What Is A Non-Disclosure Agreement?
A Non-Disclosure Agreement, or NDA, is a legal agreement between your prospective software development company and yourself not to disclose any information relating to your project to anyone else, and it’s something that’s usually signed even before tendering the contract to your chosen development company.
Why is it important? Sometimes the prospective client may need to share specific information with the development house that might be disadvantageous to them if it fell into the wrong hands (for example, business-critical information).
Other times, the client may want to protect a new idea. Having an NDA ensures your intellectual property is protected before you share any confidential parts of your ideas with anyone.
Many NDAs specify that the NDA continues past the term of the agreement, and that anything disclosed to you must be kept confidential, unless it is subsequently made public.
Who’s included in the Non-Disclosure Agreement?
If people work for you as employees or subcontractors, it may be necessary to share some of the protected information with them in order to fulfil your obligation. If that is the case, make sure the NDA includes provision for those people. This means the subcontractor/employee must also sign an agreement that binds them to the same level of discretion.
Types of NDA
There are usually two types of Non-Disclosure Agreement:
- Unilateral non-disclosure agreement – one party agrees not to disclose particular information of another party.
- Mutual non-disclosure agreement – both parties agree to not share the other’s information.
The one-sided agreement is when you are contemplating that only one side will be sharing confidential information with the other side. The mutual NDA form is for situations where each side may potentially share confidential information.
What is covered by a Non-Disclosure Agreement?
In software development, the confidential information can include source code, development process peculiarities, project and release details, new app concepts, trade secrets, business strategy, information about customers, and so on.
The common parts of an NDA will also include a timeframe – that is, the effect and duration of the NDA – and specific details of the information that is to be kept confidential.
The Key Elements of Non-Disclosure Agreements:
- Identification of the parties
- Definition of what is deemed to be confidential
- The scope of the confidentiality obligation by the receiving party
- The exclusions from confidential treatment
- The term of the agreement
We can discuss these five key elements in more detail here:
The Parties to the Agreement
The parties to the agreement are usually a straightforward description set forth at the beginning of the contract. If it’s an agreement where only one side is providing confidential information, then the disclosing party can be referred to as the disclosing party and the recipient of the information can simply be referred to as the recipient.
Something to bear in mind is whether any other people or companies may also be a party to the agreement. In other words, will the recipient need to show the confidential information to a related or affiliated third party? If so, the NDA should also cover those third parties.
What Is Deemed Confidential?
This part of the NDA deals with the definition of what is deemed confidential. Is it all the information, or only information that is marked in writing as ‘confidential’? Can oral information be deemed as confidential?
In the context of software development, it’s important to put the concerns of an NDA in its proper place. A software development company’s focus is primarily on providing development services to their clients, not on finding a loophole and using your valuable secrets. Building a reputation as time goes on is a key part of a software developer’s longevity and viability. Nevertheless, make sure the information you want keep secret is clearly identified in the NDA, including any oral information.
Scope of the Confidentiality Obligation
The core of the Non-Disclosure Agreement is a two-part obligation on the receiver of the information: to keep the confidential information confidential and not use the confidential information itself. This usually means that the recipient has to take reasonable steps to not let others have access to it (or only a few people within the recipient’s company).
The second part is also crucial—that recipients can’t use the information themselves. If the scope of the NDA is broad enough, then you can sue for damages or to stop the recipients if they breach either their confidentiality obligations or their non-use agreement.
Exclusions from Confidentiality Treatment
NDAs can contain certain exclusions, which are intended to address situations where it would be impractical for the other side to keep the information confidential, such as:
- The information is already known to the recipient
- The information is publicly known
- The knowledge was independently developed by the recipient without reference to or use of the confidential information of the disclosing party
- The information was disclosed to the recipient by some other party who had no duty of the confidentiality to the disclosing party
The NDA can also deal with the situation where the recipient is forced to disclose information by court order without breaching the NDA, as long as the disclosing party knows about it.
Term of the Agreement
How long should the NDA last? For practical purposes, most information becomes useless after a certain number of years anyway, and the cost of policing confidentiality obligations can become expensive if the obligation doesn’t have an expiry date.
So what is a reasonable term? Ultimately it depends on the industry you are in and the type of information conveyed. Pharmaceutical companies may have longer (because drug testing and approvals can take a long time), tech companies not so long, simply because technology changes quickly, rendering the information worthless after a few years.
Most agreements have a time limit of two to five years. However, your NDA also needs to say that, even after the term is ended, the confidentiality survives the termination of the agreement, including any rights under copyright, patent, or other intellectual property laws.
Since its formation in 1997, Blueberry has been fortunate enough to work on many interesting projects, with clients both large and small. I’ve included a link below demonstrating some projects we’ve worked on where an NDA wasn’t necessary and permission was given to showcase the work.
If you have a project you’d like to discuss and would like an NDA, we have a good one we can send you – just ask!