Information Carve-Outs.
Information Carve-Outs
1. Meaning of Information Carve-Outs
Information carve-outs are specific exceptions within confidentiality, non-disclosure, non-compete, intellectual property, or indemnity clauses that exclude certain categories of information from contractual restrictions.
In simple terms, they define what information is not protected or restricted, even if it might otherwise fall under a broad contractual definition of “Confidential Information.”
They are essential to:
Prevent overbroad restrictions
Ensure fairness between parties
Protect public interest and employee mobility
Avoid unenforceable contractual clauses
2. Typical Categories of Information Carve-Outs
Most agreements contain carve-outs for information that:
Is already in the public domain
Was known prior to disclosure
Was independently developed
Is lawfully obtained from a third party
Is required to be disclosed by law
Is general skill, knowledge, or experience of an employee
3. Legal Foundations of Information Carve-Outs
Information carve-outs are grounded in:
Contract law principles of reasonableness
Trade secret law
Public policy considerations
Competition law
Constitutional protections (in some jurisdictions)
4. Important Case Laws on Information Carve-Outs
Below are at least six significant judicial decisions explaining and shaping the doctrine of carve-outs.
1. Saltman Engineering Co Ltd v Campbell Engineering Co Ltd
Principle: Public domain carve-out & quality of confidence
Held: For information to be protected, it must have the necessary quality of confidence and not be public property.
The court established that:
Information already available publicly cannot be protected.
Confidentiality requires secrecy.
Relevance to carve-outs:
This case forms the foundation for the public domain exception in confidentiality clauses.
2. Coco v A.N. Clark (Engineers) Ltd
Principle: Three-part test for breach of confidence
The court laid down three elements:
Information must have necessary quality of confidence
It must be imparted in circumstances importing confidence
There must be unauthorized use causing detriment
If information lacks confidentiality (e.g., public, already known), protection fails.
Carve-out implication:
Information that fails the first test (not confidential in nature) automatically falls within an implied carve-out.
3. Faccenda Chicken Ltd v Fowler
Principle: Employee knowledge carve-out
The court distinguished between:
Trade secrets (protected post-employment)
Confidential information (limited protection)
General skill and knowledge (not protected)
Held: An employee may use general skills and knowledge gained during employment.
Carve-out relevance:
This is the leading authority for the “general skill and knowledge” carve-out in employment contracts.
4. PepsiCo, Inc. v. Redmond
Principle: Inevitable disclosure doctrine (U.S.)
The court restrained a former employee from joining a competitor because of risk of inevitable disclosure of trade secrets.
However, the court emphasized:
Protection applies only to actual trade secrets.
Not all knowledge is protectable.
Carve-out relevance:
Confirms that only properly defined trade secrets qualify; general business knowledge remains carved out.
5. American Cyanamid Co v Ethicon Ltd
Principle: Serious issue to be tried & balance of convenience
Although primarily about injunction standards, the court emphasized:
Courts must consider proportionality.
Overbroad injunctions restricting lawful activity should not be granted.
Carve-out relevance:
Encourages drafting limited confidentiality clauses with clear carve-outs to avoid excessive restraint.
6. Zee Telefilms Ltd v Sundial Communications Pvt Ltd
Principle: Idea vs expression
The court held:
General ideas are not protected.
Only original expression may be protected.
Carve-out implication:
General concepts, themes, or ideas fall within an implied carve-out from confidentiality and IP protection.
7. R.G. Anand v Delux Films
Principle: Idea-expression dichotomy
The Supreme Court of India ruled:
There is no copyright in ideas.
Only the form, manner, and expression are protected.
Carve-out relevance:
Confirms that abstract ideas are carved out of intellectual property protection.
5. Types of Information Carve-Outs in Practice
A. Public Domain Carve-Out
“Information that is or becomes publicly available without breach…”
Supported by:
Saltman Engineering
Coco v Clark
B. Prior Knowledge Carve-Out
“Information already known to the receiving party before disclosure…”
Protects independent business development.
C. Independent Development Carve-Out
“Information independently developed without reference…”
Essential in tech collaborations.
D. Third-Party Disclosure Carve-Out
“Information lawfully received from a third party…”
Recognized across trade secret jurisprudence.
E. Legal Compulsion Carve-Out
“Disclosure required by court order or law…”
Reflects public policy supremacy over contract.
F. General Skill and Experience Carve-Out
Based on Faccenda Chicken principle.
Protects employee mobility.
6. Why Information Carve-Outs Are Legally Necessary
Without carve-outs:
Clauses may become void for restraint of trade
Courts may refuse injunctions
Contracts may violate public policy
Competition may be unfairly restricted
Enforcement becomes uncertain
Carve-outs increase enforceability by ensuring proportionality.
7. Practical Drafting Structure (Illustrative)
A well-drafted carve-out clause typically states:
“Confidential Information shall not include information that:
(a) is or becomes public other than through breach;
(b) was lawfully known prior to disclosure;
(c) is independently developed;
(d) is lawfully obtained from a third party;
(e) is required to be disclosed by law; or
(f) constitutes general skill, knowledge or experience.”
8. Conclusion
Information carve-outs serve as balancing mechanisms in contract law. Courts across the UK, US, and India consistently uphold:
Protection of genuine trade secrets
Non-protection of public, general, or independently developed information
Employee mobility
Public interest considerations
The jurisprudence from:
Saltman Engineering
Coco v Clark
Faccenda Chicken
PepsiCo v Redmond
American Cyanamid
Zee Telefilms
R.G. Anand
collectively demonstrates that confidentiality protection is not absolute — it is conditional, limited, and carefully balanced by carve-outs.
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