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Non-Disclosure Agreement (NDA) is all about the prospect of according confidentiality treatment and protection to the confidential information exchanged and shared amid the parties pursuant to the NDA.

Confidential Information definition is heart of the NDA as the core aspect of NDA is to regulate and govern the usage of confidential information by the recipient of the confidential information within the permissible limits under the NDA.

It is crucial to specifically list out what information will be identified and treated as confidential information. Otherwise all the information exchanged and shared amid the parties during the tenure of the business relationship has to be protected under the NDA.

There are three ways to define and identify the confidential information and confine confidentiality treatment to such information:

  • Information which is clearly marked or identified as confidential information.
  • Information which is initially disclosed on oral basis and later reduced to writing within certain specific period of time from the date of oral disclosure.
  • Information which is disclosed in the circumstances reasonably indicating its confidentiality.

Deemed Confidential Information:

At times, certain parties prefer to keep specific information as deemed confidential information even though such information does not meet the confidential information criteria. It is better to define the confidential information with any of the aforesaid parameters and not to induct the prospect of deemed confidential information.

If in case the parties are forced to put the prospect of deemed confidential information in the NDA then it is vital to carefully evaluate what set of information will be treated as deemed confidential information and better to confine such deemed status to a specific set of information.

Listing out the exceptions to the Confidential Information will also be equally important prospect in the NDA.

Typically, the following information will be listed as part of the exceptions:

  • Information which is already available in the public domain provided Recipient is not responsible for such availability.
  • Information which is already in the possession of the recipient prior to the receipt of the confidential information from the discloser.
  • Information developed by the recipient without using the confidential information of the discloser.
  • Information received by the recipient from a third party independently of the discloser provided such third party is under no confidentiality obligation to the discloser.

Recipient will be under no obligation to protect the information which will fall under the ambit of the exceptions to the confidential information.

Generally recipient will not be permitted to use and disclose the confidential information for any purpose outside the ambit of the NDA. In certain cases, recipient will have to make a mandatory disclosure of confidential information due operation of law.

In such cases, recipient will be permitted to disclose the confidential information only to the extent needed by operation of law but the recipient duty of confidentiality will continue until the expiry of the confidentiality protection period.

It is important to learn the distinction that there will be no duty of confidentiality on the recipient in relation to the information covered under the ambit of exceptions to confidential information – However, duty of confidentiality on recipient will be in prevalence in relation to confidential information disclosed due to operation of law.

During the course of drafting the Confidential Information definition the drafting person should focus on specifically defining the confidential information criteria (as described in this article) along with listing out the exceptions of the confidential information.

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June 2024