Two years from now, a competitor ships something that looks a lot like what you shared with them in a conference room, under an NDA that expired a year ago. Nobody is going to fight about whether the NDA existed. They’re going to fight about whether what shipped came from your disclosure or from the other side’s own engineering, and the paragraph that decides that fight is the one almost nobody negotiates: the exclusions.

The bottom line: the four standard exclusions exist so a recipient isn’t stuck treating its own prior knowledge, or plain public information, as somehow restricted. Whether they’re present in your NDA isn’t the negotiation. Whether your NDA says who has to prove one applies is, and on that question courts don’t agree with each other, which means your contract needs to answer it instead of leaving it to whichever judge you end up in front of.

Part 1 of this series named these four exclusions among the nine provisions that actually get negotiated. This post is the deeper look, plus the fight nobody sees coming until they’re already in it.

The Four Carve-Outs, and Where Each One Actually Fails

Every NDA I’ve reviewed uses some version of the same four. Say them out loud and they sound uncontroversial: you’re not liable for information that was already public, that you already knew, that came to you honestly from someone else, or that you built yourself without touching what was disclosed. Each one fails in a specific, predictable spot.

Already Public

Through no fault of the recipient is the phrase doing the work here, and it needs to survive in every version you sign. Drop it and a recipient could leak your information itself and then claim the exclusion, because the information is now, in fact, public. I’ve seen forms shorten this sentence by cutting exactly that phrase. Don’t let it happen to yours.

Already Known

This one lives or dies on paper that predates the NDA, not memory. “We already had this” is a sentence anyone can say two years into a dispute, and it’s worth exactly nothing without a business record, an email, a file with a modification date, something dated before the disclosure. Keep the kind of dated record Part 2 recommended for oral disclosures. It does double duty here.

From a Third Party

The recipient should have to reasonably believe the third party had the right to disclose the information, not just point to a third party who happened to hand it over. A supplier who breached its own NDA with your counterparty shouldn’t hand your counterparty a clean defense merely by being the source. Push for language that requires the recipient to have no reason to know of a restriction, not language that asks nothing of the recipient at all.

Independently Developed

This is the one that actually gets litigated, and it’s the one I’ll spend the rest of this post on.

Compelled Disclosure Still Isn’t a Fifth Exclusion

Part 1 of this series flagged this, and it’s worth restating because forms keep getting it wrong: a subpoena or a regulatory demand belongs in its own provision, not bolted onto the exclusions as a fifth carve-out. The difference matters more than it looks. An exclusion removes information from protection permanently, against everyone. A compelled-disclosure clause authorizes one specific disclosure, to one specific requester, while the information stays protected against the rest of the world. Write compelled disclosure as an exclusion, and a single subpoena can read as stripping your trade secret of protection altogether, which is the opposite of what either side actually wants. Structure it instead as prompt notice where notice is lawful, cooperation in seeking protective treatment, and disclosure of no more than the law actually requires. If the disclosure involves an employee or contractor reporting suspected illegal conduct to the government, the Defend Trade Secrets Act’s own whistleblower immunity, 18 U.S.C. § 1833(b)(3), already overrides anything your NDA says regardless. Part 1 has the notice requirement that comes with it.

The Independent-Development Fight, and Who Has to Prove It

Every independent-development carve-out I’ve drafted or reviewed uses some version of “without use of or reference to” the disclosed information. Reference to is the clause that should stop you. Use means the recipient actually relied on what it received. Reference to is broader and murkier, close enough to “was aware the information existed while building something similar” that a sufficiently aggressive plaintiff can argue awareness alone defeats the defense, even where the recipient’s engineers never opened the file. I flagged this in Part 1 as one of the two live negotiation points buried in the exclusions, and it’s worth being specific about why: a recipient wants use, full stop, because that’s a standard it can actually meet by running a clean-room process. A discloser wants reference to, because it lowers the bar for a later claim.

