General Contract Clauses: Confidentiality Agreement Clauses After

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STANDARD DOCUMENT

General Contract Clauses: Conﬁdentiality Agreement Clauses After

the Defend Trade Secrets Act

byCharles R. Macedo, Amster, Rothstein & Ebenstein LLP, with Practical Law Commercial Transactions

The author acknowledges with appreciation the contributions of Michael Sebba to the original version of these Standard Clauses,

and David Goldberg, Olivia Harris, and Christopher Lisiewski, who assisted with research and revisions to these Standard Clauses.

Status: Maintained | Jurisdiction: United States

This document is published by Practical Law and can be found at: us.practicallaw.tr.com/w-002-9194

Request a free trial and demonstration at: us.practicallaw.tr.com/about/freetrial

Standard Clauses for use in conﬁdentiality agreements drafted after the Defend Trade Secrets Act

of 2016 (DTSA). These Standard Clauses include whistleblower protections and notice of immunity

provisions for nondisclosure agreements (NDAs) between a company and an individual who is an

employee, a contractor, or a consultant. They also include other clauses commonly used in business-

to-business transactions with drafting notes addressing possible implications of the DTSA. These

Standard Clauses have integrated notes with important explanations and drafting and negotiating tips.

DRAFTING NOTE: READ THIS BEFORE USING DOCUMENT

The Defend Trade Secrets Act of 2016 (DTSA)

(18U.S.C.§§1831-1836) became effective on May 11,

2016, creating a federal private cause of action for

trade secret misappropriation claims occurring on or

after the effective date. Private parties can now bring

civil trade secret claims in federal court.

Conﬁdentiality agreements typically address the

handling and protection of trade secrets by the

parties. Before the DTSA, conﬁdentiality agreements

were traditionally governed exclusively by state

law. Like most state trade secrets laws, the DTSA is

modeled after the Uniform Trade Secrets Act (UTSA)

and contains similar remedies. However, the DTSA has

unique provisions that require renewed consideration

when drafting or revising a company’s conﬁdentiality

agreements with:

• Individuals who are employees, consultants, or

contractors.

• Potential and actual business partners.

These unique provisions of the DTSA:

• Provide protection for whistleblowers. A company

must provide written notice of the DTSA’s immunity

provisions to take full advantage of the enforcement

rights and remedies for a successful DTSA

misappropriation claim, such as exemplary damages

or attorneys’ fees (see Drafting Note, Notice of

Immunity Under the Economic Espionage Act of 1996,

as Amended by the Defend Trade Secrets Act of 2016).

• Do not preempt state trade secrets law. Parties

may bring claims for trade secret misappropriation

under the DTSA and combine them with state law

claims (18 U.S.C.§1838) (see Drafting Note, Choice

of Forum and Drafting Note, Choice of Law).

• Allow for civil ex parte seizures. In extreme

situations, the DTSA authorizes courts to order

seizure of property (18 U.S.C.§1836(b)(2)). Courts

have generally taken a cautious approach in

granting these, however, relying instead on the

availability of standard temporary restraining orders

and preliminary injunctions to deny them.

These Standard Clauses are not intended to be used

sequentially in a conﬁdentiality agreement. Section 1

differs from the remaining sections as follows:

• Section 1 includes a notice of immunity which

is required under the DTSA for a company’s

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General Contract Clauses: Conﬁdentiality Agreement Clauses After the Defend Trade Secrets Act

conﬁdentiality agreements with individuals who are

employees, contractors, or consultants.

• Section 2 – Section 10 are commonly used in

business-to-business conﬁdentiality agreements.

The drafting notes to these sections mainly focus on

the DTSA’s possible implications.

For a general discussion of the DTSA in the context

of trade secrets litigation, see Practice Note, Trade

Secrets Litigation: Defend Trade Secrets Act. For

further discussion of conﬁdentiality agreements

generally, see Practice Note, Conﬁdentiality and

Nondisclosure Agreements and other resources

included in the Conﬁdentiality and Nondisclosure

Agreements Toolkit. For more information on

employee conﬁdentiality agreements, see Standard

Document, Employee Conﬁdentiality and Proprietary

Rights Agreement.

