Confidentiality agreements are among the most common agreements in corporate practice, often viewed as routinized documents unworthy of close reading. When drafting and negotiating confidentiality agreements, however, both parties should be aware of potentially broad restrictions on their activities. For example, in an acquisition deal, a “use” restriction can be the source of a creative argument for a seller seeking to prevent an unsolicited offer or other activity that arguably requires use of the seller’s confidential information.

Use Restrictions, Generally

In a confidentiality agreement, a disclosing party will want to do more than contractually prohibit a receiving party from sharing the disclosing party’s confidential information with others. A nonuse provision—a common feature of most any confidentiality agreement—restricts how the receiving party may use the disclosing party’s confidential information.

A flat prohibition on the use of confidential information would likely be overly broad in many deal contexts. For example, an employer likely wants its employee to use confidential information disclosed by the employer when it helps the employee to do a good job. In an acquisition, a seller likely wishes a potential buyer to use the confidential information disclosed by the seller for the purpose of evaluating the potential transaction. Indeed, confidentiality agreements are often put in place because there is a desire on the part of both parties for at least one party to use the other’s confidential information.

Read more: www.corpcounsel.com/id=1202659271333/Confidentiality-Agreements-More-Unintended-Consequences#ixzz35O5Druba

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