Confidentiality Agreements - Term
Hello Entrepreneurs!
Below is an example of an ambiguous “term” provision in a Confidentiality Agreement. The provision doesn’t distinguish between the “Disclosure Period" and the “Obligation Period”. The Disclosure Period is the time period during which disclosures (of secret information) are made by the Disclosing Party (the owner of the secret information) to the Receiving Party (the contract party that receives the secret information from the Disclosing Party). The "Obligation Period" is the time period during which the Receiving Party must comply with its obligations of confidentiality and non-use.“Recipient’s obligations [under this Confidentiality Agreement] shall remain in effect for a period of 3 years from the date of disclosure.”
Let’s say the Disclosing Party discloses some Confidential Information on January 2, 2008. It’s pretty clear that the Receiving Party has to keep the information confidential until January 1, 2011. So far so good. But let’s say that the Disclosing Party furnishes additional Confidential Information on February 2, 2008. Does this mean that the Receiving Party has to keep this batch of information confidential also until January 1, 2011, or rather until February 1, 2011? The language is not clear.
People enter into Confidentiality Agreements to protect secret information either disclosed during an on-going business relationship, or during a shorter period of time during which the parties are deciding whether it’s feasible to enter into a business relationship. In either case, information will be flowing, sometimes in both directions, on a sustained basis.
So even if the language was made a bit more clear to mandate confidentiality for any piece of information for three years after disclosure of that particular piece of information, a moving target end date is not necessarily in the best interests of either party. It’s a monumental task to keep track of the dates of disclosure.
Rather, it may be better to have an Obligation Period that ends on a date certain, and have that date be “x number” of years after the END of the Disclosure Period. More on that in my next column.
Good hunting!
For more information about me, or to contact me directly, please leave a post or visit ContractAdviser.com
