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Confidentiality and Nondisclosure Agreements

Lynn P. Hendrix, Oil & Gas Agreements: The Exploration Phase

Confidential and proprietary information and data (“confidential information”) can be an oil and gas company's most valuable asset. Processes, procedures, methods, information and data can all be confidential and proprietary and subject to protection under applicable trade secret law. During the exploration phase, parties invariably disclose to other parties confidential information relating to the exploration project. Often such disclosure is pursuant to one of the many types of exploration agreements used in the oil and gas industry. But even more often such disclosure is made prior to entering into the applicable exploration agreement in an effort to entice another party to join in the project.

Confidential information can be owned, or it can be licensed. Licensing is the procedure by which the owner of property allows another party to use the property to a limited extent. A confidentiality and nondisclosure agreement (“CNDA”) is a type of license that allows one party to use and disclose certain information of another party to the extent authorized in the CNDA. CNDAs are contracts between parties and, to a great extent, are governed by general state contract law; but CNDAs are also subject to the overlay of the laws establishing the different types of intellectual property, particularly trade secret law. Trade secrets are classified as intangible personal property