I have noticed that most of the world's wealthiest people, have operated on the theory that the vast majority of people in life are honest. There are a number of methods to very a person's identity online. But instead, why not hire a lawyer in that person's community to verify? Ronald Reagan coined the term "trust but verify." Most jurisdictions have a local county bar association lawyer referral service.

posted February 23, 2008

How can you be sure that the party signing a NDA has signature authority to bind the company to the terms of the NDA?

When a company communicates a document that purports to be executed by the company; then it is executed by the company. This is true regardless of whether or not the signatory actually works for the company. The company communicating the document (signed by anyone), communicates an implied authority to bind the company under the legal speak, “color of authority”. The issue is whether the party which enforcement of the NDA is being sought against demonstrated, an intention to be bound be the terms of the NDA.

If you seek to enforce the terms of the contract (NDA’s are contracts) against company ABC, Inc. and ABC, Inc transmitted to you a signed NDA, then ABC, Inc is bound by the NDA It doesn’t matter if the janitor signed the NDA. What matters is that ABC represented to you an intention to be bound by the terms of the NDA when after it had the janitor sign the NDA it was communicated back to you, and that your reliance on that representation was reasonable under the circumstances.

A claim that the NDA was signed by the janitor and therefore invalid is a poor defense to a suit for damages resulting from a breach of the NDA. If the company didn’t intend on being bound by the NDA, then they shouldn’t have represented that intention by sending a signed NDA to you. There is no get out of liability free card available to the defendant.


What is the effect of signing a NDA? The same as a Contract. Damages in the event of breach should be specifically laid out in a “Damages” paragraph of the NDA.

How do you enforce a NDA? In a court of law and equity the same as a contract. Jurisdiction is proper in either your country or the offending party’s country, and a “Venue Clause” and “Choice of Law” clause should be included in the NDA. It should make clear that in the case of a breach, the venue is to be X and the court of X will apply the law of country X. A Dutch court is perfectly capable of apply Mexican law. These types of clauses are common place and should be utilized.

posted February 23, 2008

From what I understand, NDAs don't provide a terrific amount of protection. You may want to discuss this with an intellectual property attorney first.

posted February 23, 2008

In the general case: An NDA is simply a contract. So the rather complex rules of contract formation would apply.

A contract may exist even if it is not signed.

For your specific case, this becomes a "get a lawyer" question.

posted February 24, 2008

Ernest

As John says an NDA is a contract and as such is a "get a lawyer" scenario.

However, like all contracts they are initially of use to establish behaviours and standards. If a party choses to ignore these contractual requirements then you sue or, preferably, seek some other resolution in the first instance.

With IP this is equally true but there is another dimension which makes NDAs difficult to enforce and that is the human mind - you can not strip out the details of a conversation or the sight of diagrams, flow charts, whatever. Thus whilst an NDA can restrict use of this intangible information it does not mean that the recipient will at some time in the future use the information unwittingly and without malice.

So as well a properly drafted NDA you need to ensure your people are aware of the potential for this kind of circumstance and ensure they act accordingly albeit they need to disclose to sell. I have found in the software world that people are so aware of the proprietary nature of code etc. that they recipients are paranoid about disclosure anyway

In conclusion though, I agree with those who believe that people are inherently honest and want to comply with contracts.

Peter

posted February 24, 2008

NDAs are notoriously difficult to enforce, as it can be very hard to prove unauthorized disclosure. Add to the fact that you as the discloser and the recipient are in two different jurisdictions, enforcement becomes extremely expensive.

I usually recommend disclosing only what you need to, while maintaining a certain amount of information that would not allow the recipient to damage you if they were to disclose or use the information. There are some other practical considerations as well aside from relying upon the provisions of an NDA.

posted February 24, 2008

As for the notary question ... the whole point is for a person to actually execute a document in the presence of the notary who checks that persons identification. Doing this on line is really not possible. I certainly would not accept it.

On the topic of NDAs, allow me to say that the theme behind the prior comments is correct; they can be hard to enforce. For this reason, three things need to be kept in mind. Don't disclose more than is necessary and provide for audit if at all possible (this is difficult). Most important, find a way to be both present and serious in the jurisdiction of the NDA partner. In this regard, you might consider US counsel with strong litigation credentials. Have this counsel work on the NDA and be a clear presence. You need not be a horse's patoot or a "pit bull" about this, but it is well not to be seen to be a "pussycat."

posted February 24, 2008

1. Make sure you send it to the company (so check their address). Do not disclose anything until they have signed. If that company holds someone out as having authority to sign they are bound (in the UK (here) and the US.
2. I always tell people to disclose enough but not too much so you have practical as well as legal protection (if that is possible).
3. Take some measured risk but realise it's a risk - most people cannot afford to litigate NDAs easily - I usually advise the safest thing to do is lock an idea or invention in the bedroom and next tell anyone but that the trouble is you make no money that way.
4., Check it says inf. held confidential and only used for certain purposes (both). Make sure the duration is not too short - US ones seem very short compared to UK ones where we sometimes have secrets lasting 100 years.
5. If it's something you protect via IP consider getting that protection first if affordable.

posted February 24, 2008

Hi Ernest, little reality check, assuming both high value and high paranoia.

If they sign an NDA and release or use the information in a damaging way that becomes known to you, are you capable of pursuing them?

1_ You'll never know
2_ By the time they (or someone else) do/does something damaging with the info it's too late
3_ 'team soon company' isn't shouting deep pockets capable of pursuit

If you must give the impression that you will know, will act quickly, and will be ferocious in defence of your IP, act through a solicitor rather than a fax, and that would be _either_ a profiled company, or a known specialist.

It will cost you more than putting it the way of your second cousin who normally does wills and probate, but won't be outrageous. In early stage negotiations perceptions are very important; how seriously do you want them to take you?

~get some quotes.

Philip

posted February 24, 2008

At a basic IP Rights level, an NDA is agreement designed to protect "trade secrets" - so to the extent you have copyrighted, trademarked or applied for patent protection, your rights may already be protected and the NDA would be little more than added "contract" protection against the other party using your concept.

As others have noted, its best to consult with an attorney to make sure the actual NDA contains the provisions favorable to protection of your concept or excludes provisions unfavorable to your enfrocement (such as a "residual memory" clause).

While violation of an NDA is difficult to "police", the failure to pursue NDA's may be viewed as failure to attempt to protect your trade secrets or confidential information at all. Thus, if the choice is between having or not having an NDA, I would suggest you pursue an NDA when discussing any information you might want to protect/enforce in the future.

You can also protect yourself against potential violation of the NDA by only disclosing the minimal amount of information. Many people view an NDA as an agreement which allows them to "open the kimono", so to speak. Your rule of thumb is that you should not disclose information you are not comfortable with the other party eventually using. A concept in and of itself may not be particularly useful without the details of how you intend to commercialize or produce the concept. Once you have signed some sort of licensing or development agreement, at that point you can feel more secure in divulging more detailed information.

Re: notarization of the NDA - I think seeking notarization is really overkill. I do disagree somewhat with the "janitor" binding the company below. If you have reason to believe a person signing an agreement (e.g. administrative assistant, janitor, etc.) is not authorized to bind his company - there are instances of those agreements not being enforceable. What is important is that you get the signature of an officer or authorized representative of the company. Normally, officers are authorized by the company's bylaws to sign contracts on behalf of the company and you can insert a clause in the NDA that both parties represent that the the agreement is signed by an authorized representative on behalf of both parties. Once an authorized representative signs the NDA, the violation of the NDA makes the the entire company liable via actual, apparent, or implied authority theory.

posted February 24, 2008

Ernest
If the information is very valuable - take some other steps to protect it first.
I noticed that you used the word 'concept' - is it patentable? If so, spend a little bit of time (and money) getting a patent filed before you go ans speak to these people.
Good luck.
Duncan

posted February 25, 2008

An NDA has limited value. It is very difficult to prove that the other party has breached the confidentiality and you will have to proof damages in case you wish to enforce. In the US it is difficult to get an injunction if the agreement is not complied with unless damages are no adequate remedy. It is therefore advisable to include a specific performance clause. My advise is to be very carefull with disclosure of non patented confidential information, also in case you have an NDA in place.

posted February 25, 2008

I am a European patent and trade mark attorney based in the UK and I deal with clients ranging from small start-ups, like yourselves, to large corporations. What follows helps I hope, but should not be considered as formal legal advice on the matter:

My experience is that the most important thing in these situations is to ensure that all recipients of confidential information know and respect that the information is confidential and that they know not to disclose the information to others without the permission of the disclosing party. Having a formal written NDA certainly helps focus the minds of those receiving such information and I would recommend getting one executed for that reason.

I would certainly recommend filing a patent application, if the information relates to a patentable invention, so that you can inform the recipients of the information that you have done so. You’ll probably need professional assistance to make this worthwhile, but there are ways in which you can reduce costs in the short-term if you’re happy to keep the information confidential. Contact me if you want some further advice in that regard.

Make sure you have good records of any copyright-protected materials (original drawings, images, text, etc), including proof of the date of creation and details of the creators of the copyright works. Mark such materials with appropriate copyright notices.

If you haven’t done so already, do as much research as you can on the company you’re planning to do business with. If they are established and value their reputation, then being caught breaching an NDA from a small outfit such as yourselves will not make good press.

As others have said, you have to take risks when in business to get somewhere. You can do things to minimise risk, but you can’t always eliminate it. Good luck!

posted February 26, 2008

Dear Ernest,
I believe any NDA is only worth the amount of money you are ready to spend defending; the violation of such NDA.

posted February 27, 2008

The issue of company-to-company NDAs has been pretty well covered, but here are a few additional points:

1) You can also execute Personal NDAs with the individuals at the other company with whom you will communicate. Most people will pay a little extra attention to obligations if their own personal wealth is at stake.

2) Include an NDA provision that covers oral and visual disclosures (not just documents). My favorite provision requires oral and visual disclosures to be reduced to writing and marked as 'Proprietary', 'Confidential', 'Restricted Distribution', 'Communication in Confidence', or with similar restrictive markings.

3) Include an NDA provision that requires markings on documents (like 'Proprietary', 'Confidential', 'Restricted Distribution', 'Communication in Confidence', or similar restrictive markings) for the document/communication to be covered under the NDA.

4) Even without 1), 2), or 3) above, mark all documents you want to be covered under the NDA with 'Proprietary', 'Confidential', 'Restricted Distribution', 'Communication in Confidence', or with similar restrictive markings. For oral or visual disclosures, reduce to writing any such disclosures you wish to be covered under the NDA, mark those writings appropriately, and immediately send the writing to the other party.

5) Keep good records indicating:
(a) when your IP was developed;
(b) when and what was communicated to the other party, and;
(c) how and when you communicated to the other party that you considered the communications to be covered under the NDA(s).
Use registered mail for (c) above, which evidences:
i) the date of the communication to the other party and;
ii) that the other party received and signed for your notice that the communication(s) was considered by you to be covered under the NDA.

With all that backup, you won't need a notary to be able to enforce the other parties' obligations to not disclose.

posted February 29, 2008