Protecting Trade Secrets When Partnering with Engineering and Construction Firms: Confidentiality and Non-Disclosure Clauses for Proprietary Power Plant Designs in the Philippines
Introduction: why power plant design sharing creates legal exposure
Power plant projects often require an owner or developer to share sensitive technical information with engineering and construction firms—drawings, schematics, single-line diagrams, performance curves, equipment specifications, control logic, commissioning procedures, cost build-ups, and vendor lists. In Philippine law, much of this information may qualify as a trade secret and can be protected against compelled disclosure in court and against misuse by contractors, employees, and third parties.
The risk is not only “leakage.” It also includes disputes where a contractor demands deeper design disclosures, or where project documents later surface in competing bids, permitting filings, or litigation. A well-written confidentiality and non-disclosure structure in the EPC/contractor documents helps you control access, define ownership, and set enforceable remedies.
Governing Philippine legal rules on trade secrets and confidentiality
1) Trade secrets are privileged and generally protected from compelled disclosure
The Supreme Court recognizes a privilege not to disclose trade secrets. Courts generally will not compel a party to reveal proprietary formulations or similarly confidential business information unless there is a strong showing that disclosure is necessary to prevent fraud or injustice. In Air Philippines Corporation v. Pennswell, Inc. (G.R. No. 172835, 2007), the Court treated the chemical composition/formulation of products as trade secrets and ruled that privileged trade secret material is not subject to compulsory disclosure through modes of discovery.
That same decision also associates trade secrets with constitutional and statutory limits on disclosure, acknowledging that trade or industrial secrets are recognized restrictions against compulsory disclosure (Air Philippines Corporation v. Pennswell, Inc., 2007).
2) In evidence: the Rules of Court expressly recognize privilege relating to trade secrets
The 2019 Amendments to the 1989 Revised Rules on Evidence expressly state that a person cannot be compelled to testify about any trade secret, unless non-disclosure would conceal fraud or otherwise work injustice; and if disclosure is ordered, the court must adopt protective measures to safeguard the owner’s interest and the needs of justice (2019 Amendments to the 1989 Revised Rules on Evidence, Rule 130, Section 26, 2019).
This rule matters in disputes involving design claims, delay claims, change orders, and defect allegations—because parties often attempt to force production of proprietary drawings, control philosophy, and calculations during discovery or testimony.
3) “Trade secret” cannot be defined so broadly that it becomes a weapon
Philippine jurisprudence cautions against vague or overly broad confidentiality definitions. In Yonzon v. Coca-Cola Bottlers Philippines, Inc. (G.R. No. 226244, 2021), the Court emphasized that broad company rules on “confidential information” cannot automatically justify sanctions; the employer must show a clearly established act supporting loss of trust and confidence, and the context (including good faith disclosure for a legitimate purpose) is relevant. While the case is labor-focused, its discussion is useful when drafting confidentiality language: definitions must be defensible, and enforcement must be tied to specific protected information and legitimate business interests.
4) Statutory recognition of trade secret confidentiality in regulated settings
Philippine statutes also protect confidential business information in regulated contexts. For example, the tax code penalizes unlawful divulgence by BIR personnel of confidential taxpayer business information and trade secrets learned in official duties (National Internal Revenue Code, Commonwealth Act No. 466, Section 347, 1939). While not directly a contract rule, it reflects the policy that certain business secrets deserve legal protection.
What counts as a “trade secret” in a power plant design context
Philippine cases describe trade secrets as information not generally known, with economic value from secrecy, and subject to measures to keep it secret. Air Philippines Corporation v. Pennswell, Inc. (2007) lists factors commonly used to evaluate trade secrets, including: how widely known the information is outside the business, internal access, security measures, value to competitors, development cost/effort, and ease of independent acquisition.
Typical power plant materials that should be treated as protected confidential information
In contracts with local contractors, treat the following (as applicable) as Confidential Information and, where appropriate, Trade Secrets:
Design and engineering: IFC/IFR drawings, P&IDs, PFDs, single-line diagrams, relay protection philosophy, grounding studies, load flow/short circuit studies, heat balance, turbine/generator performance curves, control narrative, logic diagrams, PLC/DCS code, alarm settings, cause-and-effect matrices, proprietary calculations and templates.
