Establishes requirements to promptly notify the disclosing party about any unauthorized access, disclosure, or security incident involving confidential information.
Medium Complexity
What This Clause Does
A breach notification clause requires the receiving party to notify the disclosing party when confidential information is or may have been compromised. This includes actual breaches (confirmed unauthorized disclosure or access), suspected breaches (circumstances suggesting a breach may have occurred), and security incidents (events that could lead to a breach, such as system intrusions). The clause typically specifies notification timing, required content, and ongoing cooperation obligations during incident response.
Why This Clause Matters
Damage Mitigation: Early notification allows the disclosing party to take protective action - notifying affected individuals, changing access credentials, monitoring for misuse, or pursuing injunctive relief before damage spreads.
Regulatory Compliance: Many industries have mandatory breach notification requirements. This clause ensures contractual alignment with regulatory obligations.
Forensic Preservation: Prompt notification enables evidence preservation while digital forensic information is still available and recoverable.
Legal Strategy: Knowing about breaches early allows the disclosing party to assess legal options, potentially including emergency injunctive relief.
Relationship Trust: Transparent breach reporting demonstrates good faith and can preserve business relationships even after security incidents.
Legal Context
Breach notification requirements exist at multiple levels. Federal laws like HIPAA and GLBA mandate notification for certain data types. Most states have breach notification statutes requiring notification to individuals when personal information is compromised. Contractual breach notification provisions supplement these requirements and often apply to a broader range of confidential information. Courts generally enforce reasonable notification provisions, though extremely short timeframes (e.g., "immediate" notification) may be interpreted to mean "as soon as reasonably practicable." The receiving party should ensure notification requirements are achievable given their incident response capabilities.
Breach Notification
If the Receiving Party becomes aware of any unauthorized disclosure or use of Confidential Information, the Receiving Party shall promptly notify the Disclosing Party in writing and shall cooperate with the Disclosing Party in remedying such unauthorized disclosure or use.
Basic Version: Simple notification requirement triggered by awareness of unauthorized disclosure. Suitable for lower-risk information exchanges where detailed incident response isn't critical.
Security Incident and Breach Notification
1. Notification Requirement. The Receiving Party shall notify the Disclosing Party in writing within seventy-two (72) hours after becoming aware of any:
(a) Unauthorized access to, disclosure of, or use of Confidential Information;
(b) Security incident reasonably likely to result in unauthorized access to or disclosure of Confidential Information; or
(c) Breach of this Agreement by the Receiving Party or any of its Representatives.
2. Content of Notice. Such notification shall include, to the extent known:
(a) A description of the nature of the incident;
(b) The types and approximate volume of Confidential Information involved;
(c) The identity of any unauthorized recipients, if known;
(d) Steps taken or planned to investigate and remediate the incident; and
(e) A contact person for ongoing communications.
3. Ongoing Updates. The Receiving Party shall provide reasonable updates as additional information becomes available during the investigation.
4. Cooperation. The Receiving Party shall:
(a) Cooperate with the Disclosing Party's reasonable requests regarding investigation and remediation;
(b) Preserve relevant evidence and records;
(c) Take reasonable steps to mitigate any harmful effects of the incident; and
(d) Implement measures to prevent similar incidents in the future.
5. Regulatory Notifications. The parties shall coordinate regarding any notifications to regulatory authorities or affected individuals, with the Disclosing Party having final approval over the timing and content of such notifications to the extent relating to its Confidential Information.
Standard Version: Comprehensive notification framework with 72-hour timeline, detailed content requirements, and cooperation obligations. Appropriate for most business relationships involving sensitive information.
Mandatory Immediate Breach Notification and Response
1. Immediate Notification. The Receiving Party shall notify the Disclosing Party immediately, and in no event later than twenty-four (24) hours, after:
(a) Any actual or suspected unauthorized access to, disclosure of, or use of Confidential Information;
(b) Any security incident, system intrusion, malware infection, or other event that could potentially affect Confidential Information;
(c) Any actual or threatened legal process seeking disclosure of Confidential Information;
(d) Any termination or departure of personnel with access to Confidential Information; or
(e) Any breach or potential breach of this Agreement.
