Sticking to my guns, I don’t sign NDAs

About an hour ago I had a very brief conversation with a potential customer. The conversation went something like:

First 15 seconds: Friendly greetings & introductions
Next 15 seconds:
Customer: “The first item on the agenda is that we’re going to need you to sign the NDA before
we can talk about the project due to sensitive information about product pricing and product information"
Me: "I’m sorry, we should probably end this conversation now then, I’m no longer comfortable signing NDAs”

A little background on this particular situation

Before I go into my reasoning why, let me start with some let me explain with some background information. My potential customer is a great guy who I’ve worked with in the past, and somebody for whom I have a lot of respect. He e-mailed me a couple of days ago, but was unwilling to provide any information to me about the project without signing an NDA. I told him that I didn’t sign NDAs, and if he would like to discuss, that would be OK. It seemed like a moot point for him, so he just added it to the agenda and scheduled a time to talk.

My intuitive guess from the limited discussions we had was that I would spend two weeks at my $125/hour friends & family billing discount rate helping them choose a colocation provider, design a network, spec out the hardware for their server build-out, make configuration management suggestions and probably be involved in the negotiation on the colo provider(s) as well as the ISPs and the hardware vendors.

There was also a hint that later on I would probably have been involved in the physical and software build-out. This is my ideal project, the kind I’d almost do for free because it lets me utilize my datacenter expertise in a very social way. More importantly it’s the next-best thing to being given a green field infrastructure, as new build-outs are the other time I get to implement best processes and break bad habits.

Unfortunately, as you can see from the transcript, they insisted on having me sign an NDA before they would even describe what it was they wanted me to do, so I can only speculate as to what the job what have entailed. I will remain forever un-disclosed on the details of this project. The rest of this blog posting is a bit of an attempt to explain why this is important to me.

The company who wouldn’t tell me what they did

Since I’m hyper-active, let me rewind to 2000, I interviewed for a storage company in Fremont, back then NAS start-ups were as common as Group-on clones are today. I sat down in this company to be greeted by a gruff older gentleman who wanted to interview me as team lead for their internal systems group. It wasn’t really exciting to me as I always care more about supporting production than supporting corporate users, but some of the technologies on the job were pretty exciting to me (back then I was really excited about clustered storage. I had no life in 2000!).

After signing the 10-page NDA ( unfortunately I no longer have, but my notebook from back then says 10 pages, so I’ll stick with it) and some sort of liability waiver the customer refused to tell me what the product did. Every single question I asked about how the product worked or how customers would use it was met with, “Why do you need to know that?”. After about 20 minutes of this I politely but tersely said, “this isn’t going to work, thank you for your time, have a great day”. I shook his hand and took my leave. That was the first time an NDA really left a bad taste in my mouth.

In retrospect, signing 70 NDAs in 9 years seems like a bad idea to me

Fast-forward a few years to 2009. I was working on selling out of my last company, and was contracting for a gaming start-up on the peninsula. I was beginning to want a change of direction, and decided to try and re-shape my career in a way that suited my life and ideals, rather than vice-versa. Part of this was a semi-successful attempt at moving to a paperless personal office by scanning in everything in my filing cabinet, then shredding it.

When I got to my folder of NDAs I realized that I had ~330 pages of NDAs to scan from about 70 companies. The companies those 70 documents represented came from a wide mix of sales opportunities, partnership opportunities, job interviews, even an acquisition attempt with a partner. They seemed to reproduce on their own. I had a pile of 11 NDAs from two days of interviewing fro 10 start-ups at idealab! in 1999 or 2000 (11 because I had to sign one just to walk into idealab’s office building).

IANAL

Most of these NDAs were maddeningly complex with different terminology from one day to the next. Many of them read as the type of non-compete employment agreements which are meaningless in a “right to work” state like California. There seemed to be no baseline in term-lengths either, with the shortest I had found being 12 months and the longest being four years.

No more NDAs

That day in 2009 was spent consuming NDAs. My process was:

1. I would read the document in full
2. Log the execution and expiration dates into a spreadsheet
3. Scan the document
4. Back the document up
5. Shred the document.

After about 6 hours of this I had made it through a third of the pile, and couldn’t see any benefit out of it, so I took them all out to Ocean Beach and asked a nice group of hippy kids if I could throw them in their bonfire. (They happily obliged, and enjoyed my story of what they were and why I was doing this.) NDAs are pretty when they burn. On my way home from the beach I decided I would never sign an NDA again, or at least try really hard instead of just giving the idea lip-service.