Here’s the part that doesn’t get talked about enough. Even where the contract language is settled, courts don’t agree on who has to prove independent development once a dispute actually lands in front of one of them. The Third Circuit, applying Pennsylvania law in Moore v. Kulicke & Soffa Industries, Inc., 318 F.3d 561 (3d Cir. 2003), held that the burden of persuasion never leaves the party claiming misuse: the recipient only has to offer some evidence of independent development, and the discloser still has to prove that evidence wrong. The Eighth and Ninth Circuits will shift that burden onto the recipient instead. In Garter-Bare Co. v. Munsingwear, Inc., 723 F.2d 707 (9th Cir. 1984), once the discloser showed a confidential relationship and later use of similar information, the recipient had to prove it could have arrived there on its own. Pioneer Hi-Bred International, Inc. v. Holden Foundation Seeds, Inc., 35 F.3d 1226 (8th Cir. 1994), shifted the burden the same way, though the Eighth Circuit tied it to specific facts: the defendant had pursued the plaintiff’s secrets, discarded records that would have shown otherwise, denied obtaining the material, and ended up holding secrets shown to have probably been derived from the discloser’s secrets. Three circuits, two different rules, and in the Eighth Circuit’s case, a rule that depends on facts nobody sorts out until well into the litigation.

An Example from My Home Jurisdiction, Oklahoma

The Tenth Circuit recently ruled on a question relevant to this discussion. In Double Eagle Alloys, Inc. v. Hooper, et al., 134 F.4th 1078 (10th Cir. 2025), a Tulsa metals company sued a former employee and the competitor he joined, Ace Alloys, claiming the former employee wrongfully took Double Eagle’s confidential information to his new employer. The Tenth Circuit affirmed summary judgment for the defendants under the Oklahoma Uniform Trade Secrets Act, and a paper trail did the work. Double Eagle lost because it never proved with sufficient evidence that the specifications were secret to begin with: its own website had posted similar numbers, and its customers held nearly identical specs sourced from other suppliers, which the court treated as evidence the information was readily ascertainable through proper means, the same threshold an exclusion never needs to reach if the plaintiff can’t clear it first. Ace Alloys won the independent-development point outright, and won it with a paper trail: “the undisputed evidence also demonstrates that Ace Alloys developed its own … specifications almost a year before [the former employee] even left Double Eagle.” Id. at 1090. A dated engineering file from before the former employee’s departure did more for Ace Alloys than any argument about who had to prove what would have. That’s the fix this post keeps circling back to: whichever exclusion you’re relying on, win it with a record that predates the dispute, not a story assembled after one starts.

The foregoing split in the Circuit Courts is exactly why leaving this to background law is a bad plan. Your governing-law clause picks a state, not a circuit’s approach to burden-shifting, and you may not know which rule you’re actually going to get until you’re already in the dispute. The fix costs one sentence: state directly in the exclusions provision which side carries the burden of establishing that an exclusion applies, and require that it be established by evidence that predates the disclosure, not by testimony reconstructed after the fact. Something close to “the Receiving Party bears the burden of establishing the applicability of any exclusion under this Section by contemporaneous written evidence” does the job. Whichever side of a given deal you’re usually on, know whether that sentence is doing you a favor or costing you one before you sign it.

Whose Burden Is It in Your NDA?

• Confirm your NDA actually says “through no fault of the recipient” on the public-information exclusion, not just “became public.”
• Check whether your independent-development carve-out uses “use of” or the broader “reference to,” and know which one you want depending on which side of the disclosure you’re usually on.
• Look for a sentence assigning the burden of proving an exclusion. If there isn’t one, you’re relying on whichever circuit’s rule a court decides applies, and that isn’t a plan.
• Keep dated records for anything you might need to prove later as prior knowledge or independent development. A file’s timestamp beats a witness’s memory every time.
• Make sure compelled disclosure lives in its own clause, not folded into the exclusions as a fifth item.

Part 4 of this series turns to the permitted purpose clause: the one line that decides whether your own ordinary use of what you received counts as a breach.

This post is provided for general informational purposes only and does not constitute legal advice. Reading this post does not create an attorney-client relationship. Contact Ken McConkey to discuss your company’s specific confidentiality agreements.