BLC Sideline: Avoiding the indeterminate NDA

Let’s review how a typical Non Disclosure Agreement (NDA) gets signed.

Someone pulls a standard template, sends it to the other side, and the Parties sign without ever having any lawyer actually read its terms.

Most of the problems this creates are fairly well known- unenforceable damages clauses, conflict of laws issues, overbroad definitions for what actually constitutes “confidential information”, and so on and so forth. Without discounting the relevance of the other usual issues, in this Sideline, we focus on one that is routinely missed, even by seasoned counsel: the “Term” and “Survival” clauses of an NDA, at least in respect of appreciating the distinction between the two.

Every NDA runs two clocks- The first is the “term”, which is the window during which the parties actually share information. The second is the “survival” period, which is how long the duty to keep that information confidential continues after the window closes. Templates tend to blur the two, or leave out the first altogether.

Term

Take an NDA with no clear “Term”, and a “Purpose” clause described in loose words. Anything the parties discuss later, even on an unrelated deal years on, can arguably fall under such “Purpose”, arguably falling within the scope of the NDA, as the “Term” never ended. There is also no end date, and without an end date nothing triggers the obligation to return or destroy what was shared in the past.

Some disclosing parties keep the “Term” clause vague deliberately, thinking that no end date means lasting protection. In fact, a contract with no fixed term can generally be ended by either side on reasonable notice. So the recipient can walk out at a time of its own choosing, leaving the disclosing party exposed to potential risk as well.

So, absence of a definite “Term” clause is in the interest of neither the disclosing party, nor the receiving party.

Survival

Perpetual survival is no better. The recipient is left guarding a pile of ordinary commercial information forever, with the risk of a claim never going away. The discloser suffers too, though less obviously. When a clause claims permanent secrecy over everything, courts in India are more likely to ask whether any of it was truly confidential, jeopardizing the whole purpose of executing the NDA in the first place.

The opposite mistake is just as costly. If real know-how sits under a short fixed period, the recipient is free to use it the day that period ends. The clause then works like a licence with a start date.

So the real question is not “perpetual or fixed”, but which information deserves which clock.

NDA- the last bastion protecting trade secrets

It is no secret that India has no trade secrets statute.

Therefore, in practice, the NDA is the protection. Given the practical relevancy and importance, thus, in this Sideline, our approach is simple-

The term should run only while information is actually being exchanged, and must end on either, a fixed outer date, or a written communication from either party that it is not going ahead with the Purpose.

Once the term ends, the information is returned or destroyed, and a certificate is given.

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The survival period can then be kept short. Three years is a sensible benchmark, echoing the limitation period for contract claims. It is only a commercial yardstick, because limitation runs from the breach and not from the disclosure. By then, most business information has lost its value anyway. Indefinite survival should be kept for trade secrets that are specifically identified in the NDA, and worded to last “for so long as the information remains a trade secret”.

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In the end, an NDA protects only what the law is prepared to protect.

That raises the next question: can confidentiality ever be claimed over information the use of which is illegal?

More on that in the next Sideline.

This update is for general information only and is not legal advice.

Feel free to reach out to us with your queries at legal@benevolentlawchambers.com