NDA Definition of Confidential Information: Why It's the Most Important Clause
What This Clause Does
The definition of confidential information is the most important clause in any NDA. It determines exactly what you're legally required to protect. A narrow, well-crafted definition covers specific categories (trade secrets, financial data, customer lists) and often requires the disclosing party to mark information as confidential or confirm it in writing.
A dangerously broad definition can cover everything you ever learn in the relationship, including information that's publicly available or that you already knew. Overly broad definitions are also harder to comply with in practice because you can't easily keep track of what's covered.
Example Clause Pattern
"'Confidential Information' means any information or data that has or could have commercial value or other utility in the business in which Disclosing Party is engaged, whether in tangible or intangible form, and regardless of whether it is marked 'confidential.'"
What to Watch
- Definition covers any information regardless of how it was disclosed or whether it was marked confidential
- No exclusion for publicly available information
- No exclusion for information independently developed by the receiving party
- "Could have commercial value" language is almost unlimited in scope
What to Negotiate
- Add the four standard exclusions: information already public, information you knew before signing, information you independently developed, and information received from a third party without restriction
- Require tangible disclosures to be marked 'Confidential' and oral disclosures confirmed in writing within 30 days — otherwise you have no clear record of what is covered
- Replace vague language like 'could have commercial value' with a specific list of covered categories: technical data, financial projections, customer lists, source code
- Limit the definition to information disclosed during the agreement term, not all past or future information
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Found in These Contracts
This clause commonly appears in the following contract types:
Frequently Argued Questions
What should be excluded from the definition of confidential information?
Standard exclusions include: (1) information already in the public domain before or after disclosure through no fault of the receiving party, (2) information the receiving party already knew before the agreement, (3) information independently developed by the receiving party without using the disclosing party's information, and (4) information received from a third party who had no obligation to keep it confidential. Without these exclusions, you could be restricted from using knowledge you legitimately had before signing.
Does an NDA cover everything said during a meeting?
Only if the definition is broad enough to cover oral disclosures. Some NDAs require the disclosing party to identify oral disclosures as confidential at the time of disclosure and confirm them in a written summary within a set period (typically 10–30 days). Without this requirement, any information shared verbally could technically be covered — or not covered — with no clear record of what was disclosed.
What is wrong with 'any information of commercial value' in an NDA definition?
It is dangerously broad. Almost any information about a business can be characterized as having commercial value, including general industry knowledge, skills developed on the job, and contact information. Courts in many states will narrow an overly broad definition, but you cannot count on that. Better definitions list specific categories — financial data, source code, customer lists, product roadmaps — so both parties know exactly what is and is not covered.
Negotiation Strategies
Add standard carve-outs: public knowledge, prior knowledge, independent development
Require tangible information to be marked and oral disclosures confirmed in writing
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