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NDAs are legally enforceable contracts, but they're now coming under increased scrutiny from lawmakers, attorneys and legal experts.Companies often use them as part of an employment contract or settlement agreement to protect sensitive information like trade secrets.
In short -- investors don't sign NDAs. They won't sign your NDA.
The VC business has an unwritten rule on NDAs. And people who violate this rule risk losing credibility with investors even before meeting with them. The rule is simple: never ask a VC to sign an NDA unless your company absolutely needs one.
An NDA is typically a written agreement, extortion is not. The person paying for the NDA has legal recourse against the other party if information is revealed.The overlap is that a person or company may refuse to allow you to work for them if you refuse to agree to keep their confidential information secret.
NDAs keep people from sharing trade secrets, proprietary knowledge, client information, product information, and strategic plans. NDAs keep people from making a profit on any secret company information. NDAs usually say that a company owns things that get developed or produced during someone's employment.
If the NDA is fully executed by all parties, from the contract law perspective it should be binding. Go ahead and send copies of the fully executed NDA out, and make it a practice to do that right after you collect all of the signatures, with a cover...
The cold hard truth is that most NDAs do not hold up in court. Non-Disclosure Agreements are most effective in establishing a paper trail of confidential information as it relates to partnerships, and discouraging partners from misappropriating proprietary information.
Identification of the parties. Definition of what is deemed to be confidential. The scope of the confidentiality obligation by the receiving party. The exclusions from confidential treatment. The term of the agreement.
An NDA is only really useful as a legal document in the case that the parties end up in court. And if you end up in court, it's going to be expensive VERY, expensive.By requiring an NDA, these companies put up an unnecessary roadblock that slowed innovation. They are mired in paperwork for a false sense of security.