1) What time period is it reasonable for a non-disclosure agreement to cover ?

2) When the end of the time period is reached, is the signatory the free to develop the idea as outlined in the NDA ?

3) Are there any pitfalls to watch out for in the wording of a NDA ?

4) If a 12 month agreement is signed and information is imparted to the signatory in month 11. Are they free to use this information to their advantage in month 13 ?

5) Are NDAs worth the paper they're written on ?


In answer to the question of time periods etc in NDA

1. I prefer an indefinite time "until the information shall have entered the public domain other than by the fault of the disclosee.  If you must go for a fixed period, unless the window of opportunity for the idea is very ephemeral for confidential information the period should be 5 yrs plus (obviously, if the subject matter of the non disclosure is simply the fact that you are in commercial negotiations with X the period is much shorter)

2. yes, hence the need for a longer period, unless the subject matter of the NDA is also protected by alternative IPRs eg patent

3.yes - duration, exceptions to material covered, reciprocity.

4, depends on the wording ie if it is rolling twelve months from disclosure no, if fixed 12 from signature yes

5. yes, provided you don't expect them to do too much.  treat them as a line in the sand marking an important statement of principle, and be restrained in what is disclosed.  one important point which is often overlooked is that if you disclose potentially patentable material and there is no NDA you may subsequently be regarded as having lost the right to patent.

Posted Sat 11 March 2000 Re:Non Disclosure Agreement (NDA)

In my experience most of the significant lenders and VCs will not sign NDA's. Notable examples are CMGI, ICMG. They have too many conflicting business plans it would be a nightmare for them. One of the larger Incubators I was dealing with last week claims to be receiving over 300 plans a day!!!!! They don't need to waste opportunity tying themselves to someone who holds out on an NDA when 10 of the 300 plans probably cover the same idea anyway.

Also be very wary of accepting VC's and particularly Internet Incubator NDA's. When I sold my last software business ($20M) many of the suitors including Microsoft offered their 'standard' 2-way NDA's. All included a fantastic term called 'RESIDUALS'. Residuals were specifically excluded from the scope of the NDA and allowed the company to make use of information  later regurgitated by their technical staff as new or enhanced ideas that may have been sparked by the discussions but were not identical.

Don't get too hung up on NDA's. Most VC's don't really understand the inner workings of your idea so don't go to too much detail if any about how what you have does what it does. Keep to the features, benefits and commercial advantages of what you have without disclosing what you consider to be proprietary. Once you have a VC hooked on the idea then most will eventually offer you some protection before you disclose the inner details.

Don't forget also that Internet speed means a month lost on the Internet is like 12 months in a normal business. Work on defining your business plan to the right level of detail without it posing too much of a risk and get the plan out there .....fast!!!

Speed to market is a decisive advantage. And you can bet that 1,000+ people around the world have already had the same idea, and one or two are already getting financed as you read this.

Better get on with it!

Posted Feb 2000 

You are right to be concerned about copyright. Basically if you are going to copy someone's material without obtaining  their consent potentially you will be in breach of copyright.  To infringe copyright you would need to copy or adapt the whole or any substantial part of a copyright work. It is not at all easy to say  whether or not reproducing an extract is the copying of a substantial  part. However if the extract is going to be of any use to you on your Website then it is safer to assume that it is a substantial part and therefore you need to obtain consent.

There are various circumstances in which one can reproduce copyright works without consent. One of these is the so called "fair dealing" exception  which allows certain copying for the purposes of criticism or review or for the purpose of reporting current events provided that it is accompanied by a sufficient acknowledgement. This may be where you have seen the  references to authors acknowledgements. However, acknowledging the author/owner will not help you if the reproduction is in breach of copyright.

Also, authors of works can have what are known as moral rights to be attributed as the author when their works are reproduced.

