Beware the NDA | Hacker News Reader

Beware the NDA

vcexperts.com

50 pointsvcexperts18 comments

I'll only sign a one-way NDA if I'm in a weaker bargining position---example, I want to buy something from you or use some of your knowledge.

If its just consultancy, then you'll have to have a two-way agreement because surely I'm going to comment on your implementation for free and I can't have my expert knowledge bound up and sold off in training manuals now can I?

As a developer I'm often approached by individuals interested in my skill set but who insist upon an NDA before going into any details.

I've always assumed this is a non-issue (unless the product is similar to something I'm already considering building).

Am I being naive? Should I be signing these? Do I need a lawyer (which obviously I'm not going to bother with 90% of the time)?

You're needlessly binding yourself to some level of liability which amounts to giving the other party something for nothing in return, other than the idea which is generally worthless coming from someone who likely can't execute it.

Just be careful about NDA's that are worded like non-compete clauses. If you read the NDA and clear and happy with it then your ok. If you read it and don't fully understand the potentual outcomes or your not happy then get somebody who knows that area or law to go over it. Not aware that you can't just upload the NDA publicly to be gone over, though may not be looked upon positivly but when NDA's need a NDA then you know things are messed up.

Might be nice to have a collection of NDA's or some more standard ones that have been fully legaly audited and known. Instead companies seem to reinvent wheels and add on spikes and bells to there own gain.

[EDIT ADD] Nothing stopping you doing your own NDA template that your happy with and offering that instead and also in that having your own NDA to cover what they pay you or anything you don't want made public. You may have your own tool-set you use for development that you use in work. Something to think about, if it's important to you then what protects you from them. It's about trust and if they want you to sign a statement of trust then why can't they. Rememebr companies will mostly insist its trivial and insist you sign it there and then, if you do it to them would they sign just as fast. Thats how you measure trust sometimes.

Every place I've worked has required its employees to sign some form of non-disclosure agreement, it's pretty standard practice--once you're an employee. Prior to that though, everyone who hired me was able to explain (without an NDA) the big picture of what they were doing. If people can't explain what they're trying to accomplish without legalese, I'd be a little leery.

The anecdotal corollary to this stems from several friends who attended school at a different university. They had latest and greatest business ideas and would make their friends sign NDAs, for each new idea, before they'd even whisper what it was they're doing. To date and current knowledge, none of them have started their own company or actually pursued those grand visions hidden away by legalese.

That being said, (FWIW IANAL), if the people actually have a built product or devised a demonstrable new process or possess some other physical IP (eg: book of math proofs they've devised proving worm hole travel) and you'd be working on it/with it/viewing it, sure an NDA might make sense. I.E. They actually have a physical asset to protect. If they're just spouting off they're next great business idea and won't even talk to you until you're wrapped in legalese, I'd take a second look before jumping in.

"It's standard" is a lie often told to employees to weaken their bargaining position. The only time I've seen and NDA was for a client that was insane. NDAs are not standard. Negotiate harder.

Seriously? You think its standard for people to protect trade secrets out of the goodness of their hearts?

I would not discuss a valuable invention with my dad without an NDA.

I feel that if you need an NDA, more than likely, you're not the first person to come up with the idea, and chances are, someone else is already executing it. The NDA would just get in the way of getting the resources you need together quickly enough to execute before others.

And if you wouldn't discuss it with your own father, I'd put forward that perhaps you have some deeper trust issues.

Customer lists, marketing test results, sales breakdowns, password databases, personnel files, you name it. Everybody is put under NDA to maintain these secrets.

Telling my dad about an invention without putting him under an NDA makes it unpatentable. It has nothing to do with trust. If you do not observe the proper legal forms, you are flushing IP down the toilet.

I was speaking in the specific context of ideas. Clearly, sensitive data should be protected, and an NDA is a good legal control for that.

But I don't believe that an idea is worthy of an NDA, and therefore that so-misnamed "IP" would be "flush[ed] down the toilet" just because you happened to discuss the topic with a family member.

Rather, I believe that what matters is whether and how you implement the idea. Being first to market gives you the added security of fully understanding the idea and being able to improve it as you go along - while competitors are left behind trying to understand the idea. Execution, as they say, is everything. You don't need a government-granted monopoly to do that.

