TechLaw: NDAs are not one size fits all; they are dangerous!

The subject of nondisclosure agreements–NDAs–is often treated as routine, not only in the US but also in the UK and Europe. Editor Donna has reviewed and signed a few, modifying only limited areas of ‘boilerplate’. Our contributor today is an attorney specializing in technology law, Mark Grossman, JD, and he explains to us that an NDA should not be treated quite so cavalierly–and that red flags should fly any time a trade secret is involved. (Editor’s emphases are italicized and bold.)

In the world of tech deals — more than other types of deals — my clients want to sign nondisclosure agreements quickly. I’m sure that many people will disagree with me on this one, but I like to avoid NDAs in the early stages of a deal. My feeling is that you shouldn’t be exchanging secrets with strangers and that doesn’t change no matter what they’ve signed.

Experience tells me that most deals at the “initial feeler” stage never reach fruition. It’s a long way from that first lunch to a closing and a bottle of champagne. I say skip the paperwork and legal entanglements until you’ve at least gone as far as thinking: “This is getting interesting and serious.” In the meantime, keep your secrets to yourself.

Usually, you can get through the early stages of a negotiation with a demonstration of what “it” can do without revealing how it does it. Of course, if what it does is as much a secret as how it does it, then my generalization may not be true for you.

In case you’re not familiar with NDAs, the idea behind them is that you’ll reveal confidential information only if the other side agrees not to improperly disclose or use the information. Right here, it starts getting tricky because you have to decide to whom they can disclose it and for what use.

Watch out for a form with a line for your company name. If you’re tempted to sign it, I have some simple advice: Don’t. Not ever.

Every NDA is customized. Since tech lawyers see NDAs constantly, writing a good one should never be an exercise in reinventing the wheel. Still, they do require some thought. (more…)