Guidance

1. Breadth: in general

Mary Hanson notes that if the definition is too broad, it may risk being unenforceable. "If [the] definition is too broad or vague, the agreement can't be enforced. This description needs to define the confidential information well enough to be enforceable, yet not disclose the confidential information itself."

Nondisclosure Agreements Protect Your Business Information

The California business lawyer continues, stating "Trying to cover too much information by defining the confidential information as "all business information" may backfire. It is important to try to identify particular information, without giving out valuable information." Id

The clause may even attempt to cover anything the discloser wants to be treated as confidential, such as "Confidential Information means information that any Party desires to maintain as confidential or secret, which is supplied or provided to any other Party." This clause, may, however, be too vague to be enforceable.

Note the use of the term "observation" which indicates an intention to include residual or derivative information, discussed below.

2. Specific and Marked Information

The breadth of confidential information can be narrowed by limited the scope to (i) marked information, (ii) written information, (iii) specific categories of information, (iv) information given during a specific period of time

3. Information Defined by Categories

In addition to defining information with specific categories; other examples apply broad categories such as "information that which is not generally known outside [the Disclosing Parties] or its subsidiaries or affiliates" or "information not otherwise available to the general public at the time of such disclosure" or "information that under the circumstances surrounding disclosure, ought to be treated as confidential."

4. Third Party Information

The clause may seek to include third party information, such as "information disclosed …whether or not prepared by the disclosing party."

5. Residuals or Derivatives

"Residual clauses are recipient-friendly exceptions to the prohibitions against the use and disclosure of confidential information and may be used to protect the recipient when the recipient is in the same field of business or developing a similar product as the discloser. Generally, a residual clause allows the recipient to use information that is retained by the unaided memory of employees who had access to it."

Pantea Stevenson, 5 Provisions You Should Pay Attention to in a Non-Disclosure Agreement (NDA), Lawpolis.com (September 2013).

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  • Updated: 04/07/2020
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Overview

Most confidentiality agreements define the term "Confidential Information." We propose a new concept called "Protected Information," which is intended to align the term with other emerging standards of data protection, such as personal and government information.

The Confidential Information clause defines what the parties deem to be proprietary and protected by the terms of the agreement. The clause typically defines what is, and what is not, confidential.

Scope: what is the scope confidential information? What is included?
(a) Broad (all non-public)
(b) Narrow (date defined)
(c) Marked
(d) Specific information (business, financial, technical)

Our analysis shows that the definition of the excluded items is very consistent, while the definition of the information covered by the provisions is highly variable.

As noted by Yoichiro ("Yokum") Taku, a partner at Wilson Sonsini Goodrich & Rosati, "[th]e discloser will want a broad definition of confidential information and may also want third party confidential information to be deemed confidential. The receiver will want to narrow the definition of confidential information in order to limit the scope of the information requiring compliance with confidentiality obligations. What is important in a confidentiality agreement or non-disclosure agreement (NDA)? VCs may not want an agreement fearing such attribution of information and may prefer a Non-Confidentiality Agreement, providing that the parties may freely use all information disclosed.