Assumptions

These Standard Clauses assume that:

• The notice of immunity in Section 1 is used in a

conﬁdentiality agreement between a company

and an individual who is an employee, consultant,

or contractor. Section 1 is drafted to address

protections that the DTSA affords to individual

employees, consultants, and certain contractors

and, therefore, is not written as a business-to-

business clause.

• Sections 2 – 10 are used in a business-to-

business conﬁdentiality agreement where the

parties are US entities and the transaction

takes place in the US. If any party is organized

or operates in, or any transaction takes place in a

foreign jurisdiction, these terms may need to be

modiﬁed to comply with applicable laws in the

relevant foreign jurisdictions.

• Sections 2 – 10 are used in a mutual agreement,

which assumes that both parties are disclosing

and receiving conﬁdential information. These

sections should not be used if only one party is

disclosing conﬁdential information. In addition,

these sections must be revised if the parties are not

sharing conﬁdential information on a fully mutual

basis. If the parties are instead entering into a

reciprocal conﬁdentiality agreement that contains

party-speciﬁc rights and obligations, these sections

should be revised to reﬂect any differences in the

scope and type of conﬁdential information that

each party expects to disclose (see Practice Note,

Conﬁdentiality and Nondisclosure Agreements:

Mutual Conﬁdentiality Agreements).

• These terms are not industry-speciﬁc. These

Standard Clauses do not account for any industry-

speciﬁc laws, rules, or regulations that may apply to

certain transactions, products, or services. Some of

these Standard Clauses may not be enforceable, either

because of applicable state law, industry-speciﬁc

regulations, or other rules and regulations applicable

to the parties. Parties should check all applicable

laws and regulations to ensure the Standard Clauses

included in the agreement are enforceable as drafted.

• Capitalized terms are deﬁned elsewhere in the

agreement. Certain terms are capitalized but not

deﬁned in these Standard Clauses because it is

assumed that they are deﬁned elsewhere in the

agreement (for example, Agreement).

Bracketed Items

Bracketed items in ALL CAPS should be completed

with the transaction’s facts. Bracketed items in

sentence case are either optional provisions or include

alternative language choices to be selected, added, or

deleted at the drafter’s discretion.

1. Notice of Immunity Under the Economic Espionage Act of 1996, as Amended by the Defend Trade Secrets Act of 2016.

Notwithstanding any other provision of this Agreement:

(a) [[Contractor/Employee] will not be held criminally or civilly liable under any federal or state trade secret law for

any disclosure of a trade secret that:

(i) is made:

(A) in conﬁdence to a federal, state, or local government ofﬁcial, either directly or indirectly, or to an attorney; and

(B) solely for the purpose of reporting or investigating a suspected violation of law; or

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(ii) is made in a complaint or other document that is ﬁled under seal in a lawsuit or other proceeding.

(b) If [Contractor/Employee] ﬁles a lawsuit for retaliation by [Company/Employer] for reporting a suspected violation

of law, [Contractor/Employee] may disclose [Company’s/Employer’s] trade secrets to [Contractor’s/Employee’s]

attorney and use the trade secret information in the court proceeding if [Contractor/Employee]:

(i) ﬁles any document containing the trade secret under seal; and

(ii) does not disclose the trade secret, except pursuant to court order.

[Contractor/Employee] acknowledges receipt of [Company/Employer’s] [NAME OF REPORTING POLICY FOR A

SUSPECTED VIOLATION] setting forth:

(a) [Company’s/Employer’s] reporting policy for a suspected violation of law; and

(b) Notice of immunity from criminal and civil liability for certain disclosures of trade secrets under the Defend Trade

Secrets Act of 2016 (18 U.S.C.§1833(b)).]

DRAFTING NOTE: NOTICE OF IMMUNITY UNDER THE ECONOMIC ESPIONAGE ACT OF

1996, AS AMENDED BY THE DEFEND TRADE SECRETS ACT OF 2016

If the company’s conﬁdentiality agreement is with

an individual who is an employee, consultant, or

contractor, the company must:

• Be aware of whistleblower protections afforded to

these individuals under the DTSA.

• Include a notice of immunity to preserve the full

extent of its rights and remedies afforded by the

DTSA for a successful DTSA misappropriation claim.

