These clauses exclude from the Confidential Information (CI) definition any information retained in the residual memory of the receiving party’s personnel. The provision is often contentious, as disclosing parties want to avoid losing rights to their confidential information because someone remembers it.

Be clear about what information is included. Is it as broad as all CI or are there categories that would not be included (such as a secret formula or top secret trade secret) 

Consider who is eligible. For example, does it extend to all of the receiving party’s representatives or is it only for employees? 

Look at whether there is a restriction on proactive memorization, such as not applicable if someone intentionally memorized it for use.

Evaluate what future actions are restricted. Is it only use? Only disclosure? 

Remember that this language only excludes it from restrictions imposed by contract. Be careful to clarify that there is no license to exercise statutory rights under intellectual property.

“The use by a party's employees of improved general knowledge, skills, and experience in the field of the other party's proprietary information is not a breach of this Agreement.”

Disclosing parties should push back. These provisions favor receiving parties by providing a strong basis for arguing independent development based on retained residual knowledge.

Receiving parties may want to include this language to help prevent arguments of improper use by employees due to their memories and independent work.

Script: “The reality is that our employees will remember things. We can’t make human nature a breach of the agreement.”

Suggested revision: “The term “residuals” means information retained in the unaided memory of persons employed or retained by Recipient who have had access to or worked with the Confidential Information, including ideas, concepts, know‐how or techniques contained therein.”