NDA Term and Duration: FAQ

These are two separate concepts that are often confused:

NDA Term (Agreement Term):

• How long new information can be shared under the NDA
• The period during which the parties may disclose confidential information
• When the NDA expires, no new disclosures are covered

Confidentiality Period (Protection Period):

• How long confidentiality obligations last for information that WAS disclosed
• Often extends beyond the NDA term (called "survival")
• Information disclosed on day 1 is protected for the full confidentiality period

The appropriate term depends on the type of information and relationship:

Common term lengths:

• 1-2 years: Short-term projects, limited evaluations, vendor assessments
• 3-5 years: Standard commercial relationships, partnership discussions, most business transactions
• 5-10 years: Strategic alliances, technology licensing, significant business relationships
• Perpetual: Trade secrets, highly sensitive technical information, life sciences

Factors to consider:

• How quickly will the information become obsolete?
• How long will the underlying business relationship last?
• Is the information a true trade secret with indefinite value?
• What is industry standard for similar transactions?
• How burdensome is indefinite protection for the receiving party?

Perpetual NDAs are enforceable, but their scope and application matter significantly:

When perpetual terms are more likely to be enforced:

• True trade secrets (which have perpetual protection under law anyway)
• Information that maintains value indefinitely
• Sophisticated commercial parties with equal bargaining power
• Narrow, specific definitions of confidential information

When perpetual terms face challenges:

• Overly broad definitions covering routine business information
• Employment NDAs (may be seen as unreasonable restraints)
• Information that clearly becomes obsolete over time
• Unequal bargaining power situations

Practical considerations:

• Courts may blue-pencil unreasonable terms down to reasonable periods
• Some jurisdictions are more skeptical of perpetual obligations
• Enforcement becomes difficult as time passes and evidence fades

Perpetual obligations create significant business and legal burdens:

Practical problems:

• Record-keeping burden: You must maintain records forever to track what is confidential
• Personnel turnover: Employees come and go; tracking who knew what becomes impossible
• Technology obsolescence: Information becomes outdated but obligations remain
• Merger complications: Acquirers must assume endless obligations
• Future business: May restrict work with competitors indefinitely

Negotiation strategies:

1. Propose a fixed term (5 years is usually reasonable)
2. Accept perpetual for "trade secrets" only, with a shorter term for other information
3. Propose perpetual with an escape clause when information becomes public
4. Counter with "until the information no longer qualifies as a trade secret"

Compromise language: "Confidentiality obligations shall survive for five (5) years following disclosure, provided that obligations with respect to trade secrets shall continue for so long as such information remains a trade secret under applicable law."

Auto-renewal allows an NDA to continue beyond its initial term unless a party provides notice of termination:

How auto-renewal works:

• Initial term (e.g., 2 years) automatically renews for additional periods
• Either party can terminate by providing notice before renewal
• Notice period typically 30-90 days before the renewal date

Advantages:

• Continuity without administrative burden of re-signing
• Protection continues for ongoing relationships
• Flexibility to terminate when the relationship ends

Disadvantages:

• Obligations continue if you forget to send termination notice
• Terms may become outdated but remain binding
• Creates calendar management burden

This is a critical detail that affects when protection expires:

Options for starting the clock:

• Effective Date (signing): Term runs from when NDA is signed, regardless of when disclosure occurs
• First disclosure: Term runs from when information is first shared
• Each disclosure: Each piece of information has its own term running from its disclosure date

Implications:

• Effective Date: Simplest to track, but information disclosed late in the NDA term gets less protection
• First disclosure: Good for one-time disclosures, complex for ongoing relationships
• Each disclosure: Maximum protection, but extremely difficult to track

Recommended for disclosing parties: Use "from the date of disclosure" for each item, or extend the term beyond when you expect disclosures to end. If you use "from Effective Date," make the confidentiality period long enough to account for late disclosures.

It depends on the NDA's terms. There are three common approaches:

1. Fixed term without termination right:

• NDA runs for the specified period
• Neither party can terminate early
• Common in transaction-specific NDAs (M&A due diligence)

2. Termination for convenience:

• Either party can terminate with notice (e.g., 30 days)
• Existing obligations survive termination
• Appropriate for ongoing relationships

3. Termination for cause only:

• Can only terminate if the other party breaches
• Provides more protection for disclosing parties
• Receiving party remains bound even if relationship sours

Important: Terminating the NDA does NOT terminate confidentiality obligations. Survival provisions typically keep protection in place for the specified period after termination.

Several things happen (and do not happen) when an NDA reaches its end:

What typically ends:

• The period for making new disclosures under the NDA
• Any ongoing disclosure obligations you may have had
• The relationship governed by this particular NDA

What typically continues:

• Confidentiality obligations for information already disclosed (per survival clause)
• Use restrictions on information you received
• Return or destruction obligations (often triggered by expiration)
• Remedies for prior breaches

What may be triggered:

• Obligation to return or certify destruction of materials
• End of license to use information for the stated purpose
• Need for a new NDA if the relationship continues

Yes, a two-tier approach often makes the most sense:

Why differentiate:

• Trade secrets have indefinite legal protection under state and federal law
• Ordinary business information becomes stale and less sensitive over time
• Perpetual protection for everything is hard to enforce and negotiate
• Two-tier approach is more balanced and more likely to be enforced

How to structure:

• Trade secrets: Perpetual, or "for so long as such information qualifies as a trade secret"
• Other confidential information: Fixed term (3-5 years is common)

Important: Define "trade secret" by reference to applicable law (DTSA or UTSA) rather than creating your own definition.

Long confidentiality periods can create real operational challenges. Here is how to address them:

Practical impacts of long terms:

• Cannot hire employees from competitor for extended periods
• Must maintain security controls indefinitely
• Due diligence burden for future transactions
• Cannot enter certain business lines
• Ongoing compliance costs

Negotiation approaches:

1. Shorten the term: Propose industry-standard timeframes
2. Narrow the scope: Accept longer terms for truly sensitive information only
3. Add sunset provisions: Information loses protection when it becomes obsolete
4. Limit use restrictions: Long confidentiality but shorter use restrictions
5. Termination rights: Ability to terminate with notice, triggering shorter survival

Arguments for shorter terms:

• Information in your industry moves quickly
• Competitive landscape changes frequently
• Long-term compliance is impractical
• Industry standard is shorter

Not necessarily. NDAs can be structured several ways:

Specific end date:

• "This Agreement terminates on December 31, 2026"
• Clear and certain, good for calendar management
• Must be renegotiated if relationship continues

Fixed term from effective date:

• "This Agreement continues for three (3) years from the Effective Date"
• Term depends on when parties actually sign
• More flexible for timing uncertainties

Event-based termination:

• "This Agreement terminates upon completion of the Project"
• Ties to business relationship milestones
• Can create uncertainty about exactly when termination occurs

Perpetual or indefinite:

• "This Agreement continues until terminated by either party"
• Requires active termination
• Often combined with survival provisions

Best practice: Use a specific term or a term tied to a clear event. Avoid ambiguity about when the NDA ends.

Ongoing disclosure relationships require careful structuring:

Option 1: Term measured from each disclosure

• Each piece of information has its own 5-year (or other) protection period
• Provides consistent protection for all information
• Complex to track but maximum protection

Option 2: Evergreen/auto-renewal NDA

• NDA automatically renews unless terminated
• New disclosures always fall within an active NDA term
• Simpler to manage than per-disclosure tracking

Option 3: Master NDA with amendments

• Master NDA covers the relationship
• Each major disclosure event gets an addendum specifying information and term
• Good for episodic disclosures (e.g., each new project)

Option 4: Long initial term with survival

• NDA term longer than expected disclosure period
• Survival period extends beyond NDA term
• Ensure survival period is long enough for information disclosed near the end

When the confidentiality period expires, your contractual obligations under the NDA end. However:

What you can do:

• Use the information without NDA restrictions
• Disclose to third parties (unless other agreements apply)
• Destroy records tracking what was confidential
• Stop special handling procedures

What may still apply:

• Trade secret law: Independent of contract, trade secrets remain protected
• Other agreements: Employment agreements, service contracts, etc.
• Ethical obligations: Professional standards may require continued discretion
• Liability for prior breaches: Statute of limitations may still allow claims

Best practice: Even after NDA expiration, do not use formerly confidential information to harm the disclosing party gratuitously. Business relationships outlast legal obligations.

Yes, but it requires agreement from both parties. Options include:

Amendment:

• Written amendment extending the term
• Must be signed by both parties
• Can modify other terms at the same time

New NDA:

• Replace the existing NDA with a new one
• May provide cleaner documentation
• Consider whether old NDA continues to apply to prior disclosures

Auto-renewal:

• If the NDA has auto-renewal, simply allow it to renew
• No action needed unless you want to terminate

Important considerations:

• Extension should be agreed BEFORE expiration
• Gap periods without protection are problematic
• Make clear whether extension covers prior disclosures, new disclosures, or both

Unreasonable terms can undermine enforcement:

Factors courts consider:

• Nature of information: Trade secrets warrant longer protection than routine business data
• Industry standards: What is typical for this type of transaction?
• Bargaining power: Were the parties sophisticated and represented?
• Breadth of restrictions: Long terms combined with broad scope are disfavored
• Practical necessity: Does the information actually retain value for this long?

What could happen with overreach:

• Court may refuse to enforce the term clause entirely
• Court may "blue pencil" (rewrite) to a reasonable term
• Court may view overreach as evidence the NDA is unreasonable overall
• May affect recovery of attorney's fees or damages

Safe harbor: Matching your term to trade secret law standards (perpetual for trade secrets, 3-5 years for other information) is generally defensible.