Thoughtfully negotiating the terms of NDAs can protect your company’s rights and interests, as well as those of the other party. One key element of any non-disclosure agreement is the duration or term. When negotiating an NDA, carefully consider how long the agreement should be enforceable and what should happen to confidential information obtained or exchanged by the parties after the end of the agreement’s term.
Term of Agreement
The party on the disclosing end of the NDA has an interest in making the term of the agreement as long as reasonably possible, while the receiving party may want to limit the agreement’s term. There isn’t a single “correct” term for NDAs. Instead, the duration will vary depending on the underlying circumstances. In general, the term of a non-disclosure agreement should be reasonably related to the type of information protected and the length of time confidentiality can be reasonably expected.
While businesses sometimes create and enter into NDAs with perpetual durations, courts may invalidate such provisions if they find perpetual duration is not reasonable, based on the nature of the protected information. For example, an NDA with perpetual duration may be appropriate for protecting trade secrets, but may be overly restrictive if the information subject to the NDA is ordinary business information. In the case of ordinary business information, NDA terms often range from one year to five years, depending on the parties’ needs.
Return or Destruction of Information
An NDA should also specify what happens to the information collected by the receiving party at the end of the agreement’s term. When negotiating an NDA, consider the advisability and feasibility of obligating the receiving party to either return or destroy all confidential information obtained under the agreement.
If your agreement includes a “return or destroy” provision, it may make sense to also include certain exceptions to that provision. For example, if the receiving party has a legal or regulatory obligation to maintain certain information, the NDA could create an exception for that information.
Baer Reed provides efficient and cost-effective NDA review services to support corporate legal departments. Contact us to learn more about how Baer Reed can help maintain and turn around high volumes of NDAs.
- On June 10, 2019
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