Derived information

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NDA Anatomy

Resources: Confidentiality agreement | Confi — Led Zeppelin style | GDPR | Copyright vs. confidence | OneNDA |
Common terms | Certification | Confidential information | Confidentiality obligation | Derived information | Disclosed information | Discloser | Exclusivity | Indemnity | No licence | Non-solicitation | Permitted disclosees | Permitted disclosures | Procure compliance | Purpose | Receiver | Remedies | Reps and warranties | Return of information | Term of confidentiality |

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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,[1] and may indeed be as commercially sensitive[2] 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.[3]

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.

See also


  1. If the disclosed information ever was proprietary in the first place, that is — if it doesn’t qualify as intellectual property it isn’t, or course.
  2. And more deserving of intellectual property protection: applying some analytics to raw trading data may convert it from un-ownable data to creatively juicy intellectual property, of course.
  3. Those who can’t resist the siren call, start with Lawrence Lessig’s fabulous Code: Version 2.0.