Non Disclosure Agreements: To NDA or not to NDA?

Sharing my personal opinion on this as several people have asked for advice on it recently.

What is an NDA? – I like to keep things simple: it’s basically a contract between you and someone who you are talking to about your idea, that sets out what you do and do not want them to do and how they behave once they have your precious information. Importantly it includes things like how you want your data stored in their files etc.

What isn’t it? – Well it isn’t a water tight way of suing them if they breach these rules and therefore it will not be a guarantee that your idea isn’t going to get leaked or stolen.

So why have one? – several reasons really. In a court of law it is at least some physical evidence that you have both agreed on something – so if you want to claim that someone is in breach it sets out what they were in breach of and that someone signed up to it. Without it you stand no chance. Another reason is that with the fast-moving pace of development and implementation it is going to be increasingly easy to take someone’s idea and get it to market before they do. NDA’s would at least cause someone to stop and think carefully about doing that. A further reason for me is that it shows that you are taking your idea very seriously, treating it as valuable and that you are having discussions about it only on a limited/selective, professional and ethical basis – and it sets out that this is how you want to be doing business with people and the standards you expect of them also. I like a recent quote that said that an NDA is the DNA of how you want to do business.

Why would you not have one? – Many investors (especially institutional investors) claim that they will not sign NDA’s and that you will not have access to them unless you play to these rules. They do this partly as they do see a lot of ideas and they could easily see overlap or deal with your competition. The other reason is to take them seriously takes about 20-30 mins to read. They can also seriously delay the discussion you want to have with someone (if you insist that they have signed before getting access to your information).

So how do you decide? – I personally don’t think you should be ‘bullied’ into not operating under an NDA. The judgement comes down to whether you believe you are dealing with someone with whom you are going to be having a healthy, effective, transparent working relationship and whether you believe that their objectives for not signing are genuine – or driven by the wish to reduce their admin and to refuse to be in a position where they could be accused of something.

My thoughts? – I always treat a clients wish to work under an NDA as a sign that they are serious and it gives me respect for how they intend to operate. It sends out the right signs. We should also be more protective and professional with our Intellectual Property (as those who have seen ‘The Social Network’ will know!). I recommend that you keep them to a very standard and recognisable document (to make them easier for the other party to appraise) and to only compromise on using them if you are very comfortable with the party you are talking to and there is a sound reason to – in other words you have made an informed decision, understanding the risks. You might also want to look at a – they have come up with a way of automating the process and also giving you some basic level tools for at least recording your ownership of an idea.

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