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.  

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

Anonymous

March 19th, 2013

I totally agree with Rob.  If you can't have this kind of discussion, beware of what you're getting into.

Daniel Eberhard CEO, Koho

March 19th, 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...


Andy Keil Building smart products at Waldo Photos

March 19th, 2013

Rough. It sounds like they either haven't done this before and they're overly worried or they're trying to take advantage of you. Either way, I definitely wouldn't sign it. Especially if you're only working on a quarterly basis. 

CJ Barker

March 19th, 2013

From what your describing in context such as "concepts, 'know-how'....entitled to all profits, compensation royalties, benefits" this sounds like you would be signing away complete intellectual property (IP) rights/ownership and giving up your right to compete. 

An NDA should NOT be this comprehensive at this level unless you're delving into a major Fortune 500 partnership with actual IP already in place or at risk.

I agree with the others - I wouldn't sign it.  Rob is right on.  I'd present your own more standardized NDA.  If they won't sign it then move on...it's not worth it.

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.

Daniel Wolchonok Product Manager at HubSpot

March 20th, 2013

Thank you for your email. I will be traveling internationally on a school trip until March 24th. I will have limited access to email, but I will respond as quickly as possible. Thank you in advance for your patience. If you need to get in touch with me, I can be reached at this number from March 12th-March 20th: +971-50-8791267 Best Regards, Dan -- Dan Wolchonok MBA Candidate, Class of 2013 Yale School of Management Email: Daniel.Wolchonok@Yale.edu