NOTE: An asterisk * indicates a provision that conflicts with another provision, usually the one immediately
preceding or immediately following.
Disclosing Party Means Each Party to the Agreement *
The term Disclosing Party refers to any party to the Agreement that discloses
Confidential Information (defined below) to another party bound by the Agreement.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 3 | Be OK with this provision, but might not actively seek it |
| Receiving Party will probably: | 4 | Like this provision, but might not insist on including it |
Commentary
Two-way confidentiality provisions are usually preferred: Many parties–not
just Receiving Parties, but Disclosing Parties as well–will prefer a two-way
confidentiality provision in which each party can be a Disclosing Party. There
are two main reasons for this.
First, the parties might not know for sure which party or parties might
someday want to disclose confidential information to the other. It makes sense
to plan for both possibilities.
For example, a Receiving Party might someday want to disclose its own
confidential information to the Disclosing Party. Or, a Disclosing Party might
someday want to gain access to the Receiving Party’s confidential Information.
In that type of situation, it could be awkward if the parties had previously
negotiated a one-sided, one-way agreement, and had to stop to re-negotiate a
more fair and balanced agreement. Bosses and colleagues might ask embarrassing
questions about the delay.
Second, with a two-way agreement, it should take the parties less time to come
to agreement on reasonable terms and conditions. That’s because each party would
know that someday the roles might be reversed, that someday it might have to
live with the provisions it was demanding from the other side.
For example, a Disclosing Party would know that, if it ever gained access to the
Receiving Party’s confidential information, it would have to live with the same
confidentiality obligations it was demanding that the Receiving Party agree to.
That would give the Disclosing Party an incentive not to demand unreasonable
obligations. The reverse would be true of the Receiving Party, knowing that
someday it might be providing its own confidential information to the Disclosing
Party.
Caution: Even in a two-way confidentiality agreement, a good drafter can slant
the language in favor of the role she thinks her client will be playing.
For example, if the Receiving Party knew for certain that it would not be
disclosing its own information, then it could try to water down the
confidentiality obligations as much as possible.
Or, if the Disclosing Party knew that it would never be receiving the other
side’s confidential information, then it could try to beef up the
confidentiality obligations as much as possible.
Real-life examples “in the wild”
– BDI Multiparty Confidentiality Agreement
– Disney/Pixar Co-Production Agreement
– Dow Chemical Master Collaboration Agreement
– ExxonMobil Confidentiality Agreement
– Ford Global Services Agreement
– GE Energy Financial Services Nondisclosure Agreement
– HP Confidential Disclosure Agreement
– IBM Agreement for Exchange of Confidential Information
– University of North Carolina Mutual Confidentiality Agreement
– University of Texas ‘Universal’ Non-Disclosure Agreement
– Verizon Communications Non-Disclosure and Confidentiality Agreement (1-way)
Disclosing Party Means [PARTY NAME] Only *
The term Disclosing Party refers only to the specified party to the Agreement. ) For the
avoidance of doubt, only Confidential Information owned or maintained by or on behalf of a
Disclosing Party is subject to the confidentiality obligations of the Agreement except to the extent
(if any) expressly stated otherwise in the Agreement.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 4 | Like this provision, but might not insist on including it |
| Receiving Party will probably: | 2 | Object to this provision, but might go along with it |
Commentary
See the commentary to Disclosing Party Means Each Party.
Receiving Party means Any Other Party Accessing Confidential Information
Receiving Party refers to each party to the Agreement (other than the
relevant Disclosing Party) that, pursuant to the Agreement, accesses Confidential Information.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 4 | Like this provision, but might not insist on including it |
| Receiving Party will probably: | 4 | Like this provision, but might not insist on including it |
Commentary
This provision is included mainly for completeness. Note, however, that
Definition: Confidential Information Means All Disclosing-Party Information, Except as Excluded
Except to the extent otherwise provided in the Agreement, Confidential Information refers to all information that is owned or maintained by, or on behalf of, a Disclosing Party.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 4 | Like this provision, but might not insist on including it |
| Receiving Party will probably: | 3 | Be OK with this provision, but might not actively seek it |
Commentary
The basic approach of this provision is to start out by defining
Confidential Information very broadly, then allow the drafter to
“pull back” on the definition by selectively including one or more of the
restrictive provisions below.
