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The perfect NDA (and top 5 NDA pet peeves)
Among the nearly infinite variety of legal agreements in use today, the non-disclosure agreement for general bilateral business discussions is by far the most ubiquitous. If measured only by the frequency of its use and the significance of its impact, a company’s NDA template is arguably its most important. The $200 million verdict against Oculus for breach of a rather simple NDA speaks volumes as to how critical such an agreement can be.
Every company has its own unique general use NDA template; paradoxically, many companies sign the opposite party’s template more often than not. The party larger in size, reputation, market cap, or perceived importance usually wins the battle of the NDA form. This NDA ritual takes place hundreds of times a day all over the world.
Fundamentally the purpose of the NDA is straightforward: protect confidential information from unauthorized use and disclosure. Both parties have an equal and legitimate interest in protecting their own information, and each party usually recognizes the other side’s interest as well. The best general purpose NDAs are those that are short, simple, clear, and mutual. The worst are those that are complex, lengthy, and lack basic mutuality.
The model NDA template accomplishes what should be the primary objective of any NDA: establish a balanced legal framework for the protection of each party’s confidential information in a simple, clear and direct manner. All of the terms and obligations should be reciprocal. Neither side should be advantaged. There should be no unexpected provisions. And ideally the NDA should be a modest one or two pages in length.
Effective Date
The “Effective Date” can be a date that’s inserted on the date of signature, or it can be expressed as the date of the last signature. The problem with leaving the date blank is that it often remains blank after both parties have signed. That said, if the NDA protects information whether disclosed before or after the effective date, then there’s little significance to the effective date, other than clarifying when the agreement came into being and, thus, the term of the agreement.
Definition of Confidential Information
Typically, NDAs define “Confidential Information” to include written as well as orally disclosed information, so long as marked or designated as confidential. Oral information is often protected only if it is summarized in writing within a certain period of time after disclosure. The issue of orally disclosed information is a challenging one. Many companies, especially larger ones with active and sizable legal departments, are reluctant to tie themselves to confidentiality obligations with respect to any orally disclosed information that is not summarized in writing later. The problem of course is that such summaries are rarely completed. Without the summary, no protection applies.
The ideal template attempts to strike a balance between the two extremes, by extending protection not only if it’s summarized in writing, but by extending protection to certain specifically enumerated categories of information (for example, “contemplated product or service plans, marketing or business strategies, vulnerabilities, third party relationships, or pricing or financial information”). Few would argue that oral information about a company’s publicly unreleased product plans or strategies, vulnerabilities, or financial information should not be protected as confidential. For oral information that falls outside of these protected categories, the written summary requirement applies.
Yet another possible variant is to protect orally disclosed information falling into these categories only if “the information, given its nature and the details of its disclosure, should reasonably be considered as confidential in nature” or the like. This may ease the concerns of those who insist that all orally disclosed information should be protected only if summarized in writing. Yet, this concession may not be enough to satisfy some corporate legal departments that will insist on the written summary requirement.
Ultimately, the requirement that oral disclosures be summarized is so commonplace that to oppose it in every case would unjustifiably impede the transacting of necessary business. Educating the client to ensure that important conversations are memorialized is the best solution; refusing to sign a NDA due to opposition to this requirement is not.
One final point about orally disclosed information is that the ideal template should preserve the confidential nature of the information pending the production of the written summary. Without this clarification, the information may never be confidential unless and until the disclosing party produces the written summary. This may take time. Meanwhile, the receiving party could literally publish highly sensitive orally-disclosed information within hours of the parties’ meeting, in the absence of such a clause.
Permitted Recipients
Typically, disclosure of Confidential Information is limited to the receiving party’s employees, but oftentimes disclosure to affiliates and agents is permitted. Care should be taken to ensure that such agents and affiliates are tightly defined. Virtually any person or entity can be an agent or affiliate, including, obviously, competitors of the disclosing party (even those with an ostensible “need to know”).
Exceptions
The exceptions component of the NDA is the most important. Any balanced NDA should exclude from the confidentiality obligation any information that is (a) known to the receiving party prior to its disclosure by the disclosing party; (b) is or becomes generally known or available, or is in or becomes part of the public domain, other than through breach of confidentiality; (c) disclosed to the receiving party by a third party without any apparent breach of confidentiality; or (d) independently developed by the receiving party without use of any of the disclosing party’s confidential information.
