Residuals Clause Email Templates - NDA Clause Library

Request Addition of Residuals Clause

Receiving Party Add Clause

When to use: The NDA has no residuals clause, and you need to protect your employees' ability to use general knowledge and skills after exposure to confidential information. Common in technology, consulting, and creative services contexts.

Subject: Re: NDA Review - Residuals Provision

[Name], Thank you for the draft NDA. We would like to request the addition of a standard residuals clause to address an important practical issue. Our personnel who work with your confidential information will inevitably retain general impressions, ideas, concepts, and know-how in their unaided memories. It is impractical - and would significantly impair our ability to conduct our business - to require employees to somehow "forget" what they learn or to avoid using general knowledge and skills developed during any engagement. We propose adding the following residuals provision: "Notwithstanding any other provision of this Agreement, either party shall be free to use for any purpose the Residuals resulting from access to or work with the other party's Confidential Information. 'Residuals' means information in non-tangible form that may be retained in the unaided memories of persons who have had access to Confidential Information, including general ideas, concepts, know-how, methodologies, and techniques. This provision does not grant any license under any intellectual property rights of the Disclosing Party, and nothing herein permits intentional memorization of Confidential Information or the use of tangible materials containing Confidential Information." This is a balanced provision that: - Applies mutually to both parties - Limits residuals to unaided memory (no notes, documents, or other tangible materials) - Does not permit intentional memorization - Does not affect intellectual property rights This type of provision is standard in technology industry NDAs and reflects practical reality. Please confirm you can include this language. Best regards, [Your Name]

Refuse Residuals Clause Entirely

Disclosing Party Reject Request

When to use: The other party requested a residuals clause, but your confidential information is extremely sensitive (trade secrets, algorithms, formulas) and any residuals exception would undermine protection.

Subject: Re: NDA - Cannot Accept Residuals Provision

[Name], Thank you for your comments on the NDA. I need to address your request for a residuals clause directly: we cannot include this provision. To be clear about our concern: the confidential information we will be sharing includes [proprietary algorithms / chemical formulas / manufacturing processes / trade secrets] that represent the core of our competitive advantage. A residuals clause would permit your personnel to retain and use this information in their memories without restriction. Here is why this is problematic: 1. Our Most Valuable Information Is Memorizable: Unlike bulky data sets, our [describe: algorithm logic / formula components / process steps] can be memorized. A residuals clause would create a legal path for this information to walk out the door. 2. "Unaided Memory" Is Unenforceable: We have no way to determine what was truly retained in "unaided memory" versus what was written down and later destroyed. This creates an evidentiary problem that effectively guts the NDA. 3. Industry Practices Vary: While residuals clauses may be common in certain technology sectors, they are not standard in [our industry] where trade secret protection is paramount. 4. Intentional Memorization Carve-Out Is Weak: The "no intentional memorization" limitation is nearly impossible to prove or enforce. We understand your operational concerns, but the solution is to limit exposure - having fewer people access our confidential information, not creating exceptions that undermine protection. We must proceed without a residuals clause. If this is a deal-breaker for your team, we should discuss whether there is a different structure for our discussions that addresses both parties' needs. Best regards, [Your Name]

Explain Business Need for Residuals

Receiving Party Defend Position

When to use: The disclosing party rejected your residuals request. Use this to explain why residuals protection is essential for your business operations and propose safeguards.

Subject: Re: NDA - Residuals Discussion

[Name], Thank you for explaining your concerns about the residuals clause. I understand the sensitivity of your information, but I need to explain why this provision is essential for us and propose some modifications that may address your concerns. WHY WE NEED RESIDUALS PROTECTION: Our business model depends on our personnel learning and growing from every engagement. We are a [consulting firm / technology company / creative agency], and our value comes from the cumulative knowledge and expertise our people develop. Without residuals protection: 1. Employee Mobility: Our engineers, consultants, and analysts would effectively be "contaminated" after working with your information, unable to work on similar projects for other clients. 2. Independent Development: We develop our own [products / methodologies / solutions]. Without residuals, we could face claims that our independent work actually derived from your confidential information. 3. Practical Reality: Human memory cannot be compartmentalized. Prohibiting use of all retained knowledge is unenforceable and would create constant legal exposure. PROPOSED SAFEGUARDS: We hear your concerns. Here are modifications we can accept: 1. Narrow Definition: Limit residuals to "general ideas, concepts, methodologies, and techniques" - not specific data, formulas, or detailed designs. 2. Exclusions: Expressly exclude [customer lists / specific algorithms / formulas / trade secrets as defined in the DTSA] from residuals treatment. 3. Time Limitation: Apply residuals rights only to information accessed more than [12/24] months ago. 4. No Intentional Use: Add language that residuals may not be "intentionally used to create a competitive product or service." This approach protects your most sensitive information while permitting practical business operations. Can we schedule a call to discuss? Best regards, [Your Name]