A Disclosing Party will want Confidential Information not to be limited to
information ‘owned’ by the disclosing party, but also to include information of
a third party that the Disclosing Party makes available to the receiving party.
Similarly a Disclosing Party will want Confidential Information to include not
only information proactively disclosed by the Disclosing party, but also:
- information simply made available by the Disclosing Party. This might include,
for example, information that the receiving party happens to acquire while
working on-site at the Disclosing Party’s premises or on its computer
network; and/or - information disclosed by an intermediary, for example a third party that
itself received the information in question from the Disclosing Party under an
obligation of confidence.
No laundry list: Some lawyers for disclosing parties like to include long laundry lists of
specific examples of confidential information. No such list is included here because of the
difficulty of coming up with a list that’s sufficiently general; a drafter can include such a list
if desired.
Prerequisite: Marking of Confidential Information
Except to the extent otherwise provided in the Agreement, information will not
be considered Confidential Information under the Agreement unless the
information, as initially disclosed or initially made available to the Receiving
Party, is marked with a reasonably prominent, visually-readable notice such as,
for example, “Confidential information of [name]” or “Subject to NDA.” (See
also the Catch-Up Marking provisions, if
applicable.)
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 2 | Object to this provision, but might go along with it |
| Receiving Party will probably: | 5 | Love this provision, and might walk away if it’s not included |
Commentary
A receiving party likely will want its personnel not to have to guess whether
information provided by a disclosing party is confidential and therefore isn’t
fair game for unrestricted use.
Disclosing parties usually agree to a marking requirement as long as catch-up marking is
allowed, as provided below.
Editorial comment: Marking information to indicate that it’s confidential is
usually a good idea in any case.
- In court, a disclosing party suing for misappropration of its information will
usually tout its marking of information as evidence of the precautions it took
to keep the information confidential, which in turn serves as circumstantial-
or indirect evidence that the information was indeed confidential. - Conversely, courts can sometimes interpret the disclosing party’s failure to
mark information as indirect evidence that the disclosing party didn’t
really consider the information to be confidential. (On the other hand, a
study published in the Gonzaga Law Review suggests that in judges’ eyes,
marking of confidential information may not be as important as factors such as
confidentiality agreements with employees and business partners together with
appropriate physical security measures. See David S. Almeling et al., A Statistical Analysis of Trade Secret Litigation in State Courts, 46 Gonzaga L. Rev. 57, 80-83 (2010-11).
So agreeing to a marking requirement might not be that big a deal for the
disclosing party after all.
Real-life examples “in the wild”
The following agreements include marking requirements for Confidential Information:
–
Dow Chemical Master Collaboration Agreement § 1.4 — the on-line version
appears to be an incomplete provision; the marking requirement applies to
information first disclosed in a non-written form.
–
Ford Global Services Agreement § 8.1(b) and (d).
– GE Energy Financial Services Nondisclosure Agreement § 1.
–
HP Confidential Disclosure Agreement § 5.
–
IBM Agreement for Exchange of Confidential Information § 1 says that information “should” be marked;
–
University of Texas ‘Universal’ Non-Disclosure Agreement § 2.
Exception: Catch-Up Marking Within [30 DAYS] After Initial Unmarked Disclosure
IF: Particular Confidential Information is provided to a Receiving Party without
the information’s being marked per the Marking Requirement provision above —
for example in an unmarked writing or via a demonstration, oral presentation, or
other manner not conducive to marking – THEN: The information in question will
not be excluded from the definition of Confidential Information IF the
Disclosing Party does (or causes to be done) the following:
- identify the information as confidential at the time of, or promptly after, the
initial disclosure; - within the specified Marking Catch-Up Period after the initial disclosure,
provide the Receiving Party with a copy or written summary of the
Confidential Information that is marked per the Marking Requirement provision; and - give the Receiving Party written notice of the catch-up marking, specifying
which Confidential Information has been so marked.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 5 | Love this provision, and might walk away if it’s not included |
| Receiving Party will probably: | 3 | Be OK with this provision, but might not actively seek it |
Commentary
If the Disclosing Party is going to have to mark its Confidential Information as
such as a prerequisite for protection, it will normally want a catch-up marking
period for any Confidential Information it might disclose without a marking,
either inadvertently or out of a desire to move the parties’ business along.