One exception occasionally found in NDA forms is “disclosed by the disclosing party to a third party without restriction on disclosure. ” Whichever party to the NDA has a stronger incentive to protect confidentiality may object to the inclusion of such an exception, particularly if the NDA form already contains the public domain/generally known exception. If interpreted in conjunction with the latter, this exception is not logically redundant only in the situation in which the information owner’s dissemination of its own information has not reached the level of being generally known, but has been selectively revealed to a certain few. While an argument can certainly be made that if the owner has been selectively disclosing the information in question to a select few, it should not be entitled to confidentiality protection at all, the sensitive information owner will argue that such intermittent disclosure may have been inadvertent, or under circumstances indicative of apparent, even if ultimately non-existent, confidentiality. Such party will argue that the public domain exception should suffice.
Top 5 NDA Pet Peeves
1. Blank “Purpose” Requirement
It is quite common for NDA templates to specify a “purpose” of the information exchange; less commonly, some NDAs require that information protected under the NDA be relevant or germane to, or disclosed solely in furtherance of, a defined purpose in order to qualify for protection. Oftentimes the purpose definition is blank, requiring the business people involved in the discussions to complete what they believe the purpose should be. Business clients from either side may specify an inordinately narrow purpose, or the discussions may evolve beyond what is defined in the NDA’s purpose statement. In such case, legal cycles are again consumed in order to amend the purpose statement or enter into a new NDA. Worst case, the parties will fail to realize that the discussions have evolved beyond the purpose statement set out in the NDA, thus resulting in no confidentiality protections whatsoever.
Realistically, after the NDA is signed, it is forgotten, and it is extremely unlikely that representatives from either side will be closely monitoring the discussions to make sure they do not deviate from the scope of the expressed purpose. And, whether a given item of information is germane to the purpose may not be clear, thus inviting disputes in the future.
Any information that is designated as confidential should be protected. The confidentiality exceptions are the best defense against assuming unnecessary or unrelated confidentiality obligations. Consequently, if a purpose requirement is unavoidable, then the best purpose articulation should be as broad as possible (eg, “to evaluate whether to enter into a transaction”; or “to fulfill the mutual obligations and purposes of a mutual business relationship”).
2. Documentary or Clear and Convincing Proof Requirement
Variants of the confidentiality exclusions clause may require that applicability of the exceptions be proven by documentary evidence (for example, removing “independently developed by the receiving party without use of any of the disclosing party’s confidential information, as established by documentary evidence”). The hidden premise behind such a requirement is that testimonial evidence is inherently untrustworthy or at least not as reliable as documentary evidence. This premise is questionable as an empirical matter. In any case, oftentimes it may be impossible to find documentary proof of prior knowledge or independent development for a given piece of information.
For example, it is easy to envision how a large company with R&D facilities all over the world could quite readily develop technology independently of any access to or use of the confidential information protected by the NDA and disclosed in a remote locale. Yet if the documentary proof requirement applies, it’s not clear what type of proof would satisfy the requirement. Would documents proving the existence of the development of the same information in a far-flung R&D center be sufficient? Or would a court require documents affirmatively proving that the developers of the information specifically refused to expose themselves to the NDA-protected information?
Some NDAs require that the exclusions be proven by “clear and convincing evidence”, a standard of proof that would make application of any exclusion quite difficult to establish. The default standard of proof, preponderance of the evidence (i.e., more likely than not), is the standard that would apply to all other issues relating to the NDA, such as the issue of whether the information in question is captured by the definition of confidential information, or whether the NDA itself was breached. The breach claimant should not have a lower standard of proof than the breach defendant.
3. Time-Limited Term of Protection
Many NDA forms contain a limited term of effectiveness. Such forms can be inconvenient if the NDA expires prior to the termination of the parties’ negotiations or relationship. Early expiration will result in the need for a renewal amendment or for a new NDA, thus consuming legal resources. If the NDA is truly balanced and limited in scope, there’s no compelling reason to require that the NDA expire, particularly if either party is free, as is often the case, to terminate the NDA at will.
