Embargoes, NDAs, and tech journalism’s way of doing business

By Adam L. Penenberg , written on November 18, 2012

From The News Desk

Last week, Antonio Regalado, an editor at Technology Review, asked my opinion about a stealth company circulating a non-disclosure agreement (NDA) for a pre-launch product demo. The company was making it a pre-condition for him to get a sneak peek at the technology. If he signed he was told he could join other reporters in respecting a press embargo.

Regalado abhors embargoes. In his mind they assist companies in maximizing buzz and the financial payoff of their news by keeping information from readers until a pre-appointed time that companies get to select. Still, Regalado was curious about the NDA and asked to see it. He had no intention of signing one, because, as he understood it, it would have given the source legal control over the facts.

Actually, an NDA, he recognized, is an embargo with legal consequences, and the language in the one he received was so restrictive it could expose a publication to extensive liability. The NDA was enforceable for up to three years and by signing he would acknowledge that breaching the agreement could cause “irreparable damage” for which “recovery of damages would be inadequate.” Further, the company would “be entitled to seek injunctive relief,” as well as “such further relief as may be granted by a court…” He was surprised there was no end date on it. By his reading of the document, even if another publication jumped the gun on a story, he couldn’t publish until the company gave the go ahead. Otherwise he’d be, strictly speaking, violating the terms of the agreement.

Regalado wanted to know how common this practice was. So we chatted, and he told me he had asked the company, Misfit Wearables, which news organizations had agreed to the NDA. After not hearing back he dug into patents, trademarks, and domain registrations to see if he could divine what the company was up to. He was making progress when the story broke about Shine, an activity-tracking device forged into a piece of jewelry, which the company was hoping to crowdfund on Indiegogo to the tune of $100,000. Suddenly, almost magically, articles were simultaneously published in Gizmodo, TechCrunch, ABC News, MobiHealthNews, Fast Company, and Forbes.

He wondered if any of these reporters had signed the company’s NDA, which would have precluded them from calling Misfit Wearable competitors or other skeptical sources to discuss the product. That would be a more serious failing than allowing a company to dictate when you could publish a story, which is the standard routine for embargoes.

“We’re talking about a pedometer, and a $100,000 Indiegogo campaign,” Regalado says.  "It’s not Watergate. The stakes seem pretty low. Even so, it’s an interesting window on how things work.”

Indeed. Anyone who has hung around Silicon Valley has likely encountered NDAs and press embargoes, both of which are doled as freely as sugar nuggets from PEZ dispensers. NDAs exist so that companies can engage in discussions and share information without fear that one of the parties will walk off with the other’s crown jewels, or to prevent employees who leave to join competitors from absconding with valuable intellectual property. Embargoes, on the other hand, give companies the ability to trade access to journalists for the power to control the timing and release of stories. Both serve to restrict the flow of information. I wrote a book on corporate espionage titled "Spooked" that was published back in 2000 (you can read an excerpt in The New York Times magazine) and on a daily basis ran into NDAs that bound my sources and what they could talk about. Recently, the Pentagon accused the Navy Seal who wrote the tell-all book on the assassination of Osama Bin Laden of violating his NDA. Companies like Google, Microsoft, and Facebook make a point of asking everyone who enters their buildings to sign an NDA.

Not everyone will allow himself to be bound by one. Most venture capitalists, who see countless startup ideas and technologies every year, won’t sign, because they fear that an unrequited startup founder might sue if they were to invest in a company with a similar concept or technology. (It’s also why literary agents and film producers won’t read unsolicited manuscripts or scripts.) And while gadget reviewers may sign non-disclosure agreements to gain a sneak peek at products before they’re released, they’re a touchy subject with most other journalists.

Siva Vaidhyanathan, professor of media studies at the University of Virginia and author of The Googlization of Everything, tweeted that he declined to sign an NDA but Google let him in anyway. Michael Fitzgerald, a freelance writer and former editor at Red Herring, has a policy of not signing NDAs because of the broad and restrictive language in them. Last year he was researching a story on Harmonix for Boston Magazine when the company insisted he sign an NDA, which would, if Fitzgerald followed its dictates, have prevented him from writing the story. He faxed the agreement to his editor, and he showed it to the magazine’s lawyer, who advised against signing. But Harmonix executives wouldn’t let him inside without the signed paper, so they worked out a compromise. Fitzgerald conducted interviews in a conference room off the lobby with the rest occurring over the phone. “It would've been a better story if I had been able to roam a bit more freely through the company, and come back to see a few things,” he says, “but it worked out well enough.”

A year and a half ago I was asked to sign an NDA before I would be allowed to conduct three days of interviews on the Microsoft campus for a book I’m writing. I told the company I wouldn’t sign unless someone could define “confidential information,” which the NDA would have prohibited me from divulging. “How can I be sure I’m not violating the agreement,” I argued with Catch-22 panache, “unless I know what I’m not supposed to know?” If the company did that, however, it would be divulging what it was sworn to keep secret. Ultimately we agreed that nobody at Microsoft would tell me anything “confidential” and left it at that.

While NDAs open up a publication to potentially significant damages, they are also hard to enforce. How do you prove a company with which you engaged in talks pilfered information that somehow made it into its products or business strategies, or that a journalist, by publishing a story before you gave the go ahead, caused you damage? NDAs are really just the equivalent of looking someone in the eye and saying, “Don’t even think of messing with me.”

