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How to Define Confidential Information in NDA

By Chris Daming, J.D., LL.M. on February 11 2021

For your NDA, you have to define what information you’re declaring as “confidential.”

And there’s a good reason for this -- imagine that your employer tells you that every piece of information they provide is considered “confidential.” You sign the NDA, then the employer tells you that their favorite sports team won a game last night.

That information could be found anywhere -- but the NDA said that “all information” the employer tells you is confidential. If that’s the case, are you not allowed to disclose to your friends that your hometown team won the game last night?

Of course, no court would ever uphold that. But that’s kind of the point -- you have to have a good definition of confidential information or else you’ll run into one of two problems:

First, either the NDA will be considered too broad and then deemed unenforceable.

Or second, the NDA will be too narrow. In that case, it’s possible that information the disclosing party shares might not be protected by your NDA. What does this mean? It means that the recipient might be able to share confidential information that the disclosing party otherwise wouldn’t want them to share.


So That's the Why - Here's the How:


In general, most NDAs have a broad definition like this one in our template:

“Confidential Information” means any information that is proprietary or unique to the Company and that is disclosed by the Company to the Recipient during the term of this Agreement, including the following: trade secret information; matters of a technical nature such as processes, devices, techniques, data and formulas, research subjects and results; marketing methods; plans and strategies; information about operations, products, services, revenues, expenses, profits, sales, key personnel, customers, suppliers, and pricing policies; and any information concerning the marketing and other business affairs and methods of the Company which is not readily available to the public. “Confidential Information” also includes information of others that (1) is disclosed under this Agreement, (2) the Company is obligated to protect from disclosure or restricted from using or both, and (3) that would constitute “Confidential Information” if the information belonged to the Company.

(Note: this assumes you haven’t yet shared any confidential information with the recipient; if you have, check out what happens if I’ve already disclosed confidential information.)

 

How to Make it Specific

 

So what’s the takeaway? Aim for specificity. Be as specific and descriptive as possible without actually revealing the information you want to protect in the nondisclosure agreement. If the description is too broad, a court can’t enforce the NDA. For example, if you said that all conversations between the parties are confidential, then you’d run into the same problems as noted above.


Here are some examples of what people use: trade secrets, customer lists, technical, engineering, and scientific research, development, and processes. Employee lists. Financial projections. And there are a lot more. Just try to think about what information you’re going to be disclosing to the receiving party, and then describe it in this provision.


Here’s another example. Let’s say you developed a formula for longer-lasting printer ink, and a potential distributor wants to license your ink to sell it. The NDA should clearly state that the purpose of the agreement is to protect the disclosure of your printer ink formula in the context of your relationship to the distributor.

The formula itself will not be included in the NDA, but a description of the type of trade secret to be protected should be described: the ink developed from what you might define in your NDA as “the formula for printer ink.”


If you know exactly what you have in mind in terms of protecting, add it to the definition. The last example of printer ink is a great example of that. But if it’s much more broad like if you’re hiring an employee to sales or marketing, then the broad definition we have should cover everything.

Topics: nda
1 min read

How to Handle Confidential Info Already Disclosed - NDA

By Chris Daming, J.D., LL.M. on February 11 2021

Imagine this scenario: you’re trying to get another party to sign an NDA, but you’ve already disclosed confidential information to them. If that’s the case, will the NDA still protect you from them unlawfully disclosing the information you’ve already shared?

The short answer is “yes,” but you need to make sure the NDA covers you for that.

First, make sure you have our NDA template. And then read below to learn how to cover yourself.

Changes to Make in NDA

You’ll want to tweak the template in a couple spots. First, in the “Confidential Information” paragraph, change the first sentence to:

“Confidential Information” means any information that is proprietary or unique to the Company and that is or has been disclosed by the Company to the Recipient before or during the term of this Agreement, [keep the rest of this paragraph].

Then skip to Paragraph 4(a) - Exclusions. Take out the “number 1” that says “(1) was known to the Recipient before disclosure by the Company as evidenced by contemporaneous records” and leave the rest. It’d say this instead:

(a) This Agreement imposes no obligations upon the Recipient with respect to Confidential Information that: (1) has become publicly available through no fault of the Recipient; (2) is disclosed to the Recipient by a third party that has the right to make the disclosure to the Recipient and that does not have any obligation of confidentiality with respect to the Confidential Information; or (3) is disclosed by the Recipient with the Company’s prior written consent.

Easy Peasy!

Topics: nda