Proprietary information: Overview, definition, and example
What is proprietary information?
Proprietary information refers to any confidential, proprietary, or trade-secret information that is owned by an individual or business and provides a competitive advantage. This can include intellectual property, such as patents, trademarks, and copyrights, as well as business information like customer lists, marketing strategies, product designs, or software code. Proprietary information is typically protected by non-disclosure agreements (NDAs) or other legal provisions to prevent unauthorized use or disclosure.
For example, a tech company’s software code or a manufacturer’s production process could be considered proprietary information.
Why is proprietary information important?
Proprietary information is important because it can represent a business’s most valuable assets. By protecting proprietary information, businesses safeguard their competitive edge, market position, and innovation. Unauthorized use or leakage of proprietary information can result in loss of intellectual property, customer trust, and financial resources. Protecting this information is crucial for businesses to maintain their uniqueness and profitability.
For businesses, clearly defining and protecting proprietary information ensures that sensitive data is not misused or shared inappropriately, helping to maintain the integrity and value of their intellectual property and trade secrets.
Understanding proprietary information through an example
Imagine a software company that has developed a unique algorithm that powers its application. The algorithm is proprietary information and represents a significant portion of the company’s competitive advantage in the marketplace. The company requires its employees and business partners to sign non-disclosure agreements to prevent the sharing or unauthorized use of this algorithm.
In another example, a manufacturing company may have proprietary information in the form of its production process. This information is crucial to maintaining its cost advantage in the market. The company implements strict internal protocols to ensure that only authorized personnel have access to this information.
An example of a proprietary information clause
Here’s how a proprietary information clause might look in a contract:
“The Parties agree that any proprietary information disclosed during the course of this Agreement, including but not limited to business plans, technical data, product designs, and customer lists, shall remain the sole property of the disclosing Party. The receiving Party agrees to keep all proprietary information confidential and to use such information only for the purposes of this Agreement, in accordance with the terms set forth herein.”
Conclusion
Proprietary information is a valuable asset that can determine the success and longevity of a business. Protecting this information through legal means, such as non-disclosure agreements, is essential to ensure that it remains confidential and is not exploited by competitors.
By including clear clauses regarding proprietary information in contracts, businesses can protect their innovations, maintain their market position, and avoid the risks of information theft or misuse.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.