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.