Does an NDA Work? IT Lawyers Answer. Case Law

Information

18 Jun 2026

Date of publication

Domain disputes/IT conflicts

Subject Matter of a Non-Disclosure Agreement

Therefore, the subject matter of an NDA is information that constitutes a trade secret and/or confidential information. How are the relevant concepts regulated by legislation?

Thus, according to Part 1 of Article 420 of the Civil Code of Ukraine and Part 1 of Article 155 of the Commercial Code of Ukraine, a trade secret belongs to the objects of intellectual property rights.

The concept of a trade secret is defined by Article 505 of the Civil Code of Ukraine, according to which a trade secret is information that is secret in the sense that, as a whole or in a specific form and combination of its components, it is unknown and not readily accessible to persons who normally deal with the type of information to which it belongs, and therefore has commercial value and has been the subject of measures adequate under the circumstances to preserve its secrecy, taken by a person who lawfully controls such information. At the same time, a trade secret may include information of a technical, organizational, commercial, production, or other nature, except for information which, according to law, cannot be classified as a trade secret.

A somewhat different definition of a trade secret is provided in Part 1 of Article 36 of the Commercial Code of Ukraine in conjunction with Part 1 of Article 162 of the Commercial Code of Ukraine, according to which information related to production, technology, management, financial and other activities of a business entity that does not constitute a state secret and whose disclosure may harm the interests of such entity may be recognized as a trade secret, provided that such information has commercial value because it is unknown to third parties and is not freely accessible to others on lawful grounds, and the owner of the information takes proper measures to protect its confidentiality. The composition and scope of information constituting a trade secret, as well as the methods of its protection, are determined by the business entity in accordance with the law.

Therefore, the essential conditions for classifying certain information as a trade secret and granting it corresponding legal protection are:

under ordinary circumstances, third parties do not have free lawful access to such information;
therefore, such information has commercial value for its owner;
in view of this, such information is subject to adequate measures to preserve its secrecy by the owner.

A definition and characteristics of this type of information similar in substance, which in the official translation of the document is referred to as “undisclosed information,” are contained in paragraph 2 of Article 39 of Section 7 of Annex 1C “Agreement on Trade-Related Aspects of Intellectual Property Rights” of the Agreement Establishing the World Trade Organization, to which Ukraine acceded in 2008.

The term of legal protection of a trade secret is limited by the duration of the above conditions (Part 1 of Article 508 of the Civil Code of Ukraine, Part 2 of Article 162 of the Commercial Code of Ukraine).

The provisions of Part 1 of Article 506 of the Civil Code of Ukraine and Part 1 of Article 162 of the Commercial Code of Ukraine define the proprietary rights (powers) of the owner of commercial information, that is, the person who lawfully designated the information as a trade secret (Part 2 of Article 506 of the Civil Code of Ukraine).

As a rule, the following information is treated in practice as a trade secret: internal regulatory documentation (processes, rules, policies, instructions, regulations, procedures), commercial offers, requests from potential customers for products and services, production cost calculations, profitability and profit calculations; design documentation, technological processes, technical specifications, enterprise standards, availability of inventory and material assets, new product development programs; information concerning the company’s activities, including its financial and economic condition, developments and implementation of processes, technologies, and measures intended to ensure profit; information concerning security systems and security measures aimed at protecting the company’s interests; concluded agreements; any projects, inventions, and models; information regarding work performed by an employee; information that became known to the employee while performing employment duties under the main agreement.

Also, the Resolution of the Cabinet of Ministers of Ukraine “On the List of Information That Does Not Constitute a Trade Secret” No. 611 dated 09.08.1993 provides that the following do not constitute a trade secret:

constituent documents, documents permitting engagement in entrepreneurial or business activity and its specific types;
information contained in all established forms of state reporting;
data necessary for verification of the calculation and payment of taxes and other mandatory payments;
information on the number and composition of employees, their wages in general and by professions and positions, as well as the availability of vacant positions;
documents confirming the payment of taxes and mandatory payments;
information on environmental pollution, non-compliance with safe working conditions, the sale of products harmful to health, as well as other violations of the legislation of Ukraine and the amount of damage caused thereby;
documents concerning solvency;
information on the participation of company officials in cooperatives, small enterprises, unions, associations, and other organizations engaged in entrepreneurial activity;
information that, in accordance with current legislation, is subject to disclosure.

Violations and Liability

According to Part 3 of Article 162 of the Commercial Code of Ukraine, a person who unlawfully uses commercial information belonging to a business entity is obliged to compensate for the damages caused by such actions in accordance with the law. A person who independently and in good faith obtained information constituting a trade secret has the right to use such information at their own discretion.

