How long is your nondisclosure agreement applicable?

A nondisclosure agreement, also referred to colloquially as an NDA, is a common legally binding contract used in many workplace and professional situations. In an NDA, the signers agree to keep specific information confidential and not share it with those outside the agreement. Businesses of all sizes as well as individuals use NDAs, and these agreements can cover a variety of information. 

However, just because there’s a signed NDA doesn’t mean the parties involved will keep the information confidential forever. How long is your nondisclosure agreement applicable? Let’s take a look at the types of nondisclosure agreements and the variables that impact their duration.

What are the different types of nondisclosure agreements?

Before we can answer the question of how long a nondisclosure agreement lasts, it’s important to understand the different types of nondisclosure agreements and what they cover. 

An NDA can be mutual, meaning that both parties in the agreement are making disclosures to one another and both agree to keep that shared information confidential. This is called a mutual nondisclosure agreement. nondisclosure. 

Another type of NDA is a one-way nondisclosure, which, as the name suggests, means that only one party is sharing information and requiring the other party to keep that information confidential. 

A third type of NDA involves more than two parties. “Multilateral NDAs aren’t very common,” says Wes Wright, CEO of CookOut News. “An example would be if a company was selling parts of itself to two other companies and all three were involved in the negotiation.”

Another differentiator in nondisclosure agreements is the type of information involved. There are two types of legally identified information: 

• Trade secrets involve any type of information that’s vital to the success of the business and has economic value. Take, for example, a restaurant: Its trade secrets may include the recipes for signature dishes. 
• Ordinary confidential information isn’t necessarily economically valuable in all cases, but it likely has some value to one of the parties. Examples of ordinary confidential information could include marketing lists or product specifications. This information may be highly valuable, yet not as valuable as trade secrets. 

“A well-written NDA will specifically describe the scope of the agreement and what is and is not considered confidential,” says Robert C. Bird, professor of business law at the University of Connecticut School of Business.

How long is your nondisclosure agreement applicable?

So, now we get to the question: How long is your nondisclosure agreement applicable? There’s no single answer to this question that applies across all cases. It depends on the NDA laws of your state as well as what type of information your agreement covers. 

If your agreement covers trade secrets, it’s possible that the duration of the agreement for the NDA clause could be perpetual. However, if your NDA covers ordinary confidential information, the duration could be a specified period of time, such as one, three, or ten years. The reasoning behind this is that, in many cases, the value of ordinary confidential information declines over time. For example, in three years, your business’s marketing list may be outdated, so there’s no reason for it to be confidential.

“An NDA will state how long the agreement is in force, any potential exclusions, and the consequences for breaching the contract,” says Bird. “Employers should be aware that NDAs should not be overbroad and cover an unlimited time period.” He also advises making sure an NDA is carefully written so it complies with state law; otherwise, a court could find the agreement unenforceable.

“As with many things where the law is concerned, there isn’t a simple answer to this question,” says Richard J. Brandenstein, attorney and partner at FBR Law, a firm specializing in workers’ compensation and social security disability. “There is no ‘typical duration’ for an NDA and no rules or guidance for how long they should last in certain circumstances. I always say that an NDA lasts as long as the parties involved want it to, or rather, for as long as the involved parties can agree to.”

Keep in mind that some states don’t favor indefinite time clauses for ordinary confidential information. If your agreement covers both trade secrets and ordinary confidential information, then it’s best to have a separate clause for each type of information and specify the duration of the NDA for each.

“Even after the ‘term’ of your NDA has concluded, you may still have an obligation to maintain confidentiality for a longer period of time, usually with regard to trade secrets or other kinds of intellectual property,” says Brandenstein. “The term of an NDA and the duration of your commitment to confidentiality are not necessarily the same; if they are not, this will be stipulated in a ‘duration clause’ that should clarify this. For example, an NDA might only last for five years, but your commitment to confidentiality may be perpetual as it pertains to IP.”

What are some tips for writing a nondisclosure agreement?

Want to ensure you have a valid nondisclosure agreement that protects the information you want to keep private? Follow these tips:

• Speak with a legal professional. Always consult a legal professional when drafting any type of legal agreement to ensure that your terms will be valid in court and aren’t open to interpretation.
• Be specific. “When drafting an NDA, organizations need to consider the scope of what the NDA will cover,” says Brandenstein. “For instance, it may be decided that an NDA should only apply to written information deliberately marked as confidential, or it may apply more widely, to include verbal communications shared in team meetings as well. While it might be appealing to opt for an NDA that covers a broader remit, best practice for writing NDAs is to ensure that they are as specific as possible about what information must remain confidential. It is the responsibility of the organization to define what information it considers confidential for the purposes of the NDA; sometimes, it might actually be easier for the organization to specify what information is not confidential, rather than what is.”
• Double-check every detail. “When signing an NDA, look out for non-solicitation language,” says Wright. “If you’re acquiring a company in your sector, non-solicitation language could prevent you from hiring employees or contractors from the other company. Make sure that won’t interfere with your business if the deal falls through and that the proper procedures are in place to prevent a breach.”
• Clarify the time period. “Make sure to specify a term that’s reasonable and enforceable,” says Wright. Does the clock start ticking from the date of the agreement or from the date when the disclosure is made? Clarify this in the document so there’s no question. “Additionally, it’s worth noting that information that the receiver of the NDA knows before signing the agreement cannot be included in it,” says Brandenstein. “This underlines the importance of agreeing to an NDA with an employee before they become privy to confidential information. You can’t attempt to impose an NDA on an employee — or anybody else — ex post facto if you later realize that they have access to sensitive company/organization information.”
• Get the signatures. You can use Jotform Sign to acquire electronic signatures from everyone involved. “Make sure that both parties sign the agreement and store the fully executed agreement somewhere where it can be easily retrieved,” says Wright.

“A nondisclosure agreement can be a helpful tool for protecting sensitive company data from unwanted publication,” says Bird. Just ensure you know how long your nondisclosure agreement is applicable and consult a legal expert if you have any questions.