Purpose - NDA Provision

NDA Anatomy™ JC’s guide to non-standard confidentiality agreements. For the OneNDA, see the OneNDA Anatomy A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — See also — Wikitext NDA Showdown OneNDA Homemade NDA What is Confidential Information? Confidential information Exclusions from confidential information Who can I share it with? Affiliates Permitted receivers Disclosure to regulators What are my obligations? Confidentiality obligation Procure compliance Return of information How long do my obligations last? Term Other important information Boilerplate Remedies Don’t go there girlfriend topics Non-solicitation Exclusivity Indemnity Sample text Template:Nda Purpose Resources and Navigation Index: Click ᐅ to expand: NDA

Summary

Why are the parties sharing the information in the first place? Typically, you’ll want to restrict use of the information to matters relevant to the project. This is likely to be defined as the “Purpose” or the “Project”. Expect to see this kind of definition, and this is somewhere you can let your sales guy go wild.

“So, legal eagles, what should I put for the “Purpose”?”
“I dunno, you tell me. What is the purpose?”
“What?”
“...You know, the purpose that you want the confidential information.”
“Ohh, right. [Pause] Well, looking at a sample portfolio to put some pricing together with a view to pitching financial services, I suppose.”
“Okay, so put that.”
“What?”
“Put that.”
“Just, that?”
“Sure.”
“Like, “looking at a sample portfolio to put some pricing together with a view to pitching a PB service, I suppose”?”
“Well, I woudn’t put, “I suppose”. but otherwise, yes.”

Sales will go away happy, any quietly believing he could have been a lawyer. And you know what? He probably could have.

But be clear

Take care to describe the purpose at least make it to clear. This does not require a legal drafting skill; a salesperson with a decent command of English should be able to manage it (indeed, many legal eagles have so curious a grip on English — like some kind of half-Nelson or choke-hold —that they can’t manage it); just enough facility to be broad enough to capture all information flowing between the parties that reasonably relates to the secret undertaking, so that you know it will be kept quiet, but not so indeterminate that it could take in any kind of random information that happens to pass between the parties, whether related to the purpose or not, and whether commercially sensitive or not.

Once inked, legal eagles will obsess about the precise limits of the purpose. All sorts of shades of meanings and subtleties will emerge from shadows. The question will arise, “I have this document the customer gave me; I should like to send it to this other person, who has a good reason for wanting it. Is it within the scope of the Purpose?”

To answer this question they will burrow deeply into drafting that was, we now know, dashed off rangily by someone in Sales. It won’t clearly address the present situation. Unsatisfied, and having set common sense aside for the moment, the legal eagle will look further afield for help, soon getting themselves tangled up in the definition of “confidential information” — also a thing of some craftspersonship — the manifest exceptions, carve-outs and exclusions to it, and before long the winding path will lead them to the tentative conclusion that perhaps the litigation team might have a view, or even outside counsel?

A gratuitous slight on litigation lawyers

If you want a sensible answer, do not ask the litigation department. The litigation department owes its existence to people’s collective inability to ask themselves sensible questions.

The JC has a view that if you have to ask the litigation department if something’s okay, it is probably not okay. We get to that point on this line of reasoning: we are interpreting our rights and obligations under a legal contract with a (presumably) valuable customer. If we have in mind that a consequence of adopting our desired interpretation is (i) the customer might sue us, but (ii) after a full trial, we would win, then we are wildly missing the point: the primary mischief here is not losing in court, but being sued by a valuable customer, that latter thing itself being a consequence of pissing off a valuable customer.

To “ask litigation for a view” is to acknowledge that our customer might violently object to what we are proposing to do. Customers whom you have pissed off so badly that they are are actively pursuing you in court tend not to give you as much business as those whom you have not.

Here we call to attention our old friend the commercial imperative. Commerce is a long game, friends. There are very few cases where the short term benefit of winning on this point, now, outweighs the longer reward of ongoing revenue, gladly imparted, by a happy customer. They usually come about where customer is in the process of spiralling into the side of a hill. Usually, this does not happen in connection with an NDA.

No, friends: if you believe your customer might object to your proposed disclosure you have two options. This first — which you should not dismiss out of hand — is just not to make the disclosure, however keen Sales is to do so. In the long run, this is often the best thing, commercially and legally, to do. The second — more likely where the disclosure is under some sort of compulsion, or “strongly-worded request”, to a regulator — is to tell your customer you have received the request to surrender the information, you don’t see a way around complying with it, but that you propose to disclose no more than is necessary, anonymising the information as best you can, and on condition that the recipient treats it as confidential. This is likely to be a good thing for your relationship: it demonstrates you take your confidentiality obligations seriously; it conveys to your customer the sort of regulatory pressure you are under, and it is an opportunity to talk to your customer.