At the same time, unlawful collection, disclosure, and use of trade secrets are defined by the legislator as one of the forms of unfair competition (Part 2 of Article 32 of the Commercial Code of Ukraine, Part 2 of Article 1 and Chapter 4 of the Law of Ukraine “On Protection Against Unfair Competition” – hereinafter, Law No. 236/96-VR).

The content of such actions is disclosed in the relevant provisions of the Commercial Code of Ukraine and the said Law, namely:

unlawful collection of information constituting a trade secret means obtaining such information by unlawful means if this caused or could have caused harm to a business entity (Part 2 of Article 36 of the Commercial Code, Article 16 of Law No. 236/96-VR);
disclosure of a trade secret means acquainting another person, without the consent of the authorized person, with relevant information by a person to whom it was entrusted in the prescribed manner or became known in connection with the performance of official duties, if this caused or could have caused harm to a business entity (Part 3 of Article 36 of the Commercial Code, Article 17 of Law No. 236/96-VR);
inducement to disclose a trade secret means encouraging a person to disclose such information when that information was entrusted to them in the prescribed manner or became known to them in connection with the performance of official duties, if this caused or could have caused harm to a business entity (Part 4 of Article 36 of the Commercial Code, Article 18 of Law No. 236/96-VR);
unlawful use of a trade secret means the implementation in production or consideration during planning or conducting business activities, without authorization from the entitled person, of unlawfully obtained information constituting a trade secret (Part 5 of Article 36 of the Commercial Code, Article 19 of Law No. 236/96-VR).

At the same time, Part 6 of Article 36 of the Commercial Code of Ukraine provides that persons guilty of unlawful collection, disclosure, or use of information constituting a trade secret shall bear liability established by law.

In turn, Article 24 of Law No. 236/96-VR provides the right of a person who has suffered damage as a result of actions defined by this Law as unfair competition (including unlawful actions involving trade secrets) to apply to the court for compensation.

In addition, unlawful actions involving information containing a trade secret entail administrative liability (Part 3 of Article 164-3 of the Code of Ukraine on Administrative Offenses) and criminal liability (Article 231 of the Criminal Code of Ukraine).

We will discuss the material liability of employees in the next section.

Problems of Legislative Regulation

Thus, as we can see, today legislation regarding trade secrets, and consequently agreements in the field of their protection (NDAs), is not properly systematized. Relations connected with the protection of trade secrets are regulated by legislative acts in different branches of law, including the Civil Code of Ukraine, the Commercial Code of Ukraine, the Laws of Ukraine “On Information” and “On Protection Against Unfair Competition,” and the scope of legal regulation in this area is only general in nature.

First, current legislation does not provide for such a type of agreement as an agreement on the protection of trade secrets and/or confidential information, that is, an NDA.

Special provisions regarding the obligation of parties to an agreement to preserve the confidentiality of information obtained during its performance are contained in the following provisions of current legislation:

Article 862 of the Civil Code of Ukraine (contracts for work and services);
Article 895 of the Civil Code of Ukraine (agreements for scientific research, experimental design, and technological works);
Article 302 of the Commercial Code of Ukraine (agency agreements);
Clause 6 of Part 1 of Article 1121 of the Civil Code of Ukraine and the penultimate paragraph of Part 1 of Article 371 of the Commercial Code of Ukraine (commercial concession agreements).

Thus, according to Part 1 of Article 862 of the Civil Code of Ukraine, if, as a result of performing a contract, one party receives from the other party information regarding new solutions and technical knowledge, including those not protected by law, as well as information that may be considered a trade secret, it may not disclose such information to other persons without the consent of the other party.

The remaining provisions cited above contain generally similar requirements.

At the same time, the absence in legislation of a direct reference to such a type of agreement as an agreement on the protection of trade secrets and confidential information (NDA) does not prevent its conclusion, given the principle of freedom of contract enshrined in Clause 3 of Part 1 of Article 3 and Articles 6 and 627 of the Civil Code of Ukraine, one manifestation of which is the right of parties to conclude an agreement not provided for by civil legislation but consistent with its general principles (Part 1 of Article 6 of the Code).

Second, another legislative peculiarity in this matter is the absence of a clear distinction between a trade secret and confidential information.

Thus, Article 20 of the Law of Ukraine “On Information” distinguishes, according to the access regime, between public information and information with restricted access.

In turn, Article 21 of the said Law, as well as Part 1 of Article 6 of the Law of Ukraine “On Access to Public Information,” classify the latter as confidential, secret, and official information.

