Not Disclosure Agreement

I know in many business situations a non-disclosure agreement is simply a standard business practice.

When you work on contract in any industry that has trade secrets or other material or matters your employer considered necessarily private, discretion is legally agreed to in the signed NDA. This means you are legally bound not to disclose their private business - if you do so, there are legal consequences.

It is a standard commercial procedure, but you have to read the text carefully and if it is confused, ask help of a lawyer, to prevent your rights.

I have signed NDAs, but ususllay it is a means of finding the culprit who let the cat out of the bag

At our research center, a vice president of our corp came and was furious that someone had disclosed information about another corp and chastised all the engineers.

After 6 months of investigation, it turned out another vice president was the culprit as he exposed the trade secret during a golf outing.

Read carefully. If it is properly written it provides protection for both parties. Do not sign any contract that isn't a two way street. Most are standard "boiler plate" but sometimes non-lawyer types write their own and get crazy with unreasonable demands. Pay particular attention to restrictions it places on you and for how long. If you are still in doubt tell them you would like your own attorney look it over first.

You are right to be suspicious.

If the company who asked you to reveal your secrets is a large well financed company and you are just a small company or an individual then a NDA signed by you is almost certainly going to be used as a means to learn your technology secrets, and if your technology secrets are useful to their own ends, they will most certainly steal them and take the position: Sue us if you want to go broke.

There is no honesty in big business.

Hi Guest,

You put your finger right on! Everything is related to money and/or domination.

Small story: A few years ago, I, Canadian, was contacted by a major American distributor. No offense to any countries' distributors. They send me a 7 pages NDA to agree to manufacture certain products for them only. I was the only capable to make, having the right equipment and knowledge. In the document, it was words only about their company, their interests, and their business. I must make in time, in the right quantity the right product following their recommendations. I asked, which was immediately refused, $140,000 for more equipment. Because of production and packaging difficulties, I suggested a uniform package, let say 5 kg. They wanted 6 different sizes at the same price for every kg. My inventory was multiplied by six and I don't have location for that variety. The agreement never was realized and the major distributor is out of business today. However, I stay alive as a small business.

Also, when a raw material or equipment supplier asks for NDA, step out of the relationship. They ask to sign some papers when you could be a seller or user of their new development products for a certain period of time, a year or more.

If you need help, try to find solutions out of your competition and suppliers. Competition will steal your project and supplier can talk to your competitors.

Do everything by yourself, Gil.

Hi All:

You are so right, it is so sad how our legal system becomes the real down fall in the end, it works against the small guy. Attorneys love the long drawn out process in settling a case and these type of cases take years to resolve. Also it does not have to be a large company, just an individual with money who thinks the idea has market value, gets involved in the business, files a law suit over nothing (a simple disagreement) to make you go broke.

I am an inventor, that was sued 6 years ago over a contractual agreement in the assignment of a patent. An individual invested a small amount, became involved in the business part, created discord, began getting rid of the core people, took control of the company and without the core people the company failed. I, as the inventor re-claimed my patents and the individual filed suit. The case is scheduled to go to court at the end of this year, however my guess is it will be re-scheduled again.

I want everyone to make a point, to be very careful when signing these agreements regardless if it is checked by the attorneys.

Do not "ever" assign a patent to a corporation if it can be avoided, especially, a newly formed corporation, instead draw up a license agreement with protection terms included.

We should all band together and protest our legal system as it now stands. It is a "joke" how unfair it is to the small guy and how the attorneys work the system for their own profit and not justice. Everyone has a story on this subject and it should be told to the members in this forum.

Hi Guest,

Absolutely, you have to protect yourself being small from corporations and law users. In our language every word can mean or say one, two or more significations or understandings. These little or big differences in understandings and meanings are used by lawyers against small companies or individuals who are concentrating only on the innovative products or services at place of language.

Like I said earlier, you put down what you want and let them accept or refuse your proposition. Patent is yours and leaved that way! Sign only your paper, Gil.

Hi Ferquiza, Let me give you a free tip - It is well to be very careful - if your supplier is requesting an NDA as a matter of course in order to do business then it is best to undertake ANY transactions as if no NDA exists! I am an experienced lawyer with a bunch of war stories in Project matters. Just think the value of an NDA is contextual! Factors have to be considered such as: who the parties are to the NDA (you with no money and a Corporate who can litigate till you have NO MONEY), its legal forum (Laws of which state or country - IP protection in China for example), and any dispute mechanism incorporated (Litigation is EXPENSIVE). ANY IP you divulge prior to filing any sort of protection will almost certainly render that IP valueless through disclosure of prior art. That said I will give you the standard Lawyers disclaimer ha ha - don't rely on anything I have said and you can't SUE ME if you do!

NDA is invented by Corporate attorneys to rob start ups technology if they can find one which has not gone through patent protection.

NDA is good for Corporate world to bring new technology on board without much work done on the technology and is bad for start up since it let then go broke if they challenge robbery of technology by big corporation.

My only advice is do not drop you paint by letting Big corporation know every thing in your technology so they do not need you and your technological help any more and do not go to the extend they are not excited to work with you.

Do a balancing act and I know it is tough since I have walked through this process few time

Good Morning,

Our company requires a CDA for any project that requires the exchange of intellectual property, processing information, raw materials and so forth. They are enforceable by law in the USA. May of the CDAs we have seen may require the return or all documents and correspondences at the end of the agreed upon time.

I hope this helps you.

