Signing a contract or agreement is essential for any business, whether it is projected consulting or software development. This is because while working with another party requires the sharing of certain confidential information or trade secrets. The type of information shared completely depends on the business owners and their requirements from the software development company.
However, the software developers require specific business information like product roadmaps, financial data, customer details, and the most important details about the existing system. To access all this information, the software development service providers have to sign the non-disclosure agreement (NDA) to make the business owners believe that their business data will remain confidential.
What is NDA in Software Development?
NDA (Non-Disclosure Agreement) in software development means a contract that one party (receiving party) agrees to keep some of the information confidential that it learns from the other party (disclosing party).
A non-disclosure agreement can also be mutual between both parties. Here both of them agree to keep certain shared information to themselves. Generally, NDA describes software development projects that may only remain between the business owner and the software development company.
With NDA, clarification of the parties’ expectations is sorted, making disclosing more comfortable sharing important information. In addition to this, NDA can protect the secrets of the firm and its working methods.
What are the Types of Software Development NDA?
There are two types of NDA in software development. They are -
1.Unilateral Non-Disclosure Agreement
When it’s about software development, signing the non-disclosure agreement is a very common practice. The software developers who are working on the project need insight into the business to create a system for them. Therefore, an NDA is signed to build trust between both parties. When such an NDA is signed where one party agrees not to disclose the other party’s information, it is known as a Unilateral Non-Disclosure Agreement.
2.Mutual Non-Disclosure Agreement
There are some cases when both parties request each other to sign the NDAs, so a “Mutual NDA” is created. This means that when the development process starts, the client asks the software development company to sign the NDA so that their business secrets don’t get revealed, and in return, the company asks the clients to sign the NDA so that their developing techniques and other important information remain confidential.
Benefits of Signing a Non-Disclosure Agreement
Some of the benefits of signing an NDA are -
1.One of the advantages of signing the NDA is protecting the software development project’s information. It allows you to agree on what information to disclose and what not to.
2.With NDA, the parties can define confidential information and make it clear that certain information cannot be disclosed. This type of information can be patent ideas, employee information, passwords, and more.
3.When NDA is drafted, the drafter can clearly specify what can be exclusively included in the agreement. Therefore it can also be customized and have all the specific details needed.
Why Sign a Non-Disclosure Agreement?
When a software developer takes a development project in hand, he would have his trade secrets like prototypes, designs, business intelligence, and algorithms for the project. All these will be important for the client, and mostly the client might want the plans to be patent. Before the client could file it safely, he would definitely want the software development company to protect all the information of the project by signing an NDA.
When is a Non-Disclosure Agreement needed?
There are many situations when a business has to share confidential and private information with other organizations. In such cases, to ensure that the shared information remains confidential, an NDA is signed. Here are some of the situations that demand the need to sign the non-disclosure agreement.
- Getting your business software created by a company that needs to access your private information or trade secrets.
- While discussing licensing or sale of a product.
- Offer is presented to an investor or potential partner.
- When partners or clients, or employees have access to proprietary and confidential information.
- Sharing business information when selling your product.
Important Points that are Must be in a Non-Disclosure Agreement
- Source of the Confidential Information
When a non-disclosure agreement is signed, it restricts the receiving party to use the confidential information in creating another project or use it for any other client. This is the main reason behind signing NDA is an essential thing before starting the software development procedure. But as a software developer, one would like that the NDA specifies that using confidential information of one client for another client’s work is prohibited. Still, if that information is accidentally publicly disclosed by someone, then the developers can use it.
2. Effective Length
The non-disclosure agreement clearly specifies the term during which the parties need to keep the information confidential. But in this technological world, there is no need to be tied up for the long-term as new apps could be old tomorrow. However, when it’s about the trade secrets of the company, it must be kept confidential as its disclosure would affect the value of the firm.
When someone has to sign the NDA, it usually happens that the client asks the software development company to sign the agreement after a few meetings and to finalize the project details. Besides this, sometimes, if the first meeting has a high-level conversation, the company signs the NDA initially.
4. Breach Consequences
The NDA must describe the consequences of the agreement breach for both the parties. The breach could be anything like monetary damage, legal liability, or loss of professional information. If any such rule is broken, then a lawsuit can be filed against the party that breaches the contract.
One of the most critical points in a non-disclosure agreement is the information about the party that owns the details that are being shared. This information is written in the NDA as it is clear who has the authority to execute the trade secrets.
After understanding all the important things that are required in the non-disclosure agreement, we will now learn how to make sure that the NDA you are going to sign is created by following industry standards.
Here are a few things to look for when you are reviewing or writing an NDA.
- Violation of Legal Information
The non-disclosure agreement (NDA) might not have all the information or say terms about the violation of the existing regulations or legislation of the organization. It might not also force the software development companies to avoid violation of those rules.
2. Use of Broad Language
When talking about the non-disclosure agreement, it must be capable of identifying the information that it needs to protect. This concept is so broad that there might be difficulty in enforcing it and making it signed by the software developers to give them access to the business information. All this is because the agreement might contain non-confidential information. Therefore, it is suggested only to add IP related information in the project.
When an NDA is created and signed by the parties, it is believed that it will survive the engagement for the specified time, but if it lasts the perpetual duration that there might be chances that it overreaches.
As discussed in this blog, whenever any information about your firm is shared with other organizations, signing an NDA before starting the product development process becomes essential to protect your trade secrets and sensitive information.
After looking at all the details of a non-disclosure agreement (NDA), we can say that having a good relationship between a client and a software development company is built purely on trust. Both these parties should be ready to protect each other’s confidential information to have a strong NDA.