I'm unclear about what he means by "Don't blindly sign NDAs". What are the risks, and what items to watch out for would be on the checklist my lawyer would ideally provide?
Most NDAs have two parts: non-disclosure and non-use. That means that parties won't disclose the confidential info that is shared, and they won't use that information except for the express purpose of the agreement (usually assessing a partnership or customer relationship).
One Silicon Valley company that is well-known for not having a non-use clause is Intel. This means that they can use any confidential information in their own business, in any way they desire.
It's not problematic to sign an agreement like this with another startup because they are unlikely to have the time/money to start competing with you on your home turf. But big companies can squash you like a bug if they so desire.
Other reasons to carefully review an NDA:
Make sure it's bilateral, not unilateral
Check to see how long it's in effect for — usually the parties are permitted to disclose / use the info after 2-5 years
Make sure the above clause has an exception for trade secrets that are still secret (which they should not be allowed to disclose even after the expiration)
As an example, about a decade ago I was running an eLearning startup.
A more established eLearning company approached us to discuss potential partnering opportunities, and sent over their NDA. Note - I actually read NDA's and other legal docs before signing, to make sure nothing untoward or unexpected is included.
In the above case, they included non-compete clauses (without any limits) specifically so we couldn't compete with them.
Upon asking their (from memory) CEO "WTF?" he was rude/abrasive and that was the last we heard from them.
At a guess, they were just trying a cheap tactic to get leverage over us in some way.
Mike Monteiro has an excellent talk[1] on contract negotiation and where to get lawyers involved. The pertinent point for me was the following:
Contract negotiation makes them fair. If you just sign whatever people put in front of you, you give up your rights to have a fair contract.
Also:
The contract given to you probably represents the opposing lawyers wish list of all the things they wish they could have. Most/some of these things will be extremely disadvantageous to you. Just signing anything they give you means you submit to their wish list, not your own.
NDAs aren't standard at all. They range from simple back of the napkin agreements to "we get your first born child".
Blindly signing subjects you to potentially nasty term, and obligated you not to talk about certain things. This in turn can be used as leverage by the other side if things go badly.
Really, it's just don't blindly sign any agreement. Unfortunately agreements are so ponderous (clickwrap) that most people are used to doing that
As funny as it sounds the "we get your first born child" clauses in the NDAs are not a rare occurrence. One NDA I was required to sign explicitly stated that every idea or functionality I developed on other projects for up to twelve months after delivery of their project was subject to review by the issuer of the NDA (not even a 3rd party) and that if anything even remotely similar to functionality I will be creating within the new project they're rightful owners of it or that they are able to sue me.
> One NDA I was required to sign explicitly stated that every idea or functionality I developed on other projects for up to twelve months after delivery of their project was subject to review by the issuer of the NDA
Saying 'required' makes it sound like you didn't have a choice -- out of curiosity, did they have other leverage over you above getting your help on their project, and did you attempt to negotiate on this clause?
I don't doubt that non-compete clauses happen in NDAs; other people in this thread to mention seeing them. But I think they're not that common either. I've seen my share of NDAs and never seen a non-compete clause. I do get non-compete clauses in employment contracts that also include NDAs as well as invention assignments and more, but I haven't personally seen a non-compete clause in a pure non-disclosure contract, that seems abnormal. But I agree completely that one should always read their contracts carefully before signing.
One common fact pattern:
1) small co is going to sell some partially-customized product to big co;
2) small co signs big co's NDA that leaves the definition of "confidential info" and other rights vague/favorable to big co;
3) big co floods small co with low grade confidential info relevant to customization of the product for a trial;
4) then (often through incompetence, some times through malice) big co becomes convinced that small co is misusing confidential info to sell to big co's competitors and sues for breach/trade-secret misappropriation, etc.
Effectively, the NDA gives big co the option to force small co to, at the very least, pay lawyers $50k a month until dead or the suit is resolved in two-plus years because the NDA and facts, at the very least, left a lot of issues to dispute.
Self-cite: http://www.commondraft.org/#ConfInfo — this is a pretty-comprehensive set of NDA provisions with extensive commentary and annotations. (It needs some formatting work when I can get to it.) Usual disclaimer: YMMV; IAAL but not your lawyer; don't rely on those materials as a substitute for legal advice about your specific situation; etc.
One Silicon Valley company that is well-known for not having a non-use clause is Intel. This means that they can use any confidential information in their own business, in any way they desire.
It's not problematic to sign an agreement like this with another startup because they are unlikely to have the time/money to start competing with you on your home turf. But big companies can squash you like a bug if they so desire.
Other reasons to carefully review an NDA:
Make sure it's bilateral, not unilateral
Check to see how long it's in effect for — usually the parties are permitted to disclose / use the info after 2-5 years
Make sure the above clause has an exception for trade secrets that are still secret (which they should not be allowed to disclose even after the expiration)