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Beware of the Boilerplate Series: Defining Confidential Information

October 16, 2014

This is part of our ongoing "Beware of the Boilerplate" Series to provide you with practice tips and pitfalls in the licensing of intellectual property rights.

In Non-Disclosure Agreements, there is often boilerplate language that includes trade secrets in the definition of “Confidential Information.” This seemingly innocuous language can lead to problems for the owner of the trade secrets. Here is an example: Licensor is a company that manufactures consumer products. It owns a valuable trade secret regarding the formula of its most popular product. It enters into a License Agreement with Licensee, whereby Licensee will manufacture products to Licensor’s specifications. The boilerplate terms of the Agreement provide that the “Confidential Information” includes all material marked “Confidential.” The secret formula is duly marked “Confidential” and disclosed to Licensee. The Agreement further provides that “the confidentiality provisions of this Agreement will survive termination of this Agreement for a period of five (5) years.” Licensor has just inadvertently provided for its most important trade secret to be disclosed 5 years after the Agreement’s termination!

To avoid such a situation, Agreement language should carve out an exception for trade secrets, and include a section explicitly stating what is trade secret (for example, “the secret formula for Product X”) and clearly state that the Licensee’s obligation to maintain trade secrets as confidential survives termination of the Agreement and that it can never be disclosed so long as they remain trade secrets.

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Braginsky, Philip Partner Partner 212.216.8065 VCard
Dennehy, Matthew T. Associate Associate 212.216.1128 VCard
Goldsmith, Amy B. Partner Partner 212.216.1135 VCard
Lin, Rachel J. Counsel Counsel 212.216.1152 VCard
Lippert, Nels T. Counsel Counsel 212.216.1157 VCard
Rosenberg, Mark J. Partner Partner 212.216.1127 VCard
Shravah, Aasheesh Counsel Counsel 212.216.1132 VCard
Xia, Jing Counsel Counsel 212.216.1158 VCard
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