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Developing a software program is a game-changer for any business or individual. Whether you’re selling that software program to customers or using it to increase performance and efficiency within your own company, your opportunities are limitless with software development.
With that said, software development comes with a great deal of risk and jeopardy — especially when outsourcing development to another company. As much as your idea means to you, there is a wide range of people out there that would love to steal that idea and claim it as their own.
It’s an unfortunate part of doing business, but it’s a reality nonetheless. Luckily, there are ways to protect your idea and maintain the integrity surrounding the software development process. Of all the things you can do, nothing is more important than signing an NDA prior to inception.
What is an NDA?
An NDA, also known as a non-disclosure agreement, is a legal contract between two parties, such as the software developer (or software development firm) and yourself. It outlines the information being shared and requires that information remain confidential throughout the development process.
The use of an NDA comes in handy when two parties are considering entering a business relationship, such as a custom software development project. It allows a company to properly evaluate the potential relationship without fear of confidential information being stolen, exposed, or compromised.
In the event a party breaches the non-disclosure agreement by sharing confidential information, such as trade secrets or unique ideas, the other party may seek legal recourse as a form of retribution. It will certainly make the party think twice before sharing sensitive information with someone outside of your company.
What are the components of an NDA?
No two NDAs are the same. Since there’s no standard template when creating a non-disclosure agreement, it’s going to look, read, and sound different every single time. Some are going to be short and sweet, while others will be long and filled with legalese — it all depends on the situation.
While the NDAs language and style will vary depending on the nature of the parties’ relationship and the information being shared, there are several components that every NDA should include:
- Identification of the Parties Involved – it’s important that you list the disclosing and recipient parties involved in the non-disclosure agreement.
- Defining the Confidential Information – the NDA should clearly define what information is considered confidential and therefore covered within the agreement. It should also cover any exclusions from confidential treatment.
- Explanation of Using Information – each party should understand when the confidential or sensitive information can be used, as well as when it can’t be used. It should also explain reasonable measures required to avoid unauthorized disclosure.
- Timeframe for Disclosure – the timeframe in which the agreement is valid (typically 1-3 years) as well as the requirement of return or destruction of confidential information upon termination of the agreement.
- Choice of Court Jurisdiction – in the event a party violates or breaches what’s defined in the NDA, it should list what court will hold jurisdiction over that violation.
- Punishment for Violations – also in the event of a violation or breach of the NDA, the punishment for such violation should be clearly defined in the language.
- Signatures of Both Parties – a non-disclosure agreement isn’t valid unless all parties have signed it. Once signed, the NDA will go into effect, according to the timeframe listed in the NDA.
The non-disclosure agreement can be as complex or as simple as you need, so long as it contains everything you need it to contain and it’s signed by both parties. The more complex it is, however, the harder it will be for the other party to find loopholes and take advantage of it.
Why is it important to have an NDA for software development?
An NDA is becoming more commonplace in the software development industry, largely due to the sensitive nature and purpose of software prior to completion. It’s often the first thing a company thinks of before they start the development process or during the initial interviews.
Let’s take a look at some of the most prominent reasons why an NDA is important when outsourcing software development to an outside company:
- An NDA protects your business’ trade secrets, procedures, processes, marketing schemes, and development strategies from competitors.
- An NDA secures your passwