Non-Disclosure Agreements seem like a mandate in the world of start-up entrepreneurs and inventors. Everyone is working so hard to be legitimate and protective of their business babies. I'm sure plenty of people have advised you also, "If you've got something new and you're going to talk to anybody, have them sign a Non-Disclosure Agreement (NDA), so they can't disclose it to others." For me, I really try to keep legal out of any kind of negotiations or reviews when we're in early stage talks with a company, whether they're going to be a client or a licensing partner, or whether we want to sell them our designs. So, let's talk about why, or why not, NDA's are necessary. Disclaimer: I am not a lawyer. I just have a lot of business experience in this particular area.
Slow Your Roll
Literally. Lawyers will slow your roll. Sorry counsel, but I must tell the whole truth, nothing but the truth... law jokes are so dry. Back to my point, lawyers slow things down, as they are supposed to, with due diligence and a lot of contracts, so it's important to implement this step at the right time in your process of business negotiations.
Lawyers also pretty-much-never agree on terms and language used by other lawyers even on the fairly common non-disclosure agreement. So you can expect anytime you ask someone to review a NDA that the process of review, prior to signing, will also take a pretty substantial amount of time.
Businesses React to NDA's Differently
"You want me to sign what?" When you get a legal department, or you seem like a hassle too early on, you've already put yourself in this adversarial position.
"It's not worth hearing your idea. I'm not signing any agreement." I've heard this a lot over the years, where the hassle of legalities too early on, kills the process dead.
In the beginnings of my career, more than 25 years ago, I definitely subscribed to the NDA process and proudly rode the bandwagon. Any new invention had a non-disclosure agreement. Especially if a patent had not been issued yet, and more importantly, if it had not been filed yet. Over many years of practical experience, my opinion on this has evolved. What we've seen is that, depending on the size of the corporation, NDA's can unnecessarily slow down the process.
Patents Are A Form of Protection Also
Rather than focusing on contractual means of protection, such as a lawyer or a NDA, think about what you can do, from the inside, to protect your ideas. My partner and I have made a massive switch in our approach to protecting proprietary information. We most often go the route of, "Let's file provisional patents instead of non-disclosure agreements" because in the provisional patent, once it's filed, your protection starts.
Business Pitch Perfect
You are not required to give away all of your secrets when you pitch. Be careful. There are probably a lot of ways you can have a conversation about your product without disclosing what's truly proprietary. When I go into a meeting, I get them energized, talk about the marketing opportunities, the gap in the market, then the product itself. And then, when they start asking more specific questions, it is okay to say something like, "Some of this is patented and some of this is proprietary. I don't feel comfortable disclosing every single detail in our how-to yet. Let's have a follow-up discussion after we further solidify our relationship." Either file a letter of intent, get to the next stage, contract together, and then you can go forward. This delicate balance between sharing enough to garner excitement, while protecting your ideas, is not an easy one, but if you get it right, you will be rewarded.
Final Note: Be Ready to Act on That NDA
The only follow-up action to a breached NDA is to sue or go to court. That's it. If you don't have the time, resources, or wherewithal to go that route, think long and hard about the alternative options. Proving a breach is not easy or cheap, and will overshadow your potential progress. I want you to use this information, not in place of legal advice, but as knowledge to help you work smarter towards success in your ultimate business outcome.