Have you ever wondered why our bodies have an appendix? Everyone has one and no one knows why. Doctors only have theories. Hundreds of years of research and the best answer we have is a “maybe.” The problem is that if something goes wrong with your appendix, it can be life threatening. There are over 690,000 appendectomies in the US every year; meaning, for 100% of people an appendix is generally useless and, for .23% of the US population every year, it is life threatening.
Nondisclosure agreements are very similar. They are generally useless and can be life threatening to your organization. Here are the top three reasons Nondisclosure Agreements (NDAs) make no sense:
1. They Can Kill Your Traction
Relationships are built on trust. When you are trying to move a deal forward, you need traction and you will not get traction without trust. NDAs slow the dating period down by disabling organizations to have a conversation until they have been signed. Often, NDAs can take up to several weeks and iterations through legal review to actually get a signature just to start the conversation. So, at the very moment that you are trying to get traction, you are initiating a process that will slow you down. During that time, the other party may lose the interest or the time to move the process forward. Worse, you have begun a relationship by saying, “I don’t trust you.” In today’s global market where things move at light speed and there are millions of others that do similar things, that is not the message you want to send.
2. They Protect Very Little
An NDA only protects you against things that could have not otherwise been discovered or concluded in the marketplace without you. Unless you have a real invention which I’ll cover in a minute, you probably came to your solution by observing the same market that your competitor has access to. In other words, should you ever have to defend an NDA, it will be very difficult for you to suggest to a judge and jury that without you, there is no way they would have come to the same conclusion. In the case of a real invention, you are foolish if you are talking to anyone without first having filed for a preliminary patent at a minimum. There is the slim case where a company chooses not to file a patent in order to keep the idea more private; but, in that case, you had better be very careful about who you are sharing your idea with anyway. If you want real protection, get a patent; and, if your idea is not worth a patent, an NDA is probably indefensible.
3. The Law of Iteration
If someone steals your idea and they were not a part of your team, they simply do not have the ability to overcome obstacles. Every business or development effort will hit barriers. Only the person who had the originating thought has the ability to iterate the idea beyond its original design. In other words, if you did not solve the first problem, you will not be able to solve subsequent problems very well with the same idea. People simply cannot take someone else’s idea and morph it into something new very easily. Typically, when they hit a wall, they will crash and burn.
Have you signed any NDAs? How many of them turned into a real business engagement? How many of them were never seen again? How many of them have you actually had to defend in court? They are useless. Similar to an appendix, NDAs are outdated. No one really has a purpose for them and their very existence only poses a threat to yours.