Caveat on confidentiality agreements

Health Secretary Francisco Duque III is under fire from some senators for his alleged delay in signing a confidentiality disclosure agreement (CDA) with pharmaceutical giant Pfizer for the quick delivery of millions of doses of its COVID-19 vaccine to the Philippines.

According to the senators, had Duque immediately signed the CDA, the vaccine would have been made available to Filipinos as early as January next year and not in June.

Duque denied the accusation and said he signed the CDA only after it had been reviewed by lawyers of the Department of Health, Department of Science and Technology and Office of the Executive Secretary.

In substance, a CDA (or nondisclosure agreement as it is sometimes described) is an undertaking by a party that receives proprietary or confidential data (the data recipient) from another party (the disclosing party) not to disclose them to others without the latter’s prior consent or unless to comply with a lawful legislative, judicial or regulatory order.

The CDA is aimed at protecting the intellectual property rights and data of the disclosing party from poaching by compe­titors, a practice that has become rampant in recent years.

If that confidentiality obligation is breached, the disclosing party can sue the data recipient for damages.

By and large, CDAs are template documents, meaning, they contain standard provisions on, among others, what data shall not be considered confidential or of public knowledge already, the recipient’s warranty of its capacity to keep the information under wraps, and their return to the disclosing party upon the termination of their contract.

But not all CDAs are woven from the same cloth, so to speak. Their provisions vary depending on, for example, the nature of the business of the disclosing party, the manner the data recipient shall handle the data, and the precautionary measures the latter must take to ensure their confidentiality.

Sometimes, CDAs contain provisions that are unreaso­nable or impose requirements on the data recipient that are difficult, if not next to impossible, to comply with.

In one of the CDAs I read, the disclosing party requires the data recipient to warrant that none of its staff who will receive the information is related by consanguinity or affinity up to the fourth civil degree to a person employed in a company engaged in the same business as that of the disclosing party.

To be able to give that warranty, the data recipient would have to require its staff to list down the names of their paternal and maternal relatives and in-laws, and see if any of them is employed in a competitor of the disclosing party.

If there is such a relative or in-law, would he or she have to quit his or her job, or would the staff concerned be barred from handling the disclosing party’s information regardless of his or her expertise on the subject of the CDA?

Then there is this CDA provision that gives the disclosing party the right to examine the records of the data recipient to verify if the latter has taken the proper steps to ensure the confidentiality of the information it has received.

This provision, in effect, puts the disclosing party on the same level of an external auditor and compels the data recipient to disclose its business or trade secrets to the latter.

Considering the onerous nature of these provisions (and there are many others of similar nature), the data recipient may have to ask for their removal or, at best, their amendment to make them reasonable.

Going back to Duque, he acted properly in asking the government lawyers to vet the CDA with Pfizer before signing it. That was a prudent move because he is a doctor, not a lawyer.

Unless the contents of that CDA is made public, it is unfair to say he dropped the ball on it by his having it cleared by government lawyers before affixing his signature.

With the CDA issue out of the way already moot, the next thing to watch out for is whether Pfizer can make good its promise to make the vaccine available in June.

But don’t hold your breath because a lot of things can happen in the country’s political space that may prevent that promise from becoming a reality. INQ

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