Three Reasons Why Not To Sign Non Disclosure Agreements(myintervals.com) |
Three Reasons Why Not To Sign Non Disclosure Agreements(myintervals.com) |
VC's (for instance) won't sign NDAs because they don't want to be sued by spurned startups over something they "never" do (stealing ideas from pitches --- note: this is something several of them do). VC's get to not sign NDAs, because no VC will sign them, and they have all the money.
Consultancies sign NDAs because they are going to work in close contact with their clients code, documentation, client roster, sales pipeline, and, oh-yes, client protected information. Consultancies don't get to not sign NDA's, because every other professional consultancy will sign them, and because they have none of the money.
NB: Many fun prospective clients are legally and/or contractually required to have you sign NDAs.
NB: Many smart clients don't simply want to give you cart blanche with their name and logo for your portfolio page, which is the real subtext behind not signing an NDA.
My advice, as both a consultant and as a buyer of consulting services, is: if you have even the faintest sense that your client has legal representation, don't bother ever trying to negotiate out of the NDA. Just walk away from the deal, which you aren't going to get anyways once you try to avoid signing contracts.
We've been successful here though because we're very clear about what we are willing to sign NDAs about, and why. I will not sign an NDA to hear your cool idea because that could limit my opportunities going forward, but I will sign one that says I won't disclose your client roster or sensitive client data to an outsider.
VC's (for instance) won't sign NDAs because they don't want to be sued by spurned startups over something they "never" do (stealing ideas from pitches --- note: this is something several of them do). VC's get to not sign NDAs, because no VC will sign them, and they have all the money.
There's another facet at work here too: VCs won't sign an NDA to hear your pitch because you're providing absolutely no value to them, in exchange for something of great value (their ability to fund similar projects later). That's exactly the reason I won't sign an NDA just to have a meeting either.
Your point about the VC having all the leverage holds here as well. We like to say the VC is "the hot chick" in the situation. I think you'd find that in the design/development business there's a lot more "hot chicks" than you might think.
My advice is simple: get your lawyer to draft a generic NDA that you are comfortable signing, and offer that instead. Otherwise, if any contract makes you uncomfortable at all, don't sign it. You can jeopardize the entire future of your business, just to make that one sale.
There's also nothing wrong with refusing to sign an NDA in the early stages of a pitch, and I should have been clearer about that in my rant above.
As soon as you're offered access to a client's network, source code, or data, though, it's irresponsible for them not to have you NDA'd.
For what it's worth, it's true that there are landmined NDA's that are really IP agreements in sheep's clothing, and yeah you shouldn't sign those --- but for the most part, a standard NDA isn't going to limit what you can work on in the future; it's just going to keep you from disclosing anything sensitive and client-specific you learn at the client.
That said, in almost every other context, confidentiality agreements are invaluable ways to protect competitive advantage and, indeed, if a company fails to use them, it may legally compromise the right to protect its trade secret information. That is why companies use these as a matter of course, both with employees and with contractors.
Such agreements do not protect abstract ideas (which are basically in the public domain for the most part) and do not subject the recipient to risk if the recipient had pre-existing knowledge of any information from a separate source.
Thus, the argument not to sign an nda really amounts to saying that the consultant doesn't want to be hassled with a small extra burden even while asking for the privilege of working with the company's most closely protected information. For 99% of the cases, this argument will go nowhere.
The fact that some companies that have essentially worthless information use nda's, or that nda's are sometimes abused, does nothing to change the above fundamentals.
Of course, if an nda is onerously worded, it should be negotiated (and rejected, if insisted upon) - but that does not dispense with the need of an nda that is bona fide for the needs of the situation.
An NDA protects you as a consultant as well. That is, if you're smart enough to make sure it's bidirectional.
Always make sure every NDA has an expiration date for the obligation to keep the information secret (not just for the contract itself). Tech knowledge has a shelf life and you don't want to be on the hook for backing up 10-year-old data because it's impossible to prove you've destroyed it.
Note I am not in the web consulting business so there are slightly different sensitivities.
It's a slightly different matter after the contract is signed, though. If they have some unique technology or sensitive data to protect, then an NDA is reasonable. But not before the work is agreed!
This agreement has absolutely no legal binding. However, upon breach or violation of the agreement, I will feel free to do any of the following:
1. Curse you under my breath.
2. Publicly disclose the manner of your screw-i-tude.
3. Write about your transgressions in ALL CAPS.
4. No longer consider you a person with whom I can share my ideas.
Worse, it seems difficult to prove in hindsight what is things they told me and what isn't. An NDA might give them the option to hijack any of my further work by claiming that it is based on something they told me beforehand.
So I have a lot to lose and nothing to gain.
That's what I was trying to say, but you put it much more succinctly. The main friction points we encounter involve what exactly is "client specific", as everyone likes to think their ideas are unique, which is rarely the case.
* valuable or sensitive information
* that was disclosed by the client to the vendor
* that hadn't been publicly disclosed by anyone
* and hadn't been known to the vendor prior to the NDA
* and hadn't been disclosed to the vendor by someone else sans-NDA
That seems to me like extraordinary care not to be overbroad. These were megacorp boilerplate MNDA's, not something we had to negotiate.
Three of these NDA's, from totally different megacorps, used literally identical language to define "Confidential Information".
We've never worked with a megacorp, so its nice to know they're handling this in a more professional manner than some of the folks I've encountered. An NDA is certainly a stupid thing to derail a business deal.
Most lawyers have these already, and although they'll certainly charge you for the domain knowledge, you shouldn't have to pay hourly. You should be able to get a good, generic NDA for <= $500. NDAs are really simple, and usually pretty short.
I've never tried docstoc et. all, because part of the value for me is having a domain expert say "yes, this will cover your specific business needs."
One other thing: I've seen a number of companies providing their NDA on the contact / quote request page. I've been considering the same, as it might be a good way to head these uncomfortable conversations off at the pass.
Edit: this is a great place to barter as well. What you want from the lawyer is their expertise, not their time, and lawyers know the ROI a good website can bring them. I'm sure you know some lawyers, ask one of them if they'd be willing to barter a website in return for a set of documents. If you happen to be an SEO (I know, dirty word around here), offer that instead - one of my clients is an attorney, and the #2 Google ranking we helped him achieve yields thousands of dollars each month.
Feel free to use mine (http://markwatson.com/consulting/nda.htm) but if you improve it, please share your changes back with me.
After just re-reading my own doc, it is probably too long. It used to be about half this length.
HOWEVER, I frequently delete or amend small portions of the NDA before signing and explain to the client why I have done so. I've never had a problem so far.
Once I had the president of a company (new client) tell me how much he appreciated me haggling a bit. This guy was a lawyer and told me he was surprised by how often people just sign stuff. Anyway, his telling me this after the fact made me feel much better about haggling in the future.