The definition of confidential information is provided in Part 2 of Article 21 of the Law of Ukraine “On Information” and Part 1 of Article 7 of the Law of Ukraine “On Access to Public Information,” according to which confidential information is information about an individual, as well as information access to which has been restricted by an individual or legal entity, except for public authorities, and which may be disseminated at the wish (consent) of the respective person in the manner determined by them and under the conditions established by them, as well as in other cases provided by law.

The Law of Ukraine “On Information” does not contain a definition of secret information, while Article 8 of the Law of Ukraine “On Access to Public Information” defines it as information access to which is restricted and the disclosure of which may cause harm to a person, society, or the state. This legislative provision classifies as secret information that which contains state secrets, professional secrecy, banking secrecy, intelligence secrecy, secrecy of pre-trial investigation, and other types of secrecy provided by law.

Therefore, as we can see, the provisions of the Laws of Ukraine “On Information” and “On Access to Public Information” do not contain a definition of a trade secret, nor do they classify this type of information specifically as secret or confidential, nor do they clearly distinguish between these categories of information.

Third, the next problem is the distinction of the category of trade secret between the branches of civil (commercial) law and labor law.

Thus, current labor legislation, unlike civil and commercial legislation, does not define the concept of a trade secret at all, nor the employee’s obligation to preserve it if such information was obtained during the performance of employment duties, nor does it provide for the possibility of recovering penalties from an employee for violations in the field of trade secret protection.

It should be noted that, pursuant to Part 1 of Article 130 of the Labor Code of Ukraine, employees bear material liability for damage caused to the employer as a result of violating their employment duties; however, the amount of compensation is limited to the employee’s average monthly salary (Part 1 of Article 132 of the Labor Code), and compensation beyond that amount is allowed only in cases expressly provided by law.

Such cases are provided for in Article 134 of the Code, in particular paragraphs 3 and 7 thereof, according to which employees bear material liability in the full amount of the damage caused through their fault to the employer where:

the damage was caused by actions of the employee containing elements of acts prosecuted under criminal law (paragraph 3);
the damage was caused outside the performance of employment duties (paragraph 7).

Thus, under a literal interpretation of current legislation, full compensation for damage caused by disclosure of a company’s trade secret may be recovered from an employee:

by referring to the fact that such actions contain elements of the criminal offense provided for in Article 231 of the Criminal Code of Ukraine concerning unlawful actions regarding trade secrets, but only on the condition that such actions caused substantial damage to a business entity, the amount of which is not clearly defined by the legislator;
if the disclosure of the trade secret by the employee occurred outside the direct performance of employment duties, which, as a rule, may indeed occur in practice.

At the same time, it should be borne in mind that compensation for damages is not identical to penalties that may be established by an NDA concluded with an employee. However, current legislation does not provide for the possibility of imposing penalties on employees.

In addition, according to Article 139 of the Labor Code of Ukraine, employees are obliged to work conscientiously, comply with the employer’s orders, and observe labor discipline. Therefore, if an employee’s obligation to preserve the company’s trade secrets is established in an employment agreement and/or internal company documents (orders of the employer), then failure to comply with such requirements should be regarded as a violation of labor discipline and may result in disciplinary liability.

At the same time, current legislation provides only two types of disciplinary sanctions: reprimand and dismissal (Article 147 of the Labor Code of Ukraine). As we can see, a fine is absent from this exhaustive list.

We remind that, pursuant to Article 9 of the Labor Code of Ukraine, terms of employment agreements that worsen the position of employees compared to Ukrainian labor legislation are invalid.

Furthermore, Part 3 of Article 21 of the Labor Code of Ukraine defines a special form of employment agreement, namely a contract, under which the rights, obligations, and liability of the parties (including material liability) may be established by agreement of the parties. At the same time, the scope of application of contracts is determined by the laws of Ukraine. Categories of employees with whom contracts may be concluded are determined by numerous regulatory acts. For the IT sector, potentially applicable categories include foreign employees (Law of Ukraine “On Employment of the Population”) and employees of companies operating in special (free) economic zones (Law of Ukraine “On General Principles of Establishment and Functioning of Special (Free) Economic Zones”).

Regarding the conclusion of NDAs with employees, we express the opinion that relations concerning trade secrets regulated by such an agreement should be considered not as arising within employment relations between the company and the employee, but as separate civil-law relations formed between the said parties in connection with the transfer by the company (the information owner) of such information to an individual (the employee).

However, whether courts will accept such a position remains questionable. At present, judicial practice is developing in the opposite direction.

