Trade Secrets

BladeRoom v. Emerson: The Two-Year NDA That Ate a $60 Million Verdict

The Ninth Circuit held that a sunset clause unambiguously ended an NDA's confidentiality obligations after two years, vacating a verdict built on later conduct.

June 17, 2025
Rows of modular data center server racks under blue lighting
The case arose from competing modular data-center designs pitched to Facebook after acquisition talks collapsed. Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

BladeRoom Group Ltd. v. Emerson Electric Co., 11 F.4th 1010 (9th Cir. 2021), No. 19-16583 (consolidated with No. 19-16584) (9th Cir. Aug. 30, 2021), is the rare appellate decision that turns an eight-figure trade-secret victory into a remand on the strength of a single sentence in an NDA. A jury had found that Emerson breached the parties’ non-disclosure agreement and willfully misappropriated BladeRoom’s modular data-center trade secrets, and the district court (N.D. Cal., Davila, J.) entered a judgment that, with punitive damages, exceeded $60 million. The Ninth Circuit vacated and remanded for a new trial, holding that the NDA’s twelfth paragraph unambiguously terminated the agreement — and its confidentiality obligations — two years after signing.

The decision is the cleanest modern illustration of a point that NDA drafters intuit but litigants forget: confidentiality obligations last exactly as long as the contract says, and a generic termination clause can switch the duty of secrecy off entirely.

At a glance

  • Case: BladeRoom Group Ltd. v. Emerson Electric Co., 11 F.4th 1010 (9th Cir.)
  • Decision: Opinion vacating judgment and remanding for new trial, August 30, 2021
  • Dockets: Nos. 19-16583, 19-16584 (consolidated)
  • Court below: N.D. Cal. (Davila, J.); jury verdict and post-trial awards exceeding $60 million including punitive damages
  • Governing law: The NDA specified that English law governed its interpretation
  • Key clause: Paragraph 12 — “this agreement shall terminate on the date 2 years from the date hereof”
  • Holding: Under English law, read naturally, paragraph 12 terminated the NDA and its confidentiality obligations two years after execution; conduct after that date could not breach the NDA, and the jury was wrongly allowed to consider post-termination use

The competition and the collapsed deal

BladeRoom and Emerson both design and build modular data centers — prefabricated, rapidly deployable facilities assembled from standardized units. In August 2011 the companies began discussing Emerson’s possible acquisition of BladeRoom. To enable due diligence, BladeRoom drafted an NDA, both sides signed it, and the parties agreed that English law would govern.

The acquisition fell through. Around the same time, Facebook set out to build a large data center in northern Sweden. BladeRoom pitched a design in July 2012; Emerson pitched a competing design months later; and Facebook ultimately selected Emerson’s proposal, signing a design-build contract in 2014. BladeRoom sued, contending that Emerson had used what it learned during the failed acquisition talks to build the very design that won the Facebook work. The jury agreed and found both breach of the NDA and willful, malicious trade-secret misappropriation.

The clause that decided the appeal

Paragraph 12 of the NDA stated that the agreement “shall terminate on the date 2 years from the date hereof.” The district court had read the NDA so that its confidentiality obligations survived that two-year mark — effectively treating the duty of secrecy as enduring while the agreement’s other machinery wound down. On that reading, Emerson’s later use of BladeRoom’s information in the Facebook competition could constitute a breach.

The Ninth Circuit rejected that interpretation. Applying English contract-law principles — which, like their American counterparts, prioritize the natural meaning of the words the parties chose — the panel held that paragraph 12 unambiguously terminated the entire agreement, confidentiality obligations included, two years after signing. There was no carve-out preserving the duty of secrecy beyond termination, and the court would not read one in. Because the conduct BladeRoom complained of largely occurred after the two-year period, the jury should never have been permitted to treat post-termination use as a breach of the NDA. The error infected the verdict, so the court vacated the judgment and remanded for a new trial.

Why a sunset clause is not the same as a survival clause

The heart of BladeRoom is the distinction between a termination clause and a survival clause. A termination clause says when the agreement ends. A survival clause says which obligations outlive that ending. Sophisticated NDAs routinely pair the two: the agreement terminates on a date, but the confidentiality covenants survive for a specified number of years afterward, or for as long as the information remains a trade secret. BladeRoom’s NDA had the first half and not the second. Paragraph 12 set a hard stop and said nothing about survival, so the obligation to keep the information secret stopped when the agreement did.

This produces a counterintuitive but doctrinally sound result: information that was unquestionably a protectable secret could be copied without breaching the NDA, simply because the contractual duty not to use it had expired. The trade secret did not cease to exist in the abstract; the contractual protection lapsed. That distinction matters because BladeRoom’s case was litigated heavily on the NDA, and the contract’s clock, once correctly read, ran out before the conduct at issue.

The decision also underscores how choice-of-law clauses can quietly drive outcomes. The NDA selected English law, and the Ninth Circuit’s task became one of applying English interpretive principles rather than California contract doctrine. The panel found the district court had misapplied English law by departing from the clause’s natural reading. Parties who import foreign governing law into a confidentiality agreement should understand that an American jury’s instincts about “what’s fair” will be filtered through that foreign lens on appeal.

Open questions

  • What happens to the misappropriation claim on remand? The opinion’s force is directed at the NDA’s duration. Whether a freestanding statutory or common-law misappropriation theory — one not dependent on the expired contractual duty — could still reach post-termination conduct is a question the remand had to sort out.
  • How would a survival clause have changed the result? A clause preserving confidentiality for a term of years after termination would likely have kept the relevant conduct within the protected period. The decision is, in effect, a demonstration of the absent clause’s value.
  • Does termination revive use rights immediately? The opinion treats the duty as ending with the agreement, but parties may dispute whether information acquired during the term carries any residual restriction once the contract lapses, absent a survival provision.

Implications

  • Pair every termination clause with a survival clause. State expressly that confidentiality obligations survive termination for a defined period — or for as long as the information remains a trade secret.
  • Decide consciously how long secrecy should last. A two-year acquisition-diligence window may be sensible for the deal but disastrous for the secret. Match the confidentiality term to the life of the information, not the life of the negotiation.
  • Read choice-of-law clauses as substantive, not boilerplate. Selecting English (or any foreign) law means a foreign court’s interpretive canons may govern the meaning of your secrecy obligations.
  • Do not let a contract theory crowd out an independent misappropriation theory. Anchoring a case to an NDA that may have expired risks losing everything if the clock has run; plead and preserve statutory claims that do not depend on the contract’s duration.
  • Audit duration terms in existing NDAs now. A standard “terminates in two years” clause, common in deal NDAs, may be silently extinguishing the protection you think you have.

Frequently asked questions

How can a real trade secret be copied without liability? BladeRoom concerned a contractual duty of confidentiality, not the abstract existence of a secret. When the NDA terminated, the contractual obligation not to use the information ended. Without a survival clause, later use did not breach the agreement, even if the information was still secret.

Why did English law matter? The NDA selected English law to govern its interpretation. The Ninth Circuit therefore applied English contract principles and found the district court had misread the termination clause under those principles, departing from its natural meaning.

What single drafting change would have avoided this? A survival clause. Language stating that the confidentiality obligations continue for a set number of years after termination — or for the life of the trade secret — would have kept the disputed conduct within the protected window.

Authorities and sources