Nondisclosure agreements are usually simple contracts between cooperating companies that say the proprietary technology revealed in the course of business will be treated as confidential and not revealed to third parties. Several variations are available online for less than $10. These agreements called NDAs make sense in a slightly paranoid world.

NDAs make even more sense in light of the continuing trend toward outsourcing. Bob St. John, Corporate Product Manager with New England Catheter, says he's signed more NDAs in the last 18 months than in his first 18 years in the medical industry, and they are starting to get in the way of doing business. A few problems he cites include excessively restrictive NDAs and those with legal absurdities and irrelevant details. A few suggest a third party is indiscriminately spreading a good idea around. In a nutshell, paranoia is trumping common sense.

Let's look in particular at excessive restrictions. St. John recalls a conversation with a company that wanted signed NDAs before they visited to discuss a new catheter idea. “On the surface, it sounds OK, but the nondisclosure agreement in this case stated in effect that, ‘Any manufacturing process used to make our product will not be used for anyone else's.’ That's absurd and unrealistic. Braiding and extrusion are the bread and butter of catheter manufacturers. I asked their engineering manager, ‘Are you saying if we make a braided tube for you, we can't braid or extrude for anyone else?” ‘Yes, that is correct,’” the manager said. He would not budge on the point of irrational restrictions, so the conversation ended.

It also seems a lot of people are just amateurish about business. In another case, an engineer produced an NDA that had the catheter manufacturer covering any legal fees the customer might incur from a breach of the NDA. “An extreme interpretation would have us paying them to sue us if they perceive us to be at fault,” says St. John.

And perhaps some designers are not aware of what is genuinely innovative. “One company submitted a design for an angiography catheter that had been around for 20 years. The design called for the same type of braided shaft we make for several other companies. When we asked why an NDA for an ordinary product, they responded that, ‘Ours is different. It's 43 inches long, not 42.'”

And in a perverse twist of intentions, NDAs can prevent contract manufacturers from heading off expensive or time-wasting practices. “For instance, some ideas are the idea-of-the-week,” says St. John. “In the last five months I must have had five separate requests for the same specific type of catheter, each with an NDA. One explanation is that the industry can be spurred to action by thought leaders — inventive doctors. A physician might need a new type of device and so he suggests it to several device designers. And they act on it, asking contract manufacturers to help design and prototype the idea. After we sign the first NDA for that type of product, we are legally bound not to disclose anything about it or that company's ideas. It is especially difficult when several more ideas for the same device come along. We have to deal with each one as a unique circumstance, even if we know the second concept will cost more and take longer to develop. “

Is there a way out of the nuttiness? There is. First revive common sense. When companies sign NDAs all parties should be comfortable with the agreement. “St. John suggests that, “Companies should have a general purpose nondisclosure that acknowledges you have good stuff and we have good stuff and we'll share but we won't tell anyone else about it. It's a page and a half of boiler plate. Its key points are duality and protection of true intellectual property. The agreement should also include a clause that requires following up verbal disclosures in writing. It's good to reiterate the technical aspects of a conversation and help avoid possible ‘he said - she said’ legal arguments.”

Second, be realistic and flexible. Compromise is not always bad. A ‘take it or leave it attitude’ rarely survives as a long-term business philosophy in manufacturing. Third and most importantly, be an ethical partner. No amount of paperwork can substitute for proper ethical behavior.