Slashdot Mirror
The Cult of the NDA
Anonymous Coward writes "After looking at hundreds of business plans during the tech boom of the late 1990's, and starting my own company two years ago, I've long been bothered by the near obsession with secrecy shown by many tech startups. This is especially striking considering how few startups are actually pursuing unique ideas. I finally wrote an article about this, The Cult of the NDA, where I argue that too much secrecy can actually hurt a company's chances. Open-source startups, anyone?"
And as importantly, NDAs are required by the one thing that startups really need: money.
VCs are wary of tech startups. VCs aren't going to go giving money to people who give away their intellectual property.
If you have a truly unique idea, and you announce it to the world before you get to market, you might as well kiss your funding good-bye.
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He'll find an exhaustive list here.
Just for comparison's sake:
W .h tml
/EJS
"Full Disclosure on Full Disclosure"
http://www.nytimes.com/2003/09/27/opinion/27BLO
"Confidentiality agreements were once primarily used to protect commercial secrets. More recently, celebrities have adopted these contracts to protect themselves against checkbook journalism and embittered assistants. This isn't such a big deal. But increasingly, confidentiality agreements ban their signers from revealing information that furthers more meritorious public debate. The Catholic Church, for example, used them to silence victims of sexual abuse by priests, possibly allowing that crime to continue longer than it otherwise might have.
These agreements aren't made merely out of a concern for privacy. Confidentiality agreements have become a tool used by the rich and powerful against people who can't afford to turn down a job, as a way to stifle public discussion of embarrassing issues, and as a means of ensuring that a whistle-blower can't throw a wrench into the image-making machinery of a public figure."
Read the rest of the editorial to fully appreciate his view point.
While the NDAs discussed in the Slashdot article and NDAs discussed in the Times editorial are different beings (one to protect potential business plan secrets, the other to protect public debate), they still point towards a disturbing trend to use these things in almost all circumstances where they can possibly be used.
Make discussion and conversation illegal, and you've just halted the exchange of ideas.
Just some food for thought.
I'll start with the obligatory acknowledgement that a ton of bogus patents are issued.
But some patents are legitimate.
If a technique is publicly disclosed prior to filing a patent, then a one-year timeclock starts in which you must file for a US patent on the technique or lose the right to file. In addition, the ability to file is lost immediately in Europe.
So, NDAs are very useful if one intends to file patents.
At my last position, I was in charge of winning new business, particularly at startups. The evaluation process was challenging to say the least, in terms of funding, management experience, etc..
One particular company, involved in one of the latest and greatest tech crazes, had requested that we design ASICs (custom chips) for them. At our first meeting, they made it known in no uncertain terms that we (the vendor) were not to ask any deeply probing questions regarding the end product, or they would promptly and henceforth terminate all discussions. This was the first clue, since we already had a comprehensive NDA and it's a very atypical request.
At one point in a subsequent discussion they wanted to include an embedded processor from one of the well-known embedded processor providers. They claimed another vendor could run it at some number of MHz, and asked what we could do ours at. I replied that I wanted to understand some basic things regarding the processor's use - MIPS rating, types of ops like multiply-accumulates, any add-on DSP functions, etc.. The response I got: "Well, we're not sure, we just want the fastest one." I said "we are quite comparable in process performance and can rework it to at least as good a standard depending on your needs." The impression from other engineers working with me was that they had no clue what they were doing.
Needless to say, soon thereafter they had undergone a major reorg and we didn't hear anything until many months hence, when a different individual with very specific requirements came by and who was very easy to make a business case for. As we found out, the thing that made them "special" had nothing to do with us directly anyway.
The point I'm trying to make is that, in a rush for secrecy, you can end up hiding a lot of the issues from vendors, customers, and investors. Most startups that I have dealt with are basically taking one or more old ideas and adding their "special sauce" to the equation. That "special sauce" needn't be revealed, but if they want some cooperation and funding (and ultimately survival), they should be a little less secretive. At best, you will appear incompetent, and at worst, you will look like so many swindlers in the business world before you.
