Running a digital agency, we have the pleasure of being connected to many businesses who need a partner to help them grow. There are no hard or fast rules, or structured process as to how these initial conversations go, since every business is different. One trend, however, that has increasingly emerged amongst our business inquiries (particularly start-ups) looking for digital assistance, is the signing an NDA (Non-Disclosure Agreement).
An NDA is a common type of agreement between businesses who share confidential information for a specific purpose. It clearly defines which information can be made public, and what needs to be kept strictly under wraps.
The downside? The majority of the time, NDA agreements between a business merchant and an agency are pointless.
Here, our Operations Director Joseph Brown explains why.
1. We’re not setting up businesses ourselves
The presumption that your prospective digital partner is going to steal your idea, set up your business and replicate your model isn’t a foregone conclusion. We get it - it’s your business and there’s a protective instinct, especially with a new relationship. That said, we see hundreds of different types of business come through our system every year. If we were in the business of replicating others, we certainly wouldn’t be here!
Slapping an NDA onto our desks is not necessarily the best introduction to a new relationship, and it’s often on the table far too early.
2. An NDA doesn’t apply to information in the public domain
Probably the biggest reason as to why it is pointless for a digital agency to sign your NDA (at least for website development services) is because this information is shortly to become public anyway. Ironically, our team comes across NDAs from start-up businesses who need a website building and haven’t been trading yet, but insist on us signing an NDA to see their draft designs.
We’re given access to designs, assets, images - all the components of the website will ultimately end up in the public domain when the site goes live, ergo voiding the NDA entirely. Lovely to look at. Pointless to sign an NDA over.
Before sending an NDA, have a think about what actual confidential information is going to be shared. It’s very rare after signing one I’ve seen anything that’d be considered new, innovative or ‘truly secret’. Internal manuals/information on a businesses internal systems and processes, would be considered confidential and an NDA should be signed.
3. The purpose and clauses are far too vague or broad
One of the key considerations when drafting an NDA is to ensure the defined purpose and the confidential information is crystal clear. Using broad language to ensure everything is covered is very much a false sense of security - it’ll backfire.
I’ve probably seen a small smattering of NDAS that would pass this test. Without clear parameters about what is or isn’t acceptable with the information you’re providing, it becomes far too easy for either party to break them. This rule also applies with any type of contract. If the terms of clauses are too vague, it’ll be considered that it’s too difficult to comply with.
❌Here’s an example of a clause that wouldn’t pass the test:
The Discloser intends to disclose information (the Confidential Information) to the Recipient for the purpose of discussing a website development project (the Purpose).
✅Here’s an example of one that would:
The Discloser intends to disclose business strategies, trade secrets, financial information, and customer lists (the Confidential Information) to the Recipient for the purpose of discussing a website development project (the Purpose).
The above provides a much clearer idea of exactly what is considered confidential information, when compared to the ‘catch all’ term.
4. There are clauses listed that restrict trade
A surefire way to invalidate an NDA is to add an unreasonable clause or one that restricts the signatory doing legitimate business. I’ve personally seen this a few times in an effort from the prospective clients to prevent the working with competitors. Again, these are often vague and fall short of competition law. If these clauses are going to be included, be as specific and as clear as possible to have a chance of enforcing it.
5. You’ve used the wrong company name
When drafting an NDA, or any legal agreement for that matter, ensure you use the correct company name. Sounds simple, but consider you’ve just drafted an agreement for ourselves and used the name ‘Kubix’ on the document. Despite the oddly unique name, there’s actually many companies in the UK that go by the same name. Everything from Kubix Consultancy right through to Kubix Medical Services. “Close Enough” doesn’t work when it comes to agreements and this mistake can cost the entire agreement.
Always include the full company name, including ‘Limited’ (if applicable) alongside the company number and address. You can check any UK company on the public register here.
It’s a more common mistake than you’d think!
6. You’ve already said too much
News travels fast in an agency. A potential client project is exciting for us all, and so these projects don’t stay secret for long. Be careful what information you provide before producing an NDA. Any information you’ve shared with the signatory prior to presenting an NDA agreement is suddenly entirely out of scope. Sending an NDA with confidential information won’t cut it. Have the agreement signed, then spill the beans.
7. Can you prove and enforce a breach?
Not specific to ourselves, of course, but something to consider before drafting and having an agreement signed is whether you can actually prove if the agreement was breached. Jumping ahead of time, this is likely one of the biggest reasons as to why NDAs cannot be effectively enforced.
Consider an example. You provide your chosen agency with an NDA that states you do not wish for the project to be discussed outside of those explicitly involved. But this wasn’t made explicitly clear from the start of your project, and one of the team has already discussed it with their family at the dinner table. Another person has talked excitedly about your project with their friends at the pub. Interactions such as these are incredibly hard to prove.
Quite often information is shared widely in casual situations, at conferences or in a cafe, and it can be difficult to pin a breach on your recipient.
In the rare case you can prove your breach, what are the consequences? Damages can be difficult to recover when an NDA is broken, since the monetary value of the damage isn’t easily calculated or proved. Even ‘liquidated damages’ clauses aren’t enforceable unless you can prove these are anticipated damages, not just a scare tactic.
So, how do I protect my confidential information?
The key takeaway here is to not rely on the paperwork.
Pick your agencies wisely.
Foster positive collaborative relationships with your partners and only when there’s an element of trust, disclose the information on an ‘need to know’ basis. Take other measures to ensure information is only accessible to those that need it, something to consider for inside your organisation too.
The signature on the agreement is only as good as the signer’s word and intentions.