When Someone Asks You to Sign Their NDA

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Any time you’re going to agree to confidentiality and non-use obligations (whether its your form of NDA or theirs), you need to keep in mind the potential for “contamination.”  That is, can you envision likely scenarios where it could appear to the other party that you’ve used or disclosed their information to their detriment, even when you haven’t?  Are you talking with a vendor of a product that you could end up making yourself?  Or with someone who is likely to become a competitor at some point?  The classic case of contamination-avoidance is VCs: the main reason they don’t sign NDAs is that they may be talking to several startups in the same space, and don’t want to be accused of providing one company’s information to another.

If you’re concerned about contamination, and are not concerned about protecting YOUR information, you can decline to sign the NDA and request that the other party not disclose any confidential information to you.  If you’re really concerned about contamination, you could ask them to sign a “non-confidentiality” agreement, where they agree that you can use or disclose their information without restriction. IBM does this; if you’ve signed any contracts with IBM or other large companies, you may have seen this kind of language.

Of course, like the case of your asking someone to sign an NDA, context and norms are important (see my prior post), and this may ultimately dictate what you do.

If you’ve decided to sign their NDA, should you have your lawyer review it?  In my career, I’ve reviewed more NDAs than I care to admit and can say, in all honesty, that probably 95% of them say essentially the same thing (and are signable).  So consider this rule of thumb: it’s OK to sign if (a) the other party will be disclosing at least as much confidential information as you are, and (b) the NDA treats both parties equally (i.e. uses terms such as “Recipient” and “Discloser,” instead of the parties’ names).  The other party’s incentive is to protect their information, and in a truly mutual NDA, will be protecting yours as well.  This is not a risk-free strategy but is, for most of my clients, a reasonable way to reduce legal expense.

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  • Many thanks for the post. We are a new start up and I always find legal matters difficult to get my head around. I dont usually post comments but had to say I found this advice very useful. We are starting to get a lot of interest from partnerships and the I picked up on a few notes after reading point (b) above.
    Alun - Market Dojo (http://www.marketdojo.com/)

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