Advisors · IP protection

Mitigating Confidential Information Provided without NDA first to Bad Apple

Anonymous

June 27th, 2017

Has anyone here experienced bringing someone on board their company and, giving too much trust to that person, provided them some access to confidential information without signing an NDA - and then have that person start turning on you (like becoming a bad apple)? In our case, it's an advisor that wants special treatment in his contract now that informalities are becoming formalities.


It's the ultimate entrepreneur's mistake, but it can happen to the best of us. How did you mitigate your situation - were you able to get them to sign an NDA at some point after divulging the sensitive information or what other techniques ended up working for you?

George Michalelis A mechanical engineer with business experience

Last updated on June 28th, 2017

This usually happens to good-natured people when they have their first or even second entrepreneurial attempt. And it has happened to me too of course. So here are some suggestions stemming from my personal experiences in Greece (consult as many people as you can though!).


Your first action should be to adjust your mindset. Hope for the best but prepare for the worst. So from now on try to do business with people you think you can trust but always prepare contracts with them as if they are strangers. After all a contract is there to protect both parties in case things go south (almost nobody cares about contracts when things go smooth). If they get offended they may have ulterior motives or they may be inexperienced but in either case you need to stay away from them because when problems DO arise both of you will be unprotected (and in business, problems WILL arise "one year or another").


Once the problem has arisen you can only cut your losses. You should consult a lawyer because an NDA may not be admissible. Other means than an NDA may be available though, depending on the country of incorporation, your country of residence and the relevant legal system prevalent there.


Your best chance of course is to treat this as business. So try to change your strategy in a way that his information become obsolete or even turn to your advantage. For example if he knows about your designed product you could protect it, change it, improve it slightly, bring to the market earlier etc. If he knows your deficiencies and starts telling your competitors then try to confuse them (act as if you have already addressed them). Think like a businessman.


In business you will easily find people who will harm your company either on purpose or by accident (not everyone is business savvy). You cannot count on just one method of protection.

K. Robbins Head Moose at Moose WorldWide Digital

June 27th, 2017

If they turned on you this early they would have ignored the NDA. Sorry for your trouble. Cut your losses now.

Dmitry Kroshka Marketing, Strategy, Partnerships

June 27th, 2017

I'm not an attorney so this shouldn't count as legal advice. Ultimately, I believe that there is little to prevent someone with a signed NDA from becoming a liability, short of a lawsuit, where you would need to prove the novelty of the technology. Protecting ideas is really difficult.


My suggestion is that if they are turning out bad you cut your losses and end discussions. You ask them flat out for the protections that you need, and if you don't get them break away all further discussions.


If the difference between someone copying your idea or not is a NDA, and not cost, difficulty of execution, or some other factor uniquely yours, then an NDA is the least of your worries.

Anonymous Cofounder @LINKSMART

June 28th, 2017

You have two things - first being NDA that has clause to cover primary information and secondary information derived form primary. Another you should have restriction clause in agreement that post separation, he/she shall not engage-with another company in similar domain at-least for 2 years OR solicit employee of yours.I guess NDA alone can be sufficient, if you have mentioned that Party receiving information is joining as co-founder/advisor/key-employee . NDA works more like deterrent which is good enough to prevent others taking risk. Beyond these two you can depend on patents, if information is patentable.

Paul Garcia President at TABLE

June 29th, 2017

Most of these answers don't seem to get at the specifics of your situation. Because the person you're worried about is an advisor/employee, you're talking about either a confidentiality agreement or a non-compete agreement, not necessarily the standard NDA. An NDA usually lets two companies discuss sensitive information that would give an advantage to someone outside the deal being proposed between the two companies. On the other hand, with an employee/advisor person, disclosure of trade secrets or confidential information may be a violation of law even without an agreement, depending on exactly what's going on.


It's unclear what this person considers special treatment or what kind of contract you're writing. You still have the upper hand because they have zero contract without you. And you can still rattle your sabre that you'll pursue legal action against them if they disclose insider information that harms your business. You'll have to show actual monetary damages, but an individual against a company isn't going to have the same resources to defend themselves legally.


This is best handled in a conversation, not in writing, with the person involved. Have the owner/CEO get in front of the other person and be extremely frank and direct. Find out why they are doing what they're doing 1:1, in a situation where they can't feel embarrassed because someone else is listening. Most of these things can be worked out if you talk it through, but a lot of people get too scared to talk honestly to people who are threatening. This is a leadership skill. Big lawsuits are avoided when you look someone in the eye and shake their hand. A lot of the puffery goes away when it's just two people trying to get to the bottom of the situation.

Johnny Vieira Founder & CEO

June 27th, 2017

This is such a complicated issue in the start up world. Its considered bad form to ask anyone to sign an NDA yet if you divulge too much information you are not at a disadvantage. Not sure what the work around is but this seems like an issue to me. And sorry I just don't buy the whole " dont worry about anyone using your ideas cause there are no special ideas out there anymore" argument..

Paul Fraulo Patent Attorney

June 27th, 2017

If the information you are trying to protect through your NDA is patentable, you should file a patent application ASAP in order to protect yourself should the advisor actually turn out to be a bad apple. If you were hoping to keep the information secret, or if it's not patentable, then the problem is more difficult. In the future, always get an NDA and take "reasonable" measures to protect information that you consider a trade secret of your company.

Dayo Akindolani Managing Consultant

June 28th, 2017

Yeah, you have to call the person to other and have a discussion with the person. Maybe you are not meeting his needs as agreed initially, a gentle man dialogue can settle that.

Anonymous

June 28th, 2017

Hurrying to find a business partner without realising the importance of having an NDA signed is a big mistake. It may cause the person to be locked into the potential business partner without having had the opportunity to understand if the partnership was going to work.

It is human to get caught by panic and hurry into unwise decisions. A a rule, one has to keep calm, rational and reflect on the relevance of certain actions. Unfortunately sometimes it may not happen.

Anonymous

June 28th, 2017

Forgot the resolution: after a while, while the other business partner is sure he is in the business, then every other intellectual property is formalised correctly through a joint ownership agreement.