"Famous Last Words"

NDAs: Bombs In the Boilerplate (December 2008)

Dear Jim:

We've trying to schedule meetings for GDC and DICE, and have been signing NDAs sent by publishers.

My partners say these are standard and we do not need a lawyer to review them. The publishers say everyone has to sign their forms.

Lawyers are expensive and we are just starting out. Is a lawyer needed before we sign an NDA?

Pitching Our Game

Dear Pitching:

I believe a lawyer, or at least someone who has experience reading and understanding a broad range of NDAs, must review and approve. No agreement in our industry should be signed unless it is fully reviewed, and you understand every word.

Of all the documents that are exchanged and signed, the NDA may be the most common. But there are bombs lurking in the boilerplate.

Everyone has secret information it needs to protect. There is a lot of risk in showing around your work, or discussing aspects of your business or plans, without an agreement in place that protects you. Signing a “leaky” NDA puts your efforts at risk. These documents should be negotiated. If it is offered on a “take it or leave it basis,” huge red cautionary flags should go off.

While we would expect NDAs to be “standard,” experience shows that is hardly the case.

Here are a couple real-life examples of problem areas in NDAs:

1. Certain agreements masquerading as a “mutual NDA” are anything but.

Rather than a balanced agreement in which each side agrees to hold the confidential information of the other in secret, and not use it for its own purposes without a further agreement, certain agreements are, rather, “Submission Agreements.”

In a “Submission Agreement,” the developer presenting its materials actually agrees that the side receiving the materials may have similar concepts in development – and the developer waives any claim should elements, ideas, or whole swatches of their ideas or materials end up in a product.

Rather than protecting each side in connection with material it discloses, such an inside-out agreement actually protects the receiving side (the publisher) against claims of the disclosing side (the developer), should developer's material be used in publisher's product.

Certain of these agreements go so far as to disclaim any obligation to maintain developer's submission in confidence!

Beware of the Submission Agreement masquerading as an NDA.

2. Even if an agreement is a full mutual NDA and not a Submission Agreement, it is important to fully understand what exactly would be treated as “confidential.”

A recent so-called “NDA” that crossed my desk set as a threshold for anything of Developer being considered “Confidential Information” that it had to be protectable under the copyright laws of the United States .

This is a completely inadequate standard.

Copyright under the law, protects the tangible expression of an idea, but not the idea itself.

If a developer were to present, for example, a written and illustrated pitch and demo for a game, and follow it up with a face-to-face meeting, the only elements protected by copyright, and therefore, the only elements treated as “confidential information” under this NDA, may be the written and illustrated pitch document and demo; not the underlying concept or ideas presented. The essential nature of copyright is that it protects only expressions of ideas, but not ideas themselves. Ideas are “free as the wind.”

Under this standard, developer's oral presentation may also not be Confidential Information, so not subject to the NDA. This is because under the United States Copyright Act, copyright does not attach unless the work is “an original work of authorship fixed in a tangible form of expression.” Developer's oral pitch may be “an original work of authorship” in that it reflects developer's ideas and the expression of those ideas in a cogent form, but as an oral presentation, it is not “fixed in a tangible form of expression.” It would not be fixed unless it were to be recorded or transcribed.

Under this scenario, nothing may prevent the publisher from taking the idea as further developed in the oral presentation, rewriting and re-illustrating it, or material elements of it, and using it for its own purposes, with no obligation to the original developer. That is because the only protectable aspect is developer's tangible pitch document, illustrations and demo. There would be no default under this NDA by publisher unless there were actionable copyright infringement of these tangible materials.

Information, ideas, and, materials that extend far beyond information protected by copyright can and should be protected in an NDA. The nature of a trade secret is any combination of materials, ideas, and their application that has utility, regardless of whether it is obvious, unique, or protectable under intellectual property law. What makes it a trade secret is that the presenter thought of it and applied it first, it has value, and it is treated as a trade secret (at its most basic -- not to be disclosed without the receiver signing an agreement to keep it secret).

Developers should be careful never to limit their protectable elements to what would be protected by copyright. It is hugely inadequate and publishers who require that standard certainly understand that!