Disclosure to Third Parties

Disclosure to Third Parties

In a separate section dealing with exceptions to the definition of the term “Confidential Information” (see section entitled “Confidential Information: Definitions and Descriptions”), we reviewed examples of information that were by definition considered non-confidential information and therefore not subject to the confidentiality obligations prescribed in the NDA.

Depending on the underlying transaction or project, the parties may find it impractical to have a complete and unyielding prohibition against disclosing information to third parties. It may be more suitable to examine exceptions on a case-by-case basis. Accordingly, the exemplars in this section deal with exceptions to the standard prohibition against disclosure of confidential information to third parties. These exemplars prove that even information that is considered confidential or otherwise protected under the NDA may still be disclosed under certain precisely defined conditions.

Such exemptions generally place the responsibility and the liability on the receiving party, which is the party disclosing the confidential information to the third party, since the owner of the confidential information is not in contractual privity with the third party and/or has no direct rights against the third party:

Exemplar N8-1

This Agreement shall govern the disclosure of Confidential Information between the parties during the period of two (2) years from the latest date of the signature of this Agreement or until such time as the present Agreement is expressly superseded by a subsequent Agreement between the parties of this Agreement, whichever is earlier.

Accordingly, for example, the parties may allow disclosure of confidential information to an authorized third party provided that such third party is subject to confidentiality restrictions with the receiving party, either through a separate NDA or by becoming a party to the original NDA. The following exemplar complies with such a disclosure condition by requiring the third party to agree to confidentiality obligations that are no less restrictive as those in the NDA between the parties:

Exemplar N8-2

The parties agree to complete a Schedule, attached hereto, with detail and specificity for each new permitted purpose or basis for sharing Confidential Information (“Permitted Purpose”) identified between the parties. Recipient shall (a) use Confidential Information only for the Permitted Purpose; (b) not disclose Confidential Information to any third party except as expressly permitted herein or in writing by Discloser and then only if such third party has executed a non-disclosure agreement with Recipient with confidentiality obligations that are no less restrictive than those contained herein; (c) limit dissemination of Confidential Information to its, and its permitted Affiliates’, directors, officers, employees, contractor individuals working as temporary resources for the Recipient, and legal advisors (e.g., attorneys, solicitors) (“Representatives”) that have a “need to know,” provided such Representatives are made aware of, understand, and agree in writing to comply with these confidentiality obligations; and (d) not remove or obscure proprietary rights notices that appear on Confidential Information and copies thereof. Each party shall promptly report in writing to the other any unauthorized disclosure or use of Confidential Information, and shall take all reasonable steps to prevent, control or remedy such violation.

And in this exemplar, not only must the third party be subject to equivalent confidentiality obligations, but the receiving party remains liable to the disclosing party for any confidentiality breaches by the third party:

Exemplar N8-3

The Receiving Party agrees to accept and use Confidential Information solely for the Purpose. The Receiving Party will not disclose, publish or disseminate Confidential Information to a third party, other than those of its employees, consultants and service providers with a need to know for the Purpose and who prior to their receipt of any Confidential Information, either (i) have signed a non-disclosure agreement with the Receiving Party containing terms at least as restrictive as those contained herein; or (ii) are otherwise bound by a duty of confidentiality to the Receiving Party at least as restrictive as those set forth in this Agreement. Notwithstanding the foregoing, each Party can disclose the terms and existence of this Agreement in connection with a due diligence (i.e., a potential investment in a Party or a going-public transaction) subject to such third parties being bound by at least equivalent obligations of confidentiality and non-disclosure as those under this Agreement. Receiving Party shall remain liable at all times for any acts and/or omissions of its employees and consultants with respect to the Disclosing Party’s Confidential Information.

The following exemplar permits disclosures to third parties who are bound by confidentiality obligations owed to the disclosing party in connection with certain expressly enumerated contexts:

Exemplar N8-4

Neither party shall disclose any terms or conditions of this Agreement without the prior written consent of the other party, except as required by applicable law; provided however, that either party may disclose the terms or conditions of this Agreement to a third party under an obligation of confidentiality to such party in connection with customary financial reporting, a proposed sale, merger, acquisition, change in control, consolidation, or other similar transaction.