The notice of immunity provision in Section 1

assumes that it is used in an agreement between

a company and an individual who is an employee,

consultant, or contractor. Section 1 is drafted

to address protections that the DTSA affords to

these individuals and, therefore, is not written as a

business-to-business clause.

DTSA’s Whistleblower Protection

The DTSA provides employees with immunity to

both criminal and civil liability for trade secret

misappropriation under the DTSA and any state

trade secrets law if the trade secret disclosure is

made either:

• In conﬁdence and solely for the purpose of reporting

or investigating a suspected violation of law to:

– a federal, state, or local government ofﬁcial; or

– to an attorney.

• In a ﬁling in a lawsuit or other proceeding, made

under seal.

(18 U.S.C.§1833(b)(1).)

Under the DTSA, the term “employees” includes

individuals who are:

• Employees.

• Contractors.

• Consultants.

(18 U.S.C.§1833(b)(4).)

The DTSA also permits individuals ﬁling a lawsuit for

retaliation by an employer to:

• Disclose the employer’s trade secret to an attorney.

• Use the trade secret in the court proceeding.

The individual must both:

• File any document containing the trade secret under

seal.

• Not disclose the trade secret, except under court order.

(18 U.S.C.§1833(b)(2).)

Notice of Immunity Requirement

Conﬁdentiality agreements with employees (deﬁned

under the DTSA to include contractors and consultants)

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2. Recitals.

[WHEREAS, Disclosing Party has a business opportunity associated with intellectual property and/or proprietary

information relating to, inter alia, [DESCRIPTION OF PRODUCT OR SERVICE], which is intended for use in interstate

or foreign commerce (the “Business Opportunity”); and

WHEREAS, Disclosing Party has a business opportunity associated with intellectual property and/or proprietary information

relating to, inter alia, [DESCRIPTION OF PRODUCT OR SERVICE], which is intended for use solely within the State of [STATE]

(the “Business Opportunity”); and]

must provide written notice of the DTSA’s immunity

provisions. Failure to provide notice waives the

employer’s rights to exemplary damages or attorneys’

fees in a lawsuit to enforce its rights under the DTSA

against an employee who did not receive the notice. For

further discussion of consequences for failure to provide

notice, see Standard Clause, Notice of Immunity Under

the Defend Trade Secrets Act (DTSA) Provision: Drafting

Note: Consequences for Failure to Provide DTSA Notice.

Section 1 directly tracks the statutory language. It has

optional language to address either:

• An employment relationship, referring to the

individual as an “Employee” and the business

entity as the “Employer.”

• An independent contractor relationship, referring

to the individual as a “Contractor” and the business

entity as “Company.”

It also includes alternative language (the second

alternative) based on the DTSA provision which states

that an employer may provide the required notice by

reference to a policy document:

• Setting out the employer’s reporting policy for a

suspected violation of the law.

• Providing notice of the DTSA’s immunity provisions.

(18 U.S.C.§1833(b)(3).)

For further discussion of the notice of immunity

provisions and the practical implications, see:

• Standard Clause, Notice of Immunity Under

the Defend Trade Secrets Act (DTSA) Provision:

Drafting Notes: Consequences for Failure to

Provide DTSA Notice and Practical Implications

for Employers.

• Standard Document, Employee Conﬁdentiality

and Proprietary Rights Agreement: Drafting Note:

Notice of Immunity Under the Defend Trade Secrets

Act of 2016.

• Standard Document, Independent Contractor/

Consultant Agreement (Pro-Client): Drafting Note:

Notice of Immunity Under the Defend Trade Secrets

Act of 2016 (DTSA).

DRAFTING NOTE: RECITALS

Intrastate Versus Interstate

A prerequisite to invoking the DTSA is that the trade

secret concerns a product or service involved in

interstate or foreign commerce (18 U.S.C.§1832(a)).

If there is no intent evidenced in the agreement, a

court will review the nature of the actual purportedly

wrongful activities and may invoke only state law or

state and federal law. The parties can use the recitals

to demonstrate the nature of the activities and inform

the court’s analysis.

These alternative provisions enable the parties to

demonstrate that the information relates to products

or services that are either:

• Used in or intended for use in interstate or foreign

commerce.

