Why I Won’t Sign Your NDA

Posted on Jun 2, 2009 - 6:31 PM PST

In the vast majority of cases where I get a non-disclosure agreement, it makes absolutely no sense for me to sign it. Instead of writing out my reasons to each one individually, I’ll post them here and link to this as the issue comes up.
contract-nda-homepage

NDA Contract

Reason #1: It puts all the obligation on me and none on you

I have to make sure that I never reveal what you say or I’m (potentially) liable. But where’s your obligation?

Reason #2: If you don’t trust me, then how can we work together?

If you don’t trust me to be quiet about your ideas, how can you trust me with anything?

Reason #3: I’m not signing a legal document without a lawyer

I know you don’t think I need a lawyer for a simple NDA, but 1) it’s still a contract, 2) NDA’s are often over-reaching, and 3) you probably had a lawyer write it, so shouldn’t I have one read it?

Reason #4: Ideas are worthless

It’s your execution of those ideas that will be valuable. Besides, this idea that you’re so proud of now will probably change completely as you build your company.

Reason #5: Even investors won’t sign it

And those potential investors that you show your “top secret” documents to have a financial incentive to reveal your secrets. (They invest in your competitors.)

Reason #6: I’d have to keep track of it

My lawyers keep track of my big contracts. But I’m the one who’s responsible for simpler documents like NDA’s and I don’t want to store any documents let alone remember what each one obligates me to do

Reason #7: This reason so top secret that I can’t reveal it

…unless you sign an NDA promising that you will never reveal my super-secret “Reason #7.”

Anyone have a good reason for me to change my mind?

I’m willing to change my mind if you have a good reason. If you do, add it to the comments and I’ll consider it.

  • http://kshuk.com alexhoule

    Last time I hired a coder, I was so afraid that he would steal my idea that I gave him almost no details on what the product should do. I thought I knew enough to complete his code (plus I would save money). Finally, the final package was not what I wanted and I couldn't do much modification to it.

    But you're right, ideas are worthless!

  • http://www.persuasive.net AJ Kumar

    1) it’s still a contact –> is that a typo? should it be contract?

  • http://jasonmbaker.wordpress.com/ Jason Baker

    Heh… #7 is awesome.

  • Bill

    You're an idiot

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  • pplante

    I also practice this with most clients. The only one I will sign is when it specifically lays out an item which cannot be shared, such as private financials. If the contract includes any nebulous bits I will refuse it citing similar reasons to what you laid out.

  • MJLangford

    I make sure the NDA has the following paragraph or something very much like it “If the information is transmitted orally, it must be followed up by a writing within 24 hours stating it contained confidential information and specific details what pieces of information are confidential. If the information is transmitted electronically or in a written format, specific confidential sections must be marked as confidential information. No other information is considered confidential information within the terms of this contract, including non-specific claims of confidentiality over entire documents/conversations/etc.”

    I've *never* seen anyone send a writing after a phone call, or do more than blanket a document, MAYBE with confidential water marks slathered over the whole thing. (And I got this verbiage from a customer's NDA originally, but it's in the “Standard” NDA some clients ask for when they want to tell us their idea now).

  • http://www.thelastonefinished.com/ Chris Gomez

    I changed my mind right around the time they withdrew the job offer in a fiery job market.

  • http://twitter.com/maxklein maxklein

    Quite right. But keep in mind that sometimes an NDA is useful: You can use it to bash people who decide to break the honour code. If you really want to go after someone and he signed an NDA, then you can use that attack him.

  • kenrtx

    Brilliant! You should write one on non-compete agreements too. :)

  • jeffreymcmanus

    I agree that most NDAs are mostly a mindless cargo cult. But one of the paradoxes of business is that you sometimes have to do business with people you don't trust completely. This is why people are offered NDAs when they first meet instead of, say, after they've been doing business for 10 years.

    The key to a signable NDA for me is specificity (you have to state what you're protecting) and time limits (typically 6-24 months after the information is disclosed).

