Standing Your Ground on the Vendor-Side of the Table: Suggested Responses to One-Way NDAs: GFY, NFW or GPS

1. ?My New Stand Your Ground Articles and My Lingo

I have been a technology transactions lawyer for a long time (28 years and counting) and I am starting to get a little crotchety about some continuing shenanigans that I encounter in the IT contracting arena.

So, I have decided to post a series of short and pithy Stand Your Ground articles about how to deal with the neo-maxi zoom dweebies out there (thank you John Bender from The Breakfast Club) who believe that starting with one-sided agreements will secure a better end-result for your client.? It won’t. ??

This is the first article in my new series and it starts with a foundational agreement: the NDA (or confidentiality agreement).?

Sidebar: The Terminology that I Use in my IT Law Publications

As a quick note to reader (for those not familiar with the lingo I use in my publications), I use the word Vendor for the IT service provider and Client for the buyer of IT services.? And, in this regard, let me give a shout out to Bob Zahler, formerly of Shaw Pittman (as it then was), for these terms.? Back in 1999, Bob hired me to co-found the LA Office of Shaw Pittman as the west-coast hub of lawyers focused on providing Client-side counsel on large-scale ITO-BPO deals. ?Bob was somewhat of a Darth Vader figure in this area of practice because he beat the crap out of Vendor-side counsel.? Love him or hate him, Zahler was a beast of a negotiator in his prime, so much so that one of my former employers and clients complied an “intel file” on how to handle him at the negotiation table. ?I learned a lot from Zahler, including the lingo I still use, like Vendor, Client, Ts and Cs, MIPS, ARCs, RRCs, and the ones in the title of this article.? Also, as a final note, I tend to use references from 80s, 90s and 2000s movies, when movie dialogues were not scrubbed by the PC-police.

2.? My Street Cred for my Crotchetiness

I began focusing on IT Law in 1996 back when this area of practice when 99% of people did not instantly recognize the acronym “IT”!

I have worked for two large IT Vendors and for three large law firms, Shaw Pittman (LA) (that I co?founded with an IT lawyer named Bill Peters), McMillan Binch (Toronto) (where I founded and chaired the IT and Outsourcing Practice Group) and Fasken (Toronto) as a junior lawyer.? In 2003, I launched my solo, boutique firm specializing in advising Fortune 1000 Vendors on large-scale ITO and BPO deals.?

During my 19 years (2003-2022) as a solo-IT lawyer, I worked on both sides of the negotiating table (i.e. for Vendors and Clients).? In the early days, I was the ultimate road-warrior armed with an IBM ThinkPad? (before its PC business was sold to the Chinese) and the most portable projector I could find for on-screen, real-time negotiations of 100-page ITO and BPO Agreements (not including the schedules, which ran anywhere from 300-900 pages).? Yup, those were the days when I could still do frequent steak and whiskey team dinners, pull all-nighters a few times per week and still make and be sharp at the morning bell.? These days, I am a bit more mellow in my current gig as AGC for Eviden Canada, which is part of the Atos Group of Companies … but, as my Canadian CEO and colleagues will attest to, I could be a lot more chill.? Look, I still love what I do and my goal today is the same as it was back when I started: to negotiate and close fair and balanced agreements that create positive tension (not scorched earth) between two parties.

Over the course of my 26 years of negotiating various technology transactions, I have done deals with almost all of the (now older) heavy-hitter lawyers who practiced (and still practice) in this space in Canada and the US.? In Canada, I have done deals in 7 of the 10 provinces and in the US, I have done deals in over 20 states.? I have negotiated opposite big east-coast and west-coast law firms and a few of the major mid-west ones too.? I have met some really great people, on both sides, and some “major league assholes” (to quote President Dubya, caught describing a liberal-weenie reporter on a live mic).? I have learned something from all of them.? I am still very active in deal work but, these days, I also manage the Canadian legal department for Eviden and mentor younger colleagues in the art of doing IT law and deals.

Gee, thanks, but why did you just give me an executive summary of your career?

Fair question; I painted the picture above for three reasons.?

1.???????? First, so that I don’t have to repeat my credentials for my subsequent articles in this series;

2.???????? Second, so that you, the reader, understand my street cred in this area of law if/when you read my articles; and

3.???????? Third, so you can appreciate why I may cuss a bit (in coded language to avoid LinkedIn’s censorship AI) or when I am brutally direct about counsel who insist on beginning with polarized starting positions and salespeople who ask me this question: “Why can we just sign this [name any agreement] as is?”

3.? One-Way NDAs - An Oxymoronic Phrase!

Let’s start right at the beginning of a business relationship, which typically (hopefully) starts with an NDA.

As I mentioned above, I think I am mellowing out nicely like a quality Pinot … but not like a Merlot, … don’t say Merlot … and if anyone mentions Merlot in their comments, I will %$#^&*%$ block you from my feed… (from Sideways (2004)). ?

However, this does not mean that I cannot and will not represent my client without passion or prejudice (Captain Jack Ross in A Few Good Men (1992)).? Of course I can; in fact, I can even be as nice as pie when I have to be.? But, being nice doesn’t mean rolling over on one-sided Ts and Cs in key risk areas including in – or rather, especially in – an NDA.

In my perspective, this is what a one-way NDA is saying to me (figuratively), as counsel to my client:

I will allow your folks talk to my folks and maybe do business with them but only my company’s information that I share with you will be protected.

My reaction to one-way NDAs is slightly less intense than that of Professor Terguson (played by the late, great comedian, Sam Kinison) in one of my favourite movies, Back to School (1986), where he goes off on a young student for the party-line answer about the Vietnam war: https://www.youtube.com/watch?v=k9DO26O6dIg. (Looking back at that classic scene, I think I have a bit more aging to do so I can just sigh about poorly drafted, legalese-laden, illogically-organized, verbose, one-sided agreements instead of blowing a gasket.)

But, seriously, I can’t believe the audacity of any company, in 2024, to think that a one-way NDA is anything but a non-starter.? In fact, my contracting classification of these types of NDA falls into one of three categories: GFY, NFW and GPS.? (I will leave these acronyms to your imagination … but you get the point.)?

4.????? As Counsel, How Do You Handle a One-Side NDA?

When my sales folks send me a take-it-or-leave-it one-way NDA for my risk assessment and approval (i.e. legal sign-off for the authorized, executive signatory), I make them “vet” the NDA using my one-page NDA Vetting Questionnaire.? (As a quick sidebar, this is one of many short, self-help forms that I have designed, drafted, refined and implemented to help my business folks understand the business risks of what their so-called “partner” is proposing. ?And, to complete my kvetching, I can’t think of a more mis-used word in the IT industry than “partner”.? Newsflash to all Vendor-side sales-folks: AWS, Google Cloud and MS Azure are not your partners.)

The completed NDA Vetting Questionnaire acts as a leading-indicator to flush-out whether I am dealing with a reasonable document or a M-F-ing piece of crap.? If the answers to my Questionnaire raise red flags, I do a deep-dive to see if I can salvage it with surgical edits and if not, I send something like the following e-mail to my executive signatory:

Dear X:

I received the attached NDA for review from [salesperson] regarding [name of opportunity].? It is a one-way NDA [and also includes the following clauses which are contrary to our contracting playbook on NDAs: ●].

I cannot?sign-off on this NDA because it means that our confidential information is not identified as such or protected in the same way that [Counterparty X’s] information is.??

Therefore, your options for this NDA are:

1.? Push-Back:?You can contact [Counterparty X] and explain that we do not sign one-way NDAs and that we are requesting that the proposed NDA be amended into a bi-lateral NDA for our review and comment;

or

2.? Accept the NDA “As Is”:?You can exercise your executive prerogative and sign the one-way NDA as drafted.

Regardless of how eager we may be for potential business, my advice is to?stand our ground?and reject this one-way NDA.

You, as an executive of our company, may wish to ask yourself: Do I really want [our company name] do business with a company that purports to start a business relationship by saying –?in effect – that?only its confidential information is worthy of protection?

Unless senior leaders like you push-back on your counterparts and “complain” that one-way NDAs are?not acceptable for the beginning of any new relationship with a target client (for the reasons explained above), it will set a bad precedent for any one-way agreements presented to us from time to time.

Regards,

George

My e-mail seems kinda direct, huh??

Yup, and it was drafted to be direct.?

Look, as counsel to the company, I have an obligation to call-out balls and strikes as I see them.? There are times when I will exercise my discretion, given my experience, to determine whether I can live with a document “as is” and sign-off, even though it may not fall squarely within the four corners of our contracting policies … but, I cannot be willfully blind to a very one-side agreement.

Why be conservative about NDAs? ?Well, think back to a few years.?

Do you think the FAANG companies were not careful about protecting their CI in their nascent days when they were not as powerful as they are today but still needed to interact with various companies for potential business opportunities??

Of course not … and as lawyers and business folks … we should be looking out for our company’s CI.? After all, we are not asking for anything unreasonable in requesting bi-lateral protection in an NDA.? (One of the main reasons I ask my sales-folks to complete my NDA Vetting Questionnaire is to avoid the irksome question of: Why can’t we just sign this NDA as is?? By having them complete the one-pager, it exposes the one-sidedness of the proposed NDA.)

5.????? Conclusion: Stand Your Ground About Unreasonable Risks

I “grew up” in the technology transactions legal advisory space as a “deal lawyer” primarily.? I have negotiated and closed hundreds of agreements of various shapes and sizes (simple, $1MM (and less) TCV deals to complex, multi-tower $500MM+ monsters), most of which started with an NDA.

In the process, I had to make judgment calls to protect my business principals, that is, the various companies I represented – and not the individual senior executives or salespeople that I went drinking with after during negotiations and following the closure of these deals.

With respect to a baseline agreement, like an NDA, I suggest that you, as counsel, lay a good foundation with your executive signatories about what is acceptable under your company’s contracting policies.?

In the hyper-competitive market of IT services, it is understandable that Clients put pressure on Vendors to sign one-sided agreements, starting with NDAs … just because they can … and just because they know that some companies (with HQs in countries where the rule of law and contracts is not regarded as it is by, say, those with North American or European HQs) will sign anything.?

However, this does not mean that you, as counsel for your company, should pander to one-sided agreements; that’s not your job.? Your job is to identify unacceptable risks in an agreement (in comparison to your company policies), using your experience and judgment, and let the business make a decision about those risks.

In most cases, the executives with whom I worked (and work) respected (respect) my opinion, even though they may override it from time to time.? The most resistance I encountered was from salespeople (even very senior ones), who resented me for doing my job (because it meant that they would not get their commission for closing the deal).? Sometimes, they would forum-shop for another counsel in the hope of getting legal sign-off on the risks that I had flagged that went well-beyond our contracting policies.? With respect to this latter scenario, I cannot recall a time where the forum-shopping strategy worked in their favour because the lawyers to whom they appealed concluded that if I, with my experience and judgment, had expressed concern about the language in a proposed agreement, they were not going to sign-off on it without modification.

As counsel, you should be prepared to be “cross-examined” by very smart, senior executives on how and why you arrived at your opinion about the allegedly ?offensive language in a proposed agreement, using plain language and examples.? In fact, you should do this with a trusted colleague (or counterpart, without divulging your company’s CI) first, before you have to defend your opinion before the executive(s).? In short, your opinion must be well-founded in facts and law and you must be able to explain it in plain-English.

The bottom line is that if you been true to your craft, you should be prepared to stand your ground on your opinion and then defer to your executive(s) to make the call about the risk(s) in issue or take direction from them about how to go back to the other side and try to close the gap.? In some cases, the issue will not be settled among lawyers, even GCs (or CLOs or whatever title the top-dog legal executive is called) but, rather, at the CEO level.?

Here endeth the lesson on NDAs.? (See you in a few months.)

GJA