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Reporting obligation for the receiving party

(See also the sample clauses.)

A disclosing party will naturally want to know if anyone is trying to make unauthorized use or -disclosure of its protected information. (This includes governmental authorities issuing a subpoena or search warrant, or a third party issuing a subpoena.)

It’s often not unreasonable for the receiving party to agree to alert the disclosing party of any such incidents that come to its attention.

Of course, this may not be possible in some circumstances, for example if the receiving party is prohibited by law from revealing the existence of a government investigation.

Some disclosing-party drafters might want to require the receiving party to provide reasonable cooperation in the disclosing party’s efforts to go after the potential misappropriators. The receiving party’s counsel could counter that:

  • if the potential misappropriator is an employee, etc., of the receiving party, then the receiving party will already have an incentive to cooperate, namely to try to avoid being sued by the disclosing party, with the risk of punitive damages;
  • if the potential misappropriator is not associated with the receiving party, then the receiving party might legitimately not want to get in the middle of a dispute between the misappropriator and the disclosing party.