Last week, Microsoft sued the U.S. government. Microsoft is seeking the right to tell its customers when the government requires Microsoft to disclose customer information, such as emails. Since at least the enactment of the U.S.A. PATRIOT Act, the government has been able to issue a search warrant and prohibit the information provider from telling the party whose information is being sought about the search warrant.
Contracts in technology frequently have nondisclosure clauses in them. After the basics of the clause are covered — identifying the confidential information and establishing obligations for nondisclosure and limited use — there is often an exception to the nondisclosure obligation when a party receives a governmental inquiry that requires compliance, such as a subpoena. These clauses frequently require the party who received the governmental inquiry to provide notice to the other party, giving an opportunity to object to or limit the disclosure.
But what if you are prohibited by law from notifying the other party? You can be placed in a situation that requires you to either breach the contract or be in trouble with the government.
Practice Pointer: When you create an exception in a nondisclosure provision for responding to a subpoena or other governmental inquiry, make sure to provide that you will give notice to the discloser of the confidential information prior to such disclosure if allowed by law.