Confidentiality & Exclusions
Contract Type:
NDA
Jurisdiction:
1. For the purposes of this Agreement, "Confidential Information" shall mean any information disclosed by one party (the "Disclosing Party") to the other party (the "Receiving Party") relating to the Disclosing Party's business, operations, processes, plans or intentions, product information, know-how, design rights, trade secrets, market opportunities and business affairs. Confidential Information may be disclosed in oral, visual, written, electronic or any other form. 2. The Receiving Party shall keep the Confidential Information confidential and shall not disclose it to any third party without the prior written consent of the Disclosing Party. 3. The obligations of confidentiality shall not apply to any information which: 3.1 is already in the public domain at the time of disclosure; or 3.2 enters the public domain through no fault of the Receiving Party; or 3.3 was already known to the Receiving Party prior to disclosure; or 3.4 is required to be disclosed by law or regulation. 4. This Agreement shall not apply to any information which is independently developed by the Receiving Party without reference to the Confidential Information. 5. The Receiving Party may disclose Confidential Information to its employees, directors, officers, agents, consultants and professional advisors who need to know such information, provided that the Receiving Party shall ensure that each such person to whom disclosure is made complies with the obligations of confidentiality set out in this Agreement as if they were a party to it.
Explanation
This clause sets out terms governing the disclosure and use of Confidential Information under the agreement. Key points:
1) Definition: Confidential Information is defined broadly to include any information disclosed by one party (the Disclosing Party) to the other (the Receiving Party) relating to the Disclosing Party's business. This includes but is not limited to technical, operational, commercial, product-related and strategic information in any form.
2) Obligation: The Receiving Party must keep all Confidential Information confidential and not disclose it to any third party without the Disclosing Party's consent. This is an absolute obligation of non-disclosure except where exceptions apply.
3) Exclusions: There are several exclusions where information either does not qualify as Confidential Information or the obligations of confidentiality do not apply: 3.1 - Already public domain at time of disclosure
3.2 - Enters public domain through no fault of the Receiving Party
3.3 - Already known to the Receiving Party
3.4 - Required by law/regulation to be disclosed
4 - Independently developed by Receiving Party with no reference to Confidential Information
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5) Permitted sharing: The Receiving Party may disclose Confidential Information to employees, directors, officers, agents, consultants and advisors who need to know it but must require them to comply with the confidentiality obligations as if they were a party. Onward sharing is only on a need-to-know basis and obliging confidentiality.
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The objectives and rationale of this type of confidentiality provision include:
1) Providing clarity by defining Confidential Information and setting out exclusions to avoid dispute over what must be protected. The definition is deliberately broad, and exclusions aim for balance.
2) Imposing robust obligations of non-disclosure and restrictions on use of Confidential Information to safeguard its confidentiality and commercial value.
3) Allowing for certain necessary limited disclosures under appropriate obligations, e.g. to advisors who need to review to advise, but without waiving rights or releasing information into the public domain. Permitted sharing is highly controlled.
4) Carving out reasonable exclusions to prevent overbroad restriction, e.g. for publicly available information or knowledge gained legitimately through separate means. But unpermitted disclosure leading to information entering the public domain does not remove its confidential status or excuse obligations.
5) Clarifying that independent development of similar information by the Receiving Party does not make it subject to non-disclosure, provided no reference was made to Confidential Information. But proving independence may be challenging.
In summary, the clause aims for a unilateral but mutually beneficial flow of sensitive information between parties under strict limits - disclosing it where and to the extent genuinely necessary for the purposes of their relationship but without compromising confidentiality or ownership beyond that which is unavoidable. Exclusions maintain reasonableness but do not remove obligations where still applicable. Enforceable confidentiality depends on clarity as to what must be protected and when.
Early commercial contracts often imposed blanket confidentiality obligations lacking definition or qualification, simply requiring all information exchanged to remain confidential. This approach was problematic as ambiguity threatened enforceability and reasonableness. Unlimited restrictions could be seen as unjustified restraints on trade, and parties could not determine obligations.
By the 19th century, courts required confidentiality to be confined to specifically identified information to be enforceable and commercially adequate. Standard categories emerged in clauses e.g. covering technical, business and product details. Marking information as "confidential" allocated responsibility but risks remained, e.g. where categories were exhaustive. Exclusions developed for public domain information, but approaches were ad hoc.
Confidentiality periods became more complex as commercial dealings lengthened. Exclusions were needed to accommodate interests in employee mobility, pre-existing knowledge, and disclosures required by law. Formulas developed allowing necessary circulation under obligations, e.g. to advisors. "Need to know" concepts aimed for minimal disclosure. But determining independence challenged.
By the early 20th century, tension between comprehensive protection and practical qualification persisted. Drafting confidentiality required judgment around likely future disputes. Certain standard exclusions and permitted disclosures emerged, but treatment remained heavily negotiated, balancing risks of leakage against restraints on use. Defining information as "confidential" could be counterproductive where it signaled value.
Today, sophisticated confidentiality provisions are common, but challenges continue. Globally connected dealings and digitization increase potential for controversies and unpermitted circulation, but also exclusions and interpretations. Approaches vary, but aim for inclusive definition, limited exceptions, circulation only where essential under obligations, and proof of independence. However, increased complexity of business relationships means judgment around future disputes remains difficult. There are no formulas to address every situation.
In summary, recognition of a need to balance robust protection against reasonable limits and commercial efficacy has driven the spread of mechanisms within confidentiality clauses for clarifying sensitive information, allocating responsibility for its handling, and allowing necessary use while limiting risks of unrestrained circulation. Tension persists due to compounded complexity, but certain standard principles have emerged to guide determination of scope and treatment in specific deals. Overall, there has been movement toward more sophisticated management within contracts but no universal solution. Confidentiality remains heavily negotiated to suit transactions, relationships and anticipated issues.
Perfect protection is elusive, but workable standards can uphold it where it matters most.
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