
Why I Won’t Sign Your NDA - ctingom
http://mixergy.com/why-i-wont-sign-your-nda/
======
grellas
Here is a related HN thread (<http://news.ycombinator.com/item?id=986990>)
centered around a piece entitled "Reasons to Drop NDAs."

Because the theme is the same in the post here, I repost below my response to
the prior piece:

"It all depends on what one means by 'NDA.'

If it means the piece of paper people ask you to sign before giving you a
pitch, the author's points are largely well taken.

On the other hand:

1\. If a company fails to have its employees sign NDAs, it potentially
jeopardizes its trade secrets (to protect something as a trade secret, an
employer must show that it took reasonable steps to treat the proprietary
information as trade secret information and having employees sign NDAs is a
key component of this).

2\. If a supposed suitor approaches you about buying your business, and you
fail to sign an NDA, then the information disclosed in the buying process -
which can include your most intimate and valuable business techniques and
plans - can potentially be lifted by the would-be suitor and used
competitively against you after the suitor abandons the deal.

3\. If you attempt to negotiate a potential strategic partnership, and you
trade proprietary information relating to what would be a valuable joint
venture, and do so without an NDA, then, again, the prospective partner can
betray you and use your valuable information against you.

4\. If you let your sales people develop all of a company's leads in their own
name and using their own resources, without confidentiality agreements (i.e.,
NDAs) acknowledging that the customer information is valuable proprietary and
confidential information belonging to the company, you leave your company
exposed to having its customers raided without any legal recourse. Are sales
people prone to do this? Absolutely. They tend to think of customers as
belonging to them and not to the company. Without the basic legal protections
afforded by NDAs, a company runs serious risks of losing its customer base to
those who might chose to raid it.

5\. Other examples could be multiplied, almost ad infinitem, depending on the
particular business context, of how it is positively naive and, indeed,
stupid, to proceed in various business dealings without benefit of the legal
protections needed to protect confidential and proprietary information, that
is, without an NDA.

While I think the author's basic points make perfect sense in the fast and
loose world of 'pitches,' they are not generally applicable in the world of
startups. As long as there are business dealings in which any party has
valuable information that it wants to keep secret, NDAs will continue to serve
valuable purposes and are necessary and, indeed, indispensable to the
transactions involved. This is from the perspective of one who has specialized
in business startup law in Silicon Valley for the past quarter century."

------
tptacek
I really worry that people get the wrong impression from these articles. Yes,
don't ask VCs and journalists to sign NDAs. Yes, don't sign an NDA if you're
unsure of whether there's an opportunity.

But in the real world, refusing to sign an NDA to move a business transaction
forward will very often kill the transaction and sour the prospect on you.
Most businesses that have been operating for awhile have very valid reasons to
get NDA cover for everyone they work with.

A really common case where NDAs are almost unavoidable is when you're working
with companies that have in-house general counsel. This, by the way, is one
reason not to have in-house general counsel.

~~~
rwhitman
Not true. I've refused signing several NDAs and never once lost the deal
because of it.

~~~
icey
Just because it hasn't happened to you yet doesn't make it untrue. I know at
least 2 people who have had deals fall through because they refused to sign
NDAs.

------
niyazpk
Here is a related link and at the end of the post you can see more related
links: [http://www.mark-welch-
blog.com/index.php?option=com_content&...](http://www.mark-welch-
blog.com/index.php?option=com_content&view=article&id=110:why-i-dont-sign-
ndas&catid=36:internet-industry&Itemid=55)

~~~
jbellis
Wow, NDA trolling. That hadn't even occurred to me.

------
wooster
My rebuttal: <http://en.wikipedia.org/wiki/Gary_Kildall#IBM_dealings>

Short version, for those unfamiliar with the story: IBM approaches Digital
Research to license CP/M, Digital Research refuses to sign a fairly standard
NDA, IBM licenses DOS from Microsoft instead, Bill Gates now richest man in
the world.

------
flooha
Funny seeing this. I'm currently reviewing a NDA & contract for a consulting
gig and came across this gem:

 _Recipient agrees that any violation or threatened violation of this
Agreement will cause irreparable injury to COMPANY, entitling COMPANY to
obtain injunctive relief in addition to all legal remedies without showing or
proving any actual damage and without any bond required to be posted._

 _without showing or proving any actual damage_

yeah, whatever.

 _Consultant agrees that all right, title, and interest in and to any
copyrightable material, notes, records, drawings, designs, inventions,
improvements, developments, discoveries and trade secrets conceived,
discovered, authored, invented, developed or reduced to practice by
Consultant, solely or in collaboration with others, during the term of this
Agreement and arising out of, or in connection with, performing the Services
under this Agreement and any copyrights, patents, trade secrets, mask work
rights or other intellectual property rights relating to the foregoing
(collectively, “Inventions”), are the sole property of the Company. Consultant
also agrees to promptly make full written disclosure to the Company of any
Inventions and to deliver and assign (or cause to be assigned) and hereby
irrevocably assigns fully to the Company all right, title and interest in and
to the Inventions._

I probably won't be getting the job due to crossing off all of this crap.

