Lawyers see non-disclosure agreements all the time. Some of our well-established clients may see literally hundreds of them over the course of a year. In fact, we all probably see so many of them that they may not always get the attention they deserve (except when the confidential information involves source code or some other critical information). There are lots of issues that I am often surprised to see appear in what seem to be tried and true non-disclosure agreement forms; these include issues such as (a) not having a clear distinction between the period during which the exchange of information takes place and the period during which the confidentiality obligations are binding on the parties; (b) specifying a term for the confidentiality obligations without separately addressing the fact that trade secrets may be protected indefinitely; or (c) imposing restrictions on disclosure without any restrictions on use of confidential information. However, the issue for today’s blog is the “exception” for legally required disclosures.
We’ve all seen the list of exceptions in a non-disclosure agreement; it is the list of information that is not considered confidential (information that is publicly available, information that is disclosed by a third party without breaching a duty of confidentiality, information that is independently developed, information that the receiving party rightfully possesses). Interestingly, I still see “information that is required by law to be disclosed” as an exception. The problem with treating information that is legally required to be disclosed as an exception to what is confidential information is that once that information is disclosed it is no longer confidential information. The correct way to incorporate this concept in a non-disclosure agreement is instead to include “legally required disclosures” as an exception to the non-disclosure obligations. That is, “legally required disclosures” are a specifically permitted disclosure of confidential information. Even after the information is disclosed, the information is still confidential information. In fact, most provisions allowing for legally required disclosures also include specific conditions to the disclosure, such as having giving prior notice of the proposed disclosure and having to seek a protective order. The following is a sample of such language: “A disclosure by Recipient of any of Discloser’s Confidential Information (1) in response to a valid order by a court or other governmental body; (2) as otherwise required by law; or (3) necessary to establish the rights of either party under this Agreement shall not be considered to be a breach of this Agreement by the Recipient; provided, however, that Recipient provides prompt prior written notice thereof to the Discloser to enable Discloser to seek a protective order or otherwise prevent the disclosure.”
Just remember the next time you see a non-disclosure agreement; it may be short; it may be like the last ten other non-disclosure agreements you saw; it may not need any changes. But then again, it may include an exception that really should not be an exception.