This contract tip is about how every confidentiality obligation should include language about legal disclosures. This is the provision that outlines the process for the receiver to share the discloser’s confidential information with a government, court, or other entity.
While it may seem very simple, there are lots of nuances to these sections. How you word it often depends on the information you’ll disclose under the NDA.
Here are the five concepts to address in these provisions:
1. When can the receiver disclose? - Typically, I see the standard as required or requested. The party disclosing more confidential information wants to limit disclosure, so it will use "required." A receiving company may prefer requested, which allows more disclosure without penalty.
2. What legal demands are included in the permission? - The language ranges from limiting them to a valid court order or law to any government or industry entity request. The party disclosing more confidential information typically prefers the former, while companies that primarily receive information may want the latter.
3. What is the notice requirement? - Some provisions impose a strict notice period, while others use the vague “promptly” standard. As you can imagine, you'll want stricter rules around notice as the primary discloser, but less strict rules if you are the receiver.
4. What is the receiver required to do? - In many provisions, the receiving party has to take action to limit the disclosure. Sometimes I see the disclosing party having to pay for those actions or take over the challenge.
5. What may be disclosed? - These range from very narrow - "only information the receiver's legal counsel advises must be disclosed to comply with the law" or the broader whatever is requested.
One last practice pointer. The best practice is to not include legal disclosure concepts as exceptions to the definition of confidential information. These are not broad exceptions, but rather a specific operational process to deal with a specific situation.
What other nuances or techniques would you add for drafting or negotiating this provision?
