Define: Proprietary Information

What Proprietary Information Means in a Contract

Proprietary Information refers to any material, data, or knowledge that a party owns and treats as confidential because it provides commercial or competitive value. This can include formulas, source code, customer lists, pricing models, manufacturing processes, marketing strategies, and internal research. In a contract, the term is used to draw a boundary around what one party is not permitted to share, copy, or exploit without permission.

The purpose of naming Proprietary Information in an agreement is to give both sides clarity on what falls inside the protected category. Without a clear definition, disputes can arise over whether a piece of information was genuinely confidential or simply general industry knowledge. Contracts therefore usually pair the term with obligations, remedies, and exceptions so that the scope of protection is understood from the outset.

This concept overlaps heavily with confidential information and trade secrets, but it is often used more broadly to also capture intellectual property that has not yet been formally registered or patented. A well drafted clause will specify not just what the information is, but how it must be handled, stored, and eventually returned or destroyed.

How Proprietary Information Is Defined or Measured

Most agreements define Proprietary Information by listing categories rather than relying on a single sentence. Common categories include technical data, business plans, financial records, client and vendor details, software code, and unpublished inventions. Some contracts also include a catch-all phrase covering any information marked or reasonably understood to be confidential at the time of disclosure.

Measurement in this context is less about quantifying value and more about establishing boundaries. Courts and contract drafters typically look at three factors: whether the information is not publicly known, whether the owner has taken reasonable steps to keep it secret, and whether it provides some economic or competitive advantage. These factors mirror the tests often used for trade secrets under the law governing the contract.

• Confidentiality markings or labels used by the disclosing party
• Internal access controls, such as restricted folders or need-to-know policies
• Express carve-outs for information that becomes public through no fault of the receiving party
• Time limits on how long the protection lasts after the contract ends

These elements help both parties assess, at any given moment, whether a specific piece of information still qualifies for protection under the agreement.

Where Proprietary Information Appears in Agreements

The term shows up most often in non-disclosure agreements, employment contracts, licensing deals, and technology agreements. It is a standard feature of vendor and consultancy engagements where one party gains access to internal systems or strategic plans. For guidance on structuring these protections, many organizations reference resources like