One More Time: No NDAs
May 7, 2010
By unusual coincidence, this week I had a number of different folks ask me to sign NDAs about the new projects they're working on. It's great that we're in such a fertile phase for the tech industry that lots of people have new ideas, and I'm very flattered that people value my input or ideas enough to want to share their projects with me. But signing an NDA? It's a bum deal, so I don't do it.
I can explain why, but if you saw what Brad Feld or Alexander Muse or Fred Wilson or Joel Spolsky or (my favorite take) Andrew Warner write about why they don't sign NDAs, you can skip the rest of this post.
In case you missed all of those, here's a couple quick reasons I will probably decline to sign your NDA:
- When you ask me to sign your NDA, you're basically saying, in writing, that you don't trust me. It's your prerogative to say that, but it's a pretty lousy context in which to ask for a favor.
- I have to pay a lawyer to review a document without having any idea why I'm making that investment. No, I won't "just sign it" without having a lawyer look it over, because it's a legally binding document whether a lawyer reads it or not.
- If your idea's that good, it's probably not that rare. I hate to be the one to point it out, but protecting your idea in general is a fool's errand — good execution is hard to find, but good ideas are cheap.
- I could get screwed through no fault of my own if some other random person walks up to me and blurts out the same idea that you've had. Being exposed to the risk of a lawsuit even if I haven't done anything wrong sucks.
- If I couldn't be trusted with your idea, you'd already know about it. There are folks who don't like me, or who are annoyed by me, but if I'd broken somebody's trust in regard to their work, I guarantee it'd be just about the first thing you'd find when you Google my name.
- The biggest value I can probably offer you is that I would talk about what you're working on. If I honor your NDA, and I meet a great investor or potential employee or valuable partner for your new venture, I wouldn't be able to tell them about it.
Most other folks are too nice to actually mention it, but since I'm not a VC or big deal business tycoon, I'll just say the most important point outright: Asking for someone to sign an NDA also often makes you look amateurish. Not always, but too often.
Now, I've had clients ask for an NDA, which makes perfect sense, and I might ask contractors working for me to do the same. Or some big companies just have a boilerplate NDA that they throw in front of people as a matter of course. But for individual entrepreneurs who just have a good idea and big dreams, it's easy to be misled into thinking that walking in the door with a fancy legal document makes you look professional or "serious".
Frankly, though, you should only share your ideas with those whom you trust, if you're at a phase where disclosing an idea could negatively impact its success. Most ideas gain value when more people know about them and are rooting for them. If you can, design for circumstances where, once you're ready to start talking about your idea, you're encouraging people to "disclose" your efforts. And that shouldn't require a contract at all.
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While all your points are valid, what do you suggest for me as a contractor ? Some client do not even disclose project details or discuss project without us signing NDA. How should we creatively deny them ? Any reference in this matter will be highly appreciated.
Nishal : SilverCrux.com
That's a great question. Fundamentally, I'm speaking from a position of privilege here, and I apologize for that. I wanted to explain my point of view clearly so that people would know it was nothing personal. But for a contractor, because the people writing the checks fundamentally have the power, you might not be able to be quite so strict about these things.
In that case, I'd at least push for the NDA to be as narrow as possible, make sure it has both a date of expiry and real specifics about what topics it covers, and ensure that it's a mutual NDA so that you're at least as covered as the client is. Of course, I'm not a lawyer, and I am not giving legal advice, but those would be the guidelines I'd try to follow for myself.
Most NDAs I have seen are very one-sided and have unreasonable time limits, which in the tech sector are sometimes moot. However, there is the concept of "mutual" NDA, which should give your IP equal protection if you share any of yours. What folks should remember is that an NDA is just another contract whose terms may be negotiated. It is not heresy to suggest modifications, although many entrepreneurs's ego may take offense to being challenged.
But I would say that presenting an NDA is not amateurish; sometimes a business person is required by investors or primes to do so. What is amateurish is presenting poorly written or lopsided ones. The same goes for "non-competes" or non- solicitation covenants.
Ultimately, trust is not new and always has been important. If you are requested to sign an agreement and don't like the terms and they won't budge, don't sign; just decline and move on.
I a stack of lopsided NDAs, for when people want to meet me. It's a great way to get out of boring coffee meetings. It works like this: (1) Someone approaches and says, "Hey, are you Mark Drapeau? I'm a big fan!" (2) A butler emerges from the shadows and presents an NDA to said fan. (3) The fan, being a smart reader of dashes.com, rejects the NDA and leaves. (4) I enjoy my bourbon in peace.
A parallel situation in a different context is the widespread reluctance among writers to share what they're working on, for fear it's so brilliant that if word gets out, someone will hear it and immediately write the same thing. Which is a little ridiculous, because if someone did rip your thing off, what could be better publicity for it than the ensuing controversy? I would love to be plagiarized and embroiled in a lawsuit--the curiosity factor alone would boost my sales and name recognition exponentially.
