Generally speaking, my rule of thumb is that an NDA shouldn't be necessary if you're simply discussing the business. If an idea is so copyable that simply repeating aloud it is dangerous, then you're going to get copied by bigger players as soon as the viability of the idea has been demonstrated. So the company's pretty much hosed anyway. When it comes to basic business and marketing advice, it really limits the valuable input that can be gained if the business owners are super cagey about talking about their ideas.<p>On the other hand, if actual core IP (like code and business documents) is going to be seen in detail and contributed to by someone, then an NDA is a must. Not only an NDA, but also an IP assignment agreement. It must be unambiguously clear that the business, not any individuals, owns the IP of the company. I don't care if someone just wants to help out of the goodness of their heart; if they're looking at the code, they need to be willing to sign some paperwork.
The reason I ask you to sign an NDA is not because I am scared you're going to steal my idea. We can talk in depth about the business over coffee, dinner, long weekend ad nauseam. But if you want to see the code and hear about the non-public deals then you sign an NDA.<p>I'm pretty sure this post is not meant to apply to real companies, but there is a lot more going on out in the real world than this straw man of cold-calling wantrepreneurs.
Partway through a 12-week course, I had a student hand me an NDA to sign before he would tell me the awesome brilliant idea he was so eager to discuss. He was baffled when I didn't sign it on the spot and said I'd get back to him after I had a chance to read it. He never showed up in class again.<p>If you want me to sign an NDA, make sure you follow thru on your commitments to me. If you're a student and I'm the professor, <i>pass the course first</i>.
The biggest problem with NDAs that I've come across is that often people want to slip non-compete type clauses into them. If it is a straight up non-disclosure agreement, it's going to cost the company more to sue you than it would ever be worth to enforce the NDA, so practically it doesn't have much effect. Of course, if the company in question has huge resources, you might want to be more circumspect.
Way back when IBM was a big juicy target for lawsuits, an employee told me IBM doesn't sign NDAs: "We don't want you to disclose anything confidential to us." Because, how the hell would they even keep track of the information status across all those people and projects? Not realistic.<p>In my experience NDAs aren't practical to enforce and hardly anyone takes them seriously. I've seen them used mostly as a sort of social ritual, much like shaking hands, asking "How are you?", and "Hey, can you keep a secret?".
A lot of this seems like mis-communication between a lawyer and a client. It sounds like people have talked to a lawyer. The lawyer says, "you need an NDA to talk with people about your business." The lawyer means for real negotiations about partnerships, etc. He never intends for it to be about semi-casual discussions about ideas. He is not in the tech business. "Talking about your business" to him means specific business strategies, pricing, bid and proposals, etc. And he crafted the NDA to cover these items.<p>A good alternative to "I'll never sign an NDA" is to counter with your own NDA that properly excludes the obvious. A good NDA, including ones that I have signed from major corporations, exclude information that has been made public in any way or that you hear from a third party. Or material that can be derived from public information.
I think this is something where the perception of utility is far different in the startup world that big enterprise. In the enterprise world, where there are too many people with too many complex business relationships to keep track of everything, and too diverse a group of meeting participants to know everything about them, and where you may not be discussing your IP or your business deals but the situations of your own customers or suppliers, an NDA is a no-brainer. It amounts to much the same thing as doctor/patient or attorney/client confidentiality principles and allows free, assumed-secure speech in any environment where all parties present may not otherwise have an appropriate level of trust to be comfortable engaging that way. In my business of contract engineering & manufacturing, we don't create nearly as much internal IP as we handle the IP of our customers. However, we apply our unique processes & systems to achieve the goals of our customers and if we want to discuss how we do that when engaging with potential new customers, we absolutely require NDAs. It doesn't help things that in the EMS industry almost all the big OEMs have contracts with several competing EMS companies (just look at Apple with Foxconn, Samsung and Pegatron, for example... or Dell/HP using both Quanta & Compal... but also using Flextronics, Sanmina, Jabil and Celestica.). It gets messy fast and ensuring legal recourse for accidental or intentional leaks is a necessity.
If your business model is so fragile that merely discussing it threatens is a threat then you haven't got a business model at all.<p>Great businesspeople <i>talk</i> about their business. They tell everyone: Friends, strangers, potential customers. All kinds of people can provide useful feedback and the more you discuss your business the better an idea you're likely to have of how to build a good product.<p>Besides -- the only people who ever ask me to sign an NDA are the people who haven't got anything worth guarding to begin with.
There are plenty of good reasons not to sign someone else's NDA, but there's usually a very good reason not to ask someone to sign yours: without the willingness <i>and ability</i> to <i>try</i> to enforce it, your NDA isn't worth the paper it's printed on.<p>In reality only a fraction of the people who enter into agreements actually have the wherewithal to enforce them. This is particularly true when dealing with individuals (especially "entrepreneurs") and small business owners.
I normally don't sign NDAs, but I'm currently at a company that I'm really enjoying and they're putting one in front of me. The case they're making is that if they don't get all their devs to sign NDAs that they'll have trouble attracting investors. Thoughts?
I've heard of a few misguided attempts to go after former employees who, supposedly, violated anti-compete clauses, but I don't recall anyone being sued for violating an NDA. I'm sure it's happened, but it's got to be rare. Usually successful companies are too busy building a great product and don't have time to mess around with NDA lawsuits.<p>I'm curious, can anyone recall a successful lawsuit over a violation of an NDA? Particularly with regard to early stage startups.
Tyler, good post. I agree with you on most of it. I think your issue really becomes (and this is why I refuse to sign them most of the time): the cost of defending an NDA is usually not worth the cost of the engagement. I.e. if the project is worth under $20k to you, its not worth the potential cost of hiring a lawyer to defend it. Also what are these people building? nuclear weapons? most ideas aren't as original as people think.
It is very hard to copy the most important parts of a startup, even if you have some of the ideas:<p>+ business model innovation<p>+ go to market strategy<p>+ execution, focus and efficiency<p>+ iteration<p>+ user/customer care and cultivation<p>+ brand integrity and trust<p>+ vision<p>+ partnerships<p>Said another way, if it my idea and I am going to you, then I am doing so to brainstorm and get ideas from you too that may eventually conflict with your interests. Should you ask me for an NDA?
No one ever sues over an NDA. The point of an NDA is to set up an expectation of confidentiality. It's easier than having the conversation that you expect the discussions to go no further which leaves the possibility of ambiguity.<p>Absolutely problems arise where an NDA is overly broad, the duration is excessive or there are circumstances where it is inappropriate but the idea of the NDA itself is not bad per se.
This NDA business seems far more prevalent in the US than in Europe. I've only been asked to sign an NDA at one place I worked at for several years. After refusing they just let the idea go and I didn't hear of the NDA ever again.