• Only offered within the borders of a single state.

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General Contract Clauses: Conﬁdentiality Agreement Clauses After the Defend Trade Secrets Act

3. Conﬁdential Information.

”Conﬁdential Information” means[, except as set forth in Section 4,] any facts, opinions, conclusions, projections,

data, information, trade secrets, patents, patent applications, inventions, software, hardware, or know-how relating to

any work in process, future development, sales, marketing, ﬁnancial, or personnel matter relating to (a) the Business

Opportunity; and (b) Disclosing Party or its afﬁliates, its present or future development, sales, marketing, ﬁnancial, or

personnel matter relating to Disclosing Party, its present or future products, patents, patent applications, technology,

inventions, know how, sales, customers, employees, investors, prospects, markets, or business, whether communicated

orally or in writing or obtained by Receiving Party through observation or examination of Disclosing Party’s facilities,

documents, or procedures.

The ﬁrst alternative can help the parties invoke the

DTSA. If the conﬁdential information relates to products

or services offered within a single state, the second

alternative can support a position that the DTSA does

not apply.

DRAFTING NOTE: CONFIDENTIAL INFORMATION

Most conﬁdentiality agreements include a deﬁnition

of information to be protected. Parties can invoke

protection under the DTSA for the following types of

information:

• Financial.

• Business.

• Scientiﬁc.

• Technical.

• Economic.

• Engineering.

(18 U.S.C.§1839(3).)

DTSA protections apply if:

• The owner takes reasonable measures to keep the

information secret.

• The information derives actual or potential

independent economic value from not being

generally known to, and not being readily and

properly ascertained by, other persons who can use

it for economic gain.

(18 U.S.C.§1839(3).)

These requirements have two implications to the

DTSA’s application:

• Certain types of information may not be covered.

The Conﬁdential Information deﬁnition in Section 3 is

consistent with the categories speciﬁed in the DTSA.

Most trade secrets should be covered by the DTSA.

However, courts may interpret the act narrowly and,

if the parties add other types of information, they

should ensure that the description is consistent with

categories listed in the DTSA.

• The secrecy must create value and the owner

must take steps to protect the information. For

the DTSA to apply, a party must demonstrate

that there is some economic value derived from

the information being secret and not readily

ascertainable. The parties should also consider

taking reasonable measures to ensure that the

information is protected. For example, they should:

– show that they take measures to protect their own

data; and

– consider adding additional requirements, such as

a marking provision (see Drafting Note, Marking).

If a marking provision is included (see Section 4),

the drafter should include the bracketed phrase

“except as set forth [in Section 4/below].”

If the DTSA does not apply to the information,

a party may need to pursue state law claims for

misappropriation, unfair competition, or breach of

contract. For further discussion of the deﬁnition

of conﬁdential information, see Practice Note,

Conﬁdentiality and Nondisclosure Agreements:

Deﬁnition of Conﬁdential Information.

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4. Marking.

[Conﬁdential Information shall not include any [written] information disclosed under this Agreement unless it is

conspicuously marked “Conﬁdential” at the time of disclosure.]

[Conﬁdential Information shall not include information that is disclosed orally, visually, or in another form that [is

difﬁcult to mark/cannot be tangibly marked] unless Disclosing Party, within ﬁfteen (15) days of the disclosure, delivers a

tangible version of the information marked “Conﬁdential,” or in the case of information that is not amenable to tangible

form, a writing describing the information and marked “Conﬁdential.”]

[If disclosed information should reasonably be recognized by Receiving Party as conﬁdential, then Disclosing Party’s

inadvertent failure to mark the information as Conﬁdential shall not result in the information being deemed to be non-

conﬁdential under this Agreement.]

DRAFTING NOTE: MARKING

Parties must determine whether and to what extent

conﬁdential information should be marked as

“Conﬁdential.” The parties should carefully consider the

inclusion of a marking clause as courts have held that

failure to mark removes the unmarked information from

the agreement’s protection. Marking requirements can

increase both:

• The certainty of what information is protected as

conﬁdential under the agreement’s terms.

• The risk that a party’s valuable information may

become unprotected after an inadvertent failure

to mark.

