💡 Plain English Explanation

The Customer Data Protection clause specifically addresses the handling of consumer information in retail relationships. This includes personally identifiable information (PII), purchase histories, loyalty program data, and behavioral analytics that retailers collect through point-of-sale systems, e-commerce platforms, and customer engagement programs.

In retail, customer data is both highly valuable and heavily regulated. Retailers spend millions building customer databases, analyzing buying patterns, and developing personalized marketing strategies. A breach of this information can trigger regulatory penalties under CCPA, state breach notification laws, and potentially GDPR for international customers.

This clause typically addresses:

⚠ Why This Clause Matters in Retail

For the Retailer (Disclosing Party): Your customer database represents years of investment and trust. When sharing this data with vendors, marketing partners, or technology providers, you need assurance that it will be protected to the same standards you maintain. A data breach traced to a vendor can destroy customer trust and trigger class action lawsuits.

For the Service Provider (Receiving Party): Handling retail customer data comes with significant compliance obligations. You need clear boundaries on what you can and cannot do with the data, how long you must retain it, and your responsibilities in case of a security incident. Overly broad obligations can make the engagement commercially unviable.

Regulatory Considerations: The CCPA, state privacy laws, and PCI-DSS requirements create overlapping obligations for customer data. Your NDA should acknowledge these requirements and clarify how compliance responsibilities are allocated between the parties.

📄 Clause Versions

Balanced Version: Provides reasonable protection for customer data while acknowledging practical operational needs. Includes clear security requirements and breach notification procedures without imposing unlimited liability. 
"Customer Data" means any information relating to identified or identifiable consumers or households that is disclosed by the Disclosing Party or to which the Receiving Party gains access in connection with this Agreement, including without limitation:

(a) personally identifiable information such as names, addresses, email addresses, phone numbers, and government-issued identification numbers;
(b) payment card information, bank account details, and financial transaction records;
(c) purchase history, transaction records, and product return information;
(d) loyalty program membership data, reward points balances, and redemption history;
(e) customer preferences, wish lists, and saved shopping carts; and
(f) behavioral data derived from website visits, app usage, and in-store interactions.

The Receiving Party shall:

(i) implement and maintain industry-standard administrative, technical, and physical safeguards to protect Customer Data, including encryption of data in transit and at rest;
(ii) limit access to Customer Data to personnel who require such access to perform obligations under this Agreement;
(iii) not use Customer Data for any purpose other than the Purpose defined herein;
(iv) notify the Disclosing Party within forty-eight (48) hours of discovering any actual or suspected unauthorized access to Customer Data; and
(v) cooperate with the Disclosing Party in investigating and remediating any security incident.

Upon termination or expiration of this Agreement, the Receiving Party shall securely delete or return all Customer Data within thirty (30) days, and certify such deletion in writing upon request.
Disclosing Party Favor: Maximum protection for the retailer's customer data with strict security requirements, immediate breach notification, comprehensive audit rights, and broad indemnification for data breaches. 
"Customer Data" means all information, in any form, relating to or derived from the Disclosing Party's customers, consumers, shoppers, loyalty members, website visitors, or any individuals whose data the Disclosing Party collects, processes, or maintains, including without limitation:

(a) all personally identifiable information, including names, addresses, email addresses, phone numbers, dates of birth, Social Security numbers, driver's license numbers, and any other government-issued identifiers;
(b) all payment information, including credit card numbers, debit card numbers, bank account information, payment histories, and credit information;
(c) all transaction data, including purchase histories, returns, exchanges, browsing histories, abandoned carts, and product interactions;
(d) all loyalty and rewards program data, including membership information, point balances, tier status, redemption histories, and program preferences;
(e) all preference and profile data, including product preferences, size information, brand affinities, communication preferences, and marketing opt-ins;
(f) all behavioral and analytics data, including website clickstreams, app usage patterns, in-store traffic patterns, dwell times, and heat mapping data; and
(g) any data derived from, aggregated from, or created using any of the foregoing.

The Receiving Party acknowledges that Customer Data constitutes trade secrets and the most sensitive category of Confidential Information. The Receiving Party shall:

(i) implement security measures that meet or exceed SOC 2 Type II standards, including encryption using AES-256 or equivalent for data at rest and TLS 1.3 or higher for data in transit;
(ii) maintain a written information security program and provide evidence of compliance upon request;
(iii) limit access to Customer Data to specific named individuals who have been background checked, trained on data protection, and bound by confidentiality obligations;
(iv) not process, store, or transfer Customer Data outside the United States without prior written consent;
(v) notify the Disclosing Party within twenty-four (24) hours of any actual or suspected security incident, and provide the Disclosing Party with all information necessary to assess the incident and notify affected consumers;
(vi) bear all costs associated with any data breach resulting from the Receiving Party's acts or omissions, including notification costs, credit monitoring, regulatory fines, and legal fees;
(vii) submit to annual security audits by the Disclosing Party or its designated third party, at the Receiving Party's expense; and
(viii) maintain cyber liability insurance with coverage of at least $5,000,000 per occurrence.

The Receiving Party shall indemnify and hold harmless the Disclosing Party from any claims, damages, or losses arising from any unauthorized access to, use of, or disclosure of Customer Data caused by the Receiving Party's breach of this Agreement or failure to maintain adequate security measures.
Receiving Party Favor: Defines clear boundaries around what constitutes protected customer data, limits security obligations to commercially reasonable measures, caps liability, and provides adequate time for breach notification and remediation. 
"Customer Data" means only the following categories of information that are expressly provided by the Disclosing Party in writing and specifically identified as Customer Data at the time of disclosure:

(a) customer names and contact information (address, email, phone number);
(b) transaction records directly related to the Purpose of this Agreement; and
(c) loyalty program membership identifiers (but excluding point balances, tier status, or redemption histories unless specifically provided).

For clarity, Customer Data does not include:
(i) aggregated or anonymized data from which individual customers cannot be identified;
(ii) data that the Receiving Party independently collects through its own customer relationships;
(iii) publicly available information; or
(iv) data that the Disclosing Party has previously disclosed to the Receiving Party outside this Agreement.

The Receiving Party shall implement commercially reasonable security measures to protect Customer Data, consistent with industry practices for companies of similar size and scope. The Receiving Party makes no representations regarding specific security certifications or standards unless expressly agreed in a separate written addendum.

In the event of a security incident involving Customer Data, the Receiving Party shall:
(i) notify the Disclosing Party within seventy-two (72) hours of confirming that Customer Data was actually accessed by unauthorized parties;
(ii) provide reasonable cooperation in investigating the incident; and
(iii) implement reasonable measures to prevent recurrence.

The Receiving Party's total liability for any claims arising from Customer Data breaches shall not exceed the greater of (A) the fees paid by the Disclosing Party under the related services agreement during the twelve (12) months preceding the incident, or (B) $100,000. This limitation shall not apply to the Receiving Party's indemnification obligations for third-party claims, which shall be subject to the general limitation of liability provisions of this Agreement.

The Disclosing Party acknowledges that the security measures described herein are adequate for the nature and sensitivity of Customer Data to be disclosed, and agrees that the Receiving Party shall not be liable for breaches resulting from sophisticated attacks that could not reasonably have been prevented.

💬 Key Considerations for Retail