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How Small Businesses Can Protect Confidential Info

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Most well-drafted client agreements will contain some kind of confidentiality provision. Below are four tips to consider when drafting your confidentiality provision.

1. Mutual or Unilateral

First, consider whether the provision is unilateral or mutual. A unilateral provision means only one party is agreeing to protect the other party’s confidential information; while a mutual provision means both party’s are agreeing to do so.

2. Obligations

The core element of a confidentiality provision is the obligation not to use or disclose the other party’s confidential information. In most situations, the provision will say the receiving party (1) cannot disclose the confidential information to third parties, (2) cannot use the confidential information for their own benefit, and (3) will use reasonable efforts to protect the confidentiality of the confidential information.

However, it is usually a good practice to include exceptions that allow the recipient to disclose the confidential information to certain people such as lawyers, accounts, and other parties, provided those additional recipients are under a written agreement not to disclose the confidential information.

3. “Confidential Information” Defined

There are several ways to define “Confidential Information.” You can say all information disclosed is “confidential” or that only stamped information is “confidential.” More commonly, you’ll see a definition that describes what constitutes “confidential information” but then states that any information that a reasonable person would deem confidential is included in the definition.

When writing this definition, you might want to add exceptions. For example, information commonly known in your industry or information the recipient properly obtains from some other source.

4. Length of Non-Disclosure Obligations

For most client agreements, the confidentiality obligations will last for the length of the agreement plus some period of time after the termination of the relationship (for example, another five). In some cases a perpetual term makes sense, but you should carefully consider the practical implications for your situation before agreeing to a perpetual confidentiality provision.

With that said, it is often a good idea to also call out trade secrets in the confidentiality provision and state that trade secret protection will survive for as long as your state’s trade secret law provides.

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