Generally speaking, NDAs can be worse than waste of time - they can actually be damaging. Unless you genuinely have something to protect (and by that I mean something more than just an idea), then you really shouldn't be thinking about asking someone to sign one.
I examine the pitfalls in my blog from both an Investor perspective and an Entrepreneur perspective in An NDA or no NDA? That is the question
You'll probably be surprised to read that more often than not, I would advocate avoiding it altogether.
Non-Disclosure Agreements (NDAs) are typically the first legal document shared between customers and suppliers. How your company manages NDAs will set the tone for the relationship. You know what they say about “good first impressions”. I am not a lawyer, and any changes in Non-Dislosure Agreements or policies should be reviewed by your legal department. I have however, been involved with hundreds of NDAs and many corporate legal departments. Following are 10 useful approaches I have learned along the way:
Read Your Own NDA: If you wouldn’t sign it, why would you expect others to? Conversely if you can honestly say to the supplier “I would sign my own NDA, with no issues”, that increases confidence and goodwill.
Avoid Groundhog Day: If the same sections of your NDA are constantly being flagged by the suppliers’ legal departments, have it reviewed by your lawyers. If you can be flexible in those areas, consider a permanent change to the wording. Why pay your lawyers to spend time reviewing the same supplier feedback, and offering the same concessions? Sounds like the definition of “insanity”, trying the same thing and expecting a different result. More than once I have heard: “let’s send our NDA as is, maybe the supplier won’t complain about those sections.” Is that any way to start a relationship?
Send Mutual NDAs: Insisting on using a "non-mutual" NDA, or hoping to sneak it by the suppliers’ legal department, causes cynicism and distrust. Purposefully risking a potentially important supplier relationship is self-destructive. Start with a mutual NDA. Both sides expect to be protected.
Employ the KISS Principle (Keep It Simple Stupid): The best NDAs manage to protect companies, without being overly long and complicated. Do you believe a solid, single page NDA is impossible without fine print? I recently reviewed an excellent example from a Fortune 500 company.
Don’t Pull the Trigger Too Soon: Set up a “safe room” in the office with no trade secrets or intellectual property in sight. Train employees on exactly what is and is not allowable to discuss with suppliers, if an NDA is not yet signed. Engage in exploratory, non-confidential information meetings or calls to make sure you want to move forward. A bit of supplier qualification up-front can save a lot of NDA paperwork.
Avoid the Battle of NDAs: It is fine for the customer in the relationship to at first push for their NDA to be used. There are many suppliers, usually the large corporations, which will not sign other company’s NDAs, or require weeks of internal review. In such a case be open to having your lawyer review the supplier’s mutual NDA. If it gets the green light consider signing it.
Willingness to Negotiate:Never start with a "take it or leave it approach". If some sections of your NDA are not acceptable to the supplier, be willing to have your lawyers review the proposed changes. At the very beginning of a relationship, it is especially important to show your company is open to dialogue. Try to understand what the concerns are.
Use E-Signatures: Utilize a reputable and legally valid web service for online document sending and signatures. The latest software keeps track of the many NDAs sent, and also speeds up the process of getting them back. Having to manually sign, scan, then use snail mail is inefficient.
Case of the Disappearing NDA: It shouldn't take a Private Investigator to find the NDA history. Centralize responsibility for: sending, receiving, tracking, renewing, revision level control, referring issues to the legal department, and filing the NDAs. Consider having a database available for employees to quickly check status.
It’s Not File and Forget: A signed NDA can sometimes provide a false sense of security. Information should still be shared on a need to know basis. In countries which do not protect intellectual property, strong supplier relationships, and document control, are the best defense. What they don’t know can’t come back to hurt you.
Adam Shayevitz M.B.A. is the President of Strategic Sourcing Dynamics, LLC. Adam has 30 years experience in the field of Strategic Sourcing. His consulting firm works with technology companies from start-ups to Fortune 500's, setting up and optimizing supply bases (mechanical, electromechanical, and electronics). Adam focuses on accelerating product realization, lowering cost, and improving quality through early phase design for manufacturing & assembly (DFMA) supplier partnering. Visit his web site at: www.strategicsourcingconsultant.com