Desk notes · US commercial contracts · Seen on the desk
Seen on the US desk: residuals are back in vendor paper
Three of the five US vendor NDAs on the desk this week had a residuals clause. Two years ago it was one in ten. Here is what the clause does and why it gets struck.
A residuals clause says that the recipient of confidential information may freely use whatever its people remember without deliberate effort — “information retained in unaided memory”. It was born in big-technology licensing, where engineers could not un-know what they had learned, and it has been quietly migrating into ordinary commercial NDAs from large vendors.
What it actually permits
Everything a smart person can remember from a meeting. Your pricing model. Your product roadmap. The architecture you sketched on the whiteboard. For a company sharing anything more than a logo, a residuals clause turns a confidentiality agreement into a courtesy.
Why it is back
Partly because large vendors have re-templated their paper, and partly because AI-related diligence has made “what did you learn from us” a live question again. Whatever the cause, the clause is now common enough that it needs to be on the checklist rather than treated as a surprise.
Our position
Delete it. If the counterparty insists, narrow it hard: exclude anything intentionally memorised, exclude trade secrets and source code, and require that the recipient not use residuals to develop a competing product. Most counterparties accept deletion when it is explained; the clause is usually there because nobody removed it, not because anybody is relying on it.
Next step
Seen something like this on your own paper?
Send it over. Twenty minutes, marked up, explained.