NDAs and Foreign Companies

Sarah Stefaniuk Localist and Founder LOCALMOTIV

November 6th, 2019

Hi there, I am considering hiring a foreign development team to do some work on my platform. My question is around what kind of protection does an American business have when working with contractors outside the US. I assume there is none and it's a leap of faith but thought I would put it out there. Is it worth getting NDAs signed? How is this typically handled. Thanks so much for your feedback in advance.

David M

Last updated on November 9th, 2019

Contracts in general are only as powerful as the attorney behind them. That is not a reason to not have a detailed and competent contract. That is also not to say that you can not have a rookie attorney who can enforce them. That is also not to say that a power player attorney won't fall short at times. But optics, with everything, is extremely important. I generally let people know who my attorney's are and, because of their associations and recognition, those who might consider breaching a contract are HIGHLY discouraged from doing so because they know if they do, it will not end favorably at all for them. You should consider having an international attorney you can consult. There can be many challenges with international dealings, especially if they have no assets in the US for which you could go after if damages were incurred. One other thought on NDA's. I never sign them unless someone is putting compensation on the table. Most startup entrepreneurs request them. They do so because they think they have some IP that has never been done before or is unique. While there are unique elements, I have yet to find one startup that did not have IP that overlapped with existing IP or was completely the same. So be understanding if they do not want to sign until you have offered them a contract for their compensation.

Paul Garcia marketing exec & business advisor

November 7th, 2019

Regardless of what contracts you sign, the ability to enforce any of them is very challenging. What I try to focus on when this question gets asked is finding out what you're afraid will happen and are trying to prevent. Then I look for ways to procedurally address those concerns, and other ways to remove incentives for those undesirable things to happen.

The other thing you can do is to talk to other clients of the contractor. Find out what it's like to work with them and what kinds of miscommunication or issues they had to deal with, so you're prepared.

Concentrate on what is likely, not what is possible, and you won't waste a lot of effort that will not get you further forward.

T Y www.hexagonstrategic.com

Last updated on November 7th, 2019


The law system of the entire countries are based on two law systems, British and French. In the U.S. your law system is influenced by British system and in your Trade Law an ''NDA'' is a binding agreement. However, in many countries NDAs are not binding agreements and therefore we either state that ''This NDA signed between etc. , etc. is a binding agreement''. Or we state that it is not a binding agreement, depending on our position of interest.

For an NDA prepared in the U.S. to bind a company which is established outside of U.S. (the generic term is Cross-Border Contracts) you must add a statement that the NDA will be governed by U.S. Jurisdiction. I can provide you the exact sentence if needed.

This however will not be a protective measure of your Intellectual Property (even though World Trade Organization applies this subject in International Trade Law) , this will be a preventive measure.

My advice to you to strengthen this preventive measure is:

Inform the foreign development team that your company's Trade Lawyer will prepare the NDA and will act as a representer of your company, plus if you have serious concerns extend the disclosure period.

Lastly, noone will follow up a breach of an NDA unless the parties are publicly listed. But you can strengthen your preventive measures as a small enterprise for the other party to avoid breach of contract just by making them think that a possible breach might damage their reputation (at least online).

T Y www.hexagonstrategic.com

Last updated on November 7th, 2019

|Off Topic|

I have read through your webpage as a startup advisor.

Building a Localist Community and living as a Localist are great public value offerings. More to that your idea, public value offering and the company is right at the heart of such an emerging topic of the entire world...

I hope me sharing my idea will find you well.

-2/3 of the population of the entire world history who passed the age of 65 are alive today.

-Average life expectancy in U.S. and in Europe on 1880 was 45. Today over 70.

-Ageing is one of the problems of the world according to United Nations.

-Our lifespan extended apprx. +20 years.

-If we cannot match our healthspan to our lifespan we are in need of Gerontologic and Geriatric Care.

-If we cannot match our brainspan to our lifespan we are facing diseases like Dementia and Alzheimer.

-Dementia and Alzheimer's care cost in U.S. in 2019 290 Billion USD. (alz.org)

-''Populations around the world are rapidly ageing. Ageing presents both challenges and opportunities. It will increase demand for primary health care and long-term care, require a larger and better trained workforce and intensify the need for environments to be made more age-friendly. Yet, these investments can enable the many contributions of older people – whether it be within their family, to their local community (e.g. as volunteers or within the formal or informal workforce) or to society more broadly.
Societies that adapt to this changing demographic and invest in Healthy Ageing can enable individuals to live both longer and healthier lives and for societies to reap the dividends.''

World Health Organization on Ageing.

-According to researches elder people want to age in place, not in retirement homes or elderly homes.


A secondary public value offering which will raise awareness towards LOCALMOTIV.

By building Localist Communities and promoting Local Living, LOCALMOTIV helps elders to age in place. By keeping the local environment alive and sociable, LOCALMOTIV motivates elder people to stay connected to their micro environment and helps extend their health and brainspans. Keeping them connected to life helps figthing Dementia and Alzheimer.

