Confidentiality Agreements

The Fluoropolymers Division
Coaters Section

In commercial relationships, companies are often required to share sensitive proprietary information about processes, products, or services. To assure the confidentiality of trade secrets, companies enter into agreements that specify the obligations of each party and assign duties requiring the parties to keep the secrets of the other learned in the course of the relationship. Typical agreements prepared by only one of the parties often are one-sided, providing protection to the proponent, and offering little in return to the other party. Counsel was asked to provide an example of a balanced confidentiality clause for use by members of the Fluoropolymers Division. The use of mutual provisions, such as the ones provided below, can offer an efficient way to address the issue in a contract negotiation, avoiding repeated legal reviews of similar but slightly different wording of confidentiality provisions.

The language provided below is an example of provisions related to confidentiality that do not give undue advantage to either party. Some of the provisions may not apply in all circumstances, and the provisions should be modified as appropriate for a particular situation. For example, it may not be necessary for a purchaser to agree to have its employees be bound by the agreement if the employees are not expected to obtain any confidential information in the course of the contract. All such provisions should be negotiated separately as part of the purchase of services agreement, and need not be included in all agreements. You should consult with your company counsel before using this or any other prepared contract language to be sure that it is consistent with other provisions in your sales and service agreements and that it is consistent with state law.

SAMPLE CONFIDENTIALITY PROVISIONS

Whereas _______________, hereinafter the Purchaser, requires that certain coating and cleaning operations be performed on parts or materials;

Whereas ___________, hereinafter the Company, agrees to perform such work coating parts supplied by Purchaser;

Whereas in the course of such work, the parties each may obtain access to private, proprietary, confidential trade secret information by virtue of the work [and visits to each party's respective facilities];

Therefore, in consideration of mutual cooperation, the parties agree to the following provisions:

AGREEMENT ON TREATMENT OF CONFIDENTIAL INFORMATION

The Company agrees to provide information about its coating operations and facilities and to provide access to its facilities for the sole purpose of permitting the Purchaser to assure itself that its requirements are satisfied and to develop mutually agreeable standards of performance for completion of the required tasks. Purchaser agrees to make all requests for written records, information, or data in writing and understands that all data or information provided in response to such requests may contain proprietary, trade secret data, or other information belonging to the Company.

The Parties agree to maintain the confidentiality of proprietary, trade secret, or personal data, provided that such data or other material are marked as confidential and are not otherwise within the public domain. Such data or information are provided solely for the purpose of contributing to the work under this Agreement. Each Party will keep confidential all such information during and after the period covered by this Agreement except when: (1) authorized by the other Party or the individual in writing; (2) such information is independently acquired from other sources; (3) such information becomes public knowledge; or (4) required by law or legal process.

CONFIDENTIAL INFORMATION AND MATERIALS. As used herein, the term "confidential information and materials" refers to all information used by, or in the possession of either Party relating to (by way of example, but without limitation) products, processes, production methods, data, environmental and health and safety data and information, diagrams, specifications, know-how, calculations, memoranda, notes, photographs, technical reports, business information, formulae, formulations, and studies.

OWNERSHIP. Each Party hereby acknowledges that all of the confidential information and materials to which it will have access are and shall continue to be the exclusive property of the other Party, whether or not prepared in whole or in part by the other Party and whether or not disclosed to or entrusted to the custody of the Party. Each Party hereby acknowledges that any and all confidential information and materials to which it will have access will be disclosed to it solely for purposes of assisting it in defining the work to be performed and the criteria for acceptable performance, and for no other purpose.

NON-DISCLOSURE AND NON-USE. The Parties hereby agree that they will not at any time during or after the course of the work under this Agreement disclose any confidential information or materials of the other Party, in whole or in part, to any person or entity for any reason or purpose whatsoever, unless the other Party gives its consent, in writing, to such disclosure, except as required by law.

The agreement to maintain the confidentiality of this information extends to any employees, present or future, involved in the work desired and who will have access to the information. These employees will hold the information in confidence in accordance with this agreement and use the information only in the performance of their employment. Each Party will review this agreement and its terms with all employees assigned to this project and will obtain their agreement with the terms of this agreement before providing them with any confidential information of the other Party.

Obligations regarding confidentiality and use of the information shall not apply to the following:

(1) information that was in a Party's possession prior to the date of this agreement and which was not received from the other Party;

(2) information that is independently developed by a Party without access to or benefit of information disclosed by the other Party;

(3) information that is or becomes known publicly through no fault of the Parties;

(4) information that a Party learns from a third party entitled to disclose it.

NOTIFICATION OF RECEIPT OF LEGAL PROCESS REQUIRING DISCLOSURE OF COMPANY INFORMATION. In the event that a Party receives a subpoena or other legal process from any party, including any governmental entity, demanding that the Party produce any confidential information concerning, relating to, or deriving or resulting from the project, or to discuss or respond to questions regarding discussions, reports, or other communications about confidential information in the context of projects on which the Party is working, the Party agrees to immediately provide a copy of the subpoena or other legal document to the other Party and to cooperate with the other Party in any attempt by the other Party to quash or limit the subpoena or any other demand for the information. Each Party reserves the right to defend against, and will pay for, any attempt to obtain any information. Upon compliance with the above, and upon receipt of a final order, each Party shall be authorized to surrender any required materials.

STORAGE OF DATA AND INFORMATION. With regard to the information and documents provided by the a Party, all such items will be stored in specially designated files and marked on the outside of each folder as follows:

THIS FILE CONTAINS PROPRIETARY OR TRADE SECRET, CONFIDENTIAL INFORMATION WHICH IS SUBJECT TO A CONFIDENTIALITY AGREEMENT WITH [COMPANY] and MAY NOT BE DISCLOSED TO ANY THIRD PARTY WITHOUT PRIOR WRITTEN CONSENT FROM [COMPANY].

These files will be stored in a secure manner so that access is limited only to employees who (1) need to have access to the information for the purpose of completing the work under this Agreement and (2) have agreed to the terms of this Agreement. The files and information contained therein will at all times remain the property of the originating Party, and the other Party agrees to return the files, and any copies of confidential material not in the files, to the originating Party immediately upon request. Each Party agrees to retain only a copy of that portion of the files, and other materials not in the files, necessary for record keeping purposes. Such files will be destroyed five (5) years after the close of the specific project to which they apply, unless the Party is otherwise directed to retain the files by the other Party.

REMEDIES FOR BREACH. The Parties hereby acknowledge and agree that the services they will render and the confidential information and materials disclosed during and by virtue of this Agreement are of a special, unique, and extraordinary character, and that the breach of any provision of this Confidentiality Agreement will cause irreparable damage and injury to the other Party. The non-breaching Party will be entitled to seek any and all legal and/or equitable remedies against the breaching Party in the event of a breach of this agreement.

(a) Injunctive Relief. The Parties agree that the non-breaching Party will be entitled to all remedies, including injunctive relief prohibiting disclosure, in the event of a breach of these provisions.

(b) Liquidated Damages. In the event of a breach of this Confidentiality Agreement, the breaching Party shall pay the non-breaching Party $ [amount] as liquidated damages. The sum is agreed upon as liquidated damages and not as a penalty. The parties hereto have computed, estimated, and agreed upon the sum as an attempt to make a reasonable forecast of probable actual loss because of the difficulty of estimating with exactness the damages which will result.

GOVERNING LAW. This Confidentiality Agreement shall be construed in accordance with the laws of the ____________________ [insert e.g., District of Columbia, Commonwealth of Virginia, State of Maryland, etc.].

{Additional clauses: separability of provisions, etc.}