But moreover, that's just not how things work. Ideas are cheap. Execution is hard.
Years ago, Six Apart invited me to be a part of some kind of developer's program without telling me what it is. They sent me an NDA, no expiration date. I signed it without thinking. Years later, I accidentally revealed this fact to my employer's legal department as part of something else, and nearly lost my job. (Technically, I was working for this employer when I signed the NDA.) My friends at 6A were helpful in trying to get the NDA dissolved, but they were busy and of course this required special effort by 6A's own lawyer. Months later after lots of pinging, I got a piece of paper dissolving the NDA. 6A deserves credit for that; pretty much any other company wouldn't have made the effort.
The developer program for which I signed the NDA never came to fruition, and no information was actually disclosed in all that time.
The experience soured me on my employer, and less than a year later I switched companies, for lots of reasons and for the better. Several lessons: 1) Don't sign NDAs unless required for substantial full-time employment. 2) If an NDA is requested in exchange for something valuable, follow Anil's advice on narrowing, time limits, lawyer review, etc. 3) Never hand someone else's lawyer a piece of paper that belongs to you unless required to do so by law. They'll run out of the room and photocopy it. (Seriously.) 4) Your employer's lawyer is not your lawyer, and will not give you legal advice or speak or act in your best interest. These are obvious in retrospect, but some things you have to learn the hard way.
Anil,
I never considered having a lawyer look over the NDAs I sign.
If someone hired you, would you have your lawyer look over the NDA?
Tactically, I wonder about what you'd get done by saying "you pay for my lawyer to look over this". I suspect it would sound petty, but it provides a more theoretically optimal set of incentives.
Also, the first thing that popped into my head when I saw this was Rands' "FriendDa".
I want to share with you my ideas on own to eliminate this NDA problem, but first please sign this NDA
"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." � Howard Aiken
By way of context: It took me 28 years (from summer fo 1975 til December of 2003) and at least four close encounters to see what seems to me so obvious after the fact. Those years were filled with books like John Willinsky's "If only we knew: Increasing the public value of social science research" and texts like Jurgen Habermas' "Discourse Ethics". On the practical side, how many folk can relate to implementing MIL-SPEC "change requests" in an R&D environment?
I can talk about "discourse-based decision support system" til the cows come home, c/w references to cognitive ergonomics and "helmet fire" ... but there are plenty of folk who talk as well or better than I (see last week's Web 2.0 Expo San Francisco 2010) and a whole lot of them are very well positioned. (Parley-vous "A-list"?)
You know about the contractor who charged $15K for hitting the apparatus with a silver hammer? The trick worked and the hyper-sophisticated AC system hummed into operation, but he was still challenged. He itemized the bill as follows: $50 to hit with the hammer, $14,950 for knowing where to hit.
I can relate to that. I was responsible for 4,300 miles of NORAD/SAC communications. That and $5 will get me a cuppa at Starbucks.
I'm quite sure my implementation will get scooped. The essential design paradigm can be sketched on the back of an envelope. (Does glasperlenspiel ring bells? "Glass Bead Game" aka "Magister Ludi" is a must read.)
I don't live in SF ... or Portland ... or Seattle ... or Vancouver.
Innovation is essentially a social process. Like high-school politics.
;-p
Anyhow, it's Catch-22. I guess the design will go to my grave with me. (I turned 56 this week, so I can start to talk that way.)
After decades of pro bono I'm witholding 1 thing. HeyHo, so it goes.
You nail it with your final bullet. Perhaps this is because NDAs, like mission statements, are typically drafted around corporate boardrooms and customers are rarely, if ever, asked to ensure it makes sense?
Right on, Anil. I was asked to sign an NDA just a few weeks ago while working for [REDACTED] on their brand new [REDACTED]. My main qualm with the NDA, like you said, was that non of the 'ideas' covered in the agreement were all that original - things that I had though of while waiting for water to boil and disregarded as not valuable.
However, how do you reconcile an objection to NDAs when they are often required to secure employment as a freelancer? Most of us are not in the position to turn down work because of an, arguably, marginal distrust of NDAs.
I'm currently working on a few projects where this exact thing is coming up. While all of your points are valid, the challenge is translating this in a way that doesn't offend/lose business. The reality is a lot of people see an NDA as a kind of security blanket - sure it doesn't really do anything, and it's not necessary, but they've seen enough Law & Order or been to enough corporate meetings to think that it's the first phase of *any* project.
I would recommend any freelancer/shop to counter that unless they are handling truly sensitive information like financial data then a NDA does not need to enter the picture. This is doubly true for web application development where you're scoping a project that at an abstract level does what many sites already do, e.g,. a login system, an account management system, etc.
I've run multiple projects, like List Here where the idea is common, but as you've said the execution is what matters. In that case, screw an NDA!