THE UBIQUITOUS NDA: HARMLESS HABIT OR RISKY RITUAL?By Indigo Katzenbaum *It is often said that the average Silicon Valley start-up will enter into over 1,000 NDA’s (non-disclosure agreements) long before the company reaches its much-coveted liquidity event. The source of this statistic is unknown, but it seems to be a widely accepted truth.Should there be concern that so many companies blithely sign so many NDA’s? Especially when a large majority of them seem to be entered into without a lawyer’s prior review, let alone a cursory review by management?We won’t attempt to directly answer this searching question today. But we do want bring to your attention an interesting recent case involving an NDA that was decided by the Delaware Chancery Court – Vulcan Materials Company vs. Martin-Marietta Materials, Inc.

The case involved a party who was stunned when it learned that highly confidential information it had shared with a once-friendly merger suitor was later used by that party to help it mount an aggressive hostile takeover bid after the friendly discussions soured. A lengthy NDA had been entered into by the two parties.

The case is intriguing on several levels. First, both the parties have been among the most acquisitive of American companies over the past two decades. Second, the New York law firms representing the opposing parties – Wachtell, Lipton, Rosen and Katz, and Skadden, Arps, Slate, Meaghre and Flom – are among the most prominent – and aggressive – merger and acquisition law firms in America. Third, Chancellor Stine of the Chancery Court chose to write an especially colorful and frank opinion, one which did little to conceal his deep disdain for the party who used the NDA-derived information for a purpose that was quite different than what it was found to have been originally intended for.

Even though the case arose between two publicly-traded companies in a merger/acquisition context, we think there is a “take-away” for all who sign NDA’s:

  • Read all NDA’s carefully and make sure that the information’s permitted use is expressly limited to the purpose that the parties (especially the divulging party) intend.
  • Anticipate that the friendly atmosphere in which the NDA is given might later become less friendly, and that the information divulged might thus be in the hands of an enemy who could do harm to the disclosing party with the information.
  • Consider whether to include an expiration date for using the disclosed information. (Most NDA’s have expiration dates for when the confidentiality obligation expires. Few contain an expiration date for use of the information.)

A more detailed memorandum on this case can be found here. A copy of the complete case decision can be found here.

*Not the author’s real name. He is a high-profile Silicon Valley corporate lawyer who prefers, for personal, professional and spiritual reasons, to remain anonymous. The author is currently employed as a senior in-house counsel for a leading Silicon Valley Internet-based company.


How to Make A Bad Law Job Market Even Worse: A summer associate party held at the home of an East Coast IP boutique law firm’s managing partner went awry when a summer associate allegedly touched the bare arm of the host.

The managing partner-host had invited her boyfriend to the party, who is a transit police officer. The boyfriend carries a gun for his job. For reasons that are not yet clear, he chose to bring his weapon to the party.

The boyfriend, outraged at what he saw as an inappropriate touching of his girlfriend, drew his weapon and confronted the touchster.

The outcome: the party reportedly fell quite flat after the incident. And the summer associate-touchster did not receive an employment offer when his summer term ended.

Chutzpah Squared: A divorce lawyer got into a great deal of hot water when his client, a divorcing husband who learned his wife was having an affair with someone he thought to be a fireman, learned that the party making flames with his wife was none other than his own divorce lawyer.

The husband understandably fired the lawyer and sought a return of his legal fees. But the lawyer resisted. A legal claim for refund was then made. The lawyer’s multi-pronged defense: (1) my intentions were always honorable; (2) I rendered good service to you; (3) your wife was the first person who ever really understood my alcoholism, and she did not shun me when I tried to pick her up; and (4) I apologized to you, and told you I would discuss the matter of your fees.

The outcome: The lawyer was given a 3 year suspension from the practice of law. Shortly after the suspension was meted out, however, the lawyer was cited for another serious infraction, and he was disbarred

Grief Counseling, Indeed: A southern California criminal lawyer recently may have set new boundaries for what constitutes creative advocacy. His client, a college professor, was accused of arson for setting a string of eight fires. He also composed a long, rambling email threatening to carry out a shooting rampage, commit sexual assaults, burn down a school and to obtain a dozen machine guns.

The prosecutor cited the email as evidence that the defendant posed a danger to the community. The defense lawyer argued that the email was harmless, and was merely the defendant’s way of coping with his grief over the recent death of his son.

The outcome: The judge denied the defense attorney’s request for bail.


We’ve been working on some interesting matters lately. Spoiler alert: No billion dollar IPO’s; no appearances before the US Supreme Court; no purchases of Hawaiian island paradises.

