The Whole Truth

May 03

2010

Do I Need (and Should I Sign) an NDA?

by Alexis Neely - Posted in Blogathon, Business, Legal stuff, LIFT |

I try to listen when the Universe sends me a message. I’ve been getting this one loud and clear.  There is a LOT of confusion about when to use a Non-Disclosure Agreement (NDA).

And before you go ho-hum, boring, consider this …

If, how and when you present an NDA can make or break a relationship. And, if you just choose to do nothing, you really could get taken.

So, what to do?

Never fear, I’ve got some guidelines about:

  • when to ask for a Non-Disclosure Agreement if you have an idea you want to protect,
  • how to present the NDA if you are going to ask,
  • what to do if someone asks you to sign an NDA (signing an NDA can often be a VERY bad idea – I’ll tell you why),
  • and how this is all about setting boundaries with an open heart and you can just tell that’s a good way to go by the way it sounds, can’t ya?

This story will help you understand.

I have a team member who has a great idea. She says it’s a great idea, but I don’t actually know that because she hasn’t shared it with me yet.

Why? Because she is afraid that if she does I will take the idea and capitalize on it and cut her out.

That is a very good thing to be worried about.

I am notorious for hearing about a great idea and executing on it. I can make things happen.

That’s why she’s so excited to share the idea with me. Because she knows that I have the capacity to actually do it. And she also knows that ideas alone aren’t valuable – it’s the execution on the idea that is where the money’s at.

Yet, at the same time, she wants to be compensated for her concept.

Maybe not now, but later – when it happens.  Understandable.

Unfortunately, because she is asking for the NDA in the wrong way and at the wrong time, her idea may never make it to execution.

So that’s why when I saw self-described ambitious entrepreneur Zack Shapiro post on Twitter about whether an NDA he found on Google was legal, I had to jump in and save him from making a mistake that could crush his idea before it ever sees the light of day.

We don’t want to lose our ideas.  I get it.

But, here’s the rub, if we don’t talk about them, they are as good as lost.

You are not a mad scientist operating alone in your basement.

It’s very likely that your idea will take the pulling together of a variety of resources and people.

You have to talk about it.

So, it’s natural to think about an NDA and you should have a signed Relationship Protection Agreement (a soup-up NDA I created) with everyone you work with.  (Get a copy of my super comprehensive relationship protection agreement free here on the welcome tab of my Facebook page.)

But here’s the thing, you should never, ever  present an NDA before the relationship has been well-established.

Instead, establish your relationship before asking for a signed NDA.  Present as much about your idea as you possibly can in terms of concept and end result.

Elicit intrigue.

The first time an NDA should ever be considered is when the person you are presenting your idea to asks for more information.

Now, they are interested.

Until they’ve got some idea about what your idea/concept is, anyone who would sign an NDA does not know much about business and you probably don’t have to worry about them stealing your ideas anyway.

Which gets us into – when should you sign an NDA?

Never just say okay to signing an NDA.  It could be opening you up to frivolous litigation.

If you sign an NDA with someone who is litigious by nature and frequently feels things have been taken from them, you are putting yourself at unnecessary risk.

In the event that you hear the idea and you already have a project like it in the works, you could be risking a frivolous (but still expensive and painful) lawsuit.

I know a lot of people who appear to be great people you’d want to do business with, but their belief system is such that they are easily offended and think ideas are where the money is at. And they will do anything to fight for what they think is right. On principle.

This is not a person you want to be in a fight with.

So, before you every sign an NDA, make sure you know the type of person you are working with.

Make sure you know their values structure and that you understand enough about the concept they are presenting to know it’s not something you are already working on.

Whether you are the one with the idea or the one being asked to sign an agreement before hearing the idea, recognize that no matter which side of the transaction you are on, legal agreements are the starting point for the kind of dialogue that will tell you exactly the type of person you are dealing with.

When done right legal agreements are about setting boundaries with an open-heart, which is the key to healthy, stress-free business relationships that have the capacity to do a whole lot of good in the world.

If you have other questions about NDAs (when to sign em or when to present em) or any other legal questions like that and you want an answer you can not only understand, but that will help you see legal stuff from a new perspective, ask em in the comments below.

Because listen, when you’ve got your legal shizz in order, you are going to be way more creative and free than if you don’t.


  • http://twitter.com/adryenn Adryenn Ashley

    Love this! It does get so confusing especially with us idea generating entrepreneurs. So now I have a stack of fabulous million dollar ideas and when I find the right person I think can execute them, I hand it over. If I get something on the back end, great, but for me, having the idea come to fruition and see the light of day is reward enough. Because most of my ideas are because I see problems that need to be solved. What do they say, “scratch your own itch”. I have a lot of itches. :)

  • http://nighthelper.com LisaLisa

    Great article and all so true! Thanks for sharing!!

