Non-Disclosure Agreements- Inequitable Instruments of Unholy & Unfair Leverage

This subject is complex however, this particular article is about business to business Non-Disclosure Agreements.

If you’re about to sign a business to business NDA or, a Non-Disclosure-Agreement? Think again!

The reason is that so many operating NDA’s are often one- sided legal traps that ensnare the signer, and function as if, the issuer is the only person or company that contains any important and valuable expertise, knowledge, trade secrets and intellectual property.

In fact, the massive generalization contained in most NDA’s, makes them function as if the signer has nothing to offer and the issuer is the only one with the real value. I remember going to see a new client in 2007, to assist them with a very complicated series of issues that involved both business and government, that, by just showing up to see what could be done to assist them, put my company and myself at risk. They were in a grave situation for not only what they created but also, the way they were using what they created in business. After we spent several days together, after arriving back home, one of the executives sent my company, a massive NDA to sign and required me to send it back via an encrypted PGP file.

Not only was the document very long, with legal language that required an attorney to properly explain, but, I didn’t even know about, understand, or, had ever used PGP. I found the entire experience distasteful and inappropriate for developing a relationship with the organization. Let me see if I get this right? I was going to have to pay an attorney to read and legally translate this NDA before I could go to the next level of discussion to assist my new client?

I understood my clients dilemma and had compassion for their fears and the fact that they had something really big and important to protect however, to force the signing of a complicated NDA, that required legal counsel to understand, that was totally one- sided, was a kind of insanity I would not fund, in order to keep the client. I explained why I could not continue with them and let them go. They were not flexible about having a more clear and easily understood agreement, so that they were protected and could still feel at ease about talking with me at the next level.

One sided NDA’s are typically not the kind of agreements that engender trust, joint ventures, long- term healthy and successful relationships, or, even, a kind of agreement that can establish a confidentiality and trust between parties that want to get to know each other better. They can function to severely limit and often kill the getting to know you process before the parties have had a chance to know if there’s a fit or a potential future together.

So many times, we take actions and make decisions because they’re expected as part of industry standards and yet, we often don’t ask the question whether the industry standards are truly protective and effective at building the kind of business relationships we truly want.

Current Mutual NDA’s are still full of language that’s unnecessarily complicated and confusing, in terms of holding people and companies accountable. The reason to have and use an NDA, is to be able to know that the person or group you are sharing the information with will not divulge or use it. It’s also so that you can share confidential and sensitive information about a specific application, method, plan, process, product, project, or company.

The sad truth is that, if anyone wants to violate the NDA that they sign, most of them can be easily violated without the other party knowing about it.  The person or group who was violated, who had their confidential information or trade secret leaked or used, or, sensitive information shared, has to be able to prove it in court and have the funds to retain legal counsel to do it. Most people are not in a position to be able to defend their own NDA’s.

So, why are so many people using them? Why hasn’t better, more clear, wise and intelligent mutual and specific NDA’s and business processes been created that can be broadly used that create trust and accountability with and for everyone involved?

In a rainmaking universe, they’re only two kinds of law. One is generative and the other is parasitic. If an agreement induces complications, ensnares its signers, is heavily weighed without contemplation of the other parties involved and contains legal language that requires an attorney to have to explain it and is lacking specificity, don’t sign it.

Let’s give an example of a scenario. Joe has a script that he wants Mary to read, because he wants her to be involved with his project and help him make it become a film. He hands her his NDA, created by his attorney. The film business is unique. Manufacturing is unique and many industries are heavily nuanced. Should Mary sign Joe’s one- sided NDA?

I would advise Mary not to sign it, unless, she understood every word and the meaning of every paragraph and only if Joe’s intent in sharing the script with her is clearly expressed in a cover letter that arrives with the NDA. Also, it depends what’s in the fine print. I would advise Mary to read an executive summary about the film, as an opportunity and to get a sense on paper what the story is about. That is what I would have Mary sign. This way, we begin at the beginning. An executive summary is a short encapsulation of the story, the market, the why it should be funded and how it’s different and will be attractive to movie goers. I would also ask Mary to ask Joe to write his intention with her, that is attached to the executive summary. I would advise Mary to be clear with Joe that she’s not committing to the project by simply hearing about it or reading the executive summary.

Unholy and unfair Leverage is often expressed in many kinds of legal agreements that are binding, that give extensive and one-sided legal recourse to the NDA issuers that are not equitable for their signers.

What’s needed is a new mind-set and language for mutual and non-mutual NDA’s, with the intent to have clear and specific references to what people are trying to protect and the relationships they seek to develop. They must not be general and they don’t need to be long. Whether it is for the world of inventions, prototypes, entertainment, publishing or, solving problems that become a new method or way of doing things, NDA’s need a complete transformation in how they’re contemplated, written, used and circulated.

Kim Greenhouse