The Truth About Non-Disclosure Statements
Somewhere between the time you click on your first mouse
and click into your first million, you're undoubtedly going to have an
idea that you think is the greatest thing since sliced e-mail. And if
you're like most inventors and entrepreneurs, the first thing you experience
after that rapture of invention is a hard case of paranoia.
What if someone steals my idea? What's to keep them from
going out and taking my idea and exploiting it for themselves?
That's usually followed by nightmares in which the funding
guy or patent attorney -- or sometimes both -- frolic about in togas chased
by scantily clad young women, feeding them grapes and lighting cigars
with hundred dollar bills. They're living the life you should be living,
having gotten rich off the idea they stole from you.
It's a horrible vision, especially for attorneys who don't
have the legs for togas.
For that reason, most of the inventors I meet ask me to
sign their non-disclosure statements, as if these documents are bullet-proof
shields behind which all confidentiality is protected from evildoers.
Well, the time has come to set a few things straight about non-disclosure
For one thing, they're highly overrated.
The first ting to remember about NDD's is that for them
to work, you have to enforce them. They're like patents, only harder to
prosecute. Let's say that someone who signed your non-disclosure document
actually had the stupidity to violate it. Hey, let's go even further and
say this moron not only violated it, but actually made money from it.
Even if all that happened, you'd still have to spend your time and money
hiring a lawyer, going to court, prosecuting the jerk and hoping to get
a verdict. Then you'd have to be lucky enough to get the judgement paid
out before he declared bankruptcy.
The fact is that when you deal with real players, you
don't need a non-disclosure document for any true purpose. The reason
is simple: self-interest and greed.
When it comes to venture capital types, for example, two
things can happen: they either want your project or they don't. If they
don't want your project, they have no need to expose their massive wealth
to your tiny liability claim. They're simply not motivated to make trouble
for themselves. If they do like your project, they're going to keep it
as secret as they can, because they're going to put their money in it.
Of course, I never want a VC to sign an NDD, because if you know anything
at all about them, venture people all hang out at the same clubs, eating
the same food and drinking the same drinks. If one of them happens to
drop my project to another during a second martini and he likes it, is
that a bad thing? I think not. Especially since almost every venture deal
tends to get spread out among a bunch of venture firms, anyway.
Even branding and marketing people don't really worry
about NDD's. Oh, we take them seriously enough. But not for the same reason
inventors do. We take them seriously because inventors do and if that's
what it takes to make them feel at ease, so be it. But the real reason
why non-disclosures are overrated is this:
Reputation is everything.
Do you suppose that any venture person, branding guy or
marketing person could ever get work again if they so much as let out
a peep that compromised a client's confidentiality? Forget about it. In
all of these businesses, professionalism is the name of the game. The
minute we blow it, the game's over for us.
It takes one "You idiot!" to wipe out a decade
of "Atta boy's"
So keep on faxing those non-disclosure statement. We'll
keep on signing them. But if you really want to keep things under wraps,
make sure you understand that it takes more than a piece of paper to do
it. The Rule of Thumb is that if they don't feel professional, they probably