Case Law

Thus, in case No. 752/5775/16-c (decision of the Holosiivskyi District Court of Kyiv dated 13.06.2017, upheld by the ruling of the Kyiv Court of Appeal dated 04.10.2017 and by the judgment of the Supreme Court dated 28.02.2019), in a claim by an LLC against its employee for recovery of compensation for violation of a non-disclosure agreement concerning information constituting a trade secret and confidential information concluded at the time of employment, the courts proceeded from the lack of proof and substantiation of the claims, relying on the following conclusions:

the mere fact that the Defendant entered the Plaintiff’s corporate system from his personal computer using his own password, which was not prohibited by the Plaintiff, cannot indicate unlawful use by the Defendant of any specific trade secret or any violation of the Plaintiff’s rights;
the information contained in the memorandum of the Plaintiff’s IT specialist and in the findings of the internal investigation conducted by the Plaintiff is speculative in nature;
the Plaintiff failed to prove the nature and content of the information to which the Defendant had access, namely whether it had been classified as a trade secret subject to legal protection separate from confidential information, taking into account Articles 420 and 862 of the Civil Code of Ukraine and Article 7 of the Law of Ukraine “On Access to Public Information”;
the Plaintiff failed to prove unlawful (unauthorized) obtaining, use, and dissemination of information by the Defendant, as well as the damage caused by such actions.

In another case, No. 910/2006/20 (decision of the Commercial Court of Kyiv dated 24.06.2020, upheld by the ruling of the Northern Commercial Court of Appeal dated 08.12.2020), a non-resident legal entity filed a claim against a sole proprietor seeking to eliminate violations of confidentiality provisions contained in a software development agreement concluded between them by removing from a website information posted by the defendant, without the plaintiff’s consent, regarding the creation by the defendant of software products specified in the agreement, including references to their names.

In this case, the courts drew attention to the legal definition and content of the category of “confidential information,” which should be understood as information access to which has been restricted by an individual or legal entity and which may be disseminated in a manner determined by them and under conditions established by them. Accordingly, information that is publicly available to an unlimited number of persons cannot be regarded as confidential information. Therefore, according to the courts’ conclusions, the disclosure of such information by the defendant did not violate the plaintiff’s rights and legitimate interests.

Conclusions similar to those described above are also contained in case No. 922/4148/19 (decision of the Commercial Court of Kharkiv Region dated 28.05.2020).

There is also case law favorable to plaintiffs on this issue. As an example, we may refer to case No. 757/17647/19-c (decision of the Pecherskyi District Court of Kyiv dated 20.05.2020).

We should also mention the interesting case No. 907/258/18 (ruling of the Western Commercial Court of Appeal dated 28.02.2019), in which the court formulated the conclusion that a Non-Disclosure Agreement (NDA) continues to remain in force even after the termination of the principal agreement.

Instead of Conclusions – What Should Be Remembered When Concluding an NDA

NDAs in civil-law (commercial) relations are not prohibited by current legislation and are actively used.

In employment relations, the situation is not so straightforward, since the rules of this branch of law do not expressly define employees’ obligations regarding the handling of the employer’s trade secrets and confidential information, while Article 9 of the Labor Code of Ukraine expressly prohibits establishing restrictions on employees’ rights in employment agreements compared with those provided by legislation.

At the same time, legislation does not contain a direct rule prohibiting the treatment of relations between a company and an individual (its employee) concerning trade secrets as civil-law relations separate from employment relations, existing in parallel with the latter due to the transfer of relevant information from one party to the other and regulated through an NDA.

Another approach is to establish the employee’s obligations regarding the preservation of trade secrets in the employment agreement (orders, policies, instructions, etc.), and in the event of a breach, act in accordance with the provisions of the Labor Code of Ukraine governing employees’ material liability.

In non-disclosure agreements (NDAs), it is necessary to distinguish between information constituting a trade secret and confidential information (or simply classify all such information as a trade secret, which is subject to enhanced legal protection compared to confidential information).

Such agreements and/or other documents (orders, instructions, policies) should clearly define the procedure for handling information containing trade secrets, namely: exchange; access thereto, including for employees outside the workplace and/or using personal devices; use; and the conditions under which transfer to third parties is lawful.

In the event of litigation, it is necessary to separately prove both that the information constitutes a trade secret and that there was unauthorized access to, use of, or dissemination of such information, as well as the damage caused by such actions and the causal link between the actions committed and the occurrence of such damage.

These elements must be proven by a combination of different forms of evidence (electronic correspondence, conclusions of computer and technical examinations, physical evidence in the form of electronic storage devices containing copied information, witness testimony), since a mere assertion by the information owner, as well as documents resulting solely from its unilateral actions, such as memoranda or internal investigations, may prove insufficient.

It should be remembered that, without a specific provision to that effect in the NDA, information placed in the public domain by the owner itself (for example, on websites) cannot be regarded as unlawfully disclosed. In such a case, active hyperlinks to such information, according to court conclusions, do not constitute evidence of unlawful dissemination.