Many NDA templates also limit the time period in which the confidentiality obligations apply. “The obligations of confidentiality under this agreement expire five years after termination”, for example, is a typical formulation. Arguments raised in support of an arbitrary cut-off of protection include administrative convenience; finality of obligations; and that most information should be expected to “go stale” after five years or so anyway.
Nevertheless, time-bound confidentiality obligations can be fatal to the protection of trade secrets. A trade secret derives its protection from proof that the owner has exercised reasonable efforts to safeguard its secrecy. It’s not difficult for an adverse party in any trade secrets litigation to discover and use the fact that the purported trade secret owner routinely signed time-bound NDAs, to potentially devastating effect.
4. Non-Reciprocal Terms
Language granting an enhanced degree of protection for only one party’s data, or securing a longer period of confidentiality protection for one party’s source code, or requiring one party and not the other to bear the burden of proving the applicability of confidentiality exceptions, are all common examples of non-reciprocal clauses that will inevitably invite negotiation and therefore delay. The rather limited legal benefit of such clauses should be balanced against the wasted cycles such provisions cause. The ultimate goal is to secure signatures on the NDA form as soon as possible, given that no business can take place until the NDA is closed.
5. Residual Rights
A residuals (or residual rights) clause clarifies that general knowledge or know-how that has not been intentionally memorized is not subject to the confidentiality obligations of the agreement. Example:
Nothing in this Agreement will be construed to prevent the receiving party’s employees who access Confidential Information from using Residuals for any purpose. The term “Residuals” means information of a general nature, such as general knowledge, professional skills, know-how, work experience or techniques, that is retained in the unaided memories (without conscious memorization or subsequent reference to the material in question) of the receiving party’s employees who have had access to Confidential Information.
Such a clause essentially removes confidentiality protections for any information that is retained in the unaided memories of the receiving party’s employees. At bottom, it’s a gaping hole in the non-disclosure and non-circumvention obligations of the NDA. “Anything that remains in my head” may be freely used and disclosed. Such a clause is particularly inappropriate for NDAs that cover the exchange of sensitive financial information, as such information is readily retrievable from memory.
In summary, the degree to which a bilateral non-disclosure agreement template for general business discussions can be considered “perfect” depends on the degree to which the NDA is simple, concise, and mutual. The best general-use NDAs are those that are completely unobjectionable and clear. The worst are those that invite unhelpful negotiation and attendant acrimony. Sometimes not negotiating is better than negotiating and “winning” a point or two, given that the parties must work together to forge a new relationship going forward. Crafting the perfect NDA to strike this balance is as much a science as an art, a task that requires knowledge of the law, culture, and business in which our clients operate.
First published in the Fall 2020 edition of New Matter, the quarterly journal of the Intellectual Property Section of the California Lawyers Association. Further references available at Redline: The perfect non-disclosure agreement (and top 5 NDA pet peeves); Strategies for overcoming time-bound confidentiality obligations in NDAs.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
I call bullshit
In Bullshit Jobs: A Theory, David Graebe, anthropologist and an early founder of the Occupy Wall Street movement, recounts the rise in the last century of “bullshit jobs”: occupations that serve no socially useful function, and instead cause soul-crushing psychological suffering to those forced to take on such work. Graebe contends that as much as forty percent of all jobs in the world are bullshit, which he defines as:
a form of paid employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though, as part of the conditions of employment, the employee feels obliged to pretend that this is not the case.
Graeber catalogs five different species of bullshit jobs: flunkies, goons, duct tapers, box tickers, and taskmasters. He indicts all “corporate lawyers” as falling into the “goons” category.
Goons are “people whose jobs have an aggressive element, but, crucially, who exist only because other people employ them.” He even goes so far as to say that if somehow all corporate lawyers were wiped off the face of the earth, “the world would be at least a little bit more bearable.” The fundamental underpinning of Graeber’s thesis is that the best way to tell if someone has a bullshit job is if that person admits it.
But throughout the book, Graeber recounts the experiences of only two lawyers: a tax litigator in Sydney, and a friend from his teenage years that gave up a career as a poet and a musician to be a corporate lawyer on Wall Street. He freely admits that his observation that “I’d never known a corporate lawyer who didn’t think his or her job was bullshit” is in fact “a reflection of the sort of corporate lawyers that I’m likely to know: the sort who used to be poet-musicians.”