Having said that, I have seen two large organisations work themselves into NDA deadlock over something that both of them agreed would be mutually beneficial. In large organisations, NDAs also place an extra cost on any simple transaction, as the legal departments go to work.
It occurs to me that start-ups use NDAs as a sort of mixture of puffery ("see, we're big, too") and cargo-cult behaviour ("the big companies use this, so if we behave like them ...").
Well, I guess it's hardly surprising that two people involved in the same kind of business should have the same views, but still...
A Good Hard Kick In The Ass, by one Rob Adams. I borrowed it from the library (sorry Rob :) mainly because I thought it was a catchy title... but it turned out to cover almost exactly the same notions as included in this guy's "Cult of the NDA" article (except, obviously, in a lot more depth and with a lot more entertaining anecdotes). There's an entire chapter of the book that essentially just says "You think you have a unique idea you need to keep secret? You don't and you don't."
Adams also insists on what he calls "execution intelligence" being one of the key pillars in a business-that-might-have-a-chance (as opposed to a business that has no chance because it's still hung up on worshipping its own not-unique and not-even-very-good idea).
Some good stuff in the book. Certainly worth a read - even though a few bits of the book are rather amusing from a post-dotcom perspective (the book was published in 2002 according to Amazon, but I suspect most of it was written quite a bit earlier).
Pete.Most NDAs don't actually prohibit you from discussing things generally, but they prohit you from discussing specifics.
The ones I have people sign prohibit discussing anything they may see, hear, or learn related to the technology/product being discussed.
Laugh while you can, monkey-boy!
I've signed four in my very short professional career, and not a single one told me that you couldn't discuss anything. Most of them were limited to technical aspects, algorithms, etc. Even when working on a proprietary document processor for a very image and document processing company, I was never told not to discuss the project, but rather, not to divulge the algorithm developed for that project.
Even the NDA that a well known software company makes you sign prior to interviewing wasn't as explicit as your example.
Of course, because the big companies can throw $$$ at know-how and delivery and marketing and take over the market at any time. You may be able to create a viable business, but you're not likely to be able to grow enough to be the huge success VCs want in order to offset the risk.
Another possible reason people may be focused on IP, is that it is something they can easily steal. There are people out there who will act like VCs, pretend to be very interested in investing in your company, but when it comes time to actually sign a deal they walk away. Away, to the patent office, where they will patent anything that you haven't.
NDAs are supposed to prevent this sort of thing, but in practice they are completely ineffective. It's hard to prove that Bob the VC-who-wasn't actually violated the NDA when some seemingly unrelated company is the one filing the patents. Ideas are very easy to launder.
NDAs are absolutely nothing to do with patents. NDAs are for keeping trade secrets. A patent is the opposite of a trade secret - it's a publically disclosed invention, which grants a limited-time monopoly over the exploitation of the invention in exchange for that public disclosure.
If I have a trade secret, and somebody comes along and starts to do exactly the same thing, since I have no patent over the technique involved, the only recourse I would have to stop them would be to prove they actually stole the idea from me, breaching an NDA.
If I've patented it, there should be no argument, because by patenting my invention, I've made it clear to everybody that I invented it.
So, what advantage would an NDA confer on a company which was in the process of patenting an invention? None whatsoever, basically. If, ing the time the invention is covered by the NDA, someone else patents your invention, you'll have no publically available prior art to point to to show you invented first. Far better to publish detailed information immediately, in recognised trade journals, so that nobody can deny that you had the idea when you claimed to, had publically announced it, and you effectively scupper anybody's except your own right to the patent.
NDAs are most useful to large companies, and publicly traded companies in particular, where advance warning of their plans could offer unfair advantage to some particular group of competitors/clients/investors. Liberal use of NDAs in these cases is to create a level playing field, and avoid accusations of anticompetitive practice. Startups rarely have any need for NDAs, for all the reasons stated in the article, and largely because nobody is really interested in your ideas until they are proven.