During the NDA editing and negotiating process, when a confidentiality agreement is being reviewed, attorneys must ensure that the agreement accurately identifies the information to be protected, and that it considers the situations in which disclosure of protected information would be allowable and hence not constitute a breach of the contract.
Scope of Protected Information
If you represent the disclosing party, the ultimate goal of the non-disclosure agreement is to protect your client’s confidential information. To that end, the description of the object of the contract should be sufficiently broad to cover a variety of circumstances. However, if the scope of the agreement is too broad, it could make a reviewing court less likely to uphold it if challenged.
Sometimes, a recipient party wants the scope of the NDA limited to documents marked “Confidential.” From the standpoint of the receiver, this provides clarity. However, if the disclosing entity inadvertently fails to mark an otherwise protected document “Confidential,” this provision in the agreement could result in lack of protection for the disclosing entity.
The agreement should clearly identify whether protected information includes both written and oral statements and information, or is limited to information contained in written documents. If oral statements are to be included, consider whether to also include a provision requiring the disclosing party to memorialize such statements in writing shortly after disclosure.
Consider also whether, and under what circumstances, a recipient party could share confidential information covered by the agreement without fear of legal recourse. The agreement should clearly specify when disclosure is permitted. Some common permitted disclosures include:
- Information that is already in the public domain
- Information the recipient obtained independently
- Information that was also disclosed to the recipient by a third party
- Information the recipient party develops independently, without using the disclosing party’s confidential information in the process
- Disclosures made prior to signing the NDA
- Information required to be disclosed in a legal matter
- Information required to be disclosed by federal or state laws
- On July 18, 2019
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