Are representatives of the recipient allowed to use “residual information”?

It’s the bigger companies that ask for this provision. The notion is that even after a representative of the recipient no longer has access to a tangible copy of certain information, that representative may well remember some residual portion of that information without necessarily remembering what the source was. The recipient would argue that because we develop new ideas by sorting through all available information, it would be unrealistic to expect a representative of the recipient to keep residual information out of his or her thought process.

One factor the disclosing party should consider in determining whether to accept a residual-information provision is whether representatives of the recipient are exposed to enough different technologies as to make the notion of residual information a plausible one.

Even in the absence of a contract provision on the subject, a court may hold that residual information doesn’t constitute confidential information. See Scott M. Kline, Matthew C. Floyd, Managing Confidential Relationships in Intellectual Property Transactions: Use Restrictions, Residual Knowledge Clauses, and Trade Secrets, Review of Litigation, Spring 2006.

The disclosing party could control the implications of this provision by excluding from its scope certain key information. This questionnaire will allow you to do that.

If you specified in your answers to this questionnaire that this contract should include return-or-destroy provisions, the language inserted in the contract on answering “Yes” to this question would make it a condition to the right to use residual information that the recipient have complied with those return-or-destroy provisions.