Succeeding in Your Business by Cliff Ennico

"I am a leading authority on a certain management topic. Since being laid off last year, I am writing a book on this topic and have started a number of blogs to help promote interest in my expertise. I have picked up a few paid speaking engagements and might be doing some consulting work for a couple of large corporations in the near future.

At one of my speaking engagements, I was approached by a fellow who is starting a website devoted to this topic. He was interested in having me sit on his board of advisers and told me he wanted me to write some articles specifically for his website, as the association with my name would help him promote the website to corporate users.

I was intrigued by his offer, but he has sent me a nondisclosure agreement he wants me to sign before he will meet with me to discuss my role in his website project. Now, I have no intention of blabbing his trade secrets to anyone, and the agreement looks pretty harmless overall, but there's a clause in there saying I cannot use any of his information if I work with a competing business. That makes me a little nervous. I am talking to a lot of people in the industry, and I don't want to have to get this guy's permission each time I talk to someone. Am I right to be concerned about this, or will I look like a fool or a 'newbie' if I refuse to sign his agreement?"

I have four words of advice for you: Don't sign this agreement.

Nondisclosure agreements, also called NDAs for short and sometimes "confidentiality agreements," are usually pretty harmless. This individual will be sharing with you a lot of detailed information about how his site will work, his business plan and so forth, and he wants to be sure that information doesn't leak out to potential competitors. Since he doesn't know you very well, he is right to protect himself and his company against that risk. So far, so good.

But quite a few entrepreneurs use their nondisclosure agreement as a "red herring" for something else. What they really want is to lock up your expertise so that you can't work for anyone in the field but them without getting their permission. That way, if they see you working with someone they don't like, or doing something they don't like, they can have their lawyers send you a nasty letter threatening you with a lawsuit if you do not "cease and desist" the offending behavior immediately unless you can show you are NOT abusing their confidential information. Good luck trying to prove that!

These people know that you probably won't sign a noncompete agreement, especially in a situation like this where they aren't offering you any money for your services or your website content, so they wrap their noncompete language in a seemingly harmless "nondisclosure agreement," which they know you will be more likely to sign.

That is exactly what is happening here.

Also, I would be nervous about signing on to this company's "board of advisers." While an appointment like that is purely honorary, and you do not have any of the legal liability risk that the actual directors and officers of the company have, your membership on the board may suggest to other people (wrongly) that you have an exclusive or preferred relationship with them. For example, let's say they enter into an agreement with a large corporation, under which the corporation is prohibited from soliciting business from any of the company's "employees, agents, affiliates, alliance partners or anyone else with whom the Company has a business relationship" as long as the agreement is in effect. In that case, you will be blocked from working for that corporation (they won't even talk to you for fear of breaching their agreement), even though you are not personally bound by that agreement and are 100 percent free to seek business from the corporation.

Nondisclosure agreements can be treacherous animals; never sign one without having it reviewed first by a competent business lawyer. At the very least, the clause prohibiting you from using the company's information in a competing business should be stricken.

A properly drafted nondisclosure agreement will prohibit you from:

— disclosing the company's "confidential information" (this will be defined in the agreement) to anyone outside the company; and

— using the company's "confidential information" for your own purposes.

Anything else is suspect.

I also recommend adding the following clause to ANY nondisclosure agreement you sign, even if it seems harmless: "This is a nondisclosure and confidentiality agreement only, does not create an exclusive business relationship of any kind, and may be terminated at any time on written notice. Nothing in this agreement shall be deemed to prohibit or restrict you from performing services similar to those you will be performing for the Company for any other person, firm or entity whatsoever."

If the company refuses to add that clause, you are "on notice" of their true intentions and should pass on the opportunity.

Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.

COPYRIGHT 2010 CLIFFORD R. ENNICO.

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