Negotiating a corporate transaction means sharing secrets, and instead of relying on the other party`s righteousness, the parties often enter into a confidentiality agreement (NDA) to protect and prevent the misuse of confidential disclosures. Like the cone of silence in Get Smart! An NDA creates a private space where an open discussion can take place. A minority of agreements contained a clause providing for compensation following a final and unquestionable court order. Indemnification clauses were more common in unilateral NDAs. The most frequent duration of the contract was 24 months. One agreement remained in force for 120 months (the longest duration) and one for only three. Twenty agreements have not set a termination date, implying an indefinite duration. Twenty-three others ensured that the NDA`s privacy rules were perpetuated or implied. The increasing standardization of NDA usage clauses is correlated with recent court decisions that erect such clauses. A 2012 Delaware Chancery Court decision concluded that even provisions that do not explicitly “exclusively” restrict the use of confidential information under review of a proposed transaction can still act as a kind of virtual standstill clause and hinder future hostile transactions. In Martin Marietta Materials, Inc. against Vulcan Materials Company, the Tribunal held that a provision limiting the use of confidential information to a “business combination between the parties” showed the parties` intention to limit the use of confidential information to the valuation of a friendly transaction (Martin Marietta Materials, Inc.
v. Vulcan Materials Co., 56 A.3d 1072 (2012)), see also the legal update, Martin Marietta: Delaware Court of Chancery Holds Use of Confidential Information in Hostile Bid Breaches Confidentiality Agreements). A California court came to a similar conclusion and issued an injunction against a hostile offer based on the use provision of the confidentiality agreement (Depomed, Inc. Horizon Pharma plc, 2015 WL 7433326 (Cal. Sup. Ct. Nov. 19, 2015)). The standstill provisions preventing the recipient of confidential information from initiating a hostile transaction for the disclosing party for a certain period of time appeared in the majority (80%) of the agreements surveyed. . .