10 Reasons to Refuse an NDA

Photo by Helloquence on Unsplash

If you’re an established Developer you will have had this conversation multiple times over the course of your career.

> Potential Client — “I have a great idea and all I need is a Developer! How much is it going to cost?”
> Developer — “How much is what going to cost? Tell me about your idea so I can get a better understanding of what it is you would like my help with?
> Potential Client — “I can’t tell you unless you sign this 10 page Non Disclosure Agreement.”
> Developer — “…”

This happens to us so regularly that we’ve been forced to come up with concise reasoning for our “No NDAs” policy, as well as a reasonable alternative.

There are many reasons not to sign an NDA, so without further delay here are the top 10 reasons we don’t sign them, and why you shouldn’t either.


1. Fiduciary Responsibility

The ace up your sleeve, and hands-down the best reason to refuse an NDA.

There is an illuminating blog post on the topic that was posted by the ever-direct Eric Raymond in 2010 titled “How not to sign NDAs” [1] which served as an inspiration to me when I first read it all those years ago.

“I never sign NDAs because I refuse to end up in a no-win legal situation — the NDA terms might require me to violate my fiduciary responsibility, or vice-versa.” — Eric Raymond

In order for this to be a valid argument you must either be the director or an executive of a registered business.

If you are an independent Developer and have not yet registered a business for yourself I urge you to do so as soon as possible. It’s quick and easy [2], adds to your credibility, and immediately limits your personal liability.

Once you are the director or an executive of a company you have a fiduciary responsibility to the company.

It’s a very fancy sounding term, and I’m not going to go into what it means[3], but the point is that as soon as you hold a directorship you are bound by certain legal obligations that make it your responsibility to refuse 99% of NDAs that come across your desk.

This reason alone shuts down most NDA conversations, but there are times when your client may be inexperienced, or not understand what fiduciary responsibility is, or you may still be operating independently and unable to play the “fiduciary responsibility card”.

Luckily there are many other, much easier to explain reasons to refuse an NDA which don’t require you to hold a directorship.


2. They Constrain Creativity

Software is all about ideas, knowledge and experience. Everything is connected and remixed, and it’s near impossible to trace ideas and concepts back to a genesis.

Each NDA you sign places restrictions on you. These restrictions may hinder your ability to provide all your future clients with services because of some obscure limitation that could potentially result in endless litigation.

It would be shortsighted to place such artificial limits on your own creative processes or the type of projects and industries you can explore in your future.

Experience and ability to execute is your product. It’s why they came to you in the first place.


3. They Create Conflicts of Interest

What if you’re already working on something similar?

What if you’ve already signed something that makes it impossible for you to provide services to them?

You have responsibilities to all of your clients, past, present, and future, and you cannot take the risk of ending up in a no-win situation that could force non-performance, or hinder you from being able to provide a full and honest service to your clients.

NDAs place unneeded limits on your prospects for future clients, which just doesn’t make any sense.

Most products and ideas fizzle out anyway, and those that do eventually succeed are rarely as per the initial idea, so, logically, what’s the point?


4. There Are No Original Ideas

“There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely; but they are the same old pieces of colored glass that have been in use through all the ages.” — Mark Twain

It’s delusional to think an idea can be owned in the same way a physical thing can be owned. Value is in the execution, not the idea. Nobody has ever sold an idea.

That “original idea” of your clients? It’s not original.

You’ve probably already heard about it, seen it, thought of it, or worked on a variant of it before. It probably already exists in some form or another, and I can all but guarantee you that there’s someone out there in the world who is thinking about or presently working on something similar.

NDAs are little more than a “poor man’s patent”. If your potential client has something that really needs protection then you should advise them to spend their money on a patent, not an NDA.


5. Ideas Mean Nothing

There’s a great article by renowned investor Amy Rees Anderson [4] in which she quotes:

“Ideas are a dime a dozen. People who implement them are priceless.” — Mary Kay Ash

Asking for NDAs shows a potentially skewed perception on what constitutes value, and indicates that your potential client may value ideas over execution.

The cold hard truth of the matter is that ideas mean nothing, and execution means everything.

Believing that ideas supercede execution is hubris of the highest order, and you would do well to avoid working with these types of clients.

This line of thinking is often accompanied with the classic “I just need a code monkey” mentality, which is indicative of a lack of experience, a lack of industry knowledge, and a lack of understanding around how modern software development and the production process works. I can assure you that these types of clients are more hassle than they’re worth.

Value comes from the making. From the execution. From you, the Developer. Value does not come from an idea.


6. Shows a Lack of Trust

Confidentiality is implied, and it’s already illegal to disclose confidential information.

