Reasons to Drop NDAs
contrast.ie
contrast.ie
If it means the piece of paper people ask you to sign before giving you a pitch, the author's points are largely well taken.
On the other hand:
1. If a company fails to have its employees sign nda's, it potentially jeopardizes its trade secrets (to protect something as a trade secret, an employer must show that it took reasonable steps to treat the proprietary information as trade secret information and having employees sign nda's is a key component of this).
2. If a supposed suitor approaches you about buying your business, and you fail to sign an nda, then the information disclosed in the buying process - which can include your most intimate and valuable business techniques and plans - can potentially be lifted by the would-be suitor and used competitively against you after the suitor abandons the deal.
3. If you attempt to negotiate a potential strategic partnership, and you trade proprietary information relating to what would be a valuable joint venture, and do so without an nda, then, again, the prospective partner can betray you and use your valuable information against you.
4. If you let your sales people develop all of a company's leads in their own name and using their own resources, without confidentiality agreements (i.e., nda's) acknowledging that the customer information is valuable proprietary and confidential information belonging to the company, you leave your company exposed to having its customers raided without any legal recourse. Are sales people prone to do this? Absolutely. They tend to think of customers as belonging to them and not to the company. Without the basic legal protections afforded by nda's, a company runs serious risks of losing its customer base to those who might chose to raid it.
5. Other examples could be multiplied, almost ad infinitem, depending on the particular business context, of how it is positively naive and, indeed, stupid, to proceed in various business dealings without benefit of the legal protections needed to protect confidential and proprietary information, that is, without an nda.
While I think the author's basic points make perfect sense in the fast and loose world of "pitches," they are not generally applicable in the world of startups. As long as there are business dealings in which any party has valuable information that it wants to keep secret, nda's will continue to serve valuable purposes and are necessary and, indeed, indispensable to the transactions involved. This is from the perspective of one who has specialized in business startup law in Silicon Valley for the past quarter century.
NDAs are not for "hey we have an idea we'd like you to hear about" and they are frequently misused for that. This just sets everyone up for legal issues and hurt feelings later -- when you tell somebody an idea they may have already been working on it -- you then end up in a prior art mess.
NDAs are not something you should ever put into the CRM workflow for your sales people as a measured objective, i.e. I've seen quotas of, "Get 20 leads to sign an NDA, get 10 POCs, get 5 sales." If you can't tell me about the features of your product without an NDA I'm not going to understand the product after I sign it.
NDAs make sense if you have an established relationship and you're working on something pre-patent or trade secret work together. NDAs also make sense if you're hiring a consultant to come in and help with marketing, business planning, etc.
I've got a friend at a particular large game studio, working on a particularly popular Xbox 360 title. He is extremely tight-lipped about his work projects. It certainly isn't because of his NDA because we have builds of the game in our test labs. My job enables me to walk in and see them anytime if I really wanted. He keeps his mouth shut and I don't go prying simply because it makes us feel good.
Surprises are often a competitive advantage, especially in gaming. He doesn't want to ruin the fun of the big reveal for himself, his co-workers, the fans, or anyone else. The NDA is a formality; if management ever has to remind them of it, everyone is saddened that someone is spoiling the competitive and customer-pleasing fun.