2. Comprehensive Disclosure. The Receiving Party shall immediately disclose all information in its possession regarding the incident, including:
(a) Complete technical details of the incident and systems affected;
(b) All Confidential Information potentially compromised;
(c) Timeline of events and discovery;
(d) Identities of all individuals with knowledge of the incident;
(e) All forensic findings and investigation results;
(f) Communications with law enforcement or regulators; and
(g) Remediation actions taken and planned.
3. Disclosing Party Control. Upon notification, the Disclosing Party shall have the right to:
(a) Direct the investigation and remediation efforts;
(b) Engage forensic investigators at the Receiving Party's expense;
(c) Communicate directly with the Receiving Party's personnel;
(d) Control all external communications regarding the incident; and
(e) Require immediate implementation of specified security measures.
4. Costs and Liability. The Receiving Party shall bear all costs associated with the breach, including investigation, remediation, notifications, credit monitoring, regulatory fines, and the Disclosing Party's legal fees, regardless of fault.
5. No Limitation. This notification obligation is in addition to, and shall not limit, any other obligations or liabilities of the Receiving Party under this Agreement or applicable law.
Warning - One-Sided: This version imposes extremely short timeframes, broad triggers including personnel departures, and gives the disclosing party complete control over response. The 24-hour requirement may be impractical, and requiring notification of "suspected" incidents creates significant over-notification burden. Receiving Party should negotiate for reasonable timeframes and balanced response protocols.
1
Negotiate Realistic Timeframes: Push back on "immediate" or 24-hour notification requirements. Most organizations need at least 48-72 hours to confirm an incident occurred, assess its scope, and prepare meaningful notification. Industry standards like GDPR use 72 hours.
2
Define Trigger Events Clearly: Ensure notification is triggered by actual knowledge of confirmed or reasonably suspected incidents, not theoretical possibilities. Overly broad triggers like "any event that could potentially affect" information create excessive notification burden.
3
Limit Notification Content: Initial notification should require only information "known at the time" or "to the extent available." Requiring comprehensive technical details within hours is often impossible during an active investigation.
4
Preserve Response Autonomy: Resist provisions giving the other party "control" over your incident response. Coordinate and cooperate, but maintain your ability to direct your own security team and engage your own forensic experts.
5
Cap Cost Obligations: Avoid unlimited liability for breach-related costs. Negotiate for reasonable cost allocation, indemnification caps, or insurance requirements rather than bearing "all costs" regardless of circumstances.
6
Coordinate Regulatory Notifications: Ensure the clause allows you to fulfill your own regulatory notification obligations. You shouldn't need the other party's "approval" to comply with laws requiring you to notify regulators or affected individuals.
Immediate or 24-Hour Notification Requirements
Extremely short notification windows are often impossible to meet. Incident detection, confirmation, and scoping typically require more than 24 hours. Such provisions set you up for technical breach claims even when responding appropriately.
Notification for "Potential" or "Suspected" Events
Requirements to notify for any event that "could potentially" affect confidential information create massive over-notification obligations. Every phishing email or failed login attempt could arguably trigger notification.
Other Party Controls Your Response
Provisions allowing the disclosing party to "direct" your incident response or "control" communications undermine your ability to respond effectively and may conflict with your obligations to other customers or regulators.
Unlimited Cost Liability
Obligations to bear "all costs" associated with breaches - including the other party's legal fees, regulatory fines, and credit monitoring for unlimited individuals - can expose you to uncapped liability disproportionate to the contract value.
Personnel Departure Triggers
Requirements to notify when any employee with access departs creates administrative burden unrelated to actual security incidents. Routine personnel turnover shouldn't trigger breach notification protocols.
Breach notification requirements should balance the disclosing party's need for information with practical incident response realities. Ensure timeframes are achievable.