Tech and games companies love non disclosure agreements. Particularly enthusiastic companies tend to scatter them around like confetti. Frequently you have to sign them just to walk into a big tech company’s lobby these days. But NDAs are often misunderstood or used in the wrong way – which can have serious legal consequences. Besides which, we regularly see NDA ‘embargoes’ being breached, to no apparent ill effect. In this post, I talk about what NDAs are, what they do and give some tips for how to use them more effectively.
What is a NDA?
A NDA is a contract intended to protect confidential or sensitive information. Examples of information which can be protected by a NDA are: business proposals, financial data, new IP (like a game beta) and trade secrets.
How does a NDA work?
Under a NDA, the signer promises the recipient that he will not disclose certain information to any third parties, except under circumstances described in that contract. The value of the NDA is meant to be that: (i) the signer is legally bound by his promise not to disclose the information to third parties; and (ii) if he breaks that promise, the recipient can go to court to stop him and/or can sue him for damages or for other legal remedies.
Typically, NDAs are drafted as widely as possible in order to cover pretty much any kind of information which can be imparted from one party to another. So much so that in one case recently I saw the judge read a NDA and comment “the only thing it is missing is the kitchen sink!” The reason for this one size fits all NDA is fairly obvious: the wider you draft it, the greater the chance you will capture everything you want to have protected. Or so the argument runs. In fact, this is a pretty risky attitude to adopt – more on that below.
Important: there are a number of standard exceptions built into NDAs (and if they aren’t expressly in the contract they’ll likely be imposed by the law of most jurisdictions). The key exception is where the information is already in the public domain. In other words, if the confidential information you are trying to protect becomes public information (e.g. you give someone exclusive press coverage over whatever you sought to protect – like a new game) then there is a good argument any NDAs covering it would become unenforceable.
Benefits of NDAs
The primary perceived advantage of NDAs is that they provide protection of important information at relatively little cost. The chances are that a party which signs a NDA will be persuaded/cowed into compliance by the mere threat of legal consequences if he doesn’t. And besides, they’re drafted so widely they can cover everything you could want, right?
Issues for NDAs
In fact the one size fits all, standard form NDAs have three serious issues and some lesser problems too:
- You’re in the hands of the NDA signer: a NDA, like all contracts, is only as good as the person signing it. No matter how well drafted it may be, if the signer wants to breach the NDA, he will. And, more often than not, he’ll do it in a way that makes life difficult for you. So, they are not a total protection for your confidential information.
- Do you want to enforce the NDA anyway?: Even if you have a good NDA and can show that the breach of it is an open and shut case, ultimately you have to take the guy to court to protect your legal rights – which is expensive and can be a reputation killer. For example, that’s essentially why a whole bunch of journalists have been able to break big games or tech exclusives despite being quite clearly subject to NDAs.
- Does it even really work?: the wide drafting of NDAs which I talked about above is in reality a double-edged sword. On the one hand, yes it can cover as many situations as possible. On the other hand, this kind of ‘fire and forget’ approach can make it unclear what you actually want to protect. As a result, there is a risk that, if you ever needed actually to rely on the NDA in court, there may be legal issues with that wide drafting. Take that example I gave above of the judge who commented the NDA was so wide it virtually covered the kitchen sink – he went on to give the NDA and the party which had drafted it a hammering in court. To be avoided.
And a number of other problems with NDAs:
- Uncertainty: quite apart from the legal considerations, standard NDAs are often impenetrable to everyone except lawyers. This defeats the primary purpose of the NDA: to encourage the signer not to spill the beans. If the signer doesn’t really understand what ‘the beans’ are, that’s not good news. Again, to be avoided.
- Too complicated: looking at it yet another way, some NDAs are just too complicated for their own good. If you can get what you need legally in 10 words rather than 30, then use 10 words. It’s good drafting and good business.