~~~
gruseom
I see your first point, but isn't the second paragraph you quote just standard
practice? Granted the legal jargon is horrible, but it seems to be saying that
the work you do as a consultant during the term of the contract belongs to the
company. Every consulting contract says that. How is this one egregiously
different?

~~~
flooha
The legal jargon is the first grievance, which I obviously have to just accept
as part of the game, but the ambiguity of it is what I have difficulty
accepting. Does this clause prevent me from pursuing my own ventures during
this time? Is everything I do during this time claimable by them?

 _rising out of, or in connection with, performing the Services_

This bit seems to limit it to whatever I happen to be doing for them, but as
this story, currently on the front page of HN shows, even lawyers have
difficulty nailing it all down.

<http://news.ycombinator.com/item?id=1050952>

For example, if I come up with some clever little bit of javascript that does
something interesting, does it mean I can never use that for any purpose ever
again? It's terribly ambiguous and limiting. I don't expect to take the job
because I am currently working on my own projects and have no concrete way of
defending myself against them claiming all of my work.

The second problem I have is this phrase:

 _Consultant also agrees to promptly make full written disclosure to the
Company of any Inventions..._

WTF does that mean? Even if it is limited to the "inventions" I "invent" for
them, does that mean I'm supposed to immediately write some kind of disclosure
after I "invent" something and give it to them? It's ridiculous. Let's assume
this refers to my existing "inventions", not developed during the contract
term, which I don't think it does. In that case, how could I possibly expect
to protect myself? What if I forget to list one of my "inventions". They can
claim it? I honestly don't think all of the doubt is even worth the time and
effort to nail it all down.

I should pay a lawyer to go over it, but I already know I will require some
lines to be removed, which will probably negate their interest in hiring me
and thus make paying a lawyer a complete waste of money.

I understand the motivations for these kinds of contracts, but it puts all of
the burden on the consultant and gives the overall impression that they can
bend you over on a whim and screw you royally. It's basically making me not
interested in the job, especially since I have my own things I want to work
on. Initially, I recognized that my particular skills were exactly what they
needed and it would be a pleasant job, but the "pleasant" part is quickly
disappearing.

I'm probably just too uptight about this kind of stuff.

~~~
Vitaly
In general as a consultant you can assert certain rights for yourself. don't
be afraid to request changes to the contract.

Also as a contractor you are VERY different from an employee and the resulting
IP rights are quite different. While ALL an employee does during their
employment usually belongs to the company (even inventions done while at home
sleeping :) the situation is very different for a contractor.

For example it is a standard practice that NOT ALL of the code that you write
for them is theirs, but only "business specific" parts. You should retain the
rights to the generic parts of the code, all successful consultancies build a
code libraries that they can reuse. We usually release such things as open
source but not always, we do keep the rights to ourselves though. Customer
just gets a full royalty free license to do whatever they want.

Same with inventions. If during the term of the agreement while working on
their project you invent a super-duper-fast sorting algorithm and implement it
in their project, it still doesn't mean the algorithm is theirs.

The implementation is (and only if its business specific) but the idea is
yours and you can go as far as filing a patent for it (I'm quite against
software patents, but still). Again, the client gets all the necessary rights
to use it in-this-particular-implementation but that is.

------
vaksel
here is the thing with NDAs.