Rather than attempt to refute Graeber myself, it’s all too easy to use the Google to find someone else to do it:
Let’s test it out. What if we take this fellow’s advice and eliminate all the BS (i.e., “corporate” law) jobs?
Eliminate All Contracts. Now, neither money, things, nor services move. Or, if they do, then disputes run rampant, but without a court system (a bastion of BS), we are presumably left with beating each other with clubs to resolve our disputes.
Or, use contracts, but make the business folks handle them without any legal assistance. First. There is nothing efficient about that. Just try it. Second. Without a legal system, you’re quickly back to the same result – people beating each other with sticks. In this case, even if you had a legal system, it would soon be so backed up (even by today’s standards) that you might as well not have one.
In one deft swoop, we’ve managed to bring all modern economies to their knees.
Lessons from the M&A Wars: anti-fraud disclaimers in tech contracts
In high stakes transactions in which vast sums of wealth are exchanged in return for ownership in ongoing complex businesses, mergers and acquisitions (M&A) contracts are an oft-overlooked source of clever legal craftsmanship. With so much value and risk embodied in these transactions, counsel for both parties—sought after specialists in these pressure-filled transactions—play a tense game of textual jab and parry, each trying to minimize risk and maximize leverage for their clients. In doing so, they often create compelling contract language readily amenable for use in non-M&A contexts.
Legal acumen and attention in acquisition deals is most likely brought to bear on the representations and warranties, the indemnification provisions, the liability cap, and the fraud disclaimer. Glenn D. West, a prominent M&A lawyer and commentator whose insights reach well beyond the M&A context, has written extensively about the appropriate contract language to use in order to effectively disclaim the threat of fraud claims and avoid liability for extra-contractual statements. In two highly regarded pieces for the ABA Business Lawyer (Contracting to Avoid Extra-Contractual Liability —Can Your Contractual Deal Ever Really Be the “Entire” Deal? and That Pesky Little Thing Called Fraud: An Examination of Buyers’ Insistence Upon (and Sellers’ Too Ready Acceptance of) Undefined “Fraud Carve-Outs” in Acquisition Agreements), Mr. West has proven an effective advocate for, inter alia, the following propositions:
- more than a simple “entire agreement” integration clause is required to effectively disclaim reliance on extra-contractual statements;
- buyer should be required to disclaim reliance on extra-contractual statements; and
- a simple “except in the case of fraud” disclaimer at the end of an exclusive remedies provision is unacceptably vague and imbued with risk that most practitioners would not accept if they understood the implications.
These are worthy guidelines in the licensing and technology transactions context as well. Virtually any transaction in which one side is selling something of significant value (including high-dollar technology licensing or acquisition agreements, IT outsourcing agreements, and enterprise SaaS solution terms) would benefit from the clarity and certainty that comes with limiting the remedies and risks of the parties to the four corners of the contract.
After all, it’s not uncommon for a breach of contract claim to be accompanied by a fraud claim, as a matter of course. As Mr. West ably points out:
Fraud and negligent misrepresentation claims have proven to be hard to define, easy to allege, hard to dismiss on a threshold, pre-discovery motion, difficult to disprove without expensive, lengthy litigation, and highly susceptible to the erroneous conclusions of judges and juries. And ironically, it may be the one alleging the fraud that is the actual ‘fraudster’—not the person against whom the fraud is alleged.
This dynamic is no less applicable in the technology transactions context.
When a big technology implementation project fails, the customer’s lawyers will pretty much always try hard to find opportunities to accuse the vendor of having lied.
…
Litigation counsel know that jurors typically won’t understand whatever technology is involved. (In fact, the customer’s lawyers might well try to exclude any prospective juror who knows even a little about the technology.)
That can make it hard for customers to win such cases on garden-variety ‘technical’ grounds such as breach of contract or breach of warranty. Judges and jurors absolutely do get it, on the other hand, when it appears someone lied or cheated.
D.C. Toedt III, On Contracts, Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects (2010) (noting that the threat of punitive damages, not available in breach of contract claims but commonly awarded in fraud claims, raises the stakes in this context considerably).
