NDA – Nix Decent Agreement
As a sidekick to our current gig, we perform a bit of consulting. A fiddly way to preserve cash (What do I do at 8am? Work for my client thus creating a chargeable hour thus neglecting the actual reason of being of our company, or work full speed for the glory of our startup and burning cash. A wicked choice at times.)
The other day somebody contacted me to get a bit of advice for her new startup idea (anyone else interested in no-nonsense, hands on counsel, please contact us at “info at nektoon dot net”). It’s something about – ouch, I am not allowed to tell you. As a matter of fact she required me to sign a weird legal document lovingly referred to as Non-Disclosure Document (NDA) first.
The basic mechanism is easy: Before talking about your grandiose invention with somebody else, you let that party sign a document stating that all discussions and materials disclosed during those discussions remain confidential under the threat of heavy fines.
In principle a fine idea. In the context of a startup there are just a number of little snags.
For starters: Basically you want somebody to sign a NDA who you don’t completely trust. Well if you don’t trust somebody, then don’t do business with that somebody.
A NDA also rests on the assumption that the opposite party has droves of idling people hanging around and waiting for the moment that you disclose your brilliant idea to steal it and implement it on their own. Well that is not the case. The other company is either in an adjacent or tertiary business. They have other things to do and no company can afford hordes of clever people on the beach. And lastly: If you go straight to your competitor - your fault.
Plus, as a startup you anyway don’t have the means to enforce a NDA and pursue a breach of contract. You simply don’t want to invest the time and the money litigation would require.
Sure, large corporations fancy these NDAs but mostly for altogether other reasons: Some middle manager wants to cover his ass.
Clearly, there are instances where you should make your opposite party sign a NDA. In the moment you talk to any banker or lawyer. They are used to this paperwork and should you forfeit your chance of a bit of small talk over the signing of the NDA, you will miss out later. The others will definitely miss something and make you feel it.
Talking of banks: A couple of years ago we developed Website solutions for a number of large banks all sitting atop each other at a quite small place. Each made us sign such a NDA with lots of penalty clauses included if we ever talked to one of their competitors about that bank’s particular setting. Each of the banks asked us immediately after signing what we can tell them about internal matters at the other banks…
In the end, protective paranoia is not the answer. A reputation built on trust and hard work protects your idea better. Getting a successful product to market should give you all the profits you need to defend yourself via litigation if it should be necessary. If it won't, you are probably proceeding with the wrong product idea.
Comments
marc
@ 13.02.2009 00:34 CESTI've signed a lot of NDAs so far, and I have to say, that I don't really mind them anymore. But I think you forget that for some companies it's simply not enough to have a good idea and a good reputation.
Imagine a bunch of guys - say medicine guys - have a really nice idea. But they need IT guys - they don't know any. So if you go out now and need to talk to guys who would be capable to implement your idea, but you don't really know yet, you really want to protect your idea. Additionally, if you don't have the chance to work full time on that project, you might have another issue since someone else would be able to implement it faster.. And the reason might be that one of those IT guys spoke to someone because he/she thought the idea is not really interesting - because he/she is not from the medicine sector and has no idea. So, if the idea is not successful anyway, you will not go after them - who would. But if it is and you know the leak, there's at least something you can do, since it was once your baby..
And if your idea is that simple to copy that you need to protect it by legal issues, it might be a sign fur (future) problems :-(
