Startup and video game law, from a Canadian and U.S. perspective
My Problem with the NDA
I’m against the NDA. This is common sentiment in the technology sector as well. Before I dive into my issues with the NDA, let’s distinguish between types of NDA.
A Non-Disclosure Agreement is an agreement that requires a receiving party to not disclose or use certain information that the disclosing party wants to provide. Typically they are provided as a start to business negotiations or as part of a broader agreement.
I don’t take issue with NDAs that protect business information, such as financials, business plans or product launch plans or NDAs that are part of a broader agreement.
I do take issue with stand-alone NDAs that serve only to protect the “next great idea”. An idea (excluding patentable ideas) has no value; execution of an idea has value. Indeed, the same idea can be executed multiple ways with only a single approach achieving success.
Signing an NDA protecting an idea has the potential to limit your company’s own product development in the future as you will be restricted from “directly or indirectly” using the idea. Who is to say that you would not have arrived at the idea yourself, which is especially common in industries where most ideas are slight derivatives of what’s already out there, or what “indirect” use of an idea means. Further, imagine the challenge of creating a company-wide “ideas bank” where you place all ideas presented in NDAs and that you can never use.
A smart company will not use an NDA and, instead, will intelligently disclose the bare minimum level of information necessary for discussions to continue. These smart companies recognize that NDAs are hard to enforce as you face the burden of discovering an alleged breach and establishing that the breach actually involves information protected by the NDA. They also realize that NDAs tend to slow business negotiations.
Instead of the NDA, control what you say. It’s far is far easier than trying to control what other people have already been told.