Don’t Sign That NDA

(This is an old post from LinkedIn that I had on email. I can’t find the source to give credit. If you find, please let me know.)

An NDA is the closest thing to a virus that exists in the legal world. And just like the real thing, NDA obligations can stay local or spread, end quickly or last forever.

This is not to say NDAs are necessarily bad. Other than keeping your mouth shut, an NDA is the primary way, maybe the only way, to protect intellectual property (IP) that can’t otherwise be patented, trademarked, or copyrighted.

A trade secret, the information protected by an NDA,  “derives independent economic value [from] not being generally known [and] is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. “ (UTSA § 1.4)

Basically, it’s a business secret you care enough to protect. Here are some tips:

#1 Use a Mutual NDA

If you only remember one tip, it would be this one. If both parties are under the same obligations, chances are those obligations will be reasonable. You can generally tell if a NDA is mutual if it uses the terms “Recipient” and “Disclosure”, as opposed to specific party names, when discussing obligations.

#2 Limit NDA Scope

Scope defines the outer boundary of what is protected. The smaller the area, the lower the risk.

#3 Label Each Trade Secret

Make sure that any disclosed trade secret is labeled in writing as such in order to be covered by the NDA.

#4 Limit Who Can Sign the NDA

An NDA is an agreement with serious long-term legal obligations.

#5 Termination Date

Make sure the NDA has a specific termination date beyond which there is no obligation to keep the trade secret “secret”. At some point, both parties need to move on.

#6 Avoid Perpetual NDAs

These are the “Zombie Virus” of the legal world – once you get infected you’re done. Usually, the NDA will have a termination date, but will also include language like “for so long as the information remains protectable under applicable law.” Unless it’s your IP, if you must sign the NDA, I recommend limiting it to the smallest number of people, and the narrowest scope as possible, to avoid an internal IP contagion.

#7 Hire Someone Who Knows What They Are Doing

As some point, it’s worth getting professional advice from an attorney.

 

John from jpl-consulting.com makes other very good points, some of them I excerpt here but please visit his website for the complete picture (and while there, hire him):

http://blog.jpl-consulting.com/2012/04/why-i-wont-sign-your-nda/

There’s Nothing New Under the Sun

Between a first-time web entrepreneur and one who’s been for years working on many ventures, there is a huge gap in perspective regarding the importance, rarity, and uniqueness of ideas.  Namely if you have this one great idea and that’s your ticket into entrepreneurship, you’re apt to overlook (or simply be unaware of) how interconnected and overlapping innovations are, and correspondingly unable (or unwilling) to see traces of your idea in and around stuff that’s already out there.

Ideas are Plentiful, Good Execution is Scarce

It’s a well documented phenomenon how idea-havin’ first timers just need a programmer to bring their vision to life, as though the idea is somehow half the battle (or 90%, as folks like me often get offered sweat equity deals–10% seems to be a popular number).  But if you’ve ever tried to bring even one venture to market, you know perhaps all too well that ideas are just the starting point, and take by far the least work, time, and capital.

It’s Not a Good Sign

Say I’m just first meeting you to discuss your idea.  If you prize your idea so much (in relation to everything else it will take in order to make it succeed) that you feel the need to put in legal protections from me, it’s a tell that you don’t have much going for you in this endeavor.

Your NDA Treads Heavily Upon My Right to Work

Overlap in innovations and concepts found among disparate parts of the web is ubiquitous.  Any agreement that I sign to not disclose or use information shared with me in a casual engagement opens up a whole world of potentially contentious confusion about what is or isn’t okay for me to do in the future.

NDAs Have Their Place

Are there some situations where NDAs are appropriate?  You betcha.  They are appropriate when there exists something both significant and tangible to disclose, representing more than just whatever popped into your head in the shower.  The 10 page business plan alluded to above makes a reasonable cutoff, necessary but probably not sufficient.

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