No License Granted FAQ

A "no license granted" clause explicitly states that showing you confidential information does not give you any rights to use, reproduce, modify, or commercialize that information beyond the specific purposes allowed by the NDA.

Think of it this way: If someone shows you their house, you can look at it, but you don't get the keys or the deed. Similarly, seeing confidential information doesn't give you ownership or usage rights.

This clause prevents arguments that:

• Disclosure created an implied license to use the information
• You acquired rights to patents, copyrights, or trade secrets by seeing them
• You can build products or services using what you learned
• The disclosing party waived any IP rights by sharing information

Only for the purposes specified in the NDA. Most NDAs include a "purpose" clause that defines exactly what you're allowed to do with the information - typically something like "evaluating a potential business relationship" or "performing due diligence."

What's typically allowed:

• Reviewing the information to evaluate a deal or partnership
• Discussing with your team (who are also bound by confidentiality)
• Making a decision about whether to proceed with the relationship

What's typically NOT allowed:

• Building competing products or services
• Using the information in your own business operations
• Sharing with third parties who aren't covered by the NDA
• Creating derivative works based on the information

These terms overlap but aren't identical:

Confidential Information: Any information the disclosing party wants to keep secret - business plans, customer lists, financial data, technical specifications, strategies, etc. Protection depends on maintaining secrecy.

Intellectual Property (IP): Legally protected creations of the mind, including:

• Patents: Inventions and processes (requires registration)
• Copyrights: Creative works, software code (automatic upon creation)
• Trademarks: Brand identifiers (registration optional but recommended)
• Trade Secrets: Valuable confidential business information

A "no license" clause typically covers both. It prevents implied licenses to any IP contained in the confidential information AND prevents using the confidential information in ways that would infringe the disclosing party's IP rights.

No. Seeing patented technology does not grant you any license to use it. This is one of the key reasons the "no license" clause explicitly mentions patents.

Why patents are called out specifically:

• Patent licenses can sometimes be implied from conduct (unlike most other IP)
• Courts have found implied patent licenses in certain situations
• Explicit reservation language helps prevent these arguments

If you use the patented technology without a license, you could face:

• Patent infringement claims
• Injunctions stopping your product or service
• Damages (potentially trebled for willful infringement)

This is where things get complicated. The "no license" clause typically doesn't affect your pre-existing rights. However, you may face challenges proving what you knew before the NDA disclosure.

Protect yourself:

• Document your prior work: Before entering NDA discussions, document your existing developments with dated records
• Negotiate a carve-out: Add language protecting your "pre-existing intellectual property"
• Keep development records: Maintain clear records showing the independent origin of your work
• Consider a "prior knowledge" disclosure: Some NDAs allow you to list what you already know

Yes, but carefully. You can still file patents on your own independent inventions. However, you cannot file patents on:

• Their disclosed technology (that would be misappropriation)
• Improvements to their technology that incorporate their confidential information
• Inventions that are merely obvious variations of what they showed you

Best practices:

• Keep clear documentation of your independent development process
• Have team members who didn't see the confidential information work on related projects
• Consult with a patent attorney before filing anything in a related area
• Consider whether timing your filing could raise questions about source

This is one of the most debated areas in NDA law, often called the "residual knowledge" or "residual information" issue.

The basic principle: You cannot "un-learn" things. After exposure to confidential information, you'll inevitably retain some general knowledge, skills, and understanding that influences your thinking.

Two approaches in NDAs:

• Strict approach: Everything you learned is covered by the NDA, period. You can't use any of it. (Favors disclosing party)
• Residuals clause: You can use "general ideas, concepts, know-how, and techniques" retained in unaided memory, as long as you don't use specific confidential details. (Favors receiving party)

Check your NDA: Does it include a residuals clause? If not, and you're the receiving party, this might be worth negotiating.

Almost certainly not. Most NDAs with "no license" clauses explicitly prohibit reverse engineering, disassembly, or decompilation of any confidential information or products.

This prohibition typically covers:

• Disassembling hardware prototypes
• Decompiling software
• Analyzing chemical compositions
• Any method of discovering how something works through examination

State law considerations: Some states limit the enforceability of reverse engineering prohibitions, particularly for software interoperability purposes. However, in the NDA context with explicitly shared confidential information, these exceptions typically don't apply.

Possibly, but you need to be very careful. The challenge is proving that your work is truly independent and not derived from what you learned under the NDA.

Safer if:

• You had documented development work before the NDA discussions
• Your approach is substantially different from what was disclosed
• You can show a clean-room development process
• Team members who never saw the confidential information did the development
• Significant time has passed (though this doesn't automatically help)

Riskier if:

• Your product closely resembles what you saw
• Development started shortly after NDA discussions
• The same people who saw the information built the product
• You use specific techniques or approaches disclosed under the NDA

The "no license" clause typically applies to the disclosed confidential information itself, but practical evaluation often requires some level of use. The key is ensuring your use falls within the defined "purpose" of the NDA.

Best practices:

• Define the purpose broadly enough: Make sure the NDA's purpose clause covers the evaluation activities you need to perform
• Request separate evaluation licenses: For software, APIs, or tools, ask for an explicit evaluation license agreement
• Document the scope: Get written clarification of what evaluation activities are permitted
• Keep evaluation data separate: Don't integrate test results or outputs into your production systems

A comprehensive "no license" clause should include:

• Explicit patent reservation: "No license under any patent is granted or implied by the disclosure of Confidential Information."
• Copyright protection: "All copyrights in Confidential Information remain with the Disclosing Party."
• Trade secret acknowledgment: Recognize that disclosed information constitutes trade secrets.
• Prohibition on reverse engineering: "Receiving Party shall not reverse engineer, disassemble, or decompile any Confidential Information."
• Prohibition on derivative works: "Receiving Party shall not create derivative works based on Confidential Information."
• Survival clause: Ensure protections survive NDA termination.

Also consider:

• Avoid including a "residuals" clause that might weaken protection
• Define the permitted "purpose" narrowly
• Include strong remedies for IP violations

Key provisions to negotiate:

• Residuals clause: Permission to use general knowledge retained in unaided memory
• Independent development carve-out: Protect your right to independently develop similar technology
• Pre-existing IP protection: Clarify that your existing IP isn't affected
• Purpose definition: Ensure the permitted purpose covers your actual evaluation needs
• Reasonable evaluation rights: Permission to test, prototype, or integrate for evaluation purposes

Joint inventions or developments during NDA discussions create complex ownership questions that the standard "no license" clause doesn't fully address.

Common scenarios:

• You brainstorm improvements to their technology
• They suggest modifications to your approach
• You jointly identify a new solution neither had alone

Potential outcomes without clear agreement:

• Joint ownership (each party can use but not exclusively license)
• Disputes over who contributed what
• Litigation to determine ownership

Best practices:

• Address joint development in the NDA if collaboration is anticipated
• Keep development teams separate until a definitive agreement is in place
• Document contributions carefully if collaboration occurs
• Move quickly to a development agreement with clear IP terms if joint work begins