal requirements, ensuring that trade secrets are clearly identified and robustly protected. Ultimately, the enforceability of both depends not only on precise definitions but also on the practical steps taken to maintain secrecy.

Disclaimer

This practice note is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy of the information provided, laws and regulations regarding confidential information and trade secrets vary by jurisdiction and may change over time. Readers should consult qualified legal professionals for advice tailored to their specific circumstances. The authors and publishers disclaim any liability for actions taken based on the content of this document.