Confidentiality Exclusions versus Disclosures

When dealing with confidential information, one of the key areas of concern is where information that would otherwise be considered confidential loses its protection.  In most contracts, there are four situations where confidential information ceases to be confidential information and can be released.  Information that:

  • was in the public domain prior to, at the time of, or subsequently to disclosure;
  • was in the lawful possession by recipient prior to disclosure and was not already covered by a confidentiality provision;
  • is subsequently acquired by recipient through lawful means from a third party who is not under an obligation of confidentiality; or,
  • is subsequently developed by recipient without use of or reference to the confidential information.

For these four items, information that was confidential now is not.

There’s a fifth reason which would allow for disclosure, but I argue, shouldn’t change the nature of the information from confidential to non-confidential: disclosure pursuant to court order or legal process.

In this fifth scenario, we’re talking about a situation where a court of competent jurisdiction orders the release of information, usually to the court, as part of a judicial (or extra-judicial, like arbitration) process.  The information is going to be disclosed because of it’s probative value – that simply because it’s confidential doesn’t mean that the court shouldn’t consider it as part of whatever is the subject of the litigation.

But that doesn’t mean that I want that information to change status to non-confidential information.  Rather, what I want is to keep that information confidential even AFTER the judicial review.  This is possible through the use of protective orders and other legal procedures.  But if your contracts say that a judicial process will change the information’s status to non-confidential, a single well-strategized lawsuit can unintentionally release a lot of otherwise-confidential information into the public domain.

The best way to handle this is to make sure that your confidentiality provisions clearly segment release of confidential information pursuant to a court order from the other four reasons by which confidential information becomes non-confidential.  Additionally, include language that requires the disclosing party (the one responding to the court order) to:

  1. Notify the owner of the confidential information that such court order is being pursued/followed/responded to.
  2. Reasonably assist the owner of the confidential information in obtaining any available legal protections.
  3. Only disclose the specific confidential information requested by the court order (not just hand over everything).
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2 thoughts on “Confidentiality Exclusions versus Disclosures

  1. Chris Lemens

    A couple of points:

    First, your first example exception contains a very common mistake. The “public domain” is a copyright concept inappropriately imported into confidentiality agreement. “Public domain” in copyright means a work of authorship to which the owner has given up his ownership rights. No one would want this critical exception limited to public domain documents. Instead, the exception shoudl be for information that is available to the public, or is publicly known, or something along those lines.

    Second, I agree with your main point. There is a parallel private construction that I sometimes see. The exception is for something like “information that the disclosing party discloses to any third party who has no legal obligation to maintain its confidentiality.” The problem with that is that you might give information to someone that you know is never going to disclose it, and even someone where you can prevent the disclosure. For example, many employees talk to their spouses about what happens at work. There is zero risk of further disclosure, most of the time. In fact, in many states, communications between spouses are privileged. Similarly, you might give information to someone else you trust and who never, in fact, discloses it further. That should not blow up your trade secret.

    Chris Lemens

    Reply
  2. Anonymous

    Heh, nice job, Chris. I clicked through to the article from my feedreader specifically to hit that point about “public domain.” It’s a horrible mistake that keeps being perpetuated for some reason. Glad to see I’m not the only one fighting against it.

    I disagree with your point about the privilege, though. It’s not really relevant to confidentiality, just evidence (and the spouse could waive anyway). In reality, though, spouses just don’t talk because they just don’t care… or at least mine doesn’t anyway.

    Also, we draft our agreements so that even information that becomes known to [some segment of the population] as a result of criminal activity/breach/security breach must still be treated confidentially and subject to whatever use restrictions apply. No point opening the front doors because a window got cracked.

    Reply

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