Okay, I know you’re not a lawyer, or you’re not my lawyer, and/or not licensed in my jurisdiction, etc. I just need a little preparation.
Here’s the situation. I’ve just heard that a competitor to the business I own is “reorganizing” i.e. may be going bankrupt. There may already be an offer to buy them. I’d consider making such an offer, and have told them so. They said they’re willing to meet with me to discuss it, but they will want me to sign a Non-Disclosure Agreement.
The problem is that between now and the meeting I’ll be at a conference and will have little or no opportunity to consult my lawyer (whose specialty is intellectual property, anyway, so perhaps not the best to advise on this anyway).
I’ve asked to see the NDA in advance, and if they provide it, I’ll try to get real official legal advice before the meeting. But I may not see it before the meeting. So I want to have a better understanding of NDAs, how they work, what possible pitfalls they present, and how effective they are. For instance, I’ve heard many times that NDAs really can’t be enforced. But I don’t know why that would be, if it’s true.
I also don’t quite see how my agreeing to keep quiet will help them, since I am effectively their only competition. I’m certainly interested in learning more about the inner workings of their business, but it’s not as though there are other companies out there who might benefit from this information, and they need to keep me from talking. It’s really just the two of us.
So anything you can tell me about NDAs, any references or resources you can point me to, any experiences you’ve had would be helpful. I leave for the conference on Monday.
You have GOT to talk to your attorney about this. I don’t mean to come across as hostile. I’m really trying to help you. You have GOT to talk to your attorney about this. Asking for advice like this is like asking the folks on this board to diagnose this cough you’ve been having. The ONLY responsible thing that anyone can say is: go talk to a professional.
Whether or not it makes sense for you to sign this, whether it will have potential pitfalls, what those pitfalls are, what the risk is of those potential pitfalls, what state’s law will govern the agreement, whether in your particular business there is an increased risk of this for some reason, whether in their business their is an increased risk for some reason, whether it’s significant that you are their only competitor, are all questions that depend very much on the specific facts of your company and your situation.
Any advice you receive on this board–other than advice to talk to your attorney–will be worthless. There are too many factors at play here, and nobody who knows what they are talking about would advise you based on the facts that you have sketched out in your post. By the same token, anybody who would be willing to advise you based on the facts you have sketched out has no idea what they are talking about.
If you want my advice, you need to leave a voicemail for your attorney explaining what is happening, and explaining that you are going to be at a conference and difficult to reach. Your attorney can then: (a) schedule a time for a phone call, or (b) at the least, leave you a voicemail back weighing the pros and cons of signing the NDA.
I take your point, constantine, and will try to contact my attorney, but a) I may not see the NDA before the meeting, in which case I’m not sure how much better his advice will be than yours or any other Doper’s, and b) as I mentioned, he’s an IP lawyer. He’s the only lawyer I’ve had any significant contact with, and that was years ago, having to do with a legal threat unrelated to this case. So it’s not as though he knows much more about my business than you do.
The only other lawyer I have done business with was a high school friend who drew up my articles of incorporation. That was even longer ago. He might be a slighyly better advisor than my IP guy, but his main business is real estate settlements.
Ideally, I’d get a new lawyer specializing in mergers and acquisitions, but obviously, that’s not feasible in the present circumstances.
Would you say that I should simply not sign any NDA without prior legal advice and forget about this meeting? The problem there is that the principal of the other company lives in Europe, and will be at the conference. So it’s quite convenient to meet now.
Constantine is correct, you do need to talk with your attorney. NDA’s can have all kinds of weird stuff in them. That said, I’ll give you a couple of things to look for.
Term - from your point of view, the shorter the better. Trade secrets are kept secret until they are no longer secret, everything else should either be up for grabs or the term should expire ASAP.
Listing of items disclosed - this might not be in the agreement, but you should either ask that it be included as part of the agreement or you should take very careful notes of what is discussed/disclosed, and preferably both.
Exceptions: Public Domain information and stuff you already know or later receive from some innocent third party should not be covered by the NDA.
Leave your attorney a voice mail and get an opinion, NOW!
cj finn, who as an attorney does deal with NDA’s and as an attorney I recommend that you see yours before you sign the NDA!
Thanks. This is just the kind of general info I was looking for. Something to think about.
Do NDAs usually/often/sometimes specify penalties for disclosing in violation of the agreement? If so, do they have to specify how (and by whom) it will be determined that the signatory was the one who did the disclosing? Is this one of the reasons why NDAs are not considered enforceable?
And once again, practically speaking, how useful will any advice from my lawyer be if neither of us has seen the actual agreement before the meeting?
Call your IP lawyer and leave him a voicemail.
An IP lawyer is exactly who you SHOULD speak with about an NDA. You should talk about all these concerns with him. If he feels that he should review it before you sign it, then you can fax it to him. Talk to him about the logistics.
Again, talk to him about this. If he feels he cannot advise you, he will very likely be able to find someone who can.
I need to be very, very clear about something. Clear with you, and clear with anyone who is reading this thread now, or in the future. I absolutely, positively am not, will not, and cannot offer any opinion or give you any advice to you or to anyone else on whether you should or should not sign anything. It would be completely irresponsible for me to do that since–as I said–I do not know enough about your situation to be able to offer any sensible advice. I am not your lawyer and you are not my client.
If you have a concern about signing this, then you should speak with your counsel.
You keep referring to (a) the logisticial difficulties of reaching him, and (b) your opinion that his advice won’t be worth very much because he is an IP lawyer and neither you nor he will be able to review the document before the meeting. From where I sit, I don’t think that any of these are reason not to call him and leave a voicemail explaining the situation.
The phone, email, and fax machine seem to address (a), and I think it is a mistake for you to prejudge (b). If he feels he needs more information in order to advise you, then he will ask for it. If he feels he needs to see a copy of the agreement before you sign it, then he will advise you about how to make a arrangements to fax a copy to him.
I’m not an attorney, but I can offer some advice of a non-legal nature:
If you have access to a fax at the conference, fax the agreement to your attorney. That’ll give him something to work with.
Can your attorney refer you to someone who does have experience with NDA?
Now that I’ve established that I don’t know anything, let me add that this getting-the-NDA-before-we-talk-in-a-few-minutes rings serious alarms. It sounds too much like having an car salesman offer you a great deal if you buy right this minute. For example, why couldn’t they fax you the agreement before you left for the conference?
If nothing else, agreeing to let yourself be pressured like this tells them something about how you do business, and how far they can go in pushing you.
I don’t know if I’m quite as worried about the potential evils of NDAs as some of the other posters here. I’ve brokered the sale of a few businesses and most NDA’s I’ve encountered are fairly basic, and are mainly crafted to prevent the disclosing of income and expense specifics that would be discussed.
No one short of a loon is going to be revealing sensitive “trade secrets” to someone simply kicking the tires, and if that person is in a similar competing business the things discussed are typically going to center around, income specifics, client lists, fixtures, suppliers, machinery and (if applicable) real estate. Unless there’s some very proprietary technical proess involved most small business NDAs are not that onerous or complex.
If the NDA looks overly complex or restrictive to you simply refuse to sign it until you can get an attys opinion.
Ditto on all the IANAlawyer stuff, and talk to one.
I can easily imagine WHY they want non-disclosure. Widespread knowledge of their financial difficulties might affect their value and/or their client base. People mught start to bail, something like the lines waiting at banks before the Depression really closed in.
My best advice is, if they insist on you signing the thing without giving you a chance to run it by your lawyer, pass on the meeting altogether. As an alternative, you and the other company rep might jointly come up with a plain English version that you can both agree to and sign. Don’t let the other guy run that by his lawyer, either.
IMO you NEED the right to disclose at least some elements of a proposed deal to advisors and or investors. You also might need to speak to some kind of expert advisor based on something you learn in the course of the discussions, so you don’t want to specify name-by-name in advance just exactly what you might need to disclose to who. And good luck trying to put a deal like that in plain English.