Is it ridiculous of me to ask for changes to a companies standard NDA agreement?


3

A client of ours recently asked us to sign their standard NDA. We also deal with many of their competitors. We have not signed any NDA's before. They want us to sign the NDA so that they can share additional information with us that may help us help them better. We have made changes to the NDA and set back to them. The main change being the state in which any litigation would take place. Since we're a small company, having to travel to fight litigation would cripple us. Obviously, we don't want to be jerks and we want to do good business with these guys, but they are a much much larger company and would eat us for lunch should any litigation occur.

Questions:

a) should we even sign the NDA?

b) is it ridiculous of us to seek changes to the NDA?

Legal

asked Nov 23 '09 at 01:59
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Todd
18 points
  • thanks for the excellent advice everyone... it is hard to chose a "winner" – Todd 9 years ago

6 Answers


6

If your only complaint is the state for litigation, ignore that.

If it gets to the point of litigation, you're talking about 100's of 1000's of dollars in legal fees anyway. I have friends who have gone through that.

You're focusing on the wrong thing. "Travel expenses" is not the problem if you're in litigation. More important would be the clause that (probably) states that they can seek unlimited damages. It usually says something like "Signer agrees that money alone isn't sufficient remedy."

So my recommendation is to make sure it says that all the money they've paid you is the full amount they can recover if the NDA is breeched. Then your damages are limited. Remember there's two parts to a lawsuit -- winning, and damages. Really only the damages matter. And not having one in the first place (lawyer's fees are generally not recoverable even if you win).

If you're really worried about that scenario, it's not worth dealing with them at all IMO.

answered Nov 23 '09 at 02:59
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Jason
16,231 points
  • And to add to the big bux that litigation costs... keep in mind that you will have to hire a lawyer to defend your company. In just about every jurisdiction, non-person entities (corporations!) must be represented by a licenced attorney. So, if you get sued, your hosed anyway. – Alex Papadimoulis 9 years ago

4

In my experience, it is hopeless to seek changes to a NDA, and it will give bad vibes in the business relationship if you try. The reason is that your counterpart in the other company is typically powerless to change the NDA -- it is mandated by 'company policy', and your counterpart will not like to be reminded that he is powerless.

I tend to look at whether the NDA is mutual, by which I mean whether it places the same burdens on the NDA's creator as it does on me. If it's mutual then I generally sign them, considering it a (sad) necessary evil of doing business.

If you're strictly a supplier who sells a standard product to other companies, then you won't see many NDAs. But if your business relationship is closer, then my experience is that the majority of larger US companies will present you with a NDA at some point. Thus a policy of not signing NDAs or seeking to change them may be unrealistic, depending on which area of business you are in.

answered Nov 23 '09 at 03:08
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Jesper Mortensen
15,292 points
  • +1 on bi-directional. the best way to make sure there are not unfair clauses in an NDA is to make sure it's bi-directional. If you're presented with a unidirectional NDA be very careful. The only clause I tend to really watch is the term. Most will be 3-5 year but every once in a while you see a much longer term and you can often change that to be 3-5 years. It's hard to say you can keep something confidential forever. – Dane 9 years ago

3

There are usually 2 parts to an NDA. The description of the information to be shared which includes the what it can be used for and then the boilerplate. In general I agree with Jesper that most people are unable to change the boiler plate (and like Jason says if you get sued venue is the least of your worries) but you can often easily change the non-boiler plate part. One common thing to do is to narrow the NDA to only cover certain types of information. In general when I review NDA's I:

  • Check to make sure that it's bi-directional
  • Check that the information it's covering is correct (type and content)
  • Check the duration to make sure it's reasonable
  • Make sure confidential information has to be marked (sometimes there are clauses that say anything that anything can be confidential without having to state it is)

At the same time, don't ever let the NDA get in the way of business. As Jesper says often there is very little the person you are working with can do to change the NDA but I've always found that reasonable changes to the clauses above are often successful.

answered Nov 23 '09 at 04:49
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Dane
1,866 points
  • +1. Good answer all around. Limiting the scope of the NDA should be possible, and will reduce the potential legal risk. – Jesper Mortensen 9 years ago

1

I guess it would be helpful to understand the size of the company you are dealing with. Most small companies have not written their own NDA's but pulled a boilerplate document from another source or the web, which creates a situation of lack of understanding of what the document does.

Jason raises a good point and the clause he is addressing is most likely titled "Remedies", below is an example of that language and something you definitely want to modify, at the very least replace with "specific performance".

  • "In the event of a breach of this Agreement by one party, the other party shall be entitled to payment of all costs and expenses, including reasonable legal fees, incurred in connection with its enforcement of this Agreement."
The other clause you need to watch is titled "Term", most NDA's will push for a 5 year term, does that make sense for your business? Make sure you check it and understand the ramifications.
answered Nov 24 '09 at 00:40
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Rs Holman
596 points

1

ALWAYS change to YOUR advantage - NDA's are drafted by companies/entities to their ADVANTAGE

answered Nov 24 '09 at 04:47
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User287
164 points

1

I agree with everything stated in Jason's post. Just a couple of things to add.

From my experience, if you're dealing with a large corporation, it isn't worth the effort to negotiate changes to a standard NDA. As Jesper mentioned, your best bet is to make sure you are signing a mutual NDA; these are more likely to be fair to both parties.

If you are dealing with a small private company, it is possible to negotiate terms. I generally wouldn't bother to do this for boilerplate terms like jurisdiction or arbitration. I would focus on scope definition, term length, indemnification (NEVER accept open-ended unless this is a bet the company deal because that's what you would be doing), and any other unusual restrictions. The good news is scope definition is the most customary customizable piece of an NDA.

answered Nov 24 '09 at 05:13
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Edwinoh
686 points

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