Accept Narrowly Drafted Residuals Clause

Disclosing Party Compromise

When to use: You have decided to accept a residuals clause, but want to ensure it is as narrow as possible with appropriate exclusions and safeguards.

Subject: Re: NDA - Residuals Clause Compromise

[Name], After internal discussion, we are prepared to accept a residuals provision, subject to specific limitations that protect our most sensitive information. ACCEPTED RESIDUALS LANGUAGE: "Notwithstanding any other provision of this Agreement, Receiving Party personnel may use Residuals for any purpose, subject to the limitations below. 'Residuals' means only the following, to the extent retained solely in the unaided memories of individuals who have had authorized access to Confidential Information: general skills, knowledge, and experience of a type that would normally be acquired in similar work in the industry. EXCLUSIONS FROM RESIDUALS: The following shall NOT constitute Residuals and shall remain subject to all confidentiality obligations: (a) Trade secrets as defined under applicable law; (b) Specific technical specifications, formulas, algorithms, or source code; (c) Customer lists, pricing information, or financial data; (d) Any information designated as 'Highly Confidential' or 'Not Subject to Residuals'; (e) Information obtained through intentional memorization or review for the purpose of retention. ADDITIONAL LIMITATIONS: (i) This provision does not grant any license to intellectual property rights; (ii) This provision does not permit reproduction of any tangible materials; (iii) Use of Residuals to directly compete with a specific product or service disclosed in confidence is prohibited; (iv) This provision applies only to individuals who were authorized to access the information." Please confirm this language is acceptable, and we can finalize the agreement. Best regards, [Your Name]

Request Specific Memory Exception

Receiving Party Alternative Approach

When to use: A full residuals clause is rejected, but you need some protection for employee knowledge. Use this to request a more limited "memory exception" that may be more acceptable.

Subject: Re: NDA - Memory Exception Alternative

[Name], I understand that a full residuals clause is not acceptable given your concerns about [describe their concern]. As an alternative, we propose a more limited "memory exception" that addresses our operational needs while providing stronger protection for your information. PROPOSED MEMORY EXCEPTION: "Nothing in this Agreement shall prohibit the Receiving Party from engaging in the following activities, provided that such activities are conducted without reference to any tangible Confidential Information or materials: (a) Employing or assigning personnel who previously worked with Confidential Information to work on similar projects for other clients or for the Receiving Party's own business, provided such personnel do not recreate or replicate specific Confidential Information; (b) Developing products, services, or solutions in areas similar to those discussed under this Agreement, provided such development is based on the Receiving Party's own independent work and not on specific Confidential Information; and (c) Responding to inquiries from clients or customers about general capabilities, provided no specific Confidential Information is disclosed. For the avoidance of doubt, this provision: - Does not permit intentional memorization of Confidential Information; - Does not apply to any information qualifying as a trade secret; - Does not permit reference to or use of any tangible materials; and - Does not limit the Disclosing Party's right to seek injunctive relief for actual or threatened misappropriation." This language is narrower than a typical residuals clause - it focuses on what we can do (work on similar projects) rather than creating a broad exception for anything retained in memory. Would this approach be more acceptable? Best regards, [Your Name]

Condition Residuals on Protective Measures

Disclosing Party Add Conditions

When to use: You are willing to consider a residuals clause if the receiving party implements specific protective measures to limit exposure in the first place.

