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I am currently reviewing our company's NDA templates and came across the following term:

  1. This Agreement shall remain effective for six (6) months from the Effective Date. All obligations of the Recipient with respect to the use and disclosure of Confidential Information hereunder shall terminate three (3) years from the Effective Date.

If I'm reading this right, it is saying that the NDA is binding for 3 years after the date it is signed. But how does the first part, "This Agreement shall remain effective for six (6) months from the Effective Date." apply in lieu of the second part?

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It means that the agreement lasts for 6 months under which confidential information (CI) provided must be kept secret for 3 years.

So lets say you signed this agreement on January 1, 2018. Any CI materials provided between Jan-1 2018 to Jun-30 2018 must be kept confidential up until January 1, 2021 (3 years from the effective date). However if you received a CI material on July 1, 2018 the NDA would have expired and you would not be obligated to keep it confidential at all.

These types of short-term NDA's require careful oversight because it is easy to forget that the NDA has expired and start providing CI to third parties not obligated to keep them confidential because the NDA expired.

So, in short, it means that anything provided as CI during the 6-month term of the NDA must be kept confidential for 3 years. After 6 months the NDA is no longer in effect and care must be taken in exchange of CI to third parties.

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