NDAs: Definition of Confidential Information

Nov 07, 2016

Parties entering into a non-disclosure agreement (NDA) should define the scope of the contract. Hence, they should determine what is encompassed by the term “confidential information.” Clarifying the parameters of the NDA could protect the parties from liabilities and could further ensure that the confidential information that needs to be protected is covered by the agreement.

Generally, the company disclosing information would want to broaden the subject matter that is included under “confidential information.” On the other hand, the company receiving confidential information would usually want to limit the term. To serve the interests of both parties, businesses commonly agree that the following are excluded from the definition of confidential information:

1. information that is generally available to the public;

2. information that was available to the party receiving information before entering to an NDA;

3. information received from a third party; and

4. information independently developed or discovered by the receiving party.

There are other ways to narrow the definition such as by limiting the term to information disclosed in writing, marking information as confidential, and specifying what may be deemed confidential and the dates of disclosure. The disclosing party would typically want to avoid some of the limitations because of potential inadvertent disclosures or of the possibility of exceeding the scope of what is confidential information.

It is in the best interests of both parties in an NDA that the terms and conditions in the agreement are appropriate, clear, and complete. Seeking legal counsel could further help the parties memorialize their objectives and could further protect the enforceability of the contract.

Heliane Fabian