Subject: Re: NDA - Residuals with Protective Conditions

[Name], We have further considered your request for a residuals clause. While we remain concerned about this provision, we are willing to include limited residuals rights conditioned on your implementation of specific protective measures. Our logic: If residuals are an inevitable consequence of exposure to confidential information, then we should minimize that exposure in the first place. If you implement the measures below, we can accept a residuals clause. REQUIRED PROTECTIVE MEASURES: 1. Limited Access: Confidential Information shall be accessed only by personnel on a pre-approved list (Schedule A), which shall include no more than [10] individuals without our consent. 2. Clean Team for Sensitive Information: For information we designate as "Highly Sensitive," access shall be limited to a clean team that has no involvement in competitive projects during the term of this Agreement and for [12] months thereafter. 3. Access Logging: You shall maintain logs of which personnel accessed which confidential materials, and provide these logs upon request. 4. Exit Procedures: When any individual with access to our Confidential Information leaves your company or transfers to a competing project, you shall provide written notice to us within [30] days and confirm completion of exit procedures (reminder of obligations, no copying of materials). 5. Training: All personnel with access shall complete confidentiality training that specifically addresses residuals limitations. RESIDUALS SCOPE: Subject to compliance with the above, we will accept residuals rights limited to general skills and concepts (excluding trade secrets, specific technical data, and information designated "Not Subject to Residuals"). This approach addresses our concerns while accommodating your operational needs. Please confirm whether these conditions are workable. Best regards, [Your Name]

Counter on Overly Narrow Residuals

Receiving Party Expand Scope

When to use: The disclosing party proposed a residuals clause, but it is too narrow to provide meaningful protection. Use this to push for a more balanced provision.

Subject: Re: NDA - Residuals Clause Needs to Be Broader

[Name], Thank you for agreeing to include a residuals provision. However, after reviewing your proposed language, we have concerns that it is too narrow to provide meaningful protection. SPECIFIC CONCERNS: 1. "General skills, knowledge, and experience of a type normally acquired in the industry" - This language is circular and vague. What counts as "normally acquired"? This invites disputes and provides little practical guidance. 2. Extensive Exclusions - Your exclusion list (trade secrets, technical specifications, customer lists, pricing, anything designated "Highly Confidential") could encompass virtually all of the information we would receive. The practical effect is no residuals protection at all. 3. "Intentional memorization" Restriction - We accept this limitation in principle, but need clarification. Is it "intentional memorization" if an engineer naturally remembers an interesting technical approach? The provision needs to focus on bad-faith conduct, not normal cognitive function. PROPOSED MODIFICATIONS: 1. Clearer Definition: "Residuals means general ideas, concepts, methodologies, techniques, and know-how retained in the unaided memories of individuals, excluding specific data, formulas, source code, and detailed designs." 2. Limited Exclusions: Limit exclusions to: (a) information meeting the legal definition of trade secret under applicable law, and (b) specific documents or materials that you designate in writing at the time of disclosure as "Not Subject to Residuals" (with such designations to be used sparingly). 3. Good Faith Standard: Revise the intentional memorization restriction to: "This provision does not permit the intentional study or memorization of Confidential Information for the purpose of using such information after the termination of this Agreement." This provides real protection for your most sensitive information while giving us workable protection for our business operations. Can we discuss? Best regards, [Your Name]

Final Position on Residuals Clause

Disclosing Party Final Offer

When to use: Negotiations on the residuals clause have gone back and forth. Use this to state your final position clearly and move toward closing the NDA.

Subject: Re: NDA - Final Position on Residuals

[Name], I appreciate the constructive dialogue on the residuals provision. To move this forward, I want to present our final position on this clause. FINAL RESIDUALS LANGUAGE: "Residuals Rights. The Receiving Party's personnel may, after completion of any project or engagement, use for any purpose the Residuals resulting from access to Disclosing Party's Confidential Information. 'Residuals' means general skills, concepts, techniques, and know-how retained solely in the unaided memories of individuals, excluding: (i) any information that constitutes a trade secret under applicable law; (ii) specific data, formulas, source code, algorithms, or detailed technical specifications; and (iii) any information that the Disclosing Party has designated in writing at the time of disclosure as 'Not Subject to Residuals,' provided that such designation shall be used in good faith and limited to the Disclosing Party's most sensitive information. Limitations: (a) This provision does not grant any license to patents, copyrights, or other intellectual property rights; (b) This provision does not permit intentional study or memorization of Confidential Information for the purpose of post-engagement use; (c) This provision does not permit reference to or use of any tangible materials containing Confidential Information; and (d) This provision does not permit the creation of products or services that are substantially similar to specific products or services disclosed in confidence." This represents our best effort to balance your operational needs with protection for our sensitive information. We are not able to go broader on the residuals definition or narrower on the exclusions. Please confirm acceptance so we can finalize the NDA. Best regards, [Your Name]