NDA Should Come After the First Disclosure

Many Android application developers have recently been bombarded by emails from Amazon. Regrettably, the way they have gone about this guarantees that this development firm will not be responding. The critical passage in the email is this:

Once you agree to and return the nondisclosure agreement we can begin speaking with you in greater detail about the opportunity.

Requiring an NDA as a prerequisite to the recipient of a business proposal is a good way to kill the opportunity in the bud. It isn't so far removed from telemarketing scams that begin by telling you that you've just won a trip to some tropical resort, and then say: "please send us $500 to cover administrative expenses which we'll refund later." In both cases the unsuspecting recipient of a proposition is asked to ante down before being able to properly assess the merits and costs of the proposition. The correct response in such a case is typically to say nothing, do nothing and walk away.

In the case of any business proposition, the reasons to not sign an NDA are much the same as why a venture capital firm will not sign an NDA with the companies that pitch to it:

• You may be legally bound to not discuss with anyone else what you have learned in the disclosure even if it becomes public knowledge. In other words, you are being co-opted to protect the other party's pricing, features, business practices and other information. This can include not being able to tell, for example, another supplier or service provider what price they will have to beat to earn your business, even if you do not name the competing company or product.
• Regardless of the novelty or uniqueness of matters disclosed to you, you may find yourself in legal chains in your further use of these matters. For example, if you are shown an as yet not well known method for indexing a database, but is one that would not (or should not) meet the "not obvious" criterion to be patented, you may find yourself unable to use that method even if independently implemented by one of your own staff. Regrettably, the same can apply to business methods or other so-called trade secrets that are generally considered to be pretty ordinary.

There are of course valid reasons to sign an NDA in the above cases, but never as a matter of routine. There should always be a strong justification, known and discussed up front, before signing and before each disclosure. The proper way to make progress in these situations is to disclose the opportunity in broad terms before delving into details which expose trade secrets or sensitive intellectual property. Only after a further milestone is reached, and once mutual trust has been firmly established, should either party go further in what they disclose.

In the rare case where more must be disclosed up front, this requires more due diligence in establishing the good reputation (or not) of the party receiving proprietary information. Few companies or individuals are in a position to do well from recourse to the courts after the information is abused by the recipient. The objective is to avoid this if at all possible.

So then, what is Amazon going to disclose that makes the signing of an NDA so important, to them and to us? The rumour is that they plan to launch an Android app store in competition with Google, although I can't know for sure since we have not engaged Amazon on their proposal, even though it is being widely discussed.

I believe they will have eventually have to open up more publicly if they are to gain the volume of developers and apps that they would need on board if they are to be successful. Only then would we consider getting involved. However, their opening sally has put us on our guard because they feel a need to tie our hands or silence our mouths that is greater than their need to openly discuss terms, unlike Google's Android Market.

For us, an Android developer, the risks are greater than any opportunity we can see. That precludes the possibility of our signing an NDA with Amazon at this point, or at any time in the future.


Disclosure: Warning! I am not a lawyer, so please keep that in mind when reading this article.