And l believe that in your region there must be funds available for Ageing. A pitch deck involving promotion of local living together with helping elderly staying connected to life will definitely be awarded.

The rest is yours to develop if you wish.

Cris Casey Experienced leader, facilitator, trusted advisor, problem solver, analyst, thinker/doer

November 14th, 2019

Agreements between any two entities, regardless of their context, locations or legal systems are only as good as 1) the willingness of both parties to uphold what's been agreed to, 2) the desire and ability to pursue remedies should a party break the terms.

If either of these things are missing or fall short, the agreement (and its intended purpose) is worthless. So focus on establishing and maintaining a relationship that ensures #1, because if #2 becomes necessary, no amount of legal craftsmanship, understanding of the law, moral authority or money spent will guarantee a positive outcome if you are the injured party.

Rahul Sharma CEO and assisting co-founders in achieving their goals by providing technology& mgmt consulting

November 16th, 2019

As a Master of Business Law, from National Law Univ, Bangalore I can say NDA is very effective and you should get it signed and if it is breached, you can claim damages that too of high amounts.

I have worked on Foreign Projects and seen and build teams for foreign clients so I can say with my experience it is not leap of faith, it is systematic approach to protect your data. Please find attachment how your NDA can be breached what legal measures you can take:

What to Do if Your Non-Disclosure is Breached A non-disclosure agreement (NDA) is a common and effective legal tool for protecting confidential information. In fact, many Silicon Valley startups require their employees to sign confidentiality agreements or clauses before they begin their employment. Contents · 1 How breaches can occur · 2 Remedies for breaches · 3 What to do if your non-disclosure if breached o 3.1 Step 1: Seek advice for an attorney o 3.2 Step 2: Collect evidence o 3.3 Step 3: Determine the significance of the breach o 3.4 Step 4: Review your procedures · 4 Other legal choices in case of breach As an example, Sabeer Bhatia, the founder of Hotmail required over 400 of – not only his employees but also his friends and roommates – to sign non-disclosure agreements and claims that his efforts in protecting confidentiality helped his business to keep a 6-month lead in front of his competitors. Sabeer eventually reaped the financial results of his hard work by selling Hotmail to Microsoft for a reported $400 million in stock. You may or may not be a startup but let’s say that you’ve done the right thing and made it a requirement that all your employees sign a non-disclosure before they started employment with you. But now one of them has breached your non-disclosure agreement. What do you do? The risk of an employee breaching this kind of legal agreement can happen to anyone. Consider the case of Coady v. Harpo, Inc., 308 Ill.App.3d 153 (1st Dist. 1999). A disgruntled ex-employee of the Oprah Winfrey television series threatened to report her experiences as an employee of the television series. The ex-employee contended that although she had signed her agreement to a confidentiality policy that was meant to last ‘forever’, she was still entitled to exercise her rights of free speech and free press in revealing confidential information about her ex-employer. Although the Illinois court stated that it was generally against restraints of trade, it found that the confidentiality requirements did not preclude the ex-employee from seeking employment elsewhere. She was only restricted from revealing confidential information about her ex-employer. The confidentiality obligation was therefore, upheld. What to Do if Your Non-Disclosure is Breached from EveryNDA How breaches can occur A breach of non-disclosure over confidential information by an employee can happen in many ways including conducting activity of the following without authorization:

  • Talking about your confidential information to another over a beer.
  • Showing confidential documents, strategies, formulas, plans, recipes, designs etc to another.
  • Publishing confidential information in an online article, blog or social media account.
  • Revealing a prototype of your product to others when it is not meant to be launched yet.
  • Exposing your secrets to a newspaper reporter, journalist or blogger who shares this information to the world through mass media (for example, Edward Snowden).
  • A disgruntled employee stealing your confidential information and taking it with them when they leave.
  • Conspiring with an external party and passing on your confidential information to them.
  • Making photocopies of your confidential information and giving these to your competitors for personal or financial benefit.
  • Using your confidential information to set up a competing business against you.

