The Problem With Non Disclosure Agreements
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.
- You’re in the hands of the NDA signer: a NDA, like all contracts, is only as good as the person signing it. No matter how well drafted it may be, if the signer wants to breach the NDA, he will. And, more often than not, he’ll do it in a way that makes life difficult for you. So they are clearly not a concrete protection for your confidential information.
- Do you want to enforce the NDA anyway?: Even if you have a good NDA and can show that the breach of it is an open and shut case, ultimately you have to take the guy to court to protect your legal rights – which is expensive and an instant reputation killer in many industries. That’s essentially why a whole bunch of journalists have been able to break big games exclusives despite being quite clearly subject to NDAs.
- Does it even really work?: the wide drafting of NDAs which I talked about above is in reality a double-edged sword. On the one hand, yes it can cover as many situations as possible. On the other hand, this kind of ‘fire and forget’ approach can make it unclear what you actually want to protect. As a result, there is a risk that, if you ever needed actually to rely on the NDA in court, there may be legal issues with that wide drafting. Take that example I gave above of the judge who commented the NDA was so wide it virtually covered the kitchen sink – he went on to give the NDA and the party which had drafted it a hammering in court. To be avoided
- Uncertainty: quite apart from the legal considerations, standard NDAs are often impenetrable to everyone except lawyers. This defeats the primary purpose of the NDA: to encourage the signer not to spill the beans. If the signer doesn’t really understand what ‘the beans’ are, that’s not good news. Again, to be avoided.
- Too complicated: looking at it yet another way, some NDAs are just too complicated for their own good. If you can get what you need legally in 10 words rather than 30, then use 10 words. It’s good drafting and good business.
- Overzealously applied: NDAs are also known to some as the “Silicon Valley handshake” because of their liberal use over there. Again, its good business to only use a contract – especially one that tries to restrict someone’s liberty to speak – if you really need it. Besides which, using NDAs liberally just encourages all of the above problems because each NDA is less likely to be tailored and enforceable.
- NDAs are meant to protect your most important business assets – so treat NDAs just as importantly as those assets.
- Spend the time (with your lawyer ofc!) to ensure the NDA is drafted carefully and actually covers the points you want to deal with. If the NDA doesn’t scream out what you are trying to protect, something is going wrong.
- This is critical: make sure the signer of the NDA knows exactly what he can and cannot do. Don’t leave him to decipher the legal wording alone.
- If there is a media sensitivity regarding the subject matter of the NDA, then make it even clearer to the signer what he can and cannot say to the media/press about it. If need be, build in sensible exceptions so that you can control the information flow.
- Consider alternatives/supplements to NDAs, for example agreed public statements. If you do want to use a NDA, be prepared to sue to protect it.
Obligatory legal stuff:
© Jas Purewal 2010. Gamer/Law and this post are intended only as a means of bringing news of games and technology law and practice to its readers; it is not intended to provide legal advice and is no substitute for it. If you'd like to contact us concerning the contents of this blog or any other games or technology law-related topic, you can email here or tweet GamerLaw. Thanks.