Confidential Information
Contract Type:
NDA
Jurisdiction:
“Confidential Information” means any information disclosed by a party (the “Disclosing Party”) to the other party (the “Receiving Party”) during the course of the parties' relationship that is marked as “confidential” or should reasonably be understood to be confidential given the nature of the information and the circumstances of disclosure, including but not limited to information relating to the Disclosing Party’s business, affairs, products, services, software, know-how, technical processes, methodologies, designs, trade secrets, personnel, customers, suppliers, finances, plans, strategies or commercial activities.”
Explanation
This clause defines what constitutes "Confidential Information" for the purposes of the agreement. Key points:
1) Broad definition: Confidential Information is defined broadly to include any information disclosed by one party (the Disclosing Party) to the other (the Receiving Party) during their relationship that is either:
- Marked as "confidential"
or
- Should reasonably be understood as confidential given its nature and the circumstances in which it was disclosed.
This is an inclusive definition aimed at capturing all information exchanged that the parties intend or would reasonably expect to remain confidential.
2) Categories: The definition provides a non-exhaustive list of categories of information that would be considered confidential, including but not limited to:
- Business, affairs and operational details
- Products, services, software, methodologies, processes and designs
- Know-how and trade secrets
- Personnel and customer details
- Suppliers and finances
- Plans, strategies and commercial activities
3) Disclosing/Receiving Party: The clause uses the terms Disclosing Party and Receiving Party to designate which party discloses and receives the Confidential Information in question. These roles may switch between the parties during their relationship as information flows in both directions.
4) Circumstances of disclosure: The definition considers not just the nature of the information itself but also the circumstances in which it was disclosed in determining whether it should reasonably be regarded as confidential. This includes factors like:
- Any express designation as confidential by the Disclosing Party
- Industry practices around handling certain types of sensitive information
- The location and medium of disclosure, e.g. a closed-door meeting vs. public conversation
- The parties' relationship and any implied duty of confidence, e.g. an NDA or employee-employer relationship
- Reasonable business expectations of non-disclosure, even absent any express statement.
The objectives and benefits of such a broad confidential information definition are:
1) Providing clarity by expressly defining the scope of information subject to the agreement's confidentiality obligations. This helps avoid potential disputes over status.
2) Taking a deliberately inclusive approach by defining Confidential Information by way of non-exhaustive categories and examples. This aims to capture all information the parties reasonably consider sensitive, even if not anticipated at the time of drafting.
3) Balancing an inclusive definition with consideration of reasonable expectations of confidentiality based on circumstances. Not all information is explicitly marked or labeled, so this additional qualifier helps determine what the parties implicitly consider confidential.
4) Allocating responsibility for designating information as confidential to the Disclosing Party but also requiring efforts by the Receiving Party to identify implicitly confidential information from the nature of disclosure. This shared obligation helps ensure sensitive information is adequately protected.
In summary, a broad confidential information definition clause seeks to provide contractual certainty through clarity, establish an inclusive scope of protection that considers both explicit designation and implicit expectations of non-disclosure based on dealings. The aim is ensuring all information the parties reasonably intend and understand to remain confidential is captured, to facilitate the free flow of sensitive data in a relationship where confidentiality is key.
Early commercial contracts often imposed blanket confidentiality obligations lacking definition, simply requiring all information exchanged to remain confidential. This approach was problematic as ambiguity threatened enforceability and reasonableness. Unlimited restrictions could restrain trade, and parties were unsure of obligations.
By the 19th century, courts required confidentiality be confined to specifically identified information to be enforceable and commercially adequate. Standard categories emerged in clauses covering technical, business and product details. However, where categories were exhaustive, information risked exclusion. Marking information "confidential" helped but risks remained regarding orally disclosed information. Exclusions developed for public domain information, but approaches were ad hoc.
As commercial dealings lengthened, confidentiality periods grew more complex. Exclusions accommodated employee mobility, pre-existing knowledge, and mandatory disclosures. But approaches were inconsistent, raising disputes over status and undue restraint. Methods developed for necessary circulation under obligations but determining independence was challenging.
By the early 20th century, balancing comprehensive protection and practical limits was still developing. Drafting confidentiality required anticipating future disputes, but outcomes depended on context. Certain standard exclusions and permitted disclosures emerged, but treatment was negotiated. Defining information as "confidential" could signal value to competitors.
Today, sophisticated confidentiality provisions are common but challenges continue. Digitization and global trade increase potential for unrestrained circulation and disputes over status. Definitions aim for inclusiveness but require judgment around foreseeable issues. There are no formulas to address every situation
Mechanisms have emerged for clarifying sensitive information and responsibility for handling it, allowing necessary use while limiting uncontrolled spread. But complexity persists. Tensions surround determining scope, accommodating laws and relationships, evidencing delivery virtually, and preventing inconsistencies in defined terms, exclusions, and categories across jurisdictions.
In summary, the trend is toward tailored management of increasingly complex information flows. Certain principles guide determination of what and how to protect, but perfect solutions remain elusive. Definitions aim for comprehensiveness but require adaptation to context. Exclusions balance protection against restraint but risks continue where unanticipated.
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