  • http://themogulmom.com Heather Allard

    Thanks so much, Alexis! This is a topic that comes up over and over again in my member group, a group of mom entrepreneurs inventing and creating all kinds of wonderful. :D

    Heather

  • http://twitter.com/kickofftopic Karmen Reed

    Great advice Alexis! In today's world of information availability and accessibility, we have to be cautious, but also realistic. Relationships matter.

  • brittmichaelian

    Alexis, this is so important and so valuable for every business owner.
    We absolutely need to cover our booties and the NDA (as you have said so well) is the way to do it.
    Thanks for teaching us how to look out for ourselves (and our clients and contractors), Lex!

  • Kelli

    Hi Alexis. While I understand everything you are saying about relationships and how “when” you sign an NDA can matter, as an Intellectual Property attorney I must add a word of caution. Under US patent law, if you publicly disclose your invention (i.e., talk to someone without benefit of NDA) you have a year from that date of disclosure to file for patent protection. If you don't file for patent protection in that time you lose your US patent rights. Also, if you publicly disclose your invention, without the benefit of an NDA and haven't filed for patent protection, you CANNOT file for foreign patent protection. Most foreign jurisdictions are first to file systems. Any disclosure precludes you from filing for patent protection in that jurisdiction later.

  • alexisneely

    Thanks Kelli, good to know re patents. I appreciate the comment.

  • http://www.galvanilegal.com/blog/how-to-use-an-nda-to-protect-your-invention-2/ Tom – Phoenix Patent Attorney

    The NDA that Zack Shapiro asked about is pretty scary and shows exactly what is wrong with people looking to Google instead of an attorney for their legal matters. Granted, yes, I'm a lawyer so I've got player in the fight, but that NDA is completely non-tailored to any sort of specific situation Zack may have. You could use that NDA (poorly) for disclosing an idea about your collection of recipes from Grandma, your new method for a search engine algorithm, or a cheaper way to process steel. Obviously, those situations are different, and each one deserves its own NDA.

    Further, asking if the NDA is “legal” isn't really the issue, nor could it be answered where the only info is the NDA itself. Whether the NDA is effective yet reasonable might be a little more important. The question of efficacy takes us back to, among other things, the scope of the NDA and its vague treatment of “confidential information.” Reasonableness depends on a lot of things, one important one being the local state law – where is Zack, where is the other party, where is the agreement, and under what state's law was the NDA written? These are things that Zack would need to know and consider before adopting an NDA off the net.

    Just to give a few pointers, not as legal advice, but as a heads-up for something to be aware of, NDAs can be written so that each party discloses confidential information, or the receiving party can specify what it is working on to avoid a conflict of development. The NDA can request specific ways that each party can use (in their line of work, perhaps), disclose, transmit, and keep secret the information. The NDA can actually define what information is confidential a little more precisely than “stamped confidential.”

  • Mikedoyle413

    I’m working in Elance and I have an amazing idea but I don’t wanna give it away. My question is: because I’m working with Elance and people I can’t see face to face should I have  a NDA. My second question: this may sound funny but how do you get a NDA or do one, do I need a lawyer?

  • Mikedoyle413

    I’m working in Elance and I have an amazing idea but I don’t wanna give it away. My question is: because I’m working with Elance and people I can’t see face to face should I have  a NDA. My second question: this may sound funny but how do you get a NDA or do one, do I need a lawyer?

  • FPMJN

    Hi,

    I have someone who came to me to write something together, basically after I read the materials only will I decide if I want to work on the project with him. But he insisted that I sign an NDA and there is a paragraph stating injunctive relief of $ amount, which was a lot! My problem is, I don’t even know the value of the material to agree of such amount and the guarantee that we will be working together. So what should I do to reach the mutual agreement? I’m not only talking about my side, I want a solution that will work for both of us.

  • Chris Sgaraglino

    Hello Alexis,

    I run a Meetup.com Film production group and we work on projects both for profit and not for profit. We also compete with local production companies in so much so that we bid in local contracts for we’d, disc and broadcast projects. We do require that our members sign a NDA, we have already had several instances where a) a member took the idea of a second member and soliciated the business for the commercial, b) local production companies send in their employees to sit in meeting alto monitor what we are doing and projects we are working on.

    I feel an NDA is necessary for us, but asking for one as a membership requirement will likely scare off potentially creative minds that may be an assets to the group as well as the group a assets to them.

    So when should I ask for a NDA? If i let them be a member first, then they have full access to IP without any repercussions… I’m really stuck here!

    Chris

    Thus the reason fr the NDA

  • Carlo

    Can one an employer deny a copy of the signed NDA to the employee in Arizona?