- Overzealously applied: NDAs are also known to some as the “Silicon Valley handshake” because of their liberal use there. Again, its good business to only use a contract – especially one that tries to restrict someone’s liberty to speak – if you really need it. Besides which, using NDAs liberally just encourages all of the above problems because each NDA is less likely to be tailored and enforceable.
Important proviso: these problems don’t mean that NDAs are useless in the games/tech industry. Far from it. Rather, they illustrate that NDAs need to be used carefully if you want actually to achieve protection for your confidential information, whether it be a new game or a really good business idea you have.
Tips for using NDAs and protecting your confidential information:
- NDAs are meant to protect your most important business assets – so treat NDAs just as importantly as those assets. Have a standard document by all means, but think about it before you get someone to sign it.
- Spend the time (with your lawyer ofc!) to ensure the NDA is drafted carefully and actually covers the points you want to deal with. If the NDA doesn’t scream out what you are trying to protect, something is going wrong.
- Make sure the signer of the NDA knows exactly what he can and cannot do. Don’t leave him to decipher the legal wording alone.
- If there is a media sensitivity regarding the subject matter of the NDA, then make it even clearer to the signer what he can and cannot say to the media/press about it. If need be, build in sensible exceptions so that you can control the information flow.
- Consider alternatives/supplements to NDAs, for example agreed public statements. If you do want to use a NDA, be prepared to sue to protect it.
- Some people will refuse to sign NDAs. If their bargaining power is sufficiently high, you might have to accept that. Some might even be offended you asked in the first place, like a venture capitalist.
Note: this post was originally published on Gamer/Law back in 2010, but seems to have disappeared off it since then. So this is a repost.
Needed to create you one very little word to be able to thank you very much over again regarding the incredible strategies you’ve discussed here. It’s so unbelievably open-handed of people like you to grant unhampered all some people would’ve offered for an ebook in order to make some profit for themselves, most importantly considering that you could possibly have tried it if you wanted. These ideas likewise acted as the great way to be certain that other individuals have similar desire similar to my personal own to learn lots more with regards to this condition. Certainly there are thousands of more enjoyable instances in the future for individuals that look into your blog.
Thank you for every one of your hard work on this blog. My aunt take interest in working on internet research and it is simple to grasp why. All of us notice all relating to the powerful manner you provide very helpful guidelines through your web blog and strongly encourage participation from some other people on this subject while my simple princess is without question starting to learn a great deal. Have fun with the remaining portion of the new year. You have been doing a glorious job.
I and also my pals appeared to be viewing the great thoughts from your web blog and so then came up with a horrible suspicion I never expressed respect to you for those strategies. The women happened to be as a consequence joyful to learn all of them and have now simply been using those things. We appreciate you getting indeed accommodating and also for obtaining such very good subjects millions of individuals are really eager to understand about. My very own honest regret for not saying thanks to sooner.
My husband and i got happy Peter could do his web research through your precious recommendations he grabbed in your blog. It is now and again perplexing to simply find yourself giving for free information which often others might have been selling. And we also fully understand we’ve got the writer to give thanks to because of that. The specific explanations you made, the straightforward website menu, the relationships you will help to engender – it’s all unbelievable, and it’s really leading our son and the family believe that that subject matter is pleasurable, which is certainly exceptionally pressing. Thank you for the whole thing!
Thanks so much for giving everyone a very breathtaking possiblity to read from here. It is usually very cool and as well , packed with a lot of fun for me personally and my office fellow workers to visit your site at a minimum thrice in a week to see the new tips you have. And definitely, I am certainly satisfied for the awesome information served by you. Selected two tips in this posting are in fact the most impressive we’ve had.
I actually wanted to post a simple remark to thank you for all the unique points you are writing here. My long internet research has at the end been compensated with brilliant information to talk about with my family. I would declare that we visitors are unquestionably fortunate to be in a superb website with so many awesome people with very helpful tips. I feel somewhat lucky to have seen your entire webpages and look forward to many more entertaining times reading here. Thanks a lot once again for a lot of things.
