NEED-TO-KNOW
EFFECTIVE TIME OF THE NON-DISCLOSURE AGREEMENT
The Non-disclosure agreement (NDA) is usually not the main contract, but it’s effective time may not coincide with the main contract, unlike other accompanying agreements. Basically, the NDA effective time is the period during which the Recipient is obliged to keep confidential information confidential as desired by the Provider.
How should this effective time be prescribed?
- Benefit to the Provider: This effect should be “indefinite”, meaning that even if the Master Contract terminates and/or the transaction ends, the Recipient must keep confidential information confidential.
Example: This Non-disclosure agreement is effective from the time the Recipient first acquires the Confidential Information, continuously and forever (including if the Master Contract and/or Transaction is terminated, cancelled or invalidated).
- Benefit to the Recipient: This effect should be “narrow”, meaning that when the Main Contract is terminated, the Recipient is no longer required to keep confidential information confidential.
Example: This Non-disclosure agreement is effective from the time it is entered into by the Parties, continues continuously and terminates at the same time as the Master Contract.
- Cân bằng cho Các Bên: This effect should be “deterministic”, i.e. after a certain period of time (at which time the disclosed confidential information is not harmful to the Provider) the NDA ceases and the Recipient is no longer required to keep the confidential information confidential.
Example: This Confidentiality Agreement is effective from the time the Recipient first acquires the Confidential Information, is continuous and terminates [36 months] from the time of termination of the Master Contract.
(Where there is special confidential information that needs to be protected forever, an “exception rule” should be added.)
Note: In fact, many NDAs stipulate “… the obligation to keep confidentiality of Confidential Information in effect after the termination of this NDA”, which may affect the enforceability, as the question arises: Does the NDA terminate, does the Recipient’s liability provision for breach of confidentiality obligation remain valid?
