# How to Prevent Proprietary Code Leaks from Cursor

- Tool: Cursor
- Difficulty: Beginner
- Time required: 10-15 min
- Compatibility: Cursor Free/Pro/Business, any language
- Last updated: March 2026

## TL;DR

Prevent proprietary code leaks from Cursor by enabling Privacy Mode, configuring .cursorignore to exclude sensitive directories, using .cursorindexingignore for files that should be readable but not indexed, and establishing .cursorrules that forbid referencing internal APIs, proprietary algorithms, and licensed code in generated output.

## Protecting Proprietary Code While Using Cursor

Cursor sends code context to AI models for processing, which raises legitimate concerns about proprietary code exposure. This tutorial walks you through every available privacy control: Privacy Mode settings, file exclusion patterns, project rules that prevent the AI from referencing internal code, and organizational controls for teams. Whether you are a solo developer with trade secrets or part of an enterprise team, these steps ensure your sensitive code stays protected.

## Before you start

- Cursor installed (Business tier recommended for team enforcement)
- Access to Cursor Settings (Cmd+, or gear icon)
- Knowledge of which files and directories contain proprietary code
- Git initialized in your project

## Step-by-step guide

### 1. Enable Privacy Mode in Cursor Settings

Open Cursor Settings via Cmd+, and navigate to General then Privacy Mode. Select 'Privacy Mode (Enabled)' which ensures that neither Cursor nor the model providers store your code. All data is deleted after processing and your code is never used for training. For teams, the Business tier allows enforcing this setting organization-wide.

```
// Navigate in Cursor:
// Settings (Cmd+,) → General → Privacy Mode
// Select: "Privacy Mode (Enabled)"
//
// This ensures:
// - Code is NOT stored on Cursor servers
// - Code is NOT used for model training
// - All data deleted after processing
// - SOC 2 Type II certified handling
```

> Pro tip: Business and Enterprise tiers can enforce Privacy Mode organization-wide from the admin dashboard, preventing individual developers from disabling it.

**Expected result:** Privacy Mode is active and all AI interactions are ephemeral with no server-side storage.

### 2. Configure .cursorignore for sensitive directories

Create a .cursorignore file in your project root that excludes proprietary directories from ALL AI analysis. Files listed here will never be sent to any AI model, even when explicitly referenced. Use this for trade secrets, proprietary algorithms, licensed third-party code, and security-critical modules.

```
# .cursorignore
# Proprietary and sensitive directories
src/core/proprietary-algorithm/
src/licensing/
lib/internal-sdk/
vendor/licensed/

# Security-critical files
src/auth/encryption.ts
src/auth/token-signing.ts

# Secrets and credentials
.env
.env.*
credentials/
*.pem
*.key
*.p12

# Legal and compliance
contracts/
licenses/proprietary/
```

> Pro tip: Unlike .gitignore, .cursorignore completely blocks AI access. Even @file references to ignored files will not work. Use .cursorindexingignore instead if you want files excluded from search but still readable when explicitly referenced.

**Expected result:** All listed files and directories are completely invisible to Cursor's AI features.

### 3. Set up .cursorindexingignore for partial exclusion

Create a .cursorindexingignore file for files that should be excluded from Cursor's codebase indexing and search but remain accessible when you explicitly reference them with @file. This is useful for large vendor directories or internal libraries that you occasionally need to reference but do not want polluting search results.

```
# .cursorindexingignore
# Exclude from indexing but allow explicit @file reference
node_modules/
dist/
build/
vendor/
*.min.js
*.bundle.js
coverage/
__generated__/
```

**Expected result:** Listed files are excluded from @codebase search but can still be referenced directly with @file when needed.

### 4. Add proprietary code rules to .cursorrules

Create rules that explicitly tell Cursor what patterns and references it must never include in generated code. This prevents the AI from copying proprietary patterns, referencing internal-only APIs, or generating code that reveals implementation details of protected modules.

```
# .cursorrules (add to existing file)

## Proprietary Code Protection
- NEVER reference or replicate code from src/core/proprietary-algorithm/
- NEVER expose internal API endpoint paths in generated code
- NEVER include company-specific authentication logic in code snippets
- When generating examples, use generic placeholder names (not internal project names)
- All generated code must be suitable for public repositories
- Replace internal library calls with standard library equivalents in examples
- Never reference internal package names (@company/internal-*) in generated imports
```

> Pro tip: If you need to generate documentation or examples that reference internal code, do it in a separate Cursor session without the proprietary files open, so context does not bleed between tasks.

**Expected result:** Cursor avoids referencing proprietary code patterns and uses generic equivalents in all generated output.