If you are told something is confidential prior to having the information disclosed to you or receive a document marked “confidential” you cannot divulge the details.

Developers get exposed to (and protect) 1000’s of trade secrets and bits of confidential information over the course of their careers, and, to me at least, it is somewhat offensive to suggest that a reputable Developer wouldn’t be able to do the same with other so-called “secrets”.

If Developers went around blabbing clients secrets they would very quickly get a bad reputation, which would in turn severely impact their ability to do business.

It’s akin to saying “I value your ideas and want to work with you, but I don’t trust you”, which is not a vibe.


7. Creates Unneeded Liability

If you sign an NDA you need to keep track of all of them, which is nearly impossible.

Mark Busse posted an article in 2013 on the subject of NDAs [5] and summed this justification up nicely:

“if you were quick to sign NDAs, it wouldn’t take long until you had a bunch of these agreements floating around out there to keep track of. It behooves you to stay on top of what you promised to whom, and life would be much simpler without that hassle.” — Mark Busse

It would be very expensive for you to retain legal counsel to continuously review any and all work to ensure that nothing is ever violated.

You should not be willing to take on these costs, and you should certainly not take on the associated liability.


8. They’re Generally Unenforceable

It’s well known that NDAs that go to court are usually ruled as unenforceable. This makes them useless, and if something is useless then why bother to have it anyway?

NDAs can also hint to “old school thinking”, and a potentially exploitive and litigious nature. [6] You definitely do not wish to work with these sort of companies.


9. We Have Nothing to Protect

This reasoning won’t necessarily be valid for everyone, but it is for us. We’re all about being as open as possible.

NDA’s are often presented under the guise of being a so-called “Mutual NDA”. This is useless to us, as we have absolutely nothing we need to protect.

In fact, we want our clients to tell people about us and how we work! It’s revolutionary, we’ve proven that it works better than traditional models, and we encourage our clients to shout it from the rooftops.

As such a so-called “Mutual NDA” automatically becomes a unilateral agreement, in your client’s favour, that you get nothing out of other than unneeded liability and limits.


10. Potential Trojan Horse

A rare occurrence, but one we’ve come across before. Unethical clients and companies try to sneak in dodgy clauses into NDAs (especially “Mutual” ones), such as non-disparagement, or even total ownership over all of your own personal intellectual property and know-how.

To retain someone to diligently review each and every NDA that gets presented to you would be an expensive exercise, and signing willy-nilly without doing your due diligence can lead you to unfathomable legal battles.


Rare Exceptions

There are, of course, rare cases where an NDA is needed, but these are few and far between.

  • Receiving information for something that is patentable, and that has already begun the patenting process. This NDA must be hyper-specific, and should only cover the exact same details that will eventually become public domain once the patent is granted, expiring at the same time.
  • Receiving sensitive personal information, such as client lists or databases of medical records, provided that the agreement is hyper-specific and covers only that specific data.
  • The creation of arts and entertainment (movies, books, albums, games) — again, they would be hyper-specific, covering rules around leaking said entertainment online, and would need to immediately expire once the artwork has been released.

If you feel the situation is unique enough and an NDA is indeed warranted, you must ensure that your lawyers draft the NDA. Never sign someone else’s NDA, and always ensure they have a reasonable expiration date.


Alternatives

Most potential clients understand the reasoning once it’s been clearly explained to them, but there are often those who don’t.

In my experience the primary reason for a potential client wanting a signed NDA comes down to a lack of industry experience, and a natural (and understandable) desire to protect what they believe to be theirs.

This is a perfectly reasonable human response, so over time we have developed an alternative which limits the amount of liability a traditional NDA would place on us while still providing our potential clients the peace of mind they would get from a traditional NDA.

We now issue a customised “Confidentiality Undertaking” to potential clients which is based on our standard documentation. We have published these on Github under the MIT license [7] for anyone to use and modify as they see fit.

These resources should help equip you with everything you and your prospective clients need to begin exploring their ideas with confidence.


In closing, always remember that you, as the Developer, hold the power, because you have what they want, not the other way around.

Your rights are far more important than some potential clients most-likely fleeting idea. Protect them, and keep dodging those pesky NDAs like this guy:

References

[1] How not to sign NDAs by Eric Raymond(2010)

[2] Estonia e-Residency Program

[3] Fiduciary Responsibility: Everything You Need to Know

[4] Ideas are a Dime a Dozen. People Who Implement Them are Priceless by Amy Rees Anderson (2013)

[5] Why I rarely sign NDAs and neither should you by Mark Busse (2013)

[6] NDAs Are Out of Control. Here’s What Needs to Change by Orly Lobel (2018)

[7] Our MIT Licensed Terms and Conditions