If you are producing a commercial Website which involves reproducing other peoples material then you must make sure that you have procedures in place to obtain the copyright owner's consent to reproduction. Strictly speaking the same applies to non commercial Websites although the chances of a copyright owner suing and obtaining damages is less likely

It is possible to obtain free booklets from the Patent Office which give a fairly useful overview of the UK law relating to copyright, and also patents, trade marks, registered designs/design rights.  If you are looking to obtain finance from a venture capitalist etc then it is pretty standard for you to have to warrant that your operation does not infringe third party intellectual property rights and if you do not have in place adequate procedures this may well slow down or derail the funding process. hope that this is of some help.        

Posted Jan 2000

Just generally, you can use (TM) to indicate your trademark until business builds up to a level which justifies spending hundreds of pounds on formally registering (R) it (in a single country). I think (R) is legally (and expensively) enforceable to help protect you from outside attempts to plagiarize, according to you or your customers, your product and product name. Unregistered services marked with (TM) have just the basic copyright laws to fall back on. If dispute happens, both are just as expensive to defend, but, if your business is sound, you are more likely, though by no means guaranteed, to have good financial and legal backers to support your case if you're (R).  The trade mark office takes, no not £5 nor even £25, but £250 for basic registration, so you have to weigh this up with how much cash investment you're going to put into developing your product, and with the small chance that your application may fail and, that any "professional" can charge you a similar amount just to "advise" on the suitability, and there's no money-back.

Posted Nov 1999

Subject: Re: Intellectual property

Without being too negative I think you're having a problem finding people who can speak authoritatively on IP having no value because almost all of the decided cases blow down this view. Copyright and branding issues are more relevant than ever over the internet as, in the main, it is only intellectual property that an internet business is selling. That's why cases like One in a Million have happened and why we see big businesses prepared to spend thousands of pounds enforcing their rights on the internet.

Posted Nov 1999

Subject: Re: Intellectual property

I have to say that am not surprised that there should be difficulty in getting speakers to expound a view that the web-based economy makes intellectual property redundant. This is a time when both case law and legislation from around the world is emphasising the importance of intellectual property in relation to e-commerce and a quick look at the number of legal footnotes and disclaimers on any significant e-commerce website emphasises the importance of intellectual property law to the major players in the field.

Of course one of the great foundations of the internet today are the pioneering individuals and companies willing to make their intellectual property freely available and encourage open information exchange. However, intellectual property available on the internet is no different from any other form of intellectual property in that it is open to the owner of the IP to make it available to whoever and on whatever terms he so chooses. This is analogous with the medical researcher who discovers and patents a new research technology and licenses it out to large pharmaceutical companies at a high royalty rate but grants free licences to other researchers in the field.

I would suggest that individuals who may wish to speak on the redundancy or restrictiveness of conventional intellectual property to the internet/e-commerce might be found from the ranks of unsuccessful claimants or defendants in recent intellectual property/internet cases heard before the courts. Such individuals will have given a great deal of thought into opposing the conventional legal view and may have interesting commercial arguments to back up their cases.

Posted Dec 1999

Jeremy Dent wrote:

 "If you have a good Internet idea, and introduce this to investors at the  meeting, how do you protect it from other people possibly copying your idea,  before you have turned the vision into reality?"

An idea is only an idea. To get it to 'market', you need a whole host of other  qualities, skills, contacts and resources which form a natural barrier to  'stealing' the idea. You can protect information with a Non-disclosure  Agreement but this is a little formal.

Reply:

Not really formal. They are usually very short one page forms that are exchanged. Proving breach is obviously difficult and then there is the problem of the response of "oh yes we have already been doing something very similar with others". The real protection is to ensure you are dealing with people who share your interest in retaining trust. One benefit of working through First Tuesday is that anyone operating within the group meetings would want to be seen as trustworthy since they would know that any breach of confidentiality would get round pretty fast. Yet the message is still to be careful when discussing ideas. But as Jeremy says ideas count for very little in the scale of things. Most of the real successes have actually been secondary follow-on operations to existing ground breaking ideas but which simply did it better. Letting others forge ahead with the big ideas and  learning from their mistakes is a well proven lesson in business. Then again its not so much the idea but the people that cv investors are interested in. Which is another reason for an NDA in that requiring an NDA at least shows a professional approach, whereas a loose readiness to talk up the idea in a casual environment might worry them as to who else you might have given the idea away to. 

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