Common Traps to Avoid
These provisions may seem innocuous but create significant risks for receiving parties. Watch carefully for these negotiation traps.
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"Clear and convincing evidence" standard
This heightened proof standard (normally reserved for fraud cases) makes exclusions nearly impossible to invoke. Standard "preponderance of evidence" or simply "can demonstrate" is reasonable.
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"Contemporaneous written documentation" requirement
Requiring dated written records created before disclosure is onerous. Prior knowledge often exists in employees' heads, not in documented form. This effectively eliminates the prior knowledge exclusion.
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No third-party disclosure exclusion
If information you legitimately receive from a third party remains "confidential" under the NDA, you face impossible compliance situations. Insist on this standard exclusion.
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"Through no fault" extends to any third party
Language like "through no fault of any person" means if anyone makes information public, the exclusion fails. This should be limited to the receiving party and its representatives.
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Combination/mosaic clause without limits
While combinations of public information may be confidential, this should not apply if the combination and its principles are already publicly known. Unlimited combination clauses swallow exclusions.
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Missing legal compulsion exclusion
Without an exclusion for court-ordered or legally required disclosures, you face a choice between breaching the NDA or facing contempt of court. This exclusion is essential.
Exclusions to Insist On
These five exclusions are considered standard in commercial NDAs. Resist any agreement that omits them, and push back on language that makes them ineffective.
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Public Domain / Publicly Available Information
Essential for both parties. Should cover information that was public before disclosure AND information that becomes public after (through no fault of the receiving party). The public domain exclusion is the most universally accepted.
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Prior Knowledge / Already in Possession
You cannot be bound to keep secret what you already knew. Push for "as evidenced by records" rather than "contemporaneous written documentation" - the latter standard is often impossible to meet.
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Independent Development
Critical for technology and creative companies. Parallel development happens frequently, and companies should not be penalized for innovations developed without reference to confidential information.
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Third-Party Disclosure
Information received from someone with the right to share it should not be restricted. Include "without breach of any confidentiality obligation" to address disclosing party concerns while preserving the exclusion.
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Legal Compulsion / Required Disclosure
Disclosure required by law, regulation, or court order must be permitted. This can be in the exclusions or as a separate provision, but it must be addressed. Include notice obligations if the disclosing party wants advance warning.
Sample Redline Language
Use these redlines to fix common problematic exclusion provisions. Deletions are shown in red with strikethrough; additions are shown in green.
Negotiation Strategies by Position
Disclosing Party Accept Standard Exclusions
Resisting all exclusions signals bad faith and may result in an unenforceable NDA. Accept the five standard exclusions to maintain credibility and enforceability.
Disclosing Party Tighten Proof Requirements
Instead of eliminating exclusions, negotiate for "written records" or "documented evidence" to prove them. This preserves the exclusion while creating an evidentiary hurdle.
Receiving Party Reject Heightened Standards
"Clear and convincing evidence" and "contemporaneous written documentation" effectively eliminate exclusions. Push back to "can demonstrate" or "competent evidence."
Receiving Party Add Residuals Clause
In technology deals, negotiate for a "residuals" exclusion covering general ideas, concepts, and know-how retained in unaided memory after working with confidential information.
Both Parties Address Legal Compulsion
This exclusion benefits both parties (the receiving party for compliance, the disclosing party for notice). Frame it as mutual protection to reach agreement.
Both Parties Define "Public Domain"
Clarify whether "public" means published anywhere, generally known in the industry, or readily accessible. Align this with your actual business context.
Exclusions Checklist
Use this checklist when reviewing any NDA exclusions clause. Each exclusion should be present and effective.
Public Domain (Before)
Is information that was already public before disclosure excluded?
Public Domain (After)
Is information that becomes public later excluded? Whose fault matters?
Prior Knowledge
Is information already in your possession excluded? What proof is required?
Independent Development
Is independently developed information excluded? What evidence is needed?
Third-Party Disclosure
Is information from third parties with the right to disclose excluded?
Legal Compulsion
Is legally required disclosure permitted? Are notice obligations included?
Burden of Proof
Who must prove an exclusion applies? Is the standard reasonable?
Combination Clause
If present, is it limited to combinations that are not themselves public?
Common Negotiation Outcomes
Most Common Compromise: All five standard exclusions are included with a "can demonstrate by reasonable evidence" or "as evidenced by records" standard. This is the market-standard outcome in balanced commercial transactions.
When Disclosing Parties Win: In deals with significant power imbalances (e.g., investors reviewing startup data, large companies with smaller vendors), disclosing parties may secure heightened proof requirements. However, completely eliminating standard exclusions is rare.
When Receiving Parties Win: Professional services firms, consultants, and companies that sign many NDAs often negotiate for broader exclusions, including residuals clauses and easier proof standards. Their bargaining position comes from being repeat players.
Key Insight: The most heavily negotiated aspect is usually the evidence standard for prior knowledge and independent development. "Contemporaneous written documentation" is often reduced to "documented evidence" or "competent evidence" as a reasonable middle ground.