The Shelf-Life of Information – Tailor the Term to Fit the Data

The appropriate confidentiality period for information often depends on the nature of the information itself. Some data becomes obsolete quickly, while other types can remain sensitive for decades.

Considerations for Confidentiality Periods:

• Short-Term (1-3 years): Ideal for information with a limited competitive lifespan.
  Examples:
  • Marketing strategies for an upcoming product launch.
  • Customer lists that change frequently.
  • Temporary partnerships or exploratory discussions.
• Medium-Term (3-7 years): Suitable for more enduring but eventually time-limited data.
  Examples:
  • Business development plans.
  • Software prototypes that may become public after several iterations.
  • Manufacturing processes likely to evolve.
• Long-Term (7+ years or indefinite): Necessary for highly sensitive, strategic, or core technology assets.
  
• Examples:
  • R&D data for long-term product development.
  • Source code for proprietary software that forms the backbone of a company’s products.
  • Industrial designs and architectural blueprints for critical infrastructure.
  • Technology innovations expected to remain relevant or operational for decades.

The Pitfall:

If you arbitrarily apply a “3-year confidentiality” term to all information without analyzing its lifespan, you risk under-protecting valuable assets.

Special Rules for Trade Secrets – Indefinite Protection

Here’s where things get more nuanced. Trade secrets are not ordinary confidential information – they’re a distinct category governed by different legal standards.

Key Distinction:

While most NDAs include a finite confidentiality period, trade secrets should require protection for as long as the information remains secret and valuable. This principle is backed by the Defend Trade Secrets Act (DTSA) in the U.S. and similar laws globally.

Example:

• A company discloses the formula for a proprietary chemical compound under an NDA with a 5-year confidentiality term. If that formula qualifies as a trade secret, the NDA should state that trade secrets remain protected indefinitely – even after the 5 years are up.

Practical Approach – Drafting Tips

When negotiating NDAs, keep these best practices in mind:

🔸 Separate Confidentiality from Termination: Even if the NDA “expires,” the confidentiality obligations should survive. Use language like:

“The obligations of confidentiality shall survive the termination or expiration of this Agreement and continue for a period of [X years] from the date of disclosure.”

🔸 Identify Trade Secrets Explicitly: Ensure the NDA either defines trade secrets or includes language such as:

“For the avoidance of doubt, the parties acknowledge that trade secrets disclosed under this Agreement shall remain protected indefinitely or as long as they retain their status as trade secrets.”

🔸 Match Protection to the Value of the Information: If in doubt, err on the side of longer terms for highly sensitive data.

Final Thoughts:

NDAs are more than just boilerplate agreements – they’re crucial for protecting the assets that drive your business. By carefully defining the terms for receiving and maintaining confidentiality, and providing indefinite protection for trade secrets, you create a stronger safeguard for your most valuable information.

💡 Think of it this way: The right NDA length isn’t about the clock – it’s about aligning the timeline with the value of the information.

#NDATips #TradeSecrets #LegalStrategy #BusinessLaw #Confidentiality