Impact of Article 2B

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This is an unofficial draft of Article 2B from April 15, 1998. For the current official version, see the University of Pennsylvania Law School (Official NCCUSL) site at http://www.law.upenn.edu/library/ulc/ulc.htm

SECTION 2B-309. RIGHTS TO INFORMATION IN ORIGINATING PARTY.

(a) Between merchantss, if an agreement obligates a party to handle or process confidential commercial, scientific, or technical information of the other party and does not authorize republication of that information, and the receiving party has reason to know that the information is confidential, the following rules apply:

(1) As between the parties, the information and any summaries or tabulations based on it may be used by the other party only in a manner and for the purposes expressly authorized by the agreement or necessary for its performance.

(2) The party receiving, summarizing, or tabulating the information shall:

(A) act in a manner consistent with ordinary standards of the recipient's industry to hold the information in confidence; and

(B) on termination, make the information available to be destroyed or delivered to the other party on termination of the agreement pursuant according to the terms of the agreement or the instructions of that party.

(b) This section does not apply to information collected to initiate or perform a contract, maintained to effect or make a record of a transaction, or used to describe the subject matter of the transaction, or similar transactional information.

Uniform Law Source: None.

Definitional Cross Reference:

"Agreement": Section 1-201. "Contract": Section 2B-102. "Information": Section 2B-102. "Licensee": Section 2B-102. "Party": Section 1-201. "Reason to know": Section 2B-102. "Record": Section 2B-102. "Rights": Section 1-201.

Committee Votes:

1. Approved the section in principle.

Reporter's Notes:

1. General Principle. Subsection (a) states the principle that, unless agreed to the contrary, the delivering party or the person about whose business the commercial data relates maintains control of the data. This deals with an important issue relating to cases in which one party transfers data to another in the course of the transaction and for enabling that other party's performance of the contract. The rule applies to cases involving information that has not been released to the public and that the recipient knows is unlikely to be released. The presumption is that the information is received in a confidential manner and remains the property of the party who delivers it to the transferee. In effect, the circumstances themselves establish a presumption of retained ownership.

Illustration 1: Staten Hospital contracts for Computer Company to provide a computer program and data processing for Staten's records on treatment and billing. Staten data are transferred electronically to Computer and processed in Computer's system. Staten remains the owner of its data. There is an obligation to return the data at the end of the contract. See Hospital Computer Sys., Inc. v. Staten Island Hosp., 788 F. Supp. 1351 (D.N.J. 1992).

2. Remedies. The remedies for breach of the obligations described in this section are for breach of contract. Ordinary contract remedies apply as do ordinary contract remedy limitations.

3. Exceptions. Subsection (b) states two general situations under which the presumptions and obligations o subsection (a) are not appropriate under current law or practice.