Are there limitations when signing an NDA from a company that is interested in buying me out?
I have only been in business with a product that I have invented, developed and taken to market for three months. Currently it's patent is pending. But at a recent trade show another company expressed an interest in buying me out with royalties. They want me to sign an NDA and I am having them sign my NDA. This is just so that we can share proprietary information but will a typical NDA restrict me from doing a deal with someone else? I highly doubt it, but I just wanted to make sure.
Thanks for your help on this. If you have any other answers relating to royalty agreements that I can look up, please let me know.
Generally, an NDA does not prevent you from sharing your confidential information with others--only the confidential information of the other party. Where you want to be careful with an NDA is in its scope. Here, you'll want your NDA to say that you're sharing information for a particular purpose -- to see if there is a basis for moving forward with a buyout--not for confidential purposes for all time. However, you may not be such an attractive buyout target if you're running around town sharing your confidential information with others. Best to clarify whether you'll be handling one "suitor" at a time or whether you have the right to share the information with others at the same time. Also, you'll want to secure the return of your confidential information within a short time (7-10 days) after you have concluded negotiations (especially if the other company decides not to go forward). As to the royalties, I can't stress enough that you should have an attorney advising you should the negotiations go forward. An attorney who is experienced in your area will have a strong sense of what royalty structures work best (and to your best advantage) for your kind of deal and what's realistic.
Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.