Nevertheless, we’ve been busy on some enjoyable matters which we can talk briefly about, although we can’t mention specific names just yet. They include:

  • Representation of a corporate tenant in a Silicon Valley commercial office/R&D lease space so large that over 17 Wal-Mart stores (including their parking lots) would easily fit inside it. (This is just slightly smaller than the State of Rhode Island, and a tad bigger than Apple’s planned new global headquarters.)
  • Representation of parties in a bitter Silicon Valley/East Coast litigation between competing corporate shareholder interests – opposing parties who just happen to be siblings – that makes the legendary Hatfield and McCoy rivalry seem like a subdued game of checkers. The revenues of the coveted corporation are growing at a “hockey stick” rate, and are expected to exceed $40 Million this year.
  • We represented a private equity fund in its sale of a Silicon Valley-based semiconductor manufacturing corporation and its Asian subsidiaries to a publicly-traded foreign purchaser. Revenues of the target group of companies are expected to approach $100 Million this year.
  • We represent a successful serial entrepreneur in the child care and child education space who recently launched a “breakthrough concept” restaurant/lounge/child care facility in downtown Los Altos. She both created the concept and designed the facility, which features a gourmet chef, an all-organic menu and a relaxing and upscale lodge-like environment for fine dining and meetings, coupled with a separate on-site child care environment featuring highly trained staff, a 2,000 gallon aquarium and a broad array of brain-teasing toys, gadgets and tools for kids. www.bumblelosaltos.com
  • We represented the 3D@Home Alliance, the Silicon Valley-based global trade association for the rapidly growing 3D consumer technology industry in its merger with the Hollywood-based International 3D Society, a global trade association that focuses on the rapidly-growing movie and multi-media aspects of 3D technology. This combination has resulted in the largest trade association in the world dedicated to facilitating the growth, acceptance and success of 3D everywhere.
  • The Firm declined to accept an offer of representation from Donald Trump to assist with his proposed purchase of the entire island of Madagascar.



john boehnerMitt Romney may find the Hamptons a desirable venue for raising campaign funds. President Obama may find Atherton estates and Malibu beach houses more to his liking. But House Speaker John Boehner, the perpetually-tanned and always-grimacing face of the Republican Party in its endless showdowns with the Obama administration, recently chose to dine at Ann’s Coffee Shop, one of downtown Menlo Park’s most understated – and underestimated – fine restaurants.

We understand that the Speaker was here to raise money, too, but details of the success of his fund-raising efforts were not provided as of the time we went to press.

Like Mr. Boehner, Ann’s has not changed much over the years. It first opened in 1946. It’s the kind of place a Midwestern guy can really feel at home in. A side order of chilled Jell-O cubes is always an optional side dish with lunch or dinner. Superb rhubarb pie is available throughout the summer months. For breakfast, a pork chop and egg combination goes for $9.95, which includes hash browns. ($11.95 should you want to tank up with two pork chops.). Ann’s Meatloaf Special is a signature dish.

If you like Formica countertops and aqua-colored vinyl booths and seats, you’ll love Ann’s interior ambience. And you’ll love Nicky Poulos, its Greek-born proprietor who’s got a smile that can cheer up even the grumpiest of patrons. (It was reported that Speaker Boehner actually smiled briefly, especially after being told by Nicky that for him she’d whip up a deep-fried pork chop on a stick.)


Dear Aubergines Editor:

I’m writing to you because no one else seems to want to listen to me.

Money doesn’t mean a thing to me. Really. No, really.

Quoting myself, I really like to “move quickly and break things”. That may require an explanation. Let me try.

I want all 7 billion persons on our planet to be on Facebook. That is one bold goal, I realize. But I’m confident I can make it happen before year end.

But what I really want is for all of our planet’s animals to be on Facebook, too. Dogs, aardvarks, pythons, goldfish, ferrets, lemurs, you name it. By July 4th, 2013.

Why? Because I just know this will lead to world peace. And an end to poverty, malaria and erectile dysfunction. Not to mention abundant prosperity and endless smoothies for all.

mark zuckerbergHow do I know this? I regularly consult with Redfeather Rozenkranz, the noted spiritual advisor who so ably took Rielle Hunter through her tragic personal crisis with John Edwards when her Rueben sandwich came with a sauce that she thought “looked funny.” Redfeather also works closely with other respected high profile people like Kim Kardashian, Nancy Grace and the Jackson Family.

Redfeather sees a future where one day plants, microbes and even spirits will be able to connect on Facebook. And monetization will ooze from every keystroke. (I like that last part a lot.)

My question is this: Do you think I am nuts?

Mark Zuckerberg

Dear Mark:

Have you considered that wearing your hoodie throughout the warm summer months may not be such a great idea?


The Editor