Consequently, technology counsel for both sides should consider the following drafting points, in furtherance of making the written deal the entire deal of the parties. First, consider establishing the sole remedies for breach of warranties, and make such remedies available to the buyer regardless of whether breach involves “intentional, reckless or negligent misrepresentations.” Consider including language such as, “Vendor is not asserting the truth of any warranty set forth in this Agreement; rather the parties intend that if any warranty proves untrue, Buyer will have the specific rights and remedies set forth in this Agreement and no other.”
Second, consider including disclaimers of reliance on extracontractual statements. Here’s an example: “The parties have voluntarily agreed to define their rights, liabilities and obligations respecting this Agreement and [insert subject matter] exclusively in contract pursuant to the terms of this Agreement, and each party disclaims that it is owed any duties or is entitled to any remedies not set forth in this Agreement.”
And third, for any fraud-related carveouts to the disclaimers, avoid reliance on the all-too-simple “except in the case of fraud.” As Mr. West demonstrates, fraud can be a great many things; and as such, the term should be defined, so as to avoid ambiguity. One possibility is to define fraud to mean false statements with respect to the set of express warranties in the agreement. Here’s an example: “Nothing in this Agreement will operate to limit the liability of Vendor to Buyer for fraud in the event Vendor is finally determined to have willfully and knowingly committed fraud against Buyer, with the specific intent to deceive and mislead Buyer, regarding the warranties of section [x].”
From the perspective of the buyer, such measures make the warranties and the express remedies the focal point of the negotiations. Buyer’s counsel will seek to make those warranties and remedies as specific and as concrete as possible, recognizing the value that comes with stable and predictable contract language.
Finally, both sides are equally served by a robust integration and merger clause, and a choice of law and forum clause that captures not just contract claims but tort claims as well (eg “This Agreement and all related disputes will be governed by the laws of ___”).
In New York, clauses providing for the agreement to be “governed by” and “construed in accordance with” a particular law have been construed as applying only to disputes concerning the agreement itself, and not to all disputes arising out of the relationship; whereas choice of law clauses applying to controversies “arising out of” or “connected to” the contract are construed to include tort or fraud claims. In California, “governed by” is construed as encompassing all causes of action arising out of or related to the agreement, including tortious breaches of duties arising out of the agreement.
These drafting measures are by no means foolproof. Motivated litigants can always discover new ways of convincing juries to look beyond the text of the contract. Nevertheless, adoption of these measures should go a long way towards ensuring that the parties’ written deal really is the entire deal.
First published in the Spring 2020 edition of New Matter, the quarterly journal of the Intellectual Property Section of the California Lawyers Association.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
What if morality has nothing to do with contracts?
The basic assumption of our daily work as lawyers is that generally, people will follow the terms of an agreement, and that compliance is the default mode of operation. A widespread normative aversion to intentionally breaking contracts is a fundamental societal assumption. This assumption informs our work as lawyers in negotiating and drafting agreements.What if this was not a valid assumption? What if we lived in a world where contract compliance was a simple matter of dollars and cents?
Efficient breach theory states that an economically rational actor will comply with or perform a contract only if the costs of breach exceed the costs or gains of compliance. If a party can calculate with reasonable certainty the losses arising from breach, including compensation for damages to the counterparty that may be payable under the terms of the contract, and weigh that against a measurable gain that exceeds those predicted losses, the breach-efficiency advocates would say that breach in this situation is socially beneficial.
In other words, breach is a good thing. Yes, you intentionally walked away from your obligations, but your conduct is rational—and certainly should not be considered socially undesirable, or subject to any kind of punitive or social sanction. You made a reasonable cost-benefit analysis, or so the theory goes.
Efficient breach theory has its detractors, unsurprisingly.
Efficiency is not generally regarded as a sufficient ground for the law to permit, and indeed encourage, such an apparent wrong. There are no analogous doctrines of efficient conversion or efficient theft, for example.
D. Markovits & A. Schwartz, The Myth of Efficient Breach: New Defenses of the Expectation Interest, 97 Va. L. Rev. 1939 (2011) (characterizing efficient breach theory as “vacuous”).