### 5. Audit context sent to AI models

Before sending sensitive prompts, check what context Cursor includes. In Chat (Cmd+L), you can see the context chips at the top of the conversation showing which files are included. In Composer, click on the context indicator to see all referenced files. Remove any proprietary files from context before submitting.

```
// In Cursor Chat or Composer, check context before sending:
// 1. Look at the context chips at the top of the conversation
// 2. Each @file reference is visible as a chip
// 3. Click on any chip to see what content will be sent
// 4. Remove unwanted context by clicking X on the chip
//
// In Agent mode, the agent may read files autonomously.
// Use .cursorignore to prevent it from accessing sensitive files.
```

> Pro tip: For maximum control, use Ask mode (Cmd+L) instead of Agent mode (Cmd+I) when working near sensitive code. Ask mode only reads files you explicitly reference, while Agent mode may autonomously explore your codebase.

**Expected result:** You can verify exactly which files and content are included in every AI interaction.

## Complete code example

File: `.cursorignore`

```gitignore
# ===========================================
# Cursor AI Ignore File
# Files listed here are COMPLETELY HIDDEN from Cursor's AI
# ===========================================

# Proprietary source code
src/core/proprietary-algorithm/
src/licensing/
lib/internal-sdk/

# Security-critical modules
src/auth/encryption.ts
src/auth/token-signing.ts
src/auth/key-management.ts

# Environment and secrets
.env
.env.*
!.env.example
credentials/
secrets/
*.pem
*.key
*.p12
*.pfx

# Licensed third-party code
vendor/licensed/
lib/third-party-proprietary/

# Internal documentation
docs/internal/
docs/architecture/sensitive/

# Database credentials and configs
config/database.production.yml
config/secrets.yml

# Legal
contracts/
licenses/proprietary/
```

## Common mistakes

- **Assuming Privacy Mode prevents all data transmission** — Privacy Mode prevents storage and training, but code is still sent to AI models for processing. The data is ephemeral but does leave your machine during the request. Fix: Use .cursorignore for truly secret code that must never leave your machine. Privacy Mode protects against storage and training, not transmission.
- **Using .gitignore instead of .cursorignore for AI exclusion** — .gitignore only affects Git. Cursor can still index and read files that are in .gitignore. The two systems are independent. Fix: Create a separate .cursorignore file. Cursor respects .gitignore for indexing by default, but .cursorignore provides additional AI-specific exclusion.
- **Forgetting that Agent mode reads files autonomously** — In Agent mode, Cursor explores your codebase without explicit direction. It may read sensitive files while searching for context to answer your question. Fix: Add all sensitive directories to .cursorignore so Agent mode cannot access them regardless of what it searches for.

## Best practices

- Enable Privacy Mode on all machines that work with proprietary code
- Commit .cursorignore to Git so all team members have the same exclusions
- Use .cursorignore for absolute exclusion and .cursorindexingignore for partial exclusion
- Add proprietary code protection rules to .cursorrules to prevent pattern leakage
- Audit context chips in Chat and Composer before sending prompts near sensitive code
- Use Ask mode instead of Agent mode when working adjacent to proprietary directories
- On Business/Enterprise plans, enforce Privacy Mode organization-wide from the admin dashboard

## Frequently asked questions

### How do I make sure AI coding tools do not leak our proprietary code?

Enable Privacy Mode in Cursor Settings so code is never stored or used for training. Add proprietary directories to .cursorignore so they are never sent to AI models. Add rules to .cursorrules preventing the AI from referencing internal patterns. On Business plans, enforce these settings organization-wide.

### Does Cursor store my code on its servers?

With Privacy Mode enabled, no. Code is sent for processing but immediately deleted after the response is generated. It is never stored or used for training. Codebase indexing creates embeddings only, not plain text, and these are deleted after 6 weeks of inactivity.

### Is Cursor SOC 2 certified?

Yes, Cursor holds SOC 2 Type II certification. Business and Enterprise tiers include additional compliance controls, enforced privacy mode, and admin audit capabilities.

### Can Cursor's Agent mode access files in .cursorignore?

No. Files in .cursorignore are completely invisible to all Cursor AI features including Agent mode, Tab completion, and Chat. The agent cannot read, search, or reference these files in any way.

### What is the difference between .cursorignore and .cursorindexingignore?

.cursorignore completely blocks AI access to listed files. .cursorindexingignore only excludes files from the search index but allows explicit @file references. Use .cursorignore for secrets and proprietary code, .cursorindexingignore for large vendored directories.

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Source: https://www.rapidevelopers.com/cursor-tutorial/how-to-ensure-cursor-ai-doesn-t-leak-proprietary-code-when-generating-public-snippets
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