There is no love like a first time entrepreneur’s love with nondisclosure agreements. They are a romantic dream: secret pacts bonding two economic entities together as one, if only for the transaction. Promises of futures together and sweet nothings exchanged.
Now let’s talk reality. First…
NDAs don’t stop leaks.
Theoretically, a nondisclosure agreement commits the signing parties to… well, not disclose stuff. Practically, it gives you theoretical standing to prevail in a lawsuit where you sue someone for disclosing your secrets.
But that’s a giant stinking load of donkey dung. It’s almost never going to happen that you actually sue someone for disclosing a secret and prevail. It’s just too hard, too complicated, and frankly too easy to lie your way out of getting caught. How are they going to prove they didn’t just think of the idea themselves, or hear it from a different, third party that wasn’t covered by an NDA? Remember that if you have 99 people sign an NDA and 1 person doesn’t, that person can publish your idea in the Wall Street Journal – and to add insult to injury, when they do, the other NDAs all become invalid since they only apply to confidential information.
NDAs: terrorist threats
So forget winning lawsuits. What about threatening lawsuits? Well, you can threaten a lawsuit for any reason, and you can generally file lawsuits for almost any reason. But having an NDA with someone is a very good way to make that threat more annoying. You can file a suit that you have no intention of consummating, and if there’s an NDA in place, they will be forced to take it more seriously – and that’s a pain in the rear. NDAs are a force multiplier in legal blustering. If you like legal blustering, get lots of people to sign NDAs. It’ll make your sound and fury signify a bit more than nothing.
If you’re not the legal threatening type, there’s still some value to an NDA. They don’t know that you’re not a crazy legal Quixote, so they might think twice before leaking. Maybe. But I find deceptive folk make a habit of being deceptive, and honorable folk respect these things with or without paperwork, so I don’t see a terribly great amount of benefit to it.
When NDAs get signed
There’s one and only one reason that NDAs get signed: when one side or both have a great deal of leverage in the negotiation. You see, whichever side makes a commitment not to disclose is basically opening themselves to NDA terrorism. Usually NDAs are exchanged before