But then the issue arises: What should the Disclosing Party’s deadline be for
doing such catch-up marking—after which any information that remains unmarked
becomes fair game for the Receiving Party to use without restriction?
The bright-line approach: Mark within X days, or else: Some confidentiality
provisions require catch-up marking to be completed within a stated time. This
is a bright-line approach that favors the Receiving Party, because if the
Disclosing Party fails to do catch-up marking for unmarked information within
the stated time period, the information’s confidentiality restrictions
evaporate.
(This assumes confidentiality isn’t separately required by applicable law, for
example by HIPAA or the Gramm-Leach-Bliley Act.)
Bright-line tests can be advantageous in business contracts. They make life
easier on the people who actually have to do the work, and they promote
predictability, which is prized in the business world.
But this particular bright-line approach has the potential to damage the
parties’ business relationship (assuming one exists). And it’s not clear how
much good this bright-line approach will actually do for the Receiving Party.
Put yourself in the Disclosing Party’s shoes: If you were to slip up and forget
to mark particular information, the Receiving Party might claim that you’ve lost
all right to control the use of the information. The Receiving Party might claim
it didn’t matter whether it would suffer any prejudice by belated marking;
according to the Receiving Party, the information is no longer confidential,
period. If the parties’ relationship is supposed to be a collaborative one, this
would not be a good thing.
The reasonable-time approach: For collaborative relationships, another
approach is to allow catch-up marking within a reasonable time. Sure, that can
lead to uncertainty about what “a reasonable time” might be. But that very
uncertainty can usefully encourage the parties to try to work things out, which
in turn can help them preserve their business relationship.
In any case, in a collaborative relationship it’s no bad thing for the Receiving
Party to call up the Disclosing Party and ask: Hey, you didn’t mark Document X as confidential; was that intentional, or did it just fall through the cracks?
That way, the Disclosing Party gets a chance to protect its information, and the
Receiving Party gets points for being a “good” business partner.
Written notice of catch-up marking: If the Disclosing Party wants to
retroactively change the status of particular information from unprotected to
protected, the Receiving Party likely will want to have its attention
specifically called to that fact, so that later on it doesn’t unwittingly treat
the information as still being unprotected.
Real-life examples “in the wild”
The following agreements include the stated catch-up marking periods:
– Dow Chemical Master
Collaboration Agreement § 1.4 — 30 days.
– Ford Global Services
Agreement § 8.1(c) — 15 working days.
– GE
Energy Financial Services Nondisclosure Agreement § 1 — 30 days.
– HP
Confidential Disclosure Agreement § 5 — 30 days.
– University
of Texas ‘Universal’ Non-Disclosure Agreement § 2 — 30 days.
Exception: Marking Not Required for General Access
IF: The Disclosing Party allows personnel of the Receiving Party to access
information of the Disclosing Party substantially as it is kept in the ordinary
course of business (for example, by allowing Receiving Party personnel to access
Disclosing Party premises or files or to log on to a Disclosing Party computer
or network); THEN: All such information is considered Confidential Information
unless and until shown to come within an exclusion under this Agreement,
regardless whether it is marked per the Marking Requirement provision.
Show / hide: Commentary Real-life examples
Analysis at a glance
| Disclosing Party will probably: | 5 | Love this provision, and might walk away if it’s not included |
| Receiving Party will probably: | 3 | Be OK with this provision, but might not actively seek it |
Commentary
Sometimes a disclosing party anticipates allowing a receiving party to have extensive access to the
disclosing party’s files. In that situation, the disclosing party likely won’t want to have to
undertake the burden of making sure that all of its confidential information is marked as such. This
provision provides a compromise between two hard-line positions, namely a mandatory marking
requirement and a complete dispensation with a marking requirement.
Signing a business contract: