An NDA allows you to specify how long the obligations about confidential information apply. There are two schools of thought when it comes to approaching this position.
The first school worries about being liable to the other party. When you sign an NDA, you are taking on contractual obligations. And that means opening yourself up to potential legal action. If your company signs a lot of NDAs, there could be a large number of people out there who may someday come after you with a legal claim.
To help manage this exposure you can limit the term of the obligation under the NDA to a fixed number of years, often from the date the contract is signed. This makes it easy to manage your exposure. Once that fixed term has expired, you can relax. You can’t be liable under that agreement any more.
The second school worries about the confidential information you’re providing to the other party. It could well still be secret and valuable when a fixed term expires. If they disclosed it then it could still be damaging and you would have no recourse under the NDA. To prevent this, you might specify that confidential information disclosed should remain subject to NDA for as long as that information remains confidential.
For a mutual NDA (see Who is Protected?), you will be managing both of these concerns at the same time. That is, you will be both receiving information from the other side and disclosing your own confidential information. This makes it a finely balanced judgement call and reasonable parties can disagree on this point.
You will have to decide where you stand. If both parties subscribe to the same school of thought, the "How long?" question is easily resolved. However, when the parties take different views, it will usually require some genuine negotiation to get past this point.
Relevant factors to consider when negotiating include how much confidential information you intend to disclose and how much you expect to receive. It may also depend on who has the greater bargaining power at this point in the negotiation.
Some ways of reaching agreement in these circumstances include:
- Agreeing to a long fixed term (e.g. 5-6 years) may be close enough in practice to an obligation that continues for as long as information is confidential.
- If you subscribe to the second school, you could limit the amount you disclose in the subsequent negotiation, in exchange for agreeing to a fixed term.
- A longer fixed term could be agreed in conjunction with another concession that minimises exposure, for example, limiting the scope of the information protected.