Marking clauses are beneﬁcial when the parties

anticipate the dissemination of a large volume of

information between the parties and with only a small

portion being conﬁdential. In these situations, both

parties beneﬁt by having clear instruction on what

information is conﬁdential. However, marking clauses

can create an excessive administrative burden when

most information disclosed between parties will be

conﬁdential.

Section 4 provides three alternative marking

provisions that counsel can choose from or combine:

• A strict marking option.

• A permissive option that includes a catch up clause

permitting retroactive marking to remedy any

failures to mark.

• A more permissive option which requires the receiving

party to treat as conﬁdential information that should

be reasonably understood to be conﬁdential even if

there is an inadvertent failure to mark.

DTSA protections apply if the owner takes reasonable

measures to keep the information secret (18

U.S.C.§1839(3)). When considering a marking clause,

a party should evaluate whether the process would

support an argument that they took reasonable

measures to protect the information.

5. Exclusions.

Receiving Party, however, shall have no liability to Disclosing Party under this Agreement with respect to the disclosure

and/or use of any such Conﬁdential Information that it can establish:

(a) has become generally known or available to the public without breach of this Agreement by the Receiving Party;

(b) was known by the Receiving Party, as established by its [written] records, before receiving such information from

Disclosing Party; or

Party from a source other than Disclosing Party, without, to Receiving Party’s knowledge, any breach of any obligation of

conﬁdentiality owed to Disclosing Party.

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6. Required Disclosures.

Receiving Party may disclose Conﬁdential Information if and to the extent that such disclosure is required by applicable

law, regulation, or court order, provided that Receiving Party (i) uses reasonable efforts, at Disclosing Party’s expense,

to limit the disclosure by means of a protective order or a request for conﬁdential treatment and (ii) provides Disclosing

Party [a reasonable opportunity/at least ten (10) business days] to review, if permitted, the disclosure before it is made

and to interpose its own objection to the disclosure.

DRAFTING NOTE: EXCLUSIONS

There are circumstances where trade secrets are

no longer deemed protectable and courts will not

continue to enforce conﬁdentiality obligations.

Parties traditionally address those circumstances by

including exclusions from the conﬁdential information

deﬁnition. Those exclusions include situations where:

• The information is no longer conﬁdential through no

fault of the receiving party.

• The receiving party already knew about the alleged

trade secret without any wrongdoing.

It is still appropriate for parties to include these

traditional exclusions under the DTSA. For further

discussion, see Practice Note, Conﬁdentiality and

Nondisclosure Agreements: Exclusions from the

Deﬁnition.

DRAFTING NOTE: REQUIRED DISCLOSURES

Traditionally, conﬁdentiality agreements also address

required disclosures, such as disclosures required by

law or regulation. Examples include:

• Response to a subpoena or court order.

• A public company’s reporting obligations to the

Securities and Exchange Commission or another

regulatory authority.

It is still appropriate for parties to include required

disclosure language under the DTSA. For further

discussion, see Practice Note, Conﬁdentiality

and Nondisclosure Agreements: Nondisclosure

Obligations.

7. Conﬁdentiality Obligations.

Receiving Party acknowledges that irreparable injury and damage may result from disclosure of Conﬁdential Information

to any parties or individuals not expressly authorized under this Agreement or use by Receiving Party for any purpose

other than the Business Purpose. Receiving Party shall[:

(a) hold Conﬁdential Information in [strict] conﬁdence;

(b) disclose such Conﬁdential Information only to individuals who Receiving Party warrants and represents have

agreed in writing to be bound by the terms and conditions of this Agreement;

(c) use [all] reasonable precautions, at least consistent with the precautions Receiving Party takes in the procedures it

follows to avoid disclosure of its own conﬁdential information of a similar nature, to prevent the unauthorized disclosure

of Conﬁdential Information, including, without limitation, protection of documents from theft, unauthorized duplication,

and discovery of contents, and restrictions on access by other persons to such Conﬁdential Information; and

(d) not use any Conﬁdential Information for any purpose other than the Business Purpose.