I am only commenting to let you be aware of what a exceptional experience my wife’s girl obtained studying your site. She learned lots of things, with the inclusion of how it is like to have an excellent helping mood to have the rest smoothly fully understand some tortuous subject matter. You actually surpassed visitors’ expected results. I appreciate you for imparting the warm and helpful, safe, educational and even easy tips on that topic to Mary.
I together with my friends have been analyzing the best things from the blog and so suddenly I got an awful feeling I had not expressed respect to the web blog owner for those secrets. The ladies happened to be for this reason thrilled to study all of them and have in effect truly been enjoying these things. I appreciate you for turning out to be indeed kind and then for making a decision on varieties of marvelous issues millions of individuals are really needing to discover. My personal honest apologies for not expressing appreciation to you earlier.
I happen to be commenting to make you understand what a outstanding experience my wife’s princess found browsing your web page. She discovered numerous things, which included what it is like to possess an excellent giving character to have the others easily have an understanding of specified impossible matters. You actually exceeded people’s desires. Thank you for giving those insightful, safe, explanatory and in addition fun guidance on the topic to Tanya.
I actually wanted to make a brief note to be able to express gratitude to you for these magnificent information you are writing at this site. My particularly long internet search has at the end of the day been paid with useful strategies to go over with my best friends. I would assume that most of us site visitors actually are extremely endowed to be in a useful network with so many special people with good suggestions. I feel extremely blessed to have seen your web pages and look forward to so many more enjoyable times reading here. Thanks a lot once more for all the details.
I am only writing to let you understand of the incredible encounter my friend’s daughter gained checking your site. She figured out numerous things, which included how it is like to have a very effective helping mindset to have a number of people clearly completely grasp a number of complicated subject areas. You actually surpassed readers’ expectations. I appreciate you for rendering such important, dependable, edifying and even easy thoughts on this topic to Evelyn.
My wife and i felt very more than happy Ervin managed to carry out his researching while using the precious recommendations he had through your site. It is now and again perplexing to simply find yourself giving for free guidance which a number of people have been trying to sell. Therefore we consider we’ve got the website owner to appreciate because of that. The explanations you have made, the easy website navigation, the friendships you assist to foster – it is most amazing, and it is assisting our son in addition to our family imagine that the subject matter is amusing, which is certainly tremendously essential. Thank you for the whole lot!
I wish to point out my respect for your kindness giving support to those people who require help with that question. Your very own commitment to passing the message all around has been unbelievably helpful and have regularly allowed women much like me to get to their pursuits. Your informative facts means a whole lot a person like me and additionally to my office workers. With thanks; from everyone of us.
I definitely wanted to compose a brief word to thank you for all of the fabulous guidelines you are showing at this site. My prolonged internet investigation has finally been recognized with incredibly good facts and strategies to share with my best friends. I ‘d tell you that we website visitors actually are very much blessed to be in a fantastic community with many special professionals with useful hints. I feel rather happy to have used your webpage and look forward to so many more brilliant minutes reading here. Thanks once again for everything.
I not to mention my friends have already been checking out the nice guides found on your web page and then all of the sudden I got a terrible suspicion I never expressed respect to the website owner for those techniques. Those young boys came glad to learn them and already have absolutely been loving them. Appreciation for truly being well accommodating and then for pick out this sort of wonderful issues millions of individuals are really eager to be informed on. Our sincere regret for not expressing gratitude to earlier.
Needed to put you a little observation in order to thank you so much once again for your personal wonderful knowledge you have shared on this page. This has been certainly tremendously generous with people like you to convey unhampered precisely what some people could possibly have sold for an electronic book to help with making some cash for their own end, most notably since you could possibly have done it if you considered necessary. Those ideas as well worked to become great way to recognize that other people have similar interest the same as mine to realize way more with regards to this condition. I believe there are a lot more enjoyable instances up front for people who take a look at your blog.