But you can pardon publications for being cautious. When a reporter signs on the dotted line, he isn’t merely putting himself at risk; he’s also dragging his publication into this morass. This is true for any prearranged deals a reporter makes with a source. It used to be a reporter who relied on an anonymous source kept that person’s identity secret. Not even his editors would know. Bob Woodward didn’t tell editor Ben Bradlee who Deep Throat was, and Bradlee didn’t ask until after Nixon had resigned.

A few events led to the unraveling of this reporter-source exclusivity. During the Clinton administration The New York Times relied on unnamed Clinton administration officials to finger a Taiwanese-born scientist, Wen Ho Lee, for spying for China. The Times ended up apologizing for its coverage. Then there was New York Times reporter Judith Miller, who relied on a sketchy source for her reporting that led up to the Iraq war, claiming that Sadaam Hussein maintained vast stores of chemical weapons. The Times suffered great embarrassment when much of her reporting on the subject was later shown to be inaccurate or false. And there was the Valerie Plame case, when reporter Matthew Cooper  was charged with contempt and faced jail while his publication, Time, faced steep fines of $1,000 a day until he would testify. Time eventually capitulated and turned over the subpoenaed material. Meanwhile Judith Miller chose to serve 85 days in jail until Scooter Libby called to reiterate his release of confidentiality, which he had offered a year earlier. Libby was later convicted of lying to the FBI and a grand jury.

After this, with money and their reputations at stake, publications began to clamp down on anonymous source deals. As the New York Times “Confidential News Sources Policy” states, “When anonymity is granted, reporter and source must understand that the commitment is undertaken by the newspaper, not alone by an individual journalist.” Only in “the case of exceptionally sensitive reporting, on crucial issues of law or national security in which sources face dire consequences if exposed, the reporter may appeal to the executive editor for total confidentiality.”

But it is the ever-popular press embargo that has been transformed into a high art form. They first became a staple at scientific publications like Nature, The Journal of the American Medical Association, and The New England Journal of Medicine and Science, and spread to technology and business. With an embargo both sides can benefit. For the journals announcing scientific breakthroughs or new technologies they generate a powerful PR blast when a dozen outlets simultaneously publish stories.

The reporters get something out of the arrangement, too. It levels the playing field, otherwise, the thinking goes, The Wall Street Journal or The New York Times would be handed every important scoop. With an embargo a one-man or -woman blog can compete with big media. It also, in theory, gives a reporter time to research and write a better story. We at PandoDaily will agree to them from time to time, although we would prefer not to -- but we would never violate one.

The penalty for jumping the gun on an embargoed story varies. Sometimes it leads to a reporter’s venomous post. Other times a company will blackball the offending journalist from future news releases. Sony Pictures chastised New Yorker film critic David Denby for breaking an embargo the studio placed on reviews of “The Girl With the Dragon Tattoo.” Mostly nothing happens. Both the crime and the penalty are puny in the grand scheme of things.

If you think about it, though, embargoes are antithetical to the way journalism is supposed to work. Imagine if a pack of reporters came upon the corpse of a politician on the sidewalk outside a Hooters, and his spokesperson said, “Okay, nobody publish a story until I say so.”

Which brings me back to November 14, when a rash of stories about Misfit Wearables' "Shine" hit the Web all around the same time. (Note: Technology Review published a piece after the fact.) Were they all respecting an embargo, or did any of them sign an NDA? I contacted reporters from Gizmodo, Forbes, ABC, Fast Company, TechCrunch, and MobiHealthNews to ask. Ariel Schwartz from Fast Company Co-Exist, Brian Dolan of MobiHealthNews and Joanna Stern from ABC all said they were never asked about a non-disclosure agreement, although Stern said she does "sign a lot of NDAs," just not the one from Misfit. The writers from Forbes, Gizmodo and TechCrunch never responded.

Peter Ha of Gizmodo seemed particularly irritated that I would even inquire. He didn’t favor me with a reply, but he posted to Muck Rack: “‘Journalists’ are now writing stories about other journalists signing or not signing NDAs?” (The air quotes around journalists were a classy touch.) I guess we know where he stands on the issue.

I got hold of Sonny Vu, Misfit Wearables founder, who filled in the rest. He said the only publication to which he sent the NDA was Technology Review, “because we'd just gotten weird vibes from them in the past. Possibly just a misunderstanding on our part.” If I were Antonio Regalado, I'd take that as a compliment. Vu probably realized he couldn't be easily spun. The rest of the reporters were under embargo. Vu added, “As you can probably guess we're on a start-up budget for everything, so we've done a lot of things on a shoestring budget, including PR” -- no PR firm, he added, just his “leg-injured” assistant and him, “so it's a new world for us.”

For newbies, they orchestrated the press coverage like seasoned professionals. There was nary a critical word in the stories that came out. More to the point, it took just 10 hours for Sonny and company to raise $100,000 on Indiegogo from 1,500 backers from 52 countries and all 50 states. At last count, they were on their way to doubling that and more.

Sonny thanked me for my interest. “Just about any press we can get is welcomed,” he said. Maybe “it'll drive traffic to our campaign.”