Commercial and sourcing: vendor lists, pricing, bid tabulations, supply chain strategy, warranty negotiation notes, spare parts strategy, O&M costing models.
Project execution know-how: commissioning procedures, test protocols, acceptance criteria, reliability improvement plans, punch-list analytics, quality inspection checklists with proprietary acceptance thresholds.
Cyber/physical security: network architecture for OT systems, access credentials processes, and security hardening standards.
Where confidentiality obligations should appear (and why one NDA is often not enough)
For power plant projects, confidentiality should be implemented as a set of consistent obligations across documents. Relying on a standalone NDA is often insufficient because disclosure also occurs through subcontracting, site activities, document control systems, and claims processes.
Recommended document set
1) Pre-bid NDA (for bidders and consultants).
2) Bid documents / Instructions to Bidders (confidentiality + return/destruction + no reverse engineering).
3) Awarded contract (EPC / supply / construction) with detailed confidentiality, IP, audit, and remedies clauses.
4) Subcontractor flow-down clause requiring identical or stronger confidentiality obligations for all subs/vendors.
5) Data room / CDE rules (access control, watermarking, download limits, logging, device restrictions).
Contract provisions: specific non-disclosure and confidentiality clauses to include
Below are clause components commonly required when sharing proprietary power plant designs. These are presented as a contract overview (not jurisdiction-agnostic templates) and should be aligned with the project’s delivery model and document workflows.
1) Clear definitions: “Confidential Information” and “Trade Secrets”
Define Confidential Information to include technical, commercial, and operational materials, in any form (hardcopy, electronic, verbal, visual). Identify especially sensitive categories as Trade Secrets. Avoid vague “everything is confidential” language; definitions should be defensible, consistent with the Supreme Court’s caution against overbroad confidentiality labels (Yonzon v. Coca-Cola Bottlers Philippines, Inc., 2021).
2) Purpose limitation (use restriction)
Require that the contractor may use the information only for performing the specific contract scope and for no other purpose (including bidding other projects, benchmarking, training unrelated teams, or developing a competing design). This is often more enforceable than a generic “do not disclose” promise because it addresses misuse even without external disclosure.
3) Access control: “need-to-know” and named roles
Limit access to personnel who need the information for contract performance. Consider requiring a list of authorized personnel, with owner approval for changes. Require training/briefing on confidentiality duties and written acknowledgments.
4) Flow-down to subcontractors and suppliers
Require the contractor to impose confidentiality obligations on subcontractors, vendors, and consultants that are at least as strict as the prime contract, and to remain liable for their breaches. In construction, leaks often occur at subcontract tiers.
5) Security standards for electronic design data (CDE/data room rules)
Because design sharing is commonly digital, include measurable controls:
Document marking (confidential legends), watermarking, and unique IDs per recipient.
Role-based access and time-bound access (auto-expiry after milestones).
Download/print controls, encryption at rest and in transit, MFA for accounts.
Audit logs and the owner’s right to obtain access logs and conduct compliance checks.
Incident reporting deadlines (e.g., within 24 hours from discovery), mitigation duties, and cooperation.
6) No reverse engineering / no derivative use
Prohibit reverse engineering, disassembly of design logic, or using the owner’s designs to create derivative designs outside the project. For engineering deliverables, clarify whether contractor-created drawings are “work product” owned by the owner or licensed, while preserving the owner’s pre-existing proprietary design elements.
7) Ownership and intellectual property structure (background IP vs. project IP)
Separate:
Owner Background IP: pre-existing plant concepts, proprietary calculations, reference designs, control philosophy, and standards.
Contractor Background IP: contractor methods, generic tools, and pre-existing libraries.
Project Deliverables: drawings, reports, and documents produced under the contract.
State that disclosure does not transfer ownership of trade secrets. Add an express statement that the owner’s confidential disclosures remain proprietary and privileged.
