Don’t Sign That Non-Disclosure Agreement. Not Yet, Anyway.
My three co-workers sat around the conference table while the legal forms were handed out, shuffled to each developer like oversize playing cards. The technical conversation continued for a while, going into details about the contract project’s timing and scope. At some point, the client’s representative — it was a big software company — looked down at the unsigned paperwork, and said, “You need to sign the nondisclosure agreement and work-for-hire form before we can continue.”
They were, of course, completely right. The paperwork was duly signed, the contract begun and successfully completed.
But the delay was deliberate. The boss had advised us to never sign anything until the client looked for it. A client’s attention to such matters, he said, showed the seriousness of their purpose.
That incident occurred when I was new to consulting. I learned this lesson again, years later — fortunately, to my benefit — when my then-two-person company wrote custom code for a startup firm.
It began innocently enough. The startup’s founders faxed us a contract and nondisclosure agreement (NDA). My partner quietly put the paper into a desk drawer. And then he got to work writing the software that the company aimed to resell. Nobody mentioned the paperwork again.
As it turned out, the company was — to be generous about the situation — always running the ragged edge of disaster. The startup went five months without paying us, and the owners repeatedly made promises they couldn’t keep, most of which used the phrase, “…as soon as we get the next round of funding.”
Eventually, we said, “We have to be like the phone company. If you don’t pay the bill, we have to turn off the service.”
“We’re sorry to hear that,” said the startup’s founders. “We’ll pay you as soon as we get that funding, which honest it’s really imminent!” (Yeah, right, we thought.)
“…In the meantime, send us the source code for everything you completed.”
“I can’t do that,” said my partner. “You don’t own it. I do.”
“What?!” exclaimed the startup guy. “You signed a contract! You signed an NDA!”
“No,” my partner replied. “You sent a contract. I never signed it. It isn’t my problem that you never noticed.”
This understandably put the startup founders into a frenzy: They realized they didn’t own the intellectual property for which the company was seeking venture capital. They couldn’t even threaten to take us to court claiming we had done work-for-hire because they’d missed on the “giving us money” part of the equation. Oops.
It was intuitively obvious to a casual observer that, if the contract had been signed, we’d never have seen a dime of the monies owed. Suddenly the investors (and golly, turns out there were investors) had to come up with some of the back payments via a certified check. (The only reason we didn’t get more money out of it was that we didn’t want to talk to those guys ever again.)
…All because my partner followed my old boss’ advice, and set aside the NDA until the client insisted we sign it. Ever since, it’s been an easy “sniff test” for business acumen.
Oh, and the startup? It’s long gone.
Photo credit: Visual Content via Visual hunt / CC BY
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