Term of NDA

Term of the NDA 

Time Limits For Confidentiality Obligations

NDA imposes obligations on the receiving party to maintain the confidentiality of the information disclosed pursuant to an NDA signed by the parties.

The receiving party may seek to limit this burden by negotiating for an explicit expiration of the party’s obligations to maintain confidentiality. This is also referred to as the Term of the NDA. Once the term has expired, the obligation set out in the NDA also come to an end. 

1. What is the Term of NDA?

Term of NDA is the duration of time during which the receiving party is not permitted to disclose the confidential information and is bound by the terms of the NDA. 

The reasonable term of the NDA for a transaction ranges between 2-5 years to balance the need for secrecy of the disclosing party and to minimize the recipient party’s obligation to maintain the confidentiality.

2. Is the Receiving Party Authorized to Disclose after the term of the NDA expires?

Yes, the receiving party is authorized to disclose the information that was disclosed pursuant to the NDA, unless otherwise agreed by the parties in the NDA

3. When does the obligation expire if the NDA provides ‘obligations to continue as long as the shared information is still considered confidential’?

In this case, the confidentiality obligation does not expire on a fixed date. Instead, it continues for as long as the information remains confidential. This means the recipient must maintain secrecy until the information:

1. Becomes publicly known through no fault of the recipient, or
   
   
2. Loses its confidential character for another legitimate reason.

It is important to negotiate an NDA to ensure the terms and conditions are fair and reasonable.

4. Can confidentiality obligations continue until after the expiration of the NDA?

Yes in certain circumstances. 

If the parties have exchanged sensitive information, such as trade secrets, the confidentiality obligations on the recipient can continue even after the NDA expires.

5. So, the term of NDA that involves disclosure of trade secrets can be perpetual?

Yes, There is generally no time limit on the obligation to maintain the confidentiality of a trade secret. The protection lasts as long as the information remains confidential and is protected by the owner.

However, to benefit from the potentially perpetual protection of trade secrets, the owner must also take reasonable steps to maintain their secrecy. If a dispute arises, courts will examine whether the trade secret owner took adequate precautions to restrict access to the information, which will determine whether the perpetual confidentiality obligation is enforceable.

6. How to set a time limit for NDA? 3 Important Considerations 

• Balancing Protection and Practicality
  When setting confidentiality periods, it’s important to strike the right balance. If the timeframe is too short, you risk losing protection for information such as trade secrets as they may remain valuable long after the NDA expires.
• Avoiding Overreach
  On the other hand, courts are unlikely to uphold perpetual obligations for information that eventually becomes public. Overly broad restrictions can be seen as unreasonable and may not stand up in practice.
• Best Practice
  Carefully tailoring the confidentiality period to match the nature of the information is key. Critical trade secrets may justify longer protection, while other information may only require a defined timeframe.

7. Sample Perpetual NDA Clause Language

When you’re reviewing contracts every day, it helps to keep a clause library ready for quick turnaround. Here’s my go-to perpetual NDA clause:

“The Recipient shall maintain the confidentiality of the Confidential Information for so long as such information remains confidential in nature, including but not limited to trade secrets, and shall not disclose or use such information without the prior written consent of the Discloser.

8. Sample Time Bound NDA Clause Language

In some cases, a defined period works better i.e. when the information is not intended to remain sensitive indefinitely. Here’s a standard time bound clause:

“The Recipient shall maintain the confidentiality of the Confidential Information for a period of [X years] from the date of disclosure, after which the Recipient shall have no further obligation with respect to such information, except in relation to trade secrets which shall remain protected for so long as they retain their confidential nature.”

DocPro offers 10+ Non-Disclosure Agreement (NDA) templates, tailored to different business needs and scenarios. Whether you’re sharing sensitive information with a potential investor, collaborating with a partner, protecting trade secrets with employees, or entering into a joint venture, there’s a template designed to fit. Each NDA is drafted by legal professionals, easy to customize, and ready to use so you don’t waste time starting from scratch