8) Handling of legally compelled disclosure (subpoenas, court orders, regulators)
Include a process clause: prompt notice to the owner, cooperation to seek protective orders, and disclosure limited to what is strictly required. This aligns with the Rules of Court’s approach that trade secrets should not be compelled absent fraud/injustice, and that courts must use protective measures when disclosure is ordered (2019 Amendments to the 1989 Revised Rules on Evidence, Rule 130, Section 26, 2019; Air Philippines Corporation v. Pennswell, Inc., 2007).
9) Return, destruction, and retention copies
Upon termination or completion, require return or certified destruction of confidential materials, including backups and extracts, subject only to narrowly defined retention for legal compliance. If retention is allowed, keep it in locked archives with continued confidentiality obligations.
10) Duration: confidentiality term and trade secret survival
Set a defined confidentiality term for non-trade-secret confidential information (e.g., 3–5 years), but require that trade secret obligations survive as long as the information remains a trade secret. This is consistent with the economic rationale for protecting secrets recognized in jurisprudence (Air Philippines Corporation v. Pennswell, Inc., 2007).
11) Remedies: injunctive relief, liquidated damages, indemnity
Provide that breach may cause irreparable harm and that the owner may seek injunctive relief. Consider liquidated damages for specific breach types (e.g., unauthorized disclosure of IFC drawings or control logic), plus indemnity for third-party claims and costs of incident response. Draft remedies carefully to remain enforceable and proportionate.
12) Dispute handling for claims that require sensitive disclosures
Construction disputes often require document production. Add options to minimize exposure:
Confidentiality club (limited recipients, counsel/experts only).
Redactions and “attorneys’ eyes only” tiers.
Neutral expert review for sensitive calculations or control code.
Sealed filings and protective orders where available.
Summary table: clause checklist for sharing proprietary power plant designs
| Clause area | What to specify | Risk addressed |
|---|---|---|
| Definitions | Confidential Information + Trade Secrets; examples list | Overbreadth challenges; weak enforceability |
| Purpose limitation | Use only for contract performance | Internal misuse without “disclosure” |
| Access control | Need-to-know; authorized roles; acknowledgments | Leaks through unnecessary access |
| Flow-down | Subcontractors/suppliers bound; prime remains liable | Leakage at subcontract tiers |
| Security controls | Watermarking, MFA, logs, download limits, incident reporting | Data room exfiltration; weak traceability |
| Compelled disclosure | Notice; protective measures; minimum necessary disclosure | Loss of secrecy in litigation/regulatory matters |
Typical scenarios and how the clauses work
Scenario 1: Contractor requests full design basis and control logic to support a delay claim. The compelled disclosure and dispute-handling provisions should steer production into a limited “confidentiality club,” with protective measures and minimal disclosure consistent with Rule 130 on trade secrets (2019 Amendments to the 1989 Revised Rules on Evidence, 2019).
Scenario 2: A subcontractor later bids on a similar plant and uses your diagrams as “reference.” The purpose limitation, no-derivative-use, and flow-down obligations support a breach claim and make the prime contractor responsible for subcontractor violations.
Scenario 3: An employee shares design excerpts to pursue a complaint or legal claim. Definitions must be specific and defensible; enforcement should focus on genuine trade secrets and demonstrable harm, consistent with the Supreme Court’s caution against vague confidentiality rules in employment settings (Yonzon v. Coca-Cola Bottlers Philippines, Inc., 2021).
Final observations and recommendations
When sharing proprietary power plant designs with local contractors, protect trade secrets through a layered approach: clear definitions, strict use limits, controlled access, enforceable flow-down obligations, and technical security controls in the document system. Draft the compelled disclosure process to mirror Philippine evidence rules on trade secret privilege and protective measures, and ensure confidentiality labels are defensible rather than overly broad (2019 Amendments to the 1989 Revised Rules on Evidence, 2019; Air Philippines Corporation v. Pennswell, Inc., 2007; Yonzon v. Coca-Cola Bottlers Philippines, Inc., 2021).
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