The Confidentiality Clause Backfire: When Silence Costs More Than You Think

Almost every contract today includes a confidentiality clause. On the surface, it seems harmless—both parties agree not to disclose sensitive information. But when drafted too broadly, confidentiality provisions can backfire, creating unexpected costs, limits, and even litigation risk.

Why Businesses Agree Too Quickly

Clients often tell me, “It’s just confidentiality—I’ll sign it.” But few realize these clauses can do far more than protect trade secrets. Some prevent you from using your own work product, limit how you market your services, or even restrict defenses in court.

The Hidden Risks of Overbroad Clauses

• Gagging Marketing: Agreements that prevent you from mentioning projects or clients—even in general terms—can cripple your ability to attract new business.
• Blocking Negotiations: Clauses that bar disclosure to “any third party” can prevent you from consulting with investors, lenders, or advisors.
• Handcuffing Litigation: Overreaching terms may stop you from disclosing facts in court—or force you into sealed proceedings that increase costs.
• Permanent Silence: Many confidentiality clauses have no expiration date, creating indefinite obligations long after the relationship ends.

A Question I Hear Constantly

Business owners often ask me: “Isn’t confidentiality just standard?” My answer: the devil is in the details. I’ve seen clients unable to share their own designs, data, or results because a clause defined “confidential information” so broadly it included their own work.

How to Protect Yourself

• Define Narrowly: Limit “confidential information” to truly sensitive business details (not everything under the sun).
• Set Time Limits: Confidentiality should last a reasonable period, not forever.
• Add Exceptions: Allow disclosure to advisors, regulators, and courts where necessary.
• Balance Remedies: Avoid one-sided damages or injunction rights that only favor the other side.

Don’t Let Silence Work Against You

At JDE Law Firm, PLLC, I regularly negotiate and litigate confidentiality clauses that go too far. If you’re being asked to sign one—or if an overbroad clause is holding your business hostage—we can protect your rights and restore your leverage.

📞 NY: 718-966-0877 | NJ: 732-490-7120

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