Clause primer
Confidentiality residuals clause
Permits a recipient to use general knowledge, skills and ideas that its personnel retain in unaided memory after accessing the discloser's confidential information.
Legal information, not legal advice. What a clause does depends on its exact words, the rest of the agreement and the governing law.
Also called: residuals clause, residual knowledge clause, unaided memory clause. Where you find it: Mutual NDAs with technology companies, software development and services agreements, joint development agreements and some vendor evaluation agreements.
SAMPLE CLAUSE (INVENTED FOR THIS PRIMER)
Nothing in this Agreement restricts either party from using Residuals for any purpose. "Residuals" means information in non-tangible form that is retained in the unaided memory of the receiving party's employees who had authorized access to the disclosing party's Confidential Information, provided that a person's memory is unaided only if that person has not intentionally memorized the information for the purpose of retaining and later using it. This Section does not grant any license under the disclosing party's patents, copyrights or trade secrets, and does not permit disclosure of the source of Residuals or of any specific Confidential Information.
How it works
Permission to use
Carves Residuals out of the use and disclosure restrictions. The phrase "for any purpose" is broad, so check whether the clause allows use only or also allows disclosure to others.
Unaided memory
Limits the carve-out to what people remember without notes, files or other records. This is the main limiting test, and it is difficult to prove or disprove in practice.
No intentional memorization
Excludes information someone deliberately memorized in order to use it later. Without this sentence, the residuals clause could swallow the confidentiality obligations almost entirely.
No license and no disclosure of specifics
Preserves the discloser's intellectual property rights and bars revealing the source or specific details. Check carefully, because some versions omit the trade secret reference, which may weaken the discloser's position.
Why it is there
Residuals clauses exist because employees who review many partners' information cannot erase what they learned, and companies with large engineering teams want to avoid claims that their later independent work was tainted. The clause protects the recipient, usually the party with greater technical resources or the party reviewing many similar disclosures. For the discloser, the clause can create a meaningful gap in protection, especially where the most valuable information is a concept or approach that a person can easily remember. Whether to accept it often depends on what will actually be disclosed.
How it works with other clauses
- The definition of Confidential Information and its standard exclusions (public, already known, independently developed) operate alongside the residuals carve-out, and the residuals clause often reaches further than independent development.
- Trade secret law may protect information independently of the contract, so a clause that expressly preserves trade secret rights matters to the discloser.
- Intellectual property ownership and license clauses in a broader agreement should be read with the residuals clause to avoid an implied license.
- Remedies and injunctive relief provisions may be harder to use where the recipient can claim that use came from residual memory.
Negotiating it
Who it protects: The recipient of confidential information.
If it protects you
- Keep a clear, workable definition of unaided memory.
- Keep the permission broad enough to cover ordinary product development.
- Resist a requirement to track which employees accessed what information.
If it runs against you
- Standard ask: delete the residuals clause; fallback: limit it to general skills and know-how and exclude technical data, source code, pricing and business plans.
- Standard ask: add the intentional memorization exclusion and an express statement that no patent, copyright or trade secret license is granted.
- Ask that the carve-out cover use only, never disclosure to third parties, and that it apply only to personnel with authorized access.
Escalate before accepting: A residuals clause with no intentional memorization exclusion and no preservation of trade secret rights, in an agreement where core technical or strategic information will be shared, deserves escalation.
What AI explanations get wrong
- Describing the clause as a standard, harmless NDA term. Check: identify what information will actually be disclosed and how easily it could be remembered.
- Failing to notice that the clause permits disclosure as well as use. Check: read the verbs in the operative sentence.
- Missing the clause because it appears outside the confidentiality section, such as in a general or intellectual property section. Check: search the whole agreement for "residual" and "unaided memory."
- Assuming the clause is mutual in effect because it is mutual in form. Check: consider which party will disclose more valuable information in practice.
Where the law varies
Courts have not developed a uniform approach to residuals clauses, and their effect on trade secret claims may depend on the governing law and the specific wording. Treat any general statement about enforceability with caution and review the actual language.
TOOLS
Need a primer like this for a clause in front of you? The Clause Primer Kit, included in All-access, produces one in this format inside the AI tool you already use, with checks built in. For reviewing whole agreements, see the Plugin Playbook: NDAs.