Exploring Two Exceptions to the Definition of Confidential Information

[Substantially revised 29 October 2018]

I’ve had occasion to revisit something I explored a while ago.

Here’s a relatively standard set of exceptions to the definition of Confidential Information, with my shorthand term for each exception noted in brackets:

  • at the time of disclosure is, or thereafter becomes, generally available to and known by the public other than as a result of, directly or indirectly, any act or omission by the Recipient or any of its Representatives [Public];
  • at the time of disclosure is, or thereafter becomes, available to the Recipient on a non-confidential basis from a third-party source, provided that such third party is not and was not prohibited from disclosing such Confidential Information to the Recipient by any contractual obligation [Disclosed by Another];
  • was known by or in the possession of the Recipient, as established by documentary evidence, prior to being disclosed by or on behalf of the Disclosing Party pursuant to this Agreement [Already Known]; or
  • was or is independently developed by the Recipient, as established by documentary evidence, without reference to or use of, in whole or in part, any of the Disclosing Party’s Confidential Information [Independently Developed].

Overlap in Coverage

My first question is how the Already Known exception relates to the Disclosed by Another exception. For the Public and Independently Developed exceptions to be other than redundant, the Already Know exception would have to exclude information that’s public or independently developed. That would seem to leave only information received from another. If that’s the case, it would be redundant to include both the Already Known and Disclosed by Another exceptions.

The Already Known exception applies only to information that’s in the possession of the recipient on receiving what would otherwise be confidential information. By contrast, the other exceptions focus on the type of information and apply both before and after the recipients receives the information in question. It would seem that the Already Known exception is an anomaly, and an ill-conceived one at that.

Information from New Employees?

It’s possible that the Already Known exception isn’t entirely subsumed by the Disclosed by Another exception. But the only suggestion I’ve heard to that effect is that the Already Known exception includes information known by a new employee. For several reasons, that’s no reason to preserve the Already Known exception:

First,  if that scenario were to fall under the Already Known exception and that were the only difference between the Already Known exception and the Disclosed by Another exception, it would be clearer to scrap the Already Known exception in favor of one I’d call the New Employee exception.

Second, I propose that this scenario would fall under the Disclosed by Another exception. After all, if Ms. X quits Acme and subsequently sends Acme confidential information to Widgetco, this scenario would fall under the Disclosed by Another exception. It would be odd to require a different exception if Ms. X were to give the same information to Widgetco after having become an Widgetco employee.

Third, usually the Already Know exception isn’t expressed to as to limit it to disclosure that’s not in breach of a contract obligation. That’s odd.

And fourth, for the reason discussed above, the Already Known exception would cover only information received from a new employee before the recipient receives the related information from the disclosing party. That potentially disadvantages the recipient.

What I Do Instead

Given the problems described above, in my form of confidentiality agreement I have in effect eliminated the Already Know exception and bifurcated the Disclosed by Another exception:

  • information that, when the Disclosing Party discloses it to the Recipient, is already in the possession of the Recipient or any of the Recipient’s Representatives as the result of disclosure by a Person not then under an obligation to the Disclosing Party to keep that information confidential;
  • information that, after the Disclosing Party discloses it to the Recipient, is disclosed to the Recipient or any of the Recipient’s Representatives by a Person not then under an obligation to the Disclosing Party to keep that information confidential;

I could have combined the two, but I thought it best to have one exception to address the notion of information that is already known, simply because people would expect to see such an exception.

Why do I feel free to deviate from what seems to be the most prevalent way the exceptions are treated? Because the standard treatment appears not to make sense. The standard treatment could well be yet another defective product of the copy-and-paste machine: I’ve found no detailed discussion of interplay of the exceptions to the definition of Confidential Information. (If you know of any, do tell.)

And I didn’t dream up my version: you can find comparable examples without looking too hard. For example, the exceptions quoted in the following tweet by @amk351 largely track mine.

https://twitter.com/amk351/status/1056226108255952896

The same goes for the version in this comment on LinkedIn by Jim Brashear.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.