To NDA or Not to NDA

The New York Times Small Business Blog published an article about the fate of non-disclosure agreements (“NDA”) for emerging and seed companies (Why More Start-Ups Are Sharing Ideas Without Legal Protection, New York Times, July 2, 2014). The article makes it appear that initial stage companies shouldn’t bother with a written NDA. This is dangerous advice. Sharing ideas without some protection could put an entire business model at risk. The article has some good suggestions like (a) make sure you have something to protect and (b) know your audience. But the article also suggests filing a provisional patent. The problem is that not every great idea is patentable. The article also doesn’t cover a critical issue which is how a lack of confidentiality would destroy protection for your trade secret.

TAKE AWAY: Keep in mind that articles like this are giving general advice. The writer doesn’t know your business. If you’re shopping an idea around to potential investors, vendors and customers, you need to protect it. Always have an NDA on hand. If you get push back, then at least tell the other side that you have an expectation of confidentiality and confirm it in writing later. If you don’t have an NDA or they won’t agree to respect your expectation of confidentiality, then only disclose the high concept. Then tell them you can’t say more without an NDA. If you still get push-back, then you need to consider how valuable this relationship is going to be. Does the benefit of the potential business relationship outweigh the detriment of losing legal protection for your great idea?