(That said, I think the whole government-granted monopoly idea is fundamentally flawed.)

Except in the context of software development, specifically, it's not generally just "an idea." It's the sum total of all unpublished and unannounced information of unreleased products that you're being given access to as a developer. There may not even be any plans to file patents: you have to take affirmative steps to maintain trade secret protection, as well. But, among other things, trade secrets have to be reasonably specific, certainly more so than "everything you learn about our products in the course of employment", and, well, "secrets" to begin with (not merely "unannounced" or "unpublished").

Confidential business information like customer lists, on the other hand, tends to be protected even in the absence of a written agreement; a good contract lawyer can quickly pick out the potentially troubling bits of an employment-related contract from the mass of "mostly harmless" boilerplate that merely restates your obligations under various laws (often including amusingly obvious items like not stealing physical property from the company and returning company-owned equipment upon request).

Finally, many companies have agreements with third parties that require measures to ensure employees and contractors given access to third-party confidential information (of various sorts) hold it in confidence.

Your idea isn't unique, there's probably 100 other people with exact same idea. No good dev or vc will ever sign an NDA unless money is being exchanged.

They are completely standard in corporations. Once you have hundreds or thousands of employees, NDAs are the way you work, because you just have too many trade secrets to risk.

For individuals with ideas? I agree, they're non-standard.

I have my own NDA that is very short. The NDA is also a consulting contract of sorts. I give customers a 10% discount if we use my NDA/contract (about half choose to use mine and get the discount).

A tip: sometimes I get the feeling that negotiating initial terms with a potential customer is going to be very time consuming. I like to ask, but not demand, that they pay me my hourly rate while we are haggling over contracts and NDAs.

My NDA/contract: http://markwatson.com/consulting/nda.htm

I am not a lawyer, but I have evolved this over the years to make both myself and potential customers happy. I have no idea if my NDA/contract is good, legal-wise because I have never paid a lawyer to look at it.

Any NDA or indeed anything you sign that goes out of scope with it's initial intentions is something to avoid period. a NDA is just that, a seal of confidence that you wont reveal what your about to be told, to go beyond that is not a NDA but a form of contract. Whilst contract law varies country to country, as a golden rule no contract is valid unless some money has changed hands. Remember NDA's in many ways are poor mans patent protection and generaly pertain to company secrets that they can't patent. Other instances would be if your doing a security assesment and have to sign a NDA promising not to publicly reveal what you find. Also note NDA's have an expire date. So if your not too happy with whats in the NDA dont sign there and then and get it checked, and if you are happy then don't sign and get it checked. No NDA I have ever come across was written there and then and to be expected to sign it there and then is equaly not a good sign. As with any rule there are exeptions as they are rules and not laws of physics.

Can you elaborate more on the expiration? The only NDAs I've seen don't apply after the data/process/methodology/trade secret is made public. They don't have something like 1 year after termination. For many companies, this information will never be made public, and this would of course be an non-expiring NDA.

So what expiration should an NDA have?

Concerning expiration [1], many NDAs distinguish between "trade secrets" and "confidential business information":

* Basically, a trade secret is non-public information that is the subject of reasonable efforts to keep it confidential, AND that is shown to provide an economic advantage to those possessing it versus those not possessing it [2].

* NDAs often say that trade secrets don't lose their protection until they're no longer secret [3], typically as defined by the "frequent five" exclusions [4].

* NDAS might also say that other confidential information (for example, pricing) loses its protection in X years [1], where 1 < X < 5.

* Keep in mind that some types of information must be kept confidential by law, such as protected health information, without regard to an NDA.

[1] http://www.techlawnotes.com/confidential-information/#outlin...

[2] http://www.techlawnotes.com/confidential-information/#outlin...

[3] http://www.techlawnotes.com/confidential-information/#outlin...

[4] http://www.techlawnotes.com/confidential-information/#sec-1-...

Any legally enforceable agreement is, by definition, a contract, and it's a dangerous misconception that contracts aren't binding unless money changes hands [1]. IANAL, but the ones I've hired have always been very clear on this point.

[1] http://en.wikipedia.org/wiki/Peppercorn_(legal)

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