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Rechtsanwalt Marian Härtel - ITMediaLaw

Why NDAs are often considered “toothless tigers

20. September 2023
in Other
Reading Time: 3 mins read
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contract 4085336 1280
Key Facts
  • An NDA is a legal agreement to protect confidential information between two or more parties.
  • The enforceability of an NDA is crucial, but often a challenge.
  • Evidence is one of the biggest obstacles to enforcing an NDA.
  • The costs and time involved in legal proceedings can cause considerable damage.
  • A public legal dispute harbors reputational risks for all parties involved.
  • A well-formulated NDA is crucial; unclear wording can do more harm than good.
  • A comprehensive security concept should go beyond the NDA and include various methods.

Introduction

Content Hide
1. Introduction
2. What is an NDA?
3. Why “toothless”?
3.1. Difficult evidence
3.2. Cost and time
3.3. Reputational risk
3.4. Unclear formulations
4. What is the alternative?
5. Conclusion
5.1. Author: Marian Härtel

I encounter a variety of contracts every day in my practice as an attorney and business consultant, and one of the most commonly used documents is the Non-Disclosure Agreement (NDA), also known as a non-disclosure agreement. At first glance, an NDA seems like a simple and effective way to protect confidential information. But is that really the case? I have found that many people, including experienced business people, often have an exaggerated idea of the protective power of an NDA. In this article, I would like to share my thoughts on why NDAs can be considered “toothless tigers” in many cases.

What is an NDA?

An NDA is a legal contract that specifies the terms for handling confidential information between two or more parties. The idea is simple: you share important information only with people who have contractually agreed not to share it. Sounds logical, doesn’t it? But this is where the problems begin. An NDA is only as good as its enforceability, and that’s where the difficulties start. I have seen many cases in my career where an NDA was more of a placebo than a true protection.

Why “toothless”?

Difficult evidence

In my experience, one of the biggest obstacles to enforcing an NDA is evidence. Imagine you have a great business idea and share it with a potential partner under an NDA. A few months later, you see a very similar idea on the market. Is this coincidence or theft? It is incredibly difficult to concretely prove that the other party actually used your information. Even if you have evidence, it has to hold up in court, which is another challenge.

Cost and time

Another problem I see time and time again is the financial and time commitment involved in enforcing an NDA. Legal proceedings are expensive and can take years. During this time, your business could suffer serious damage. I have advised clients who ultimately decided not to sue simply because the process would be too lengthy and costly.

Reputational risk

The risk to one’s reputation is another factor I always take into account when considering an NDA. Public litigation can damage the image of both parties. In this day and age of social media, such a case can quickly go viral and cause long-term damage. Therefore, I often advise caution before taking the legal route.

Unclear formulations

I can’t stress enough how important it is to have a well-written NDA. An unclearly worded contract can do more harm than good. I have seen contracts that had so many loopholes and ambiguities that they were practically useless. An NDA should be precise and unambiguous in order to be truly protective.

What is the alternative?

There is no one-size-fits-all solution, but I always recommend using a wide range of protection mechanisms. This includes the careful selection of business partners, the use of technical protection measures such as encryption, and of course clear contractual regulations that go beyond the NDA. I often advise my clients not to rely on the NDA alone, but to develop a comprehensive security concept.

Conclusion

An NDA can be a useful first line of defense, but it is far from the only one. I have seen in my years of practice that the term “toothless tiger” is often accurate. It is important to be aware of the limitations of this tool and act accordingly. An NDA should be part of a comprehensive strategy, not the entire strategy. And as with any contract, a piece of paper can only do so much; the key is in the relationship between the parties.

Marian Härtel
Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.

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  • Informationen
    • Ideal partner
    • About lawyer Marian Härtel
    • Quick and flexible access
    • Principles as a lawyer
    • Why a lawyer and business consultant?
    • Focus areas of attorney Marian Härtel
      • Focus on start-ups
      • Investment advice
      • Corporate law
      • Cryptocurrencies, Blockchain and Games
      • AI and SaaS
      • Streamers and influencers
      • Games and esports law
      • IT/IP Law
      • Law firm for GMBH,UG, GbR
      • Law firm for IT/IP and media law
    • The everyday life of an IT lawyer
    • How can I help clients?
    • Testimonials
    • Team: Saskia Härtel – WHO AM I?
    • Agile and lean law firm
    • Price overview
    • Various information
      • Terms
      • Privacy policy
      • Imprint
  • Services
    • Support and advice of agencies
    • Contract review and preparation
    • Games law consulting
    • Consulting for influencers and streamers
    • Advice in e-commerce
    • DLT and Blockchain consulting
    • Legal advice in corporate law: from incorporation to structuring
    • Legal compliance and expert opinions
    • Outsourcing – for companies or law firms
    • Booking as speaker
  • News
    • Gloss / Opinion
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