NDA: What to consider before agreeing on a non-disclosure agreement

The topic of NDAs came up recently in a Seattle startup discussion (with a founder asking for thoughts or experiences on NDAs; his enterprise customer wanted him to sign a non-disclosure agreement and he was trying to decide whether to sign it,negotiate or punt)

Here is what I suggested.

  1. Avoid the paperwork (and potential risk of frivolous lawsuits)of an NDA, unless it is absolutely necessary
  2. Set a time-limit for the NDA, if possible (e.g. a 1-year term to limit chances of frivolous lawsuits after one year)
  3. Clear documentation on what is covered by the NDA and what is not covered (and try to narrow down the definition of what is “confidential” to limit the risk of frivolous lawsuits)
  4. If appropriate, distinguish between disclosure of info and other usage of info (e.g. can you tweak your product (add features etc.) for future customers based on what you’ve learned from your first enterprise customer. This isn’t disclosure, but it amounts to usage of data)
  5. (an additional point that wasn’t relevant to the enterprise customer scenario mentioned above) If appropriate, make the agreement mutual. A mutual agreement covering disclosures by both parties is likely to be more reasonable and not be one-sided.

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