Confidential information - 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 — Premium — See also — Wikitext Crosscheck: 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 Confidential information in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text Resources and Navigation Index: Click ᐅ to expand: NDA

Basics

Derived information

Derived information, the fecund fruits of the receiver’s own creative juice and analytical energy, worked upon information given to the receiver by the discloser, is in no sense “proprietary” to the disclosing party, and may indeed be as commercially sensitive to the receiving party as the material the disclosing party gave, and on which it was based, it in the first place: think of Paul’s middle eight about having a shave and catching the bus in A Day in the Life. We are in danger of getting into the jurisprudential wisdom of treating intellectual endeavour as if it were tangible property — but let’s not go there just now.

Actually, no: let’s do go there. If the information in question not, in the first place, mine — that is to say, it isn’t intellectual property in the first place, then the question arises why I should be able to stop you deriving your own intellectual property out of it. This boils down to whether it was just secret data, but didn’t have any proprietary qualities, or whether it can be somehow regarded as proprietary, owned information — the articulation of which required some kind of creative impulse.

If it is only data, it does not have the quality intellectual property at all, so the receiving party’s act in deriving some new type of creative work out of it is a novel thing, owes nothing to the discloser’s disclosure as such, builds upon no intellectual property of the discloser, and should not, therefore, be restricted at all. What loss could there be? The data still cannot be disclosed to anyone in a way that would betray the discloser’s confidence, but the derivation may well obliterate any confidentiality in the original document: say you give me a thousand characters of data (i.e. not intellectual property as such), on condition that I keep it confidential. And let’s say I rearrange the thousand characters into, for argument’s sake, a sonnet (which is prima facie susceptible of copyright protection — by me). Are there economic or legal justifications for obliging me to destroy that sonnet, or return it to you, under a confidentiality covenant? Humble report, sir, the answer is “no”.

On the other hand, if the information you have given me is copyrighted then the agreement you need is a licence, not an NDA. And, there, you can control, within limits, by the law of copyright, the licencee’s ability to derive new material from it.

Deriving new information from intellectual property: So: taking copyrighted information and fiddling around with it potentially takes it outside the realm of copyright. The point about copyright is that it attaches to a specific articulation of a creative idea. If you take that idea and change how it is expressed — if you derive new content out of it — then, potentially, you own that new copyright, not the person whose copyrighted work you modified. You can control a recipient’s ability to create/derive new intellectual property by contract, and it is fair to do so.

Deriving new information from data you have been given: With non-copyrightable data, you don’t own in the first place: by the lights of copyright law, you did not use your creative juices to produce it, so a person to whom you supply that information who then uses hers to derive some new information out of is not infringing your proprietary right. You don’t have a proprietary right. But you might still feel entitled to stop that derivative act: the publisher of a proprietary index who gives you a feed of the raw index data will not want you adding one more paltry variable, dividing by 0.99999, and calling it your own brand-new index. Here, too there are trademark and passing off issues: if you do that, without saying something incriminating like, “hey guys it’s just like the Eurostoxx! it’s the Eurostoxxx! with an extra x!” then perhaps you could say you weren’t doing anything to which the publisher of Eurostoxx could object. On the other hand, the publisher of Eurostoxx can remind you that the only way you can get that data in the first place is from it, and if you want it, you have to agree not to derive it.

Deriving new information from data you have accumulated yourself: the last case is where the information you’re futzing around with (a) is not copyrightable and (b) wasn’t given to you by your counterparty in the first place but, say, arose as a result of your execution activities while handling that client’s order. This is a right brokers are unlikely, in this age of big data, to want to give up.

Notes, memoranda and materials containing confidential information

You may see:

All notes, memoranda, analyses, compilations, studies and other documents prepared by the Recipient, to the extent they contain confidential information furnished by the Discloser will also be deemed to be confidential information.

Not so fast. If there is stuff in them that is confidential information, it is already captured in your definition. The substrate in which confidential information subsists is irrelevant. Anything else on those notes, memoranda and analyses ain’t confidential information of the discloser,and may well be your special sauce that you don’t want the discloser to even know about.

“Written or oral”

For purely practical reasons, resist the urge to include orally transmitted information. Especially in a client-provider relationship, and especially if you are the service provider receiving the information — it gives your client a free, and hard-to-disprove, option to claim anything at all that they want to keep secret is something “I told you, remember?”. It may also interfere with provider’s ability to claim it had prior possession of the information (and therefore the information is out of scope of the confidentiality obligation altogether).

Now chaps, really: — if data is valuable enough for you to require an “injunctionable” right to stop me using it, it must be valuable enough for you to be bothered confirming in writing. If you do that you put beyond argument the fact that you did communicate it to me, and when.

Premium content Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics👇 JC’s “nutshell” summary of the clause Background reading and long-form essays Template:Nda Confidential information premium