Remedies for breaches Monetary damages (which can include larger exemplary damages and attorney’s fees under the new Defend Trade Secrets Act 2016 for stolen trade secrets) are usually provided for in this kind of agreement. But unfortunately, unless you’re suing an unusually rich employee or a company which has conspired with your employee to appropriate your confidential information, the employee may not have enough money to pay the damages. A more effective remedy may be to obtain an injunction to stop the employee from breaching your confidential information further or from ever being able to use your information. There’s also nothing to stop you from taking employment-related measures such as disciplining the employee, requiring the employee to return all confidential information and barring him or her from further accessing any confidential information and firing the employee. What to do if your non-disclosure if breached Step 1: Seek advice for an attorney Turn over your signed non-disclosure agreements over to your attorney. Your attorney can look over the facts and provide you with guidance on what needs to be done next. The attorney can also discuss damage control options to minimize the exposure of your confidential information and possible losses. On top of this, your attorney can also give you a realistic idea of the options that you have open to you and what chances of success you have with each option. For example, you may decide not to take the matter to court directly but to use arbitration instead. If the confidential information that was exposed or stolen relates to trade secrets, you need to establish that you have taken reasonable security measures in protecting your confidential information (such as using passwords, keeping confidential information in a locked compartment etc). You should also ensure that you have followed the terms of your non-disclosure yourself as demonstrated in the case of Convolve, Inc. And Massachusetts Institute of Technology v. Compaq Computer Corporation and Seagate Technology, LLC. In this case, Convolve and MIT, who alleged that the non-disclosure agreement had been breached, were unable to prevail because they had not followed their own requirements as set in the signed agreement: all information that’s confidential to be marked as “confidential”. Step 2: Collect evidence Once you suspect – or realize – that your confidential information has been stolen or exposed without authorization, you should start conducting investigations and preparing a trail of evidence that you can use to support your claim later. The sooner you start collecting evidence, the easier it will be for you to prove your case and you also lessen the risk of any evidence being accidentally or purposefully erased. Without good evidence, you take the risk of conducting an unsuccessful lawsuit which could result in you being penalized for lack of evidence which could result in you having to pay the defendant’s attorney’s fees or being accused of defamation. Often, it’s not easy for an employer to start snooping around employee’s files or computers without arousing suspicion (which could alert the employee that did the breach) so it may make more sense for you to hire an external investigator to do the investigation work for you secretly. What has been stolen? As part of your investigation, you need to establish what has been stolen:

  • Is it trade secrets?
  • Is it a particular design?
  • Is it a prototype?

Bearing in mind applicable privacy laws and your own company policy on access to your employee’s emails and files, you should investigate files and emails sent outside your company’s network and check to see if there are any documents that are physically missing. If you believe that your confidential information has been shared or exposed to a competitor and used in their products or services, you can buy a copy of their product or service to see if you can reverse engineer or recognize your confidential information being used in these products and services. Who is involved in the breach? If your employee has published something publicly, it’ll be obvious that she/he has breached your confidential information. If not, employees who have direct access to your confidential information should be investigated. If you have a disgruntled employee who’s about to leave or has left your employment and has moved to a competitor, it’s understandable that you may suspect that this person has something to gain by stealing or exposing your confidential information. However, your employee may not be the only one involved in the breach. It’s important that while you are doing your investigation, that other employees are not alerted to the investigation being done so as not to tip off a potential crime partner. Or, it may be a collaboration between several of your employees or a collaboration with an external party who seeks to gain from the breach. If you’re unable to obtain direct evidence, circumstantial evidence can also be used such as unusual activity from the employee’s end such as copying down large amounts of confidential information without any reasonable explanation for doing so or suddenly wanting to work late nights and weekends when it hasn’t been his or her habit to do so. When you have sufficient evidence to point to the individual or individuals involved in the breach, you should note down current addresses and where confidential information might be stored. This is especially important if you intend to apply for an ex parte seizure order under the Defend Trade Secrets Act 2016. In addition to identifying the individuals or entities involved, you can also obtain financial information about these individuals to decide if it’s worth pursuing monetary damages against them. How the breach was done? Along with your collection of evidence of who was involved in the breach, you should also collect evidence on how the breach occurred:

  • Was data taken out of secure electronic files?
  • Were documents stolen or photocopied?
  • Is the employee who breached your data having lunch consistently with a competitor?

Don’t forget that you should check email records, telephone records and computer usage. If you’ve a handy IT person around, you can also retrieve records that have been deleted but are stored on a backup system. Step 3: Determine the significance of the breach If you decide to pursue your remedies in a legal court, you’ll eventually have to prove the monetary value of your confidential information. Not only is this necessary to determine the extent of any payable damages but also to establish the significance of the breach. Monetary damages can be calculated by looking at profits that another has earned from using your confidential information or the profits that you lost due to the breach of non-disclosure agreement. Your attorney will be able to provide you with assistance on how to work out the monetary value of your confidential information, especially if it’s intangible at the moment. The more evidence you can collect, the easier it will be for you to make your case. Step 4: Review your procedures While you’re doing your investigations, you may discover some gaps or loopholes that need to be improved to increase your security. You should take this chance to examine what needs to change within your own internal procedures and policies. Also note if the clauses of your non-disclosure agreements need to be amended. More effective internal procedures and policies could include:

  • Clearly marking confidential information as such
  • Ensuring that confidential information is separately stored from ordinary confidential information in a secure location
  • Conducting an exit interview for disgruntled employees
  • Or increasing training for existing employees on how to look after confidential information

Other legal choices in case of breach Any breach of your non-disclosure agreement is essentially a breach of contract. Besides pursuing remedies for a breach of contract, you may have other legal options open to you including:

  • Misappropriation of trade secrets if the confidential information qualifies as a trade secret under common law, the Uniform Trade Secrets Act (UTSA) or the new Defend Trade Secrets Act 2016
  • Breach of patent or copyright if you have an existing patent or the confidential information qualifies as a copyright and breach of fiduciary duty (normally applies to directors or executive officers).

It won’t be an easy journey once a breach of your confidential information occurs but the better prepared you are, the less stressful it will be.