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Proprietary: Definition, Example and Related Terms

What is Proprietary ?

Proprietary refers to something that is owned exclusively by a particular individual, business, or organization. It typically describes information, technology, products, or methods that are protected by legal rights and cannot be used, copied, or sold without permission from the owner.

In contract law, proprietary rights are crucial as they protect valuable business assets like trade secrets, custom software, unique business processes, or specialized knowledge. When something is marked as proprietary, it means that the owner has exclusive legal rights to its use and distribution.

For example, a software company's source code would be considered proprietary information. The company owns it exclusively and can control how it's used, who has access to it, and under what conditions it can be shared or licensed to others.

Understanding proprietary rights is essential in contract management because it helps determine what information needs to be protected, how it should be handled, and what restrictions need to be placed on its use. This often leads to the inclusion of confidentiality clauses, non-disclosure agreements, and intellectual property provisions in contracts.

Example(s)

  • Scenario Description
    A technology company develops a unique algorithm for data processing The algorithm is proprietary technology. The company protects it through patents and requires employees to sign non-disclosure agreements to prevent unauthorized disclosure or use.
    A restaurant chain has a secret recipe for its signature sauce The recipe is proprietary information. It's kept as a trade secret, and access is limited to select employees who must sign confidentiality agreements.