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Don't sign the NDA! (yes, do it, but only after you make sure the conditions are fair)

· 5 min read
Aleksandar Vucenovic

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The other day, I started preparing to partner with a larger company active in the WordPress space. Great, I thought. We are a small shop, and we are looking for ways to grow. This could be a great opportunity. I was excited.

Communication was slow at the beginning because large companies sometimes have a lot of bureaucracy. That's fine, I thought. I have time, and I'm not in a hurry.

So, the day came when they sent me an NDA to sign. NDA (non-disclosure agreement) is a contract used to protect confidential information. It's a standard practice in the business world. I've signed a few of them in the past.

But this time, I decided to give it to my new Director of Business Development, Mark Koemans. Since I now had someone to bounce ideas off of, it would be a good idea and exercise to get his opinion. So, I gave him the NDA and asked him to review it.

"A person who doesn't learn from his mistakes is a fool. A person who learns from his mistakes is smart. A person who learns from other people's mistakes is a genius."

That quote from an unknown source is what my father tried to teach me.

After reading the NDA, Mark told me a story from someone he knew who ran into an issue with a similar NDA. The essence of the story was that larger companies often have a lot of legal resources, and they can use that to their advantage.

So, what were the essential points in the NDA that Mark pointed out?

  1. The company for which I was about to sign the NDA is a large company in a foreign country.

  2. The court of law specified in the NDA was in that foreign country.

  3. The NDA was written in English, but it was not specified which language would be used in the court of law.

Hope for the best, prepare for the worst

We all hope for the best but should also prepare for the worst.

The worst would mean that I would have to go to court in a foreign country, where I don't speak the language and where I would have to pay for a lawyer. Also, in a dispute, even if I am right, a large company can use its legal resources to drag the case for a long time, which would cost me a lot of money and possibly drain my resources to the point where I would have to give up.

So, Mark brought up a good point. We propose to change the NDA to be more fair and use the WIPO (World Intellectual Property Organization) Arbitration and Mediation Center as the arbitrator in case of a dispute. WIPO is a neutral organization that can be used to resolve disputes between parties from different countries.

Not only are they neutral and have experience in resolving disputes, but there are several advantages to using WIPO:

  • They have fixed fees for resolving disputes. This means that the cost of resolving a dispute is known.

  • The language of the proceedings can be set to English.

  • The length can be set to a specified number of days. If the two parties don't solve the dispute within a limited number of days, WIPO will decide.

  • The law that will be used to resolve the dispute can be set to the law of the country of the issuer of the NDA.

  • The location of the proceedings can be set to be online. This means that I don't have to travel to a foreign country.

The WIPO Arbitration and Mediation Center even has a free tool that can be used to create a custom NDA. It's called the WIPO Clause Generator. It's a great tool that can be used to create a custom NDA that is fair to both parties.

So, we asked the company to change the NDA to use WIPO as the arbitrator in case of a dispute.

  • Law: Their country's law
  • Language: English
  • Days to resolve the dispute: 30
  • Location: Online

These are fair conditions, especially since I kept their country's law as the law that would be used to resolve the dispute.

Unfortunately, they refused to change the NDA. So I decided not to sign it, possibly losing a great opportunity.

Reasons they didn't want to change the NDA

I can only speculate about it. Probably many other partners signed the NDA without asking for changes. So they didn't want to make an exception for me. My change would make things more complicated for them. And for a large company, that's not usually worth it. I understand that (to some extent).

However, changing the NDA would also be in their best interest. They work a lot with companies across the world. Having a modern NDA that is fair to both parties would benefit them.

Conclusion

I never was in dispute after singing such an NDA. But when the moment comes, and the dispute happens, it's too late to change the NDA. So it's good to have a worst-case scenario laid out that is acceptable to both parties.

All small companies trying to do business with larger companies should know this. WIPO can be used to resolve disputes that happen after signing the NDA.