Beware Residuals Clauses in your NDA

Everynda

Description

Although the terms of an NDA are normally crafted in favour of the Disclosing Party, there's one clause that could potentially result in the cancellation of the benefits of the agreement. This clause is generally known as the "residuals" clause or "residual information" clause.
Learn about the problems with residuals clauses and when you should avoid signing an NDA that includes one.
Read the related feature article here:
https://everynda.com/blog/beware-residuals-clauses-nda/

Sujets

• Non disclosure agreement

Informations

• Publié par: everynda
• Publié le: 28 novembre 2017
• Nombre de lectures: 0
• Licence : Tous droits réservés
• Langue: English

Extrait

Beware: Residuals clauses in your NDA

The terms of the NDA are normally crafted for the benefit of the Disclosing Partyto protect her/his confidential information,unless it’s a mutual agreement(1) wherein the benefits of the agreement apply equally to both parties.

(1) Link to https://everynda.com/blog/unilateral-vs-mutual-nda-agreements/

What are residuals clauses

This clause is generally known as the"residuals" clauseor "residual information" clause.

Basically, this residuals clause allows the Receiving Party to share and use general information and concepts that are retained as a result of the working relationship, including confidential information.

Here's anexample of a residuals clause(2) that's very relaxed and broad in its scope, mainly because it's used in a mutual agreement that benefits both parties:

(2) Link to http://www.hbs.edu/newventurecompetition/Pages/default.aspx

(g)The receipt ofConfidential Information pursuant to this Agreement will not prevent or in anywaylimit either partyfrom:(i)developing, makingor marketingproducts or services that are or maybe competitive with the products or services ofthe other; or(ii)providingproducts or services to others who compete with the other.

Don't sign NDA with residuals clause

There are a few situations where it's especially dangerous for you to allow residuals clauses in your NDA:

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Trade secrets.

Where your business’ survival is dependent on the confidential information.

Patents and copyrights.

The compromise around residuals clauses

1. Use a narrow definition and scope.

Although this clause could be more restrictive, this clause from the European IPR Helpdesk’s Mutual NDA(3) does at least provide that the Receiving Party cannot act in breach of the agreement:

(3) Link to https://www.iprhelpdesk.eu/sites/default/files/newsdocuments/European%20IPR%20Helpdesk%20-%20mutual%20NDA%20-%202014.pdf

5.Competition

The receipt ofConfidential Information pursuant to this Agreement will not prevent or in anywaylimit either Partyfrom developing, makingor marketingproducts or services that are or maybe competitive with the products or services ofthe other; or providing products or services to others who compete with the other Party; as longas those re- sults have not becomefrom a breach ofthis Agreement.

2. Have separate categories of confidential information.

3. Restrictions on key personnel.

4. Independent contractor restriction.

5. Prohibit sharing of information with third parties.

6. Mutual obligations under the same NDA.

7. Limit your disclosures.

8. Expressly state that no rights are to be granted.

Here's an example of a clause fromMicrosoft’s Confidentiality Agreement for Licensing Discussions(4):

(4) Link to https://download.microsoft.com/download/a/1/7/a17f8b3a-137e-46a4-9ec0-d9d9b9a1b59a/CA%20Master%20.pdf