What’s *really* covered in an NDA? - Q&A with Brian Cuban

NDA - Non disclosure agreement. What is really covered when you sign an NDA? Beyond what is on Wikipedia - the answer to this question is rarely clear cut.

Enter Brian Cuban, working for Mark Cuban has provided him with years of experience in formulating contracts to protect I.P. for numerous startups. I reached out to Brian and he was kind enough to lend us his time to clarify the answers to these often fuzzy questions.

If you’d like to learn more about Brian, you can check out Brian’s blog or follow him on twitter.

1. What is your opinion on NDA’s?

They are a valuable tool for employers to protect proprietary information and trade secrets.

2. When you sign an NDA, are certain common sense things covered in it? Like let’s say - the implementation of a to do list in a web application? What really constitutes a trade secret?

What may constitute a trade secret is complicated and dependent on the intricacies of state and federal law. You should consult an experienced attorney if you are asked to sign an NDA. That being said…

Under the Uniform Trade Secret Act, a “trade secret” is:

“Information, including a formula, pattern, compilation, program device, method, technique, or process that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

…taken by the company to guard the secrecy of the information.

A well drafted, well communicated trade secret policy is the cornerstone of any effort to protect valuable competitive information.

What you will see in an NDA will depend on the complexity and the urgency of the employer in wanting information protected. In general here are some of the terms you should look for & consider negotiating. This is not meant to be an all inclusive list. You should consult an experienced attorney in your jurisdiction.

• Definition of Confidential Information - The information the employer wants to protect.
• Exclusions from Confidential Information - The Information the employer agrees is not confidential.
• Obligations of Receiving Party - The obligations of the employee with regards to the confidential information.
• Time Periods - How long the agreement lasts.
• Enforcement - What steps the employer may take if you breach or threaten to breach the agreement.

There will be numerous other general “boilerplate” terms as well, which should be looked over carefully.

3. Does an NDA cover things or ideas that you come up with while working for someone else if you make them public, within that company?

It would depend on the facts of the situation and the state you are in. In a vacuum, if it is information you had prior to going to the company, it would generally not be their trade secret BUT if they take the information and build on it, the new result could conceivably become your employer’s trade secret. You should also be careful that you are not giving your employer information that was the trade secret of your previous employers. You could expose both you and your employer to liability. As always if you are unsure you should consult an experienced attorney in your jurisdiction.

4. How long are NDA’s enforceable for?

How ever long you contract for. NDA terms often survive termination of employment. If you work for Coca Cola and sign an agreement that you will never provide trade secrets to Pepsi. It is enforceable for life or until the information no longer qualifies as a trade secret. Here is a typical clause:

“The nondisclosure provisions of this Agreement shall survive the termination of this Agreement and Receiving Party’s duty to hold Confidential Information in confidence shall remain in effect until the Confidential Information no longer qualifies as a trade secret or until Disclosing Party sends Receiving Party written notice releasing Receiving Party from this Agreement, whichever occurs first.”

Disclaimer: This is not legal advice. This is a general guide to the navigate the paperwork that typically comes when you work for a startup. For legal advice, find a lawyer in your jurisdiction who properly understands its governance.

This was the 1st of a 3 part series on paperwork that is typically signed when joining a startup. Look forward to reading the second piece, “Enforceable Non-Competes?” - within the next 5 - 7 days.