99% of the cases the person asking you to sign it, is just starting out.
Because these are the only guys who think they need to protect their idea(or
that an NDA will actually help them).

And the person just starting out, usually doesn't have the money to enforce
the NDA anyways. Lawyers cost money, I remember I wanted to sue someone(small
b.s. breach of contract clause), and the lawyer told me it'd cost 15-20K.

------
ghshephard
Let's be very clear about where NDAs are appropriate and inappropriate - An
NDA is very appropriate in class (A) where it concerns the protection of the
content of the Intellectual property. Signing Tables, Certificates, Source
Code, Research Studies, etc... Without an NDA of some form, either in the form
an employment contract, or explict "NDA", an employee would be free to tarball
500 Gigabytes of intellectual property and take it to their next employer -
walking away with all the hard earned IP of a company that may have spent
millions of dollars, years of effort, and entrepreneurial capital in
developing it.

An NDA is completely inappropriate in class (B) when it comes to protecting
ideas/concepts/market sizing/future growth that will be exposed in an employee
interview, investor pitch, or press interview - all of that is typically just
brainstorming by a few smart people over a week or two, has no more or less
value than what might results from any other smart people of the same caliber
brainstorming.

Depending on whether you are in class (A) or class (B) you should, or should
not sign an NDA.

------
mikeryan
NDA's have a place in business, but not for VC's and journalists who deal with
different businesses and ideas everyday.

I run a small application development services company. Our clients insist on
NDA's and we have no problem signing them. We're getting pre-release insight
to product development which should be protected.

~~~
gte910h
I am in a similar position, but I very much make sure they have a VERY
specific confidentiality marking requirement (including a "must send a follow
up communication within 24 hours after voice communications enumerating
specific confidential items disclosed within the voice communication") .

If they want super secrets and don't just trust us to show discretion, they
can clearly mark what is super secret, just like the Government does with it's
secret information.

~~~
lsc
this is key for me, too. _you_ do the work of figuring out what is secret or
not. Not me. and if you mark every communication secret, well, maybe you're
not the right client for me?

------
rwhitman
I guess there are 2 types of NDAs that I encounter.

Type 1 is the paranoid startup who thinks its a good idea to NDA everything
for fear of someone "stealing" their idea. 9 times out of 10 this kind of
startup is simply too naive to realize their idea isn't that original. I never
sign an NDA to hear an idea, usually its a waste of my time because the NDA is
typically hiding a BAD idea.

Type 2 is the legit NDA. When you're working with a large organization, or
being shown very sensitive documents. Or occasionally a stealth startup that
has a celebrity team or mega funding, something that would instantly get
publicized should word get out. I'll sign these but usually these types of
orgs are comfortable enough to give you the gist of what they're protecting
and why first, and often its accompanied by a contract which seals the deal
regardless.

------
fjabre
We didn't bring an NDA to a meeting with potential partners a few years back.

We found out a few months later after not hearing back from them that they
were developing a competitive product.

It didn't work out for them as it turns out so everything turned out alright
for us but we definitely bring NDAs to the table now.

~~~
middus
NDA != non-compete or am I missing something?

~~~
fjabre
We have basic non-compete language in our NDAs.

After some thought I guess it's all about who has more money. If you're
dealing with Intel or MSFT then I'm not sure how effective one of our NDAs
would be.

Still some level of protection might be better than 0.

~~~
tptacek
Do established companies ever sign your noncompete NDAs? (One reason we read
them carefully is because people occasionally sneak noncompete language into
them).

~~~
fjabre
Yes but they are smaller companies, between 5-20 million annual revenue, and
none of them made competitive products. We're a software company, they were
device manufacturers. I doubt we'd ever get a fortune 500 company to sign one
of our NDAs though. Companies the size of Intel for example feel they have a
right to everything in the tech domain even if they don't have competing
product lines and they're the type to sue just to intimidate. \-----

------
motters
But assuming at some point that you do have to sign an NDA, remember that
there is no such thing as a "standard NDA". Be prepared to cross things out
that you don't agree with, or add extra terms.

~~~
houseabsolute
It might help you feel better, but unilateral modifications don't hold up in
court. Of course, if the other guy agrees to your changes, it's fine. But I
think this is why my company has the NDA for visitors on computer screens.