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take [all] [reasonable] precautions, at least consistent with the precautions Receiving Party takes in the procedures it

follows to protect its own conﬁdential information of a similar nature, to prevent unauthorized copying, duplication,

sketching, drawing, photographing, downloading, uploading, alteration, destruction, photocopying, replicating,

transmitting, delivering, sending, mailing, communicating, or conveying of Conﬁdential Information, and to take [all]

[reasonable] precautions, at least consistent with the precautions Receiving Party takes in the procedures it follows to

protect its own conﬁdential information of a similar nature, against theft, unauthorized sale, or unauthorized conveyance

obtained through fraud, deception, misrepresentation, or bribery of Conﬁdential Information.]

DRAFTING NOTE: CONFIDENTIALITY OBLIGATIONS

The purpose of entering into a conﬁdentiality

agreement is to ensure the protection of conﬁdential

information. The DTSA recognizes that establishing

the protectability of a trade secret requires the trade

secret owner to take precautions to protect the trade

secret (18 U.S.C.§1839(3)).

These measures can be evidenced by:

• Written conﬁdentiality obligations that require

the recipient to maintain the information’s

conﬁdentiality.

• Precautionary measures taken by the trade secret

owner to maintain the information’s conﬁdentiality

within its own organization.

Traditional conﬁdentiality agreements often use

broader restrictive language than that listed in

the DTSA. As long as the proscribed acts are

encompassed by the type of protection provided

under the DTSA, this broader agreement language

should meet the DTSA’s requirements. If the parties

seek greater protection beyond that set out in the

DTSA, the parties should consider choosing a state’s

law that provides the best opportunity to pursue

additional claims for:

• Trade secret misappropriation claims based on state

law.

• Breach of contract.

The last alternative bracketed language provides

the most comprehensive language addressing the

disclosing party’s conﬁdentiality obligations.

DRAFTING NOTE: PERMITTED DISCLOSURES

Typically, in addition to including a paragraph

addressing the receiving party’s conﬁdentiality

obligations, conﬁdentiality agreements may alsoinclude

a permitted disclosure paragraph thatidentiﬁes certain

8. Permitted Disclosures.

[Receiving Party may disclose Conﬁdential Information to its employees with a bona ﬁde need to know such Conﬁdential

Information, but only to the extent necessary to carry out the Business Purpose and only if such persons are advised

of the conﬁdential nature of such Conﬁdential Information and the terms of this Agreement and agree to be bound in

writing by the conﬁdentiality obligations contained in this Agreement.

Receiving Party may disclose Conﬁdential Information to the following individuals to the extent necessary to carry out

the Business Purpose: [RECIPIENT NAMES]. Such disclosure may only occur after the individuals are advised of the

conﬁdential nature of the Conﬁdential Information and the terms of this Agreement and agree to be bound in writing by

the conﬁdentiality obligations contained in this Agreement. Receiving Party shall not disclose Conﬁdential Information

to other individuals except upon the Disclosing Party’s prior written permission.]

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9. Choice of Law. This Agreement and all related documents [including all exhibits attached hereto][, and all matters

arising out of or relating to this Agreement,] are governed by, and construed in accordance with, the laws of the State of

[STATE], United States of America [(including [APPLICABLE STATE CHOICE OF LAW STATUTE(S)])] [, without regard to

the conﬂict of laws provisions thereof to the extent such principles or rules would require or permit the application of the

laws of any jurisdiction other than those of the State of [STATE]].

situations where the receiving party may be permitted to

disclose conﬁdential information.

The ﬁrst alternative clause allows disclosure to

advisors or other parties who both:

• Need access to the information so the receiving

party may perform the project which is the basis of

the disclosure.

• Agree to be bound by the same conﬁdentiality

obligations set out in the agreement.

The second alternative clause is more restrictive and

requires the receiving party to limit disclosure to only

those individuals listed in the agreement. This is a

practice often employed in court-directed protective

orders.

DRAFTING NOTE: CHOICE OF LAW

Unlike many federal statutory schemes, the DTSA

expressly does not pre-empt state trade secrets

law (18 U.S.C.§1838). There may be advantages

to pursuing trade secrets misappropriation claims

under the DTSA or state law and each party should

consider whether state law may provide a favorable

option. State law includes both substantive law and

laws that deal directly with choice of law.

