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 definition of "derive" in NDA ? 
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Joined: 2012-04-13 10:23:53
Posts: 2
What is the legal-common definition of "derive" in the context of use of confidential info in an NDA?
I signed an NDA with a component manufacturer that said " ... cannot sell any product derived from any Confidential Information of X".

And, all basic instructions, manuals, documenation, etc. for the component provided by the manufacturer are marked "Confidential". Depending on the definition of "derived" this NDA may actually bar selling any product that incorporates their component.

Here's a hypothetical, made-up example. The manufacturer is an auto-parts company. The component is a transmission. The manual, installation instructions, etc. are not available to the general public and are only provided after an NDA is signed and are all marked "Confidential", "do not copy", etc.

There is no way you can use/build-in the transmission, include it in your new car line, etc. without using the Confidential info. Does the NDA without any superceding contract bar the sale of a new car you built with the transmission using their confidential information?
When does "use" become derivation?

In the example, it could be argued that by selling you the transmission the manufacturer gave permission to sell the car.
But what if I'm not buying anything directly from the manufacturer?

E.g. case 2:
My company licenses a power-train design to car manufacturers. My design includes the NDA related component. My company will never buy anything from the manufacturer. Does the NDA bar me from selling my design that incorporates their component if I needed to use their confidential manuals?

2012-04-13 10:43:42
Patent Practitioner

Joined: 2012-01-20 17:49:57
Posts: 67

I am not certain that I fully understand your question.

You seem to have two things going on besides the direct question on "derivation." The first being an NDA and the second being in a position of being a reseller. Neither of these impact the meaning of derivation under the new law. Derivation means derivation no matter how the two additional facets interact. In this sense just ask yourself, would you have the information but for the other party? If your answer is "no" then you have derived the information.

Now the other two questions do play out, but I think more in contract law. Most intersting to me is what your purchase agreement may indicate. Does the person who sold you the items knows that you want to resell them? Is "them" more than one, many more than one, or a prototype? Is it implicit (even explicit) in your purchase agreement?

Sorry I have more questions than answers...

2012-04-14 16:19:32

Joined: 2012-04-13 10:23:53
Posts: 2
Sorry about the lack of clarity.

My main question was whether the definition of "derived" in '... cannot sell any product derived ..." includes selling products that were constructed using their confidential instruction manuals, even though the purpose of the manuals is to help their customers build devices that include their components.

In other words say the NDA author makes a car headlight subsystem. Their Confidential manual explains how to hook up the wires and weld the enclosure, etc. This NDA clause seems to forbid selling a new car (product) that uses their headlights because of the "derivation" from the confidential instruction manual.

2012-04-19 14:30:20
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