Three approaches, three risk profiles
There are three ways to define confidential information. A broad catch-all (all information disclosed in any form) maximises theoretical protection but risks unenforceability - courts, especially in the US, push back on definitions so broad they have no real boundaries (and in California an over-broad definition can be struck down as a disguised non-compete). A specific enumeration (information marked confidential, or listed by category) is clear but can accidentally exclude oral disclosures or unforeseen information.
The hybrid approach is best practice: enumerated categories, plus specific examples, plus a reasonableness qualifier that information a reasonable person would regard as confidential given its nature and the circumstances of disclosure also qualifies. Add a mechanism to confirm oral disclosures in writing within a set period.
Confidentiality is relative
Confidential information does not have to be secret in an absolute sense. As Arnold J held in Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 616 (Ch), confidentiality is relative - information does not cease to be confidential merely because it could be assembled from public sources. Under the springboard doctrine, if the recipient saves time and money by using the information rather than independently rediscovering it, the breach is actionable.
So a definition should not be defeated by the argument that the information was, in principle, available elsewhere - what matters is the unfair advantage from using the disclosed compilation.
The Faccenda classes and post-employment protection
For employee-held information after employment ends, Faccenda Chicken Ltd v Fowler [1987] Ch 117 is the leading authority. It is commonly summarised in three classes: trivial information (freely usable); information confidential during employment but not protectable afterwards without an express covenant; and trade secrets, protectable even after termination. Neill LJ identified factors for the trade-secret category - the nature of the employment and of the information, whether confidentiality was impressed on the employee, and whether the information can be isolated from the employee's general skill.
Lansing Linde Ltd v Kerr [1991] 1 WLR 251 widened the trade-secret category to include things like customer lists and pricing strategies where a senior employee is involved and the circumstances warrant. The drafting consequence is sharp: an NDA trying to restrict the middle class of information after employment, without a properly structured restrictive covenant, is likely unenforceable.
Designation is not magic - but it helps
Contractually designating information as a trade secret does not make it one - trade-secret status is a question of fact - but designation supported by corresponding treatment (restricted access, need-to-know protocols, technical safeguards) helps establish the reasonable steps the statutory regime requires. So pair the definition with how the information is actually handled.
For post-employment protection of the most valuable information, either elevate it credibly towards trade-secret status (designation plus real safeguards) or rely on an express, reasonable post-termination restrictive covenant - not on the confidentiality definition alone.
The carve-outs
Every definition needs the standard carve-outs: information that is or becomes public (other than through the recipient's breach), was already lawfully held, is independently developed without use of the confidential information, or is lawfully received from a third party not under a confidentiality obligation. The critical refinement is to require the recipient to prove these by competent written evidence - without that, the recipient can simply assert prior knowledge or independent development and gut the protection.
Draft the carve-outs tightly and put the evidential burden on the recipient. A loose carve-out is a hole in the definition.
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Practical checklist
- Use a hybrid definition: enumerated categories, examples, and a reasonableness qualifier, plus an oral-disclosure confirmation mechanism.
- Avoid an unbounded 'all information' definition - it may protect nothing (and is a de facto non-compete risk in some US states).
- Remember confidentiality is relative - the springboard advantage is actionable (Force India v 1 Malaysia Racing Team [2012] EWHC 616 (Ch)).
- Do not try to restrict middle-class Faccenda information post-employment without a proper covenant (Faccenda Chicken [1987] Ch 117).
- Back any trade-secret designation with real safeguards - designation alone is not conclusive.
- Draft tight carve-outs requiring proof by 'competent written evidence'.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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