How To Create a Non-Disclosure Agreement People Can Understand

by May 12, 2009Startup Finance & Legal

How to create a Non-Disclosure Agreement people can understandLike many of you in the startup world, I have read and signed my share of non-disclosure agreements (NDAs). I have reviewed, edited, and sent hundreds of them in my career, but I am yet to come across one that really serves anyone but the lawyers who charged dearly to write it. So, why don’t we stop wasting our money on having attorneys fill in one of their NDA templates, and write one that is understandable to everyone.  Yes, let your lawyer look it over, but don’t allow him/her to insert any words your grandma would not understand. Here is how I would write my NDAs:

Non-disclosure agreement

Purpose of this document

Products, services, methods, technologies, etc. we work on in our company are considered to be a trade secret; therefore, we need to protect our “first to market” and/or other competitive advantages. We may later choose to patent, trademark, or otherwise protect our work, but for now we will protect it using trade secret status.

Who is covered by this document?

  • If your signature is at the bottom of this document, you are subject to this NDA.
  • If you are working on any projects for us and your superior signed this document when we engaged your company, you are also covered by this document.

How long this NDA is effective?

  • This NDA covers you for the entire time you are engaged with us in any way plus X years after we sever our relationship.

What is covered by our NDA and what can you do to comply?

  • If you think something is covered by the NDA, it very likely is. Ask someone in charge first before talking about it outside of our company.
  • If you can’t find it in Google search or Wikipedia… assume it is covered by our NDA.
  • Take reasonable and/or common sense efforts to help us keep anything subject to our NDA a secret.
  • Help educate other members of your team about what is subject to our NDA.
  • Keep everything related to product development, planning, strategy, and R&D as a secret from anyone who you know has not signed our NDA.
  • Do not use lists of customers, vendors, employees, components, etc. for any other purpose than what it is intended for and only for the benefit of our company.
  • If you get sued or subpoenaed to testify and you may need to talk about anything covered by our NDA, please notify us first, before making any statements. We are afforded by law the right to protect our secrets and we will be engaging an attorney to help you on anything related to what is covered by our NDA.
  • Any products or new methods and techniques you developed here are our property. Ask first before using them somewhere else.
  • If you are no longer affiliated or doing business with us, but would like to talk about anything you saw inside, please ask us first.

When is something not (or no longer) subject to NDA:

  • You can prove you knew it before you signed this document.
  • You can prove you learned about it from an outside source not related in any way to our company.
  • You have seen or heard our marketing, PR, or CEO talk to journalists and bloggers about it.
  • There has been a provisional or full patent granted for it.
  • Our executives communicated to the team it is OK to talk about it.
  • A judge in any level of the judicial system rules that it is against the law to keep particular information secret.


Signature of a witness:

From an  operations point of view, it is also very important to clearly mark boundaries, so your employees know exactly when they are stepping into the NDA world. This makes it easier for people to comply. Here are some examples that come to my mind:


  • Put your software developer or R&D team in a separate room with a big sign on the door that says: “Anything discussed in this room is subject to the NDA”.
  • Train your team to label ANY document that they even suspect would be subject to the NDA as “Confidential”
  • Have a “no personal email or browsing” rule in the areas of your office where you are working on anything subject to the NDA, but create an area where your team members are more than welcome to take a break, hit Twitter, Gmail, or check out how their bid is doing on Ebay.
  • Desktop virtualization is cheap. If you let employees use their personal equipment for work, than you should pay to install virtual desktop applications and have them do their work on a VM (virtual machine).

P.S. Folks at Orrick, Herrington & Sutcliffe LLP. were kind enough to the entrepreneurial community to release entire startup kit of required legal documents. From NDAs to incorporation papers, stock option to contractor agreements, it is all in their Start-Up Forms Library.

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