NDA Allowing Vendors to Maintain Confidential Documents for Record-Keeping Purposes

Response #1: We churn out non-disclosure agreements (NDAs) like crazy at our fund, so I think we have a pretty good feel for market terms. At this point, it is becoming standard for most recipients of confidential information to keep "one copy" in connection with their "standard document retention policies" that are applicable to all their counterparty relationships. Their ask doesn't seem too aggressive. We get and give this in the ordinary course of business.¹

 

Response #2: I agree. Working in the business-to-business (b2b) manufacturing area, this is a common term in many non-disclosure agreements (NDAs).²

 

Response #3: I agree with the other views submitted that the requested revision is legitimate. We use a similar provision in our template non-disclosure agreement (NDA) to enable each party to retain a copy for its record keeping purposes. Below is a provision that may be helpful. This provision has relatively simple wording in our NDA, but you can add other requirements or protections to the provision.

"The Recipient will return or destroy all Confidential Information (including copies) that the Disclosing Party made available to the Recipient under this Agreement upon request by the Disclosing Party. The Recipient may retain, subject to the terms of this Agreement, a copy of the Confidential Information as required for compliance with its internal recordkeeping requirements."³

 

Response #4: I agree with the first respondent. This clause has become almost standard in confidentiality agreements.⁴

 

Response #5: I agree with the other views - here is a clause that may be helpful:

The [Company] may retain 1 copy of the Confidential Information for its files, but only to the extent required to ensure compliance with law and its bona fide corporate governance, insurance or audit obligations.⁵

 

Response #6: I actually have a slightly less accommodating view on this. Before moving in-house I frequently represented venture-backed companies in their exits, and received non-disclosure agreements (NDAs) from potential buyers with that included provisions like these. My clients were generally in IP-heavy industries, so the idea of 10-20 potential buyers, including financial buyers who may be investing in or acquiring competitors, keeping copies of their confidential information was very concerning to us - especially if they said that this was necessary simply because of their document retention policies. I would generally accept some form of this provision if pushed, but only with the following changes:

• Very clearly set out the limited purposes for which they will retain the information. Sounds like they've appropriately limited that here;

• Provide that the information will remain confidential for as long as it is retained. You don't want them to be free to use your confidential information as soon as the general 2-3 year confidentiality obligation expires;

• Limit the access to that information to certain specified personnel.

For the last point, I would typically include some form of the following: "provided in each case that any such confidential information can only be accessed by your personnel whose functions are primarily legal, compliance or information technology-related, as is reasonably necessary for the performance of their duties as such." (The reference to IT personnel is only needed if they say that they need permission to keep a copy of the information because they can't scrub everything from their backup servers - which was one justification I heard a lot.)

 

Here's another example of these sorts of provisions that I've seen:

Notwithstanding anything to the contrary in this agreement, (a) the receiving party shall have no obligation to return or destroy information (including copies, extracts and other reproductions) retained in standard archival or computer back-up systems or pursuant to the receiving party's or its representatives' normal document or e-mail retention practices, (b) the receiving party or its representatives may retain information to the extent required (based upon the advice of counsel) by legal requirements or by governmental or regulatory authority, and (c) the receiving party's accountants may retain information pursuant to their professional obligations. Any information retained by the receiving party or its representatives as described in subparagraphs (a) through (c) above shall be maintained as confidential and subject to the terms and conditions of this agreement.⁶