NDA's

Scope of an NDA

Daniel Eberhard CEO, Koho

March 19th, 2013

Hi all,

I am doing some contractual consulting work on a quarterly term for a SaaS firm. They have asked me to sign an NDA which I understand to be standard procedure and have no issue with. However, I am concerned about the depth and breadth of the document.

It is an 11 clause, 6 page document and covers a much broader scope than I am used to seeing. Included under their NDA is 'concepts, 'know-how' (actually quoted') and ideas without limitation'

It goes on to say ' The Company shall be entitled to all profits, compensation royalties, benefits...You (I) may realize relating to, growing out of or in connection with any violations'.

One more 'Agree that the restrictions set forth in these sections shall not impair my ability to be employed, without limitation those areas which you have, or may seek, employment'

I would really appreciate insights into this. Is it standard? Is it enforceable?

Thanks in advance


Rob Mathewson

March 19th, 2013

My observations (not legal opinion)
  • You didn't mention that you were in Canada. I'm not familiar with the differences between US and Canadian law. So, my other comments are based on my experience in the states.
  • The document you described is not an NDA, it is a non-compete.
  • Non-competes need to specify a period of time and some definition of market (industry, geography, etc.)
  • Based on your background, I'm assuming that this is a bus dev role. If so, what possible  concepts and "know-how" could you walk away with? Their proprietary use of LinkedIn???
  • If it were me, I'd troll Legal Zoom for a more reasonable set of docs and ask that they consider them instead. 
Beware the business partners who leads with the heavy-duty legal docs from the outset. They may be sending you a message about what your relationship might be like in the long term.

Anonymous

March 19th, 2013

I've probably dealt with 50-100 NDAs in the last six months (generally between two companies).  They're usually 1-2 pages max.  

Aside from the scope ... look at the duration/time of the NDA.  Limited scope, limited time.

Lastly, if you can't have an open conversation with the company, maybe you're working with the wrong company.  

Daniel Eberhard CEO, Koho

March 20th, 2013

All valid insights thus far. Much appreciated. The term or 'Survival' states 'this agreement and the obligations set out herein shall survive the termination of any engagement or agreement with you as a Service Provider to the company' I feel comfortable bringing up my issues with the company, I just wanted to get a sense of the industry norm to ensure I had a foot to stand on in my negotiation. My perception is this is extensive. Again, much appreciated.

Alexander Ross Head of Business Development at Verifide

March 19th, 2013

I've seen a lot of overreaching NDAs. Usually a bad combination of an overzealous lawyer who's looking to cover every possible downside and someone in-house who's inflexible and 'just needs this signed'.

Once, a client refused to budge and owed myself and a colleague a total of $70k in back fees by then. The terms of the NDA were ridiculous to the point of being unenforceable, including IP rights to anything produced by my kids and grand kids.

So we just made pen and ink changes to anything we disagreed with (nearly everything) and then signed it. The admin nitwit was able to check their box and we weren't raped on the NDA.

Obviously and intelligent conversation and some reasonable terms would be nice, but I thought our workaround may provide some entertainment...


Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

March 20th, 2013

That seems pretty far reaching, and my 1 year of law school tells me it fails the reasonability test. But, an NDA should have a pretty narrow scope - whatever it is that your are discussing, plus whatever no public information that is shared with you. An NDA isn't a non compete. It should be a very straight ahead document stating the matter about which you are engaging, the things that are to be kept confidential and for how long ----------------- Tim Kilroy (617) 899-2436

Anonymous

March 20th, 2013

I recently had a similar experience.  A potential client wanted me to sign an NDA just to go in to the office to talk with them about what work we might do. That was the first flag. My thoughts were, "You shouldn't be telling me your secret sauce on day 1".  The NDA leaned toward a non-compete with some small but obvious errors and some serious attempts at limiting what I could do in the future based on speculation of what they might tell me and a zero burden of proof clause.  I suggested some changes and the reply was "oh, it's just a thing we have everyone sign. Don't worry about it and we don't need to change anything."  When I persisted they ended the conversation. 

I certainly think the person I was talking with was just doing what they were told, "get an NDA signed".  And so I like Alexander's suggestions of just make the changes you need and sign it.

Matt Mireles

March 20th, 2013

Just say no to that language and ask that they strike it. -- Sent from my iPhone. Pls firgive any spellng erors.

Kelly Mackin Entrepreneur, Writer, Product Creator

March 20th, 2013

Those seem to be a little edgy, and I have personally never seen anyone go to bat to enforce one, though it does happen. I'm not a lawyer, but it makes sense to approach them and say, "these are the ones that I can agree with without hesitation." Do we really need all this other language? The NDA should protect information that belongs to the company. that sounds like more of an assignment agreement than an NDA. I Kelly

Jon Cooper Chief Technology Officer at Colchis Capital Management

March 21st, 2013

I will not sign a bad NDA.

Contracts matter. And they matter more when there is a gigantic asymmetry in the amount of resources that each party can bring to bear to enforce them. Any contractual dispute, even one involving an unenforceable contract, requires money, time and psychic energy to resolve. You don't want to go there.

I will generally either:
  • Provide an example NDA that I'm willing to sign, or
  • Strike clauses from theirs that I find unacceptable
In either case I leave it up to the counterparty to pay their lawyers to figure out if my position is acceptable. If they can't get there, I walk, no exceptions. There are a lot of potential clients out there, and you shouldn't work with people who require a tactical weapon in reserve before they'll do business with you.

Jacob Kojfman Experienced technology and corporate lawyer, focusing on SAAS

March 19th, 2013

Hi Daniel,

It really depends on how the contract is drafted.  You do not want to sign an NDA that could limit your ability to work in the future. 

Concepts and know-how are quite vague and the issue is where did you get those concepts and know-how from? If you already had them, can you really not use them again? No, not really. 

Any agreement that could be construed as to interfere with your ability to find a job, could be held to be unenforceable and the whole thing could be struck down.  Courts don't give drafters a 2nd go at the agreements.

Regards,

Jacob