9 reasons why I do not sign NDAs

1. I’m proud of my work. I prefer to work with customers who will say, “Michael built this for us, he’s awesome!” rather than, “We’ll sue you and your daughter* if you tell anybody you built this for us”
2. You hired a lawyer to write it and to be responsible I would have to hire a lawyer to review it. On a $10k contract that’s saying that about 12.5% of my gross will go towards legal fees. Lawyers are expensive.
3. If I keep signing NDAs at this rate I will eventually need a full-time lawyer to monitor everything I do and say, because I will be under NDA with half of the valley.
4. Ideas are worthless, execution is everything
5. There are plenty of customers who have never asked me to sign an NDA, and in hindsight most of those clients had corporate cultures I felt were really successful, and so were those projects.
6. Angel investors and VCs don’t sign NDAs because they see a huge number of ideas and it wouldn’t be feasible. As a consultant, I’m in the same boat.
7. NDAs, like so many other routine corporate shenanigans, are over-used trappings of cargo cults
8. After 16 years of systems work and consulting, I’ve never personally worked with a company who failed because of an information They failed for reasons such as executing poorly, over-spending, building a product nobody wanted, building a bad product, or building a really bad company culture. It was never “some contractor told our competitors about our super-whizzy synergistically ajaxified push-technology groupon clone iphone app, but with better statistics!!#$^@!$&!$@#."
9. Because I am fortunate enough to be able to choose my customers based on how fun I think the project will be, not just how much money I need tomorrow

We’ll sue you and Kaylee too!*

“9. This Agreement shall terminate one (1) year after the Effective Date. The Recipient’s obligations under this Agreement shall survive termination of the Agreement between the parties and shall be binding upon the Recipient’s heirs, successors and assigns.
The Recipient’s obligations with respect to all Confidential Information shall be terminated only pursuant to Section 5”

This is an example from today’s NDA as to why I’m so hesitant. My feeble mind reads this wording as “You are signing this contract both for you, but for your daughter” .. Can I even sign a contract in my daughter’s name? She’s four, I don’t think she can sign contracts. Is there a fear she might look at my laptop while I’m producing a Visio network diagram for how to build out their network. Is that really confidential or proprietary information? Look at the very wordy first section of this document for a better example:

is “know-how” really confidential?

“1. As used herein, “Confidential Information” shall mean any and all technical and non-technical information provided by Company to Recipient, including but not limited to information regarding (a) patent and patent applications, (b) trade secret, and © proprietary information, mask works, ideas, media, techniques, sketches, drawings, works of authorship, models, inventions, know-how, processes, apparatuses, equipment, algorithms, software programs, software source documents, and formulae related to the current, future, and proposed products and services of the Company, and including, without limitation, the Company’s information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing, manufacturing, customer lists, investors, employees, business and contractual relationships, business forecasts, sales and merchandising, marketing plans and information the Company provides regarding third parties.”

I could spend days thinking through the implication of this and just be wrong. Know-how. What is know-how? Mask works? Aren’t “Mask Works” from the semiconductor industry? What a headache.

I am not alone

While researching this, I started googling, and found that others are just as annoyed with the ideas of an NDA.

• Andrew Warner from Mixergy has a fantastic list of seven reasons why he will not sign your NDA here.

• Eric S. Raymond deftly advises on how not to sign NDAs in his essay, How not to sign NDAs:

“The best way I know to do this is to be a director or other officer of a corporation, with fiduciary responsibility to the corporation. You tell them: “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.” Back when I was a director of VA Linux, this was a nuclear bomb that immediately vaporized all talk of NDAs whenever I brought it up.”

• In an interview with Austen Bunsen, Brian Cuban says,

“What may constitute a trade secret is complicated and dependent on the intricacies of state and federal law. You should consult an experienced attorney if you are asked to sign an NDA.”"

John Reeve from Intervals does a great job of explaining the contractor’s dilemma here where they write:

“We have developed over 300 web sites and web-based applications for over 100 clients. We’ve seen a lot of ideas. In fact, we’ve even seem the exact same idea, several times, from two different prospective clients, and only a few months apart. Had we signed an NDA for one, we could have potentially been in hot water with the other. And simply because we listened to their idea? No, thanks. In fact, web designers and developers stand to benefit by NOT signing NDAs. Without shackles on our creative processes we can specialize in a given industry. We can become specialists not only in web design and development, but within a target market where we can share our expertise with our clients.”

Resolution

As I sit here pondering this evening’s events, I admit that given the role, I’m curious why the customer would ever need to expose pricing information to me (or any data that would actually expose any of their customers or any of their ideas to me), and if they did, why would I even care about it. I think it’s just about some bizarre business ritual based on fear and distrust that has risen up. I choose to opt out, and for the most part it’s not so bad.

Working NDA-free has not been an absolute. I signed Twitter’s NDA because it was one page consisting of three clauses, and seemed to have been written by somebody who was engineer-friendly. I signed Heroku’s NDA because the opportunity was too exciting to pass up (though I did argue some of the terms, and ended up having to turn them down due to a family situation). With today’s phone-call I’ve walked away from three contracts and two potential jobs that looked really good on paper. The frugal, fiscally responsible guy in me is screaming, “WTF are you doing? Take the money!”. The experienced consultant says, “Don’t take any work that doesn’t immediately give me a warm, fuzzy feeling.”