Since the DTSA has been enacted, it has become

clear both that DTSA actions are most often brought

in combination with state UTSA actions, and also

that ancillary legal doctrines have had an impact on

the interpretation and success of such claims (for

example, whether “irreparable harm” or “inevitable

disclosure” may be presumed in motions for

preliminary injunctions). Since these ancillary legal

doctrines may differ from state to state, selecting the

right choice of law provision can impact the likelihood

that a court would adopt such doctrines when

considering enforcement measures.

Choice of Law Rules

Section 9 includes optional bracketed language that

addresses the state’s choice of law rules, which can

determine which state’s substantive law will apply.

If the parties do not include the bracketed language,

the forum court could apply the choice of law rules of

the selected state to determine that the substantive

law of a state other than the selected state applies to

the transaction. For further discussion of choice of law

rules, see Standard Clause, General Contract Clauses:

Choice of Law: Drafting Notes: Choice of Law Rules

and Interaction with Other Contract Provisions.

Other Transaction Documents

The language in the ﬁrst line “and all related

documents” captures ancillary documents, especially

short form documents that may not have stand-alone

choice of law clauses. To the extent that the ancillary

documents contain choice of law clauses, the parties

should consider whether to conform these provisions

to select the same governing law.

Extra-Contractual Matters

State law varies regarding the applicability of choice of

law clauses to tort, fraud, statutory, or other matters

that arise from or relate to the contract, but are not

explicitly a matter of contract law. The parties should

consider adding the bracketed language “[and all

matters arising out of or relating to this Agreement]” to

try to capture these and other extra-contractual matters.

For more information about key issues in choice of

law provisions, see Practice Note, Choice of Law and

Choice of Forum: Key Issues. For more explanations

and drafting and negotiating tips, see Standard

Clause, General Contract Clauses: Choice of Law.

10 Practical Law

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10. Choice of Forum.

[Mandatory Choice of Forum. Each party irrevocably and unconditionally agrees that it will not commence any

action, litigation, or proceeding of any kind whatsoever against any other party in any way arising from or relating to

this Agreement and all contemplated transactions[, including, but not limited to, contract, equity, tort, fraud, and

statutory claims], in any forum other than [US DISTRICT COURT NAME] or[, if such court does not have subject matter

jurisdiction,] the courts of the State of [STATE] sitting in [POLITICAL SUBDIVISION], and any appellate court with

jurisdiction thereover. Each party irrevocably and unconditionally submits to the exclusive jurisdiction of such courts

and agrees to bring any such action, litigation, or proceeding only in [US DISTRICT COURT NAME] or[, if such court

does not have subject matter jurisdiction,] the courts of the State of [STATE] sitting in [POLITICAL SUBDIVISION]. Each

party agrees that a ﬁnal judgment in any such action, litigation or proceeding is conclusive and may be enforced in other

jurisdictions by suit on the judgment or in any other manner provided by law.

Permissive Choice of Forum. Any party may commence any action, litigation, or proceeding of any kind whatsoever against

any other party in any way arising from or relating to this Agreement and all contemplated transactions[, including, but not

limited to, contract, equity, tort, fraud, and statutory claims], in [US DISTRICT COURT NAME] or[, if such court does not

have subject matter jurisdiction,] the courts of the State of [STATE] sitting in [POLITICAL SUBDIVISION], and any appellate

court with jurisdiction thereover. Each party submits to the nonexclusive jurisdiction of such courts and agrees that any such

action, litigation, or proceeding may be brought in [US DISTRICT COURT NAME] or[, if such court does not have subject

matter jurisdiction,] the courts of the State of [STATE] sitting in [POLITICAL SUBDIVISION]. Each party agrees that a ﬁnal

judgment in any such action, litigation or proceeding is conclusive and may be enforced in other jurisdictions by suit on the

judgment or in any other manner provided by law.]

DRAFTING NOTE: CHOICE OF FORUM

In a choice of forum clause, the parties agree

on which court will decide disputes under the

confidentiality agreement. The parties confer

personal jurisdiction on the specified state or

federal courts to adjudicate disputes.

Subject Matter Jurisdiction

The parties cannot contractually confer subject

matter jurisdiction. The parties can negotiate

to allow certain federal or state courts to have

personal jurisdiction over the parties.

