Confidential Information - Definition & Exclusions
Contract Type:
NDA
Jurisdiction:
For the purposes of this Agreement, "Confidential Information" means any information disclosed by a party (the "Disclosing Party") to the other party (the "Receiving Party") during the term of this Agreement that is marked as "confidential" or "proprietary" or which would reasonably be considered confidential under the circumstances of disclosure. Confidential Information does not include information that: (a) is or becomes generally available to the public other than as a result of disclosure by the Receiving Party or its representatives; (b) was available to the Receiving Party on a non-confidential basis prior to its disclosure by the Disclosing Party; (c) is or becomes available to the Receiving Party on a non-confidential basis from a source other than the Disclosing Party when such source is not, to the best of the Receiving Party's knowledge, subject to a confidentiality obligation with the Disclosing Party; or (d) was independently developed by the Receiving Party without the use of any of the Confidential Information, as evidenced by written records.
Explanation
This clause defines what constitutes "Confidential Information" for the purposes of the agreement and sets out exclusions from that definition. Key points:
1) Definition: Confidential Information is defined as any information disclosed by one party (the Disclosing Party) to the other (the Receiving Party) during the agreement that is either marked "confidential" or "proprietary" or would reasonably be considered confidential in the circumstances. This is a broad definition covering all information exchanged that is intended or should reasonably be expected to remain confidential.
2) Exclusions: The clause then lists categories of information that are excluded from the definition and will not be considered Confidential Information, including:
a) Publicly available information (other than through disclosure by the Receiving Party)
b) Information already available to the Receiving Party before disclosure by the Disclosing Party on a non-confidential basis
c) Information available to the Receiving Party from another source who is not obligated to keep it confidential
d) Information independently developed by the Receiving Party without using Confidential Information
3) Disclosing/Receiving Party: The clause refers to the party initially disclosing information as the Disclosing Party and the party receiving that information as the Receiving Party. These roles refer to the flow of each item of information, so the parties may switch between these roles during the contract.
The main purposes of a confidential information definition and exclusions clause are:
1) Providing clarity and certainty as to precisely what constitutes Confidential Information that is protected under the agreement's confidentiality terms. An exhaustive definition and qualified exclusions help avoid disputes over status.
2) Setting reasonable exceptions to allow parties to continue dealings with information already in the public domain or that they have pre-existing rights to, as well as information gained elsewhere through independent means. Exclusions prevent overbroad restrictions.
3) Allocating responsibility for marking and handling information as confidential to the Disclosing Party. But also requiring reasonable efforts from the Receiving Party to identify information that ought reasonably to be confidential even if not explicitly marked.
4) Balancing adequate protection of commercially sensitive information with practicalities of business by excluding information where confidentiality has otherwise been lost through no fault of the Receiving Party. But any disclosure by the Receiving Party remains prohibited.
In summary, a comprehensive confidential information definition aims to provide clarity through inclusions and exceptions, determine obligations, and set reasonable limits. Exclusions maintain proportionality but do not remove the Receiving Party's duty to safeguard Confidential Information as defined in the agreement.
Early commercial contracts often failed to define confidential information in detail, simply requiring generally all information exchanged to remain confidential. This blanket approach was problematic as ambiguity about status threatened both the enforceability and reasonableness of confidentiality obligations, especially given amounts of disclosure typical in negotiations. It was unclear what protections applied and when.
By the 19th century, exceptions to and clarification of confidentiality emerged as courts were reluctant to enforce vague clauses that could be seen as anti-competitive or unjustified restraints on trade/mobility. For enforceability, definitions developed limiting confidentiality to specifically identified categories of sensitive information, coupled with reasonable exceptions for information reasonably in the public domain. Distinguishing confidential information became key.
Standard formulations included catch-all definitions e.g. "all technical, financial and business information", but with exclusions for public knowledge. Marking clauses appeared, putting onus on owners to designate confidential information, and to be entitled to protection, but roles were not always clear. Challenges included international dealings where public domain differed. As confidential information came to include longer-term disclosure, more exceptions were recognized e.g. for recipients' pre-existing knowledge.
By the mid-20th century, the balancing of inclusive definition versus reasonable qualification was under way. Certain terms emerged around "disclosing party/receiving party" to designate owners and clarify accountability for protection, and requiring more objective judgment of confidentiality via circumstances. But approaches remained ad hoc and litigation continued where confidentiality periods or exceptions were disputed.
Today detailed confidential information definitions, allocation of responsibilities between disclosing and receiving prties, and exemptions for public/pre-existing/ independently gained knowledge are commonplace.However, terms remain heavily negotiated, balancing robust protection and restraint of use with practical exclusions, and addressing sector/relationship nuances. Broader definitions couple with specific exceptions, obliging reasonable efforts to maintain non-disclosure within exceptions, but adapting scope to purpose
In summary, recognition that confidentiality requires clarity and qualification for enforceability and commercial sense has driven development of standard approaches to defining confidential information in contracts. The trend is toward crafting confidentiality to suit transactions through allocating roles, setting inclusive but bounded categories, and articulating exemptions that shield reasonable competing interests and pre-existing rights. However, tensions persist around scoping information and judging exceptions, especially where dealings span jurisdictions.
There are no universal formulas, but certain standard mechanisms and principles to help determine boundaries, oblige protection where needed yet maintain pragmatic limits, and clarify accountability have emerged. Overall, more sophisticated and tailored management of confidential information in deals has been the result.
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