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Is it common to ask people to sign a NDA even if I'm just asking them for small tasks?

Is it common to ask friends or relatives to sign a NDA even if I just need some small help from them? I do need to disclose my idea in order to enlist their help, how do other entrepreneurs normally approach this?

17 Replies

Benjamin Olding
4
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Benjamin Olding Advisor
Co-founder, Board Member at Jana
It's common to have both a non-disclosure & IP ownership clause in any kind of contract you sign with contractors.

If someone is just doing you a favor (for free) it's kind of awkward to have them sign something. Contracts in general should be to the benefit of both parties.

Pieces of paper are only worth what you're willing to enforce. Are you really going to try to sue your friends for damages if they blab about what you're doing?

Trust is way more important and useful than a piece of paper - talk to them about helping you keep a secret. Show them what a (mutual) NDA looks like if they've never seen one just to be able to discuss how it's pretty common for companies to keep secrets... but I don't think you gain much having them sign anything.

Your goal is to keep a secret, not to maximize your ability to win a lawsuit. While threat of legal action can help communicate how serious you are in wanting to keep a secret, it's a remarkably unfriendly way of going about it... Find another way to keep information from spreading.

Also, and I'm sure someone is going to post this eventually, your idea isn't good enough that it matters whether you keep it a secret or not. Even though I believe this, I also think it's OK if you don't - a little unjustified paranoia in general can help avoid unexpected problems; just don't be a jerk to your friends over it.
Stephen Salaka
0
0
Stephen Salaka Entrepreneur • Advisor
Product Development Manager at Tsunami Tsolutions LLC.
It really depends on what you are asking them to do. Do they really need to know all the ins and outs of the business to the extent that they would have enough information to become a competitor against you? Most of the time, especially at the beginning phases of the project, you don't even have enough information out there to warrant an NDA - especially if the tasks and things you are asking are relatively trivial. In most instances you can get a lot of the generic gist across without divulging too much.
Dustin Williams
1
2
Dustin Williams Advisor
Business Systems, Software Development, Information Technology
The short answer is no. For most startups it's a waste of time. What you probably need is a confidentiality clause in your contract. That will protect communications, designs, etc, from being published or shared.

In order for an NDA to be enforceable, damages have to provable in court; so concepts, ideas, hopes, dreams about product direction & market opportunities don't count. Most startups & small businesses don't have any trade/business secrets.

Personally I would never sign an NDA unless you can prove to me that you meet the following criteria.

Has a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers.

Here's a good example:
I once signed an NDA (I also had to be be bonded & insured for a lot of $$) to gain access to a hedge fund's automated trading systems. Those systems had proprietary algorithms & business logic, that tied into a real world business processes (that I had to document). Their business was often discussed by industry analysts who were trying of figure out how much they made & what their secret recipe was. No one knew what they made (including me) but it was a huge amount of money. With the access they gave me; I could have stolen their code, spreadsheets & process diagrams and then sold it to their competitors. Those competitors would have saved millions of dollars in development & almost a decade of work.

Here's a bad example:
A startup recently approached me to rebuild their MVP. Their product is live in the market & has many similar competitors. Anyone who reads their marketing copy & evaluates their product can replicate what they are doing in 3 months or less. It's not defensible or unique (at the moment). They have some traction but they need someone (as in me) to help them establish a mid-term product/technology development strategy. They asked me to sign an NDA; when I asked them what they were protecting, they told me it was the product concept. Which was already in public.

Aleksandra Czajka
0
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Aleksandra Czajka Entrepreneur
Freelance Senior Software Engineer, Developer, Web Developer, Programmer - Full Stack
I get asked to sign an NDA even before I hear the idea. I sign a lot of NDAs because I work with a lot of start-ups. Yes, I would say it's very common.
Dustin Williams
0
1
Dustin Williams Advisor
Business Systems, Software Development, Information Technology
Aleksandra, you really shouldn't do that. You are taking on liability & putting your clients at risk. Think about this, you are agreeing that everything in this project is a trade secret. Which means if you do anything remotely similar with another client, you and that client can be accused of stealing trade secrets.
Aleksandra Czajka
0
1
Aleksandra Czajka Entrepreneur
Freelance Senior Software Engineer, Developer, Web Developer, Programmer - Full Stack
Dustin, NDAs are hard to uphold in a court of law. In my line of work, they server to assure the client and give them a comfort blanket. Haven't met any start-up founders that don't behave this way.
Dustin Williams
0
1
Dustin Williams Advisor
Business Systems, Software Development, Information Technology
Aleksandra,

Though you are right that in NY state the are hard to enforce that doesn't mean they are unenforceable. At the very least they can tie you up in court & make you waste money.

You really should talk to a lawyer and have them prepare anINDEPENDENT CONTRACTOR AGREEMENT with a confidentiality clause. It will give the founders what they need without putting your business at risk.
Zohar Hirshfeld
0
0
Zohar Hirshfeld Advisor
Sr. Director Business Operations, Product Globalization and Chief of Staff for Central Engineering
You might never have the funds to enforce the NDA it only acts as a deterrent and ensures that the people you hire or consult with understand the need for confidentiality. Any contractor agreement you ask people to sign should include a confidentiality clause which is in addition to the NDA.
From my experience you might be limiting the circle of people who will be willing to consult for you as there are some who will never sign a NDA.
On the other hand you should think hard why you would like the NDA to be signed. Is you idea that simple to implement? Is there a real threat from those you talk with that they will either steal of provide you idea to someone else? In many cases, a NDA is just not really needed...
Peter J Accorti
0
0
Peter J Accorti Entrepreneur
Director of Sales Engineering at Resonate
What a timely question. I've been working on some code that I'd like to review with a small company that does development work. Basically I want to show them the code and have them give me some tips/suggestions on my design and code techniques. The code powers a mobile website which I think has unique features/functionality. Would an NDA make sense in my case since I'll be showing them the source code?
Benjamin Olding
0
0
Benjamin Olding Advisor
Co-founder, Board Member at Jana
@Peter - a mutual NDA is a common first step to sharing information when intending to sign a contract with another company, even a services contract. You are concerned about your code, they may be concerned about you sharing their pricing or business practices when you shop your task around to their competitors.

A document like this is signed often enough the company you are speaking with should be able to provide one if asked (see @Aleksandra's comments), and it should be pretty simple.

As both Aleksandra and Dustin have pointed out, it's actual value is pretty debatable. However, when they do not have this (or are unable to offer an alternative like the confidentiality agreement Dustin is referring to), it's potentially a sign they don't do business as often as they are representing and may be learning the ropes as they go.

This situation is very much in contrast to @Jimmy's original question, where there will not be a contract signed before any work is done - it's a friend doing a favor.
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