NDA Tolling Clauses

Originally published by Patrick Keating.

When using a non-disclosure agreement or non-use agreement (collectively, a “NDA”) to protect trade secrets, a good practice is to include a tolling clause in the contract to extend the life of the NDA if the restricted party breaches the contract. 

Imagine a plaintiff who files a theft of trade secrets claim against a defendant who continuously violates a NDA.  If the lawsuit takes several years to complete, the NDA might expire before the plaintiff obtains a judgment.  The defendant would then argue that the plaintiff is not entitled to an injunction prohibiting the defendant’s further use or disclosure of the trade secrets because the NDA expired.  After all the defendant asserts, “Regardless of whether I breached the NDA, I am entitled to use the trade secrets once the contractual restrictions expire.”

To avoid this situation, include language in a NDA stating that the term of the NDA will be extended for the amount of time that the restricted party breaches the contract.

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