Thursday, April 19 , 2018, 3:56 am | A Few Clouds 48º


Paul Burri: Non-Disclosure Agreements and Eating Pizza

In a slice of business life, apparently not everyone sees the value in a document designed to protect a person's idea

I wonder if there are any parents who haven’t had a kid who refused to try a new food and found themselves saying, “Try it; you’ll like it.” That happened to me when my son was about 5 years old and my wife and I tried to get him to try pizza. Finally, when he was about 10 years old, he tried a piece and, of course, he loved it. Then for years afterward he would say, “I’m so mad at myself. I could have been eating this for five years.” It’s still a family joke among us years later.

So what does that have to do with Non-Disclosure Agreements? Let’s back up a second and explain what a Non-Disclosure Agreement is and what it’s used for.

Let’s say that I have an idea for an invention of some kind. I think it’s a great idea, but I want to check with someone who is more experienced than I am and ask for that person’s opinion. “Is this idea as good as I think it is? What are its pros and cons? Do you think it’s worth pursuing?” Etc., etc. I think this is a wise thing to do rather than to spend a lot of time and money on an idea that is not feasible for any number of reasons that I haven’t thought of.

Another person I might want to discuss my idea with is a person who might be interested in buying the idea from me or collaborating with me to develop it. To make this clear, I’ll make up a hypothetical situation.

I have just come up with a great new recipe for hot dogs that is unique and has a different and enticing taste. I think it will “revolutionize” the hot dog business. I want to show my idea to a few local hot dog sellers in town to see if there is any interest in my recipe, but I’m afraid that once I show them the recipe, they might steal it from me.

I draw up a Non-Disclosure Agreement, which is usually a one- to two-page document that I will get the disclosee (the person to whom I tell my idea) to sign, essentially agreeing that he or she will not disclose or use my idea without my permission. It doesn’t require the person to do anything other than not disclose my idea. It seems like a reasonable request to me. Not to mention the fact that NDAs are routinely used all the time in situations like this.

Should anyone have a problem with signing something like that? Well, there is the possibility that the person may have already had the same idea — in this case, the same recipe. No problem. A typical Non-Disclosure Agreement has a clause that allows the person to use the idea if the person can prove that he or she already thought of it before someone else showed him or her the idea.

Recently I was involved in just such a situation. I had an idea for a new kind of advertising device. I also, coincidentally, had heard about a local entrepreneur who was working on a related advertising idea that would dovetail perfectly with mine. I proposed that he and I get together for me to show him my idea. I advised him beforehand that I would ask him to sign a Non-Disclosure Agreement for me. We agreed to meet. A few days before our scheduled meeting, he called me to cancel because he had been advised not to sign an NDA because “it could expose him to unnecessary risk for questionable rewards.”

What risk? His adviser didn’t say. Questionable rewards? How did his adviser know what they were worth looking at, much less that they were questionable? So the local entrepreneur decided not to look at an idea that could potentially enhance and improve his idea. I figure that he rejected an opportunity where he had nothing to lose (and possibly much to gain) and that he based his decision on extremely poor advice from his adviser.

I guess his adviser has never tried pizza because he might not like it, or “because it could expose him to unnecessary risk for questionable rewards.”

— Paul Burri is an entrepreneur, inventor, columnist, engineer and iconoclast. He has been a counselor with the Santa Barbara chapter of SCORE (Service Corps of Retired Executives) for the past eight years. SCORE offers free business counseling to local businesses. He is also the membership director of the Channel City Camera Club. The opinions and comments in this column are his alone and do not reflect the opinions or policies of any outside organization. He can be reached at .(JavaScript must be enabled to view this email address). Click here for previous Paul Burri columns. Follow Paul Burri on Twitter: @BronxPaul.

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