Ensure proprietary info remains private

Contract Language. By Steven M. Harris, amednews contributor. July 1, 2002.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

SEE ARCHIVES

A nondisclosure of proprietary information provision should be included in all your employment, third-party billing, service and managed care contracts.

This provision should state that the party you are contracting with recognizes and acknowledges that the proprietary information to which they will have access is sufficiently secret to derive economic value -- a technical way of saying that if anyone else learns some of your legitimate business secrets, you could lose money. As the employer or entity contracting for health care services, you must take reasonable steps to protect the confidentiality of your proprietary information.

Make sure you pay close attention to how proprietary information is defined within your contracts and what the parameters are for disclosure by the party you are contracting with.

Proprietary information should include all your trade secrets and other proprietary or confidential information that arises out of your practice, including the following documents:

Financial statements, cost reports and forecasts.
Contract proposals, bidding information and negotiating strategies.
Rate and fee structures.
Policies and procedures.
Management systems and related procedures.
Practice plans and projections.
Patient lists.
Nonpublic information regarding actual or potential patients, vendors, referral sources, payers, contracting parties or opportunities to provide professional services.
Terms of the contract, any service contract or any other contract or agreement.
All protected software related to the provisions of patient care.
Inventions and discoveries.
All information that you are required by law or contract to maintain as confidential.
Any other information that is sufficiently secret to derive economic value from not being generally known to third parties.

Disclosure issues

You also should include a provision within your contract stating that the party you are contracting with shall not disclose any proprietary information it receives or is exposed to during the term of the contract and upon termination or expiration of the contract unless:

The other party receives prior written consent from you for disclosure.
Disclosure is required by law.
The proprietary information lawfully becomes part of the public domain.

After identifying when proprietary information may be disclosed to a third party, you also should include a provision that both parties shall safeguard all proprietary information with the same degree of control and care as a reasonably prudent person would exercise with respect to their own similar information under similar circumstances.

The party you are contracting with should agree that it has no rights or interest in your proprietary information. Also, as long as the other party provides professional services on your behalf, it shall not directly or indirectly disclose or use your proprietary information except as necessary to perform its duties pursuant to the contract.

The other party also should acknowledge and agree that all proprietary information coming into its possession during the term of the contract will remain your exclusive property.

Include a provision within your contract stating that the other party acknowledges and agrees that any breach of the terms of the nondisclosure of proprietary information would cause irreparable harm to you and no adequate remedy at law exists. Therefore, the other party agrees that you may enforce the nondisclosure of proprietary information provision with a temporary or permanent injunction without notice and bond.

Consider including a provision where the disclosure of proprietary information by the other party would not be a violation of the contract if such disclosure is reasonably necessary to comply with generally accepted ethical or professional standards or as required by law, court order, government agency or authority. If the other party is compelled by law or ethical or professional standards to use or disclose any of your proprietary information, then it should provide you with written notice so that you can seek a protective order or other remedy you deem appropriate.

Remember to include a survival provision within your contracts stating that the nondisclosure of proprietary information terms survives the termination or expiration of your contract.

Make sure that upon termination or expiration of the contract, the other party is obligated to promptly return all of your proprietary information in its possession or control, including any copies, extracts, reproductions and notes that have been made by or for the other party.

Harris, a partner at McDonald Hopkins in Chicago, concentrates on health care law and has counseled physicians, physician networks and health care groups nationally. The author and publisher are not rendering professional advice and assume no liability in connection with its use. He can be reached at 312-280-0111, or by email (sharris@mcdonaldhopkins.com).