    NDAs are different than noncompetes. Noncompetes are illegal in California anyway (although that doesn't prevent clueless amateurs from trying to get people to sign them) so it's a nonissue here.

  • petegroverman

    Hey Andrew… this is the very rough draft, I can send you the final copy when I finish it this week if you are interested… but enjoy :) http://www.docstoc.com/docs/16875061/The-Risks-

  • crazyentrepreneur

    All of your reasons are bunk.

    Reason #1 is bunk because there exist such things as mutual NDAs. This “obligation” you speak of, that would be covered by a mutual NDA.

    Reason #2 is bunk because you're someone with money, I'm someone with an idea and energy. You want to give me money so that I can do all the work and make you more money. That's usually the extent of our relationship, at least initially. You're not family, you're not a best friend, so why should I trust you?!?

    Reason #3 is bunk because I would be more than happy to sign an NDA or Mutual NDA that you create. Now you know what's being signed, and I can breath easy.

    Reason #4 is bunk because ideas aren't worthless, obviously, and if you're too prissy to sign an NDA I'll find someone who isn't, and in a few years time that great idea will be generating them money and not you.

    Reason #5 – I'm not sure who you are btw and what you do, but if you're not investing money yourself then you're probably a liaison between me and good investors that you know and who trust you. If you and I can speak together openly with trust, then I can tell you everything and thereby give you a better idea of whether or not this idea is worth your time and recommendation. I'll be OK if none of the investors you know will sign an NDA, so long as you're reasonably sure they're trustworthy and will like the idea. And this way I can always tell you 'forget about it' without having to worry.

    Reason #6 is bunk for the same reason #3 is bunk.

    In summary: you can't pick and choose your genius. Well, you can, but that means you're narrowing your chances of success. If one of those crazy entrepreneurs insists they want a signed NDA, they probably have at least some reason for it, and sometimes it might be a good one. If you're not planning on stealing anyone's idea there's no good reason you can't sign his or her NDA.

  • wooster

    My reason: http://en.wikipedia.org/wiki/Gary_Kildall#IBM_d

    Short version, for those unfamiliar with the story: IBM approaches Digital Research to license CP/M, Digital Research refuses to sign a fairly standard NDA, IBM licenses DOS from Microsoft instead, Bill Gates now richest man in the world.

  • http://mixergy.com Andrew Warner

    Sure. Email it and I'll have a look.

    Sent from my mobile

  • Andrzej

    I prefer the FDA (FriendDA) to NDAs: http://www.friendda.org/

    Enjoy!

  • http://j.mp/alban Alban Rampon

    I enjoyed reading and agree there are many, many abuse.
    The same with End User License Agreement… If you read it and all exceptions you can be surprised the software actually does something.

  • lonnyeachus

    Ideas are NOT worthless, even without execution. That's why we have a patent system. In case you did not know, it is the IDEA that is being patented, not an “execution” or implementation. In case you were not aware, about the only cases where the patent office demands a working model are when the inventions purport to result in perpetual motion.

  • mrichman

    Not true. For a patent to be granted, the inventor must have “reduced to practice” the invention. That means that an idea can't be patented, only its execution.

  • lonnyeachus

    Since when? The Patent Office has never insisted on a working model of ANYTHING, except proposed “perpetual motion machines”… and the reason for that exception is obvious. The fact is that there have been an awful lot of patents awarded for things that would never even work if they were actually built, or “reduced to practice”.

    Patents (at least what are commonly called “utility patents”) are on IDEAS, not implementations. That is very clear in the law and the Patent Office's policies.

    If that is different today, then it was changed pretty damned recently.

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

    Sorry lonny, but mrichman is right. patents are not granted on ideas – only on inventions, discoveries, processes, etc. Maybe the article is a little loose in what it defines as an “idea, or maybe you are. Either way, a pure idea can't be patented. “Reduction to practice” is a legal term, and its definition might clear up your confusion.

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