The exchange of information is an integral part of any collaboration. From marketing to development to consulting with management, in each stage of interaction with a potential strategic partner, you have to share some data about your project.
When it comes to software development space, it can be the access to business processes, the intellectual property that underlies existing systems, product roadmaps, lines of codes, and possibly even customer and financial data.
No matter what the nature and amount of such data are, it cannot be used for any unauthorized purpose. To make sure that it will not pass on to other parties without explicit permission, you have to prepare a Non-Disclosure Agreement (NDA).
At Altigee, we collaborate with different companies and happen to be involved in various NDAs. Having accumulated some knowledge, I decided to share it with a broad audience. In this article, you will learn everything about NDA for software development, and so will be able to write your own document from scratch.
What is a Nondisclosure Agreement?
A non-disclosure agreement is an official statement to not disclose private information regarding a specific project. The purpose of an NDA is to prevent third parties from discussing the stipulated data with others or using it for creating a competing product or service.
In fact, this document can be applied to any realm. NDA for software development can be prepared when you require developing a mobile application, web application, or any other software product, and you share some intellectual property and other trademarked material.
There are other variations of NDA. And although all of them are pretty similar, there are subtle differences you should know:
- CA (confidentiality agreement) is more popular in the United Kingdom, New Zealand, and Australia. By design, it is used to disclose (while NDA protects) certain information.
- SA (agreement on secrecy) is mainly used in Europe. It’s no different from an NDA.
- CDA (Confidential Disclosure Agreement). Initially, there is no difference between a CDA and an NDA, but a CDA is used when a higher degree of secrecy is required.
- PIA (information ownership agreement). No difference with NDA.
The choice of what document to use is primarily up to the preference of the involved parties. To the greatest extent, the whole difference lies in the titles. I prefer NDA because it is the most frequently used form, especially in the United States.
Types of NDA
It is obvious that this document is used by two (or more) parties that step into a potential joint venture. Depending on the number of the signees, there may be different documents:
- Unilateral NDA
This type is also referred to as one-way or one-sided NDA, and it is used when only one side is sharing and protecting materials. It is the most frequently used type, the goal of which is to ensure that the recipient of the document will not accidentally reveal confidential information.
- Bilateral NDA
Also called a mutual or two-way type, this document is signed when both parties are providing access to each other’s confidential information. For example, you reveal your ideas of the project, and the vendor reveals its own development strategy. The goal is to make sure that each of you will not wrongfully use that information.
- Multilateral NDA
A bit of a rare case, because it may involve three or even more parties, so will require more complex negotiations. In this type, at least one side is providing access to private data, and all recipients promise to not leak it.
Other than that, there could be definite or indefinite types. A definite type binds the other party for a fixed period, while an indefinite one binds a person forever. That means, the signer cannot disclose confidential information even after the contract has ended.
When do you need to ask for an NDA?
The purpose of NDA is twofold, to provide confidentiality and protection. When there is a need for both, this legal document helps you:
- To keep your trade secret
A trade secret is a type of confidential information that has exceptional value to a business and is subject to special efforts to maintain its secrecy. It can be a sales plan, a list of customers, a manufacturing process, etc.
- To keep your project a secret before release
- To protect other confidential information
When it comes to the NDA agreement for software development, you can protect highly technical processes, business plans, lines of code, or other intellectual property assets that are unique and important. The negotiated deal serves as an excellent way to set a tone of confidentiality and prevent careless chatter.
What about cases when you don’t need to sign an NDA? Sure, they exist. Your basic business idea, for example, is not proprietary information, because it’s not private. If you’re pitching your ideas at networking events, then those ideas are not confidential either.
For example, if you instruct a software company to create a shared mobile application or website based on WordPress, the whole legal thing will only slow down the process. In such cases, the private agreement may typically cause you to look unprofessional or inexperienced.
What should an NDA include?
Each document may look different, and that’s okay because everything should be tailored as per your unique case. There is no sense to replicate some NDA template for software development. However, there are several components that must be clearly defined:
- Identify all parties
Name all the parties involved in the agreement:
- the recipient (vendors, consultants, agents, and other partners);
- the owner of confidential information.
- Define the range of materials to be secured
Define what scope of information belongs exclusively to you and is secret. Also, find out what is already in the public domain, so there will be no sense to state these facts in the document. Make sure your data fits the specific circumstance.
Define the timeframe within which the deal is valid, and disclosed data must be kept safe. As a rule, the standard duration may take up to 2-3 years.
- Consequences of breaking a contract
What will happen if someone breaks the agreement? What are the potential outcomes of infringement of copyright, trade secret expropriation, breach of fiduciary duty, modification, and other various IP contraventions? State any miscellaneous provisions and how any disputes over the agreement should be settled (for example, in court or arbitration).
The above NDA format for software development may be the most winning option for any project. However, you can’t adjust it to your own structure or include more points. Keep in mind that the main idea is to customize the document.
Things better avoided in the NDA
It's up to you how to present that data. After all, you set your rules and decide what is acceptable and what is not. Nevertheless, there are some common mistakes you should definitely avoid while preparing the document:
- Not getting legal advice
Very often it can be unclear what kind of information will be sensitive. Besides, there could be a risk of violating existing legislation or regulations. In such cases, ignoring the help of the attorney is like skating on thin ice. NDA is a legal document, and when you have doubts we recommend reaching out to a lawyer to discuss all terms and clauses.
- Unclear definitions
Don’t overcomplicate your language while describing your confidential information. Come straight to the point and use only important points related to your specific project. No need to add bulk data, something not related to your case, or repeat the same things a couple of times. It is always good when an NDA is clear to the recipient, and there are no problems with it.
- Infinite duration
There is arguably no sense in forcing your partner to sign a document with perpetual duration and taking your secret to the grave. As a rule, an NDA should be active during set time frames.
What you're sending over is what you actually want it to be. That’s why it is better to approach this process with special care and avoid all possible glitches.
NDA for software development
In the software development space, NDA is widely used at the beginning of the collaboration with other documents like Request for Proposal (RFP), or Statement of Work (SOW). Because this document is legally binding, you can rest assured that your trade secret is protected, so you can proceed to further steps of collaboration.
Here are some of the things to know for software development projects:
- Provide layers of information gradually.
It is the worst mistake to leak all details about your project in the first meeting. Take some time to see whether your strategic partner has an interest, a serious one, and only then share more stuff and the document itself.
- Choose your level of customization.
It is a good idea to view a sample NDA agreement for software development prior to writing. At the same time, tailor it for your audience. Take into account your customers, the type of vendors, commercial business relationships, employees, and consultants.
- Take into account the geography of your partner.
Often you may encounter the need to bind your ties with vendors abroad. For an international partner, provide a sample in the corresponding language, and take into account the national legislation of both sides. An NDA can easily become a multi-language contract, so look for a professional translator to provide you with the right wordings and avoid any issues regarding language barriers.
Templates to use
In my experience, it is always beneficial to view more than one NDA for a software development template. Here are several samples I find helpful to use as models when drafting your agreement:
To sum it up
NDA for software development is an essential element to build trust with your partners and safeguard all valuable details from leakage. I hope this guide will simplify the overall process of writing, so you will be able to maintain the highest confidentiality and develop your product without any incidents.
If you are interested in building and growing a team for an IT project, feel free to contact us.