Shake’s legal team has carefully researched and crafted our form agreements to ensure that they are legally sound as well as clear and simple. In this post, we explain some of our drafting choices and share some of our research. We hope you find it informative — and maybe even interesting. Please note that we may revise our forms as a result of ongoing research, feedback and possible changes in the law. So, the language currently in use on the app may differ from what we reference below.
Shake’s freelance (independent contractor) agreements, governing the relationship between freelancer and client, contain the following provision addressing confidential information:
Any information supplied by one party to the other marked as “Confidential” must be used only for the purposes of this agreement and must not be disclosed to other parties without the discloser’s written consent. This does not apply to information that is publicly available or that the recipient already properly knew, developed or received independently. When the agreement terminates, [freelancer name or company] must return to [client name or company] any materials containing confidential information. Confidentiality obligations survive termination of this agreement.
Independent contractor agreements typically include a confidentiality provision when the relationship is likely to require the exchange of sensitive information. In a freelancer/client relationship, the client is typically the party more concerned about protecting its information, although it is possible that in the course of the work the freelancer will also disclose information he or she wants the client to keep confidential. Except for its return of materials language, discussed below, the above language binds both parties to the same obligations regardless of which is the discloser of confidential information and which is the recipient.
The provision requires that information be marked as “Confidential” in order to be protected. This requirement serves two purposes. First, it helps unambiguously identify what information is subject to confidentiality.1 Second, it puts each party on notice that if it wants a piece of information to be protected, it needs to mark it accordingly, which in turns helps avoid the burden associated with over-inclusive language that, in theory, requires treating virtually every piece of information exchanged as confidential, but in practice is often ignored altogether. Courts will uphold the marking requirement when it is clearly stated in the contract, as it is here.2
Per the above language, confidential information is forbidden not only from unauthorized disclosure, but also unauthorized use. (“…must only be used for the purposes of this agreement…”). This is important for preventing a recipient of confidential information from misappropriating that information even without disclosing it to a third party.
The provision concisely states a set of standard exclusions to the definition of confidential information. Information that is “publicly available” is uniformly recognized as being outside the scope of confidentiality protection.3 Information that the recipient already properly knew, developed or received independently is also excluded. The exclusion of information already known keeps the agreement from limiting a recipient’s ability to utilize her existing independent knowledge. The exclusion of information received independently acknowledges the reality that a given piece of “confidential” information may become available from a third party without restriction, in which case the discloser’s rights have not been violated. Similarly, if the recipient develops the same information independently of her relationship with the discloser, the discloser’s rights have again not been violated.
The provision requires the freelancer to return the client’s confidential materials at the agreement’s termination. For the maintenance of confidentiality, it is good practice for disclosers to have confidential materials returned to them. The provision in the form is restricted to the client’s materials because it’s very unusual for a freelancer to leave tangible confidential materials with a client that are not part of the freelancer’s work product (and therefore rightfully belong with the client).
The agreement does not expressly limit the duration of the confidentiality obligation. In certain jurisdictions, specifying a finite and reasonable duration for a confidentiality obligation may aid its enforceability, although courts have examined this issue more in the context of employee rather than contractor agreements.4 On the other hand, an indefinite duration suggests that the information is intended to be protected so long as it remains confidential. This is particularly important in relation to trade secrets, which do not expire so long as the protected information remains secret and continues to be valuable to the trade secret owner.5
- Under New York law (to give a representative example) a contract is unambiguous when it has a “definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no basis for a difference of opinion.” G5 Technologies, Inc. v. Int’l Bus. Machines Corp., 04 CIV.1201 DLC, 2005 WL 2271741 (S.D.N.Y. Sept. 19, 2005) (citing Photopaint Techs., LLC v. Smartlens Corp., 335 F.3d 152, 160 (2nd Cir. 2003)). ↩
- See, e.g., Corinthian Mortgage Corp. v. ChoicePoint Precision Mktg., LLC, 1:07CV832 (JCC), 2008 WL 4276921 (E.D. Va. Sept. 11, 2008) (“SouthBanc suggests that the contractual term ‘Confidential Information means any information…clearly marked proprietary (or) confidential’ means something else entirely, namely that confidential information does not have to be marked at all. Such an interpretation directly contradicts the written confidentiality term in the Agreements.”). ↩
- See, e.g., M.N. Dannenbaum, Inc. v. Brummerhop, 840 S.W.2d 624, 632 (Tex. App. 1992) (“Even if certain business information is considered confidential, the same information may often be obtained by observation, experimentation, or general inquiry. . . The courts acknowledge that obtaining confidential information in this way is lawful.”); see also Uniroyal Goodrich Tire Co. v. Hudson, 873 F. Supp. 1037, 1049 (E.D. Mich. 1994) aff’d, 97 F.3d 1452 (6th Cir. 1996) (issued a permanent injunction on defendant’s use of the information until defendant can demonstrate that the information is in the public domain); compare Totino v. Alexander & Associates, Inc., 01-97-01204-CV, 1998 WL 552818 (Tex. App. Aug. 20, 1998) (“A & A’s insurance policies, renewal dates, coverage limits, premiums, commission income, and correspondence files dealing with client information and insurance claim placement are examples of A & A’s nonpublic, confidential information”). ↩
- See Chris Montville, Reforming the Law of Proprietary Information, 56 Duke L.J. 1159, 1180-81 (2007). ↩
- See Julianne Hartzell, Time Limits in Confidentiality Agreements, 20 Intellectual Prop. Litig. 1, 17-19 (Spring 2009). ↩