The DTSA provides US district courts with exclusive

original jurisdictions of DTSA civil actions (18 U.S.C.

§1836(c)). If claims are brought under both the

DTSAandstate law, a federal district court would

likely have supplemental jurisdiction over the state

lawclaims as long as those claims are part of

the samecase or controversy as the DTSA claims

(28U.S.C.§1367).

Federal courts can decline to exercise supplemental

jurisdiction if:

• The state law claim raises a novel or complete state

law issue.

• The federal court has dismissed all claims over

which it has original jurisdiction.

• The state law claim substantially predominates over

the federal claim.

• In exceptional circumstances, there are other

compelling reasons for declining jurisdiction.

(28 U.S.C.§1367(c).)

If there is no cause of action under the DTSA, federal

courts could potentially have diversity jurisdiction

if the parties are from different states and have a

sufﬁcient amount in controversy (28 U.S.C.§1332(a)).

State law would apply in these cases.

For more information about federal subject matter

jurisdiction generally, see Practice Note, Commencing

a Federal Lawsuit: Initial Considerations and Subject

Matter Jurisdiction Flowchart.

Mandatory Forum Selection

Clause

The ﬁrst alternative is a mandatory forum selection

clause, which requires the parties to bring any dispute

in the selected forum. Provided the court has subject

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matter jurisdiction, the parties can negotiate to confer

personal jurisdiction on federal or state courts. In the

mandatory forum selection clause, the parties take a

targeted approach, by:

• First conferring personal jurisdiction on the speciﬁed

federal court.

• Using the bracketed language “if such court does

not have subject matter jurisdiction” to confer

personal jurisdiction on the speciﬁed state court

only if the speciﬁed federal court does not have

subject matter jurisdiction.

In many cases, the parties take a more ﬂexible

approach by taking out the bracketed language and

conferring personal jurisdiction on either:

• The state courts located in the speciﬁed location.

• The federal courts located in the speciﬁed location.

Floating Reciprocal Option

The mandatory forum selection clause contemplates

that the parties will select to litigate in the courts of

the speciﬁed party’s home jurisdiction, regardless of

which party initiates the lawsuit. However, contracting

parties sometimes agree to reciprocal forum selection

clauses to incentivize the mutual resolution of disputes

and avoid litigation. When parties include a reciprocal

forum selection clause, they agree to bring suit in their

counterparty’s home jurisdiction. For a sample form of

choice of forum clause that requires a party initiating

litigation to do so in the home jurisdiction of the

counterparty, see Standard Clause, General Contract

Clauses: Choice of Forum (Floating: Reciprocal).

Choice of Forum Selection Clause

Factors

When the parties negotiate the choice of forum

clause, they must consider the potential impact of

selecting the state or federal courts in a particular

state on the outcome of the likely disputes. These

factors include:

• How friendly or hostile judges, jury pools, and

procedural rules in the selected forum are towards

a particular type of litigant or a particular legal

position (see Practice Note, Choice of Law and

Choice of Forum: Key Issues: Legal Environment of

the Selected Forum).

• Desire to litigate in the party’s home state (see

Practice Note, Choice of Law and Choice of Forum:

Key Issues: Home State Preference).

• Where the parties are qualiﬁed to do business (see

Practice Note, Choice of Law and Choice of Forum:

Key Issues: Qualiﬁcation to Do Business).

• Whether the selected forum state has a sophisticated

body of substantive law on a particular issue.

Permissive Forum Selection

Clause

The second alternative is a permissive forum selection

clause which permits, but does not require, the

parties to bring any dispute in the selected forum. The

plaintiff has the right to choose another forum, if such

court has appropriate jurisdiction.

If the parties confer permissive jurisdiction, then the

plaintiff can freely commence a lawsuit in the selected

forum, but also in any other court with appropriate

jurisdiction. To preserve the plaintiff’s ﬂexibility to

commence litigation in other courts, some parties

include a waiver of forum non conveniens (see Practice

Note, Choice of Law and Choice of Forum: Key Issues:

Defenses).

For further discussion of choice of forum, see Practice

Note, Choice of Law and Choice of Forum: Key Issues.