When Alice contracts with Betty, Alice expects Betty to perform. She doesn’t expect Betty to either perform or pay damages to Alice if Betty chooses not to perform. Likewise, Betty’s own natural and customary understanding of this transaction is that she is promising to perform. Both expect that an obligation has been made and will be honored.
The essential purpose of a contract between commercial [parties] is actual performance and they do not bargain merely for a promise, or for a promise plus the right to win a lawsuit ….
38 Uniform Commercial Code (U.C.C.) § 2-609 cmt. 1 (2003).
Nevertheless, imagining a world without the moral compulsion to honor contracts can be an interesting thought experiment. What if the efficient breach theory became the prevailing view, such that the normative aversion to intentionally breaking contracts did not exist? In what ways would the practice of law change? How would we be impacted as lawyers?
If the societal sanctity of one’s word completely falls away, and if every clause in every contract may be freely broken as the result of a cold cost-benefit analysis, the psychology of those charged with drafting and negotiating agreements would change. If we lived in such a world, it’s not difficult to envision liquidated damages clauses becoming more common and more readily enforced.
Imagine a world where breach events would be reduced to a monetary value that must be paid on demand. Businesses would press the case that they must be allowed to fix a dollar value to noncompliance, especially for confidentiality and similar affirmative obligations, so that the costs of breach are not subject to dispute and subsequent adjudication. Breach must be efficient, after all.
The more powerful companies would be in a position to enforce subservience to contractual obligations upon less powerful entities via imposition of liquidated damages assigned to every significant obligation in the agreement. Even if the rule remains that liquidated damages must be a reasonable estimate of loss, that “estimate” will be subject to negotiations or, even worse, one-sided terms of adhesion. And naturally, smaller companies or less powerful entities would lose those negotiations more often than not, especially given the resulting imbalance in legal resources caused by increased transaction costs.
For larger companies, compliance would hinge on cost-benefit analyses, on simply quantifying amounts due and payable. If breach can be considered a simple matter of wiring payment, then breach will be more commonplace for those who can afford it. See e,g,, Uri Gneezy & Aldo Rustichini, A Fine is a Price, 29 J. LEGAL STUD. 1 (2000) (daycare that started imposing a monetary fine for parents late in picking up their children saw an increase in dilatory behavior, not a reduction as predicted).
Smaller companies, without necessary resources, would consider non-compliance with even the most anodyne of contractual obligations to be unthinkable. In short, one possible characteristic of such a world would be the routine enforcement of liquidated damage amounts that are inevitably in excess of actual loss, and consequently a considerable transfer of power and leverage in favor of those already powerful.
[C]ontractual terms fixing damages in an amount clearly disproportionate to actual loss seek to deter breach through compulsion and have an in terrorem effect: fearing severe economic loss, the promisor is compelled to continue performance, while the promisee may reap a windfall in excess of his just compensation.
Leasing Service Corp. v. Justice (2nd Cir. 1982).
The impossible clause: the NDA ‘return or destroy’ obligation
The obligation to return or destroy confidential information upon request (or at contract termination) is ubiquitous in confidentiality agreements. But in this era of distributed network computing and cloud storage, when nothing can ever be completely deleted everywhere, compliance with such a clause is illusory.
In complex, long-term contractual relationships, confidential information (usually defined quite broadly, and including “copies, analyses, descriptions” etc) is exchanged wide, often, and far, disseminated via and among countless individuals. Data resides simultaneously in emails and voicemails, in .doc, .xls, and .ppt files, in messages (eg Skype, Zoom, Slack), cloud folders, etc, and on multiple servers at multiple locations—some of which may be under the control of third parties (eg AWS, Salesforce, G-mail).
A truly effective deletion campaign would be either impossible or prohibitively expensive. And yet, return or destroy clauses are routinely accepted—even those with a requirement for a corporate officer to certify in writing that destruction has occurred.
It’s not uncommon for desperate and/or well-financed parties in litigation to pull any levers available. For such parties, a tempting target could be a claim for breach of a return or destroy clause—or even better, a claim for specific enforcement of such a clause. The e-discovery burden of defending such a claim, or complying with the clause, could force an unfavorable settlement.
Strategies for dealing with such clauses, and alternative contract text, can be found at Redline: Return or Destroy Clauses in the 21st Century.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.