What consultants should consider before signing an NDA

Before you sign an NDA, be sure you're clear about the terms of the agreement. Chip Camden, who has signed his share of NDAs, offers some guidance.

 Non-disclosure agreements (NDAs) always make me feel a little bit queasy. Why is that? After all, I'm only agreeing not to blab my client's or prospect's secrets to the world. Am I uncomfortable because I'm a blogger, so I almost involuntarily blab everything? No, there are some secrets that I'm quite capable of keeping even from Google, so it must be something else.

Let's take a closer look at NDAs to see if we can figure out my problem.

What is an NDA?

An NDA is a legal agreement between at least two parties not to disclose certain information to anyone else. You might be asked to sign an NDA before you've even signed a contract for an engagement, because the prospect may need to share specific information with you to see if you'll be a good fit.

The kind of information protected by an NDA typically includes trade secrets, business strategy, information about customers, and anything else that the prospect thinks might be disadvantageous to them if it fell into the wrong hands. For software development consultants like me, this usually includes access to their source code, proprietary algorithms, and design documents.

An NDA is not a non-compete... right?

Just because you sign an NDA doesn't mean that you can't go to work for the other party's competition, unless the agreement explicitly includes that restriction. But if you have been made privy to advantageous trade secrets of one party, how are you going to avoid using that knowledge to the advantage of your new client who competes with them? In practice, you may have to avoid working for their competition for a period of time to prevent an ethical or even legal conflict. This could restrict your available business, especially in highly specialized niches.

How much information are you cloaking?

Because each NDA you sign essentially places a cloak over part of your knowledge base as far as future work is concerned, you'll want to know exactly what sort of information you're signing into obscurity. Typically, NDAs only cover information that isn't made public through other channels -- so even though your client's next version is a secret today, once it's released, you can talk about it all you want (but even then, you must restrict your public discussion to matters about the subject that are publicly disclosed and not the secret sauce that makes it so special). Make sure your agreement includes this provision and that it doesn't require you to keep secret what everyone else already knows.

How long do you have to keep mum?

Unless you're prepared to carry these secrets to the grave, you'll want to have a term specified in the agreement for how long you must keep the information confidential and for how long the agreement remains in effect. If the latter is unspecified, you could be held to confidentiality for information disclosed to you after your engagement has ended.

Many NDAs specify that the obligation to secrecy continues past the term of the agreement, meaning that anything disclosed to you while you were under the agreement must be kept in confidentiality thereafter, unless it is subsequently made public.

The agreement may specify that you have to return all copies of all materials upon the request of the other party. This seems a bit archaic in the digital age (how do you return a digital document?), but in that event, you'll need to make every effort to erase all digital copies.

Who's included in the NDA?

If people work for you as employees or subcontractors, it may be necessary to share some of the protected information with them in order to fulfill your engagement. Make sure that the NDA includes a provision for those people.

You know the Benjamin Franklin quote, "Three can keep a secret, if two of them are dead." Make sure your subcontractor/employee has also signed an agreement that binds them to the same level of secrecy before you spill the beans. Pay attention to provisions in the NDA about what constitutes "need to know" and "appropriate efforts to keep the information secret."

What are the consequences of breaching an NDA?

Many NDAs include a paragraph stating that the damages incurred by a breach of the agreement could not be adequately remedied by an action at law and, specifically, grant the right to seek an equitable remedy; that is, instead of paying damages, the court could order you to perform the terms of the agreement. In any case, make sure you understand the consequences of non-performance before you sign on the line.

Sample NDAs

Here are links to several sample NDAs:

http://www.techrepublic.com/downloads/abstract.aspx?docid=971045 (TR Pro membership required)




Now I know why I get butterflies

It's a legal obligation, duh! And like all legal agreements, you don't want to enter into it lightly.

I am not a lawyer, nor do I hope to be one when I grow up -- should that ever happen Find somebody who did want to become a lawyer when they grew up, and ask them what your rights and obligations would be before you decide.

Thanks to TechRepublic member Jaqui Greenlees, who suggested that I write about NDAs.

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By Chip Camden

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...