Tom

The way I look at them is that they are "par for the course" if you wish to do business and you are working on "the edge" of technology or you are working with commercial companies that are trying to get "a leg up" on the competition (ie: beat them to market, create a new process that is "leaner", or develop a new product line. If you don't plan on spreading the knowledge they give you, then what do you have to fear from them spreading your knowledge?

You are trying to help them meet their goals, and you may very well have something that they don't have. If you developed it (on your OWN time), they only have the right to use it if you agree to it. If you developed it on their time, then it belongs to them, and you can't use it any more than if you were their employee. Think about who you are working for, and who is taking the risk.

This is the difference between offering licensing for your "new and awesome technology" as opposed to contracting with someone to help them meet goals. If you are willing to work for nothing until you come up with the "perfect solution", then you deserve to license the product to someone and get rich off the proceeds. If you want someone else to pay for your R&D, then they own the results of that work, and you deserve to get your invoice covered and nothing else.

Of course, there are few courts that are capable of such logical thinking and money always wins out when going to court, so don't expect that to stand up in court. If you are working for them to help them develop, then you have to be "Johnny on the spot" at your billing increments, and you have to give them just enough to spur them on to cut the check. Make sure you are paid up as you go along, and you will at least not get stuck in the end. I also (on a personal side) try to pick my customers and work for those who are "good for it" as opposed to those who I have to fight tooth and nail to get paid for legitimate billings.

Sooner or later someone will stick you, but by being choosy you will reduce the pain. I take the attitude that the last bill won't get paid, so it not only needs to be pure profit, but it should be money that you don't need to live off of. If the check comes (which, again, you try to do what you can to be sure it does), it will be gravy and will make life better or allow you to buy that business investment you have your eye on.

Do your best to read and understand them so that you don't "give away the farm". If you don't understand something assume it is not to your benefit - and contact a lawyer or consider working for someone else. I have only had to sign a few of these things in the end, and many have evaporated over the years with a little discussion and diplomacy. Usually the guys worth working with are the ones you can sit down and have a gentleman's discussion with and leave the table with everyone working toward one goal.

The key is that you need to do what you do for a living, and you don't want someone restricting that ability for a time period after you are done with the project. If you tell them that the NDA that they are asking you to sign gives away your right to operate, and you can't afford that to happen, so you must respectfully decline the project - they usually come around and either change the offensive wording, allow you to line-item what is offensive, or skip the agreement altogether (my experience is that they usually do the last option and ask you not to say so to the others on the project). They will know pretty fast if you have a loose jaw, and then they just cut you. The worst case scenario out of this is that they stick to their guns, and if you can't work for two years after working with them, then you need to get two years income from them over and above the amount of effort that they are purchasing on the surface. If they don't step up to the plate with a check, then you need to move on to the next project and don't regret the loss of this one - you couldn't afford to do it, anyway.

Finally, if you don't oppose to the part that specifically protects their interests, they will work with you. Often, if you point out that there are truly unnecessary strings attached that are an undue burden on you, then they will work out the rough edges and keep you on board. This assumes, of course, that you have something to offer that they need and understand you can offer better than your direct competition. You better be good if you act like a cowboy, or be prepared to spend the night by a lonesome campfire!

Actually a nondisclosure agreement is done because one company (usually the one requesting it) has information that if given to their competetors could damage their ability to sell their product. My company uses many subvendors that also do work with my competitors. Since there are limited companies that do the type of work we do myself and my competitors use the same vendors (by and large). This means that my competitors knowledge/information and mine are BOTH being shared with one vendor. Without a NDA there is NOTHING stopping this vendor from giving my information/knowledge to my competetors and vice versa. It allows us, with some level of confidence, to use the same subvendor without having to worry about passing information to my competitors. If you do not feel the need to sign one, and you give design information to someone they can take that information and do what ever they want with it including provide it to your competetors.

Hi Red,

Don't believe in nobody's words. Everyone has a business and want to eliminate the competition. It's normal.

You don't pass any information to no one. Everyone works for its business, Gil.

Unfortunately we cannot do the work that we require done, we do not have the resourses to build, equip and train facilities to make our product at a competative rate. The theory of "do it all yourself" sounds good on paper but the reality is that I do not have the 5 to 6 million it would take to build the facilities needed to manufacture our product, even if I did my ROI would be so poor (once you factor in the needed overhead to manage the new facility and verify QA and get the required certifications (ASME stamp, ISO, UL etc)) that I could not convince my board nor my shareholders to do so. It would take several years to get it up and running and in that time my competition would have destroyed me. In business you cannot be fearful of everyone and stay at work long. Most of my subvendors are not going to steal my information for themselves, they do not have the needed engineering to do anything with it nor do they want to be known as the group who would do that. So I am not too worried about it. I also know (since my competitors equipment in on the next line and I have NEVER been given access to their equipment) that they take the NDA seriously and are not giving my information to my competitors.

For those who think that companies are going to take your information and use it themselves and tell you to go ahead and sue, stop and think about it a minute ONE lawsuit about a violation of a NDA will stop ANY reputable group from dealing with that company, too high a risk for most companies.

Hi Red,

In your case, I encourage you to write down your NDA and let sign by someone else, and work together for a better future for both. However, after my opinion, a business must start with enough money to survive at least 6 months to a year. It's the same for growth. Sometimes, slow motion and short steps are better than big developents. When financial shortfall happens before full development of the business, it's hard and need to make some consessions. Wish you a good agreement with someone who will help both to succeed, Gil.

I thank you all for your advises and knowledge.I'll keep reading the next messages.-

i really like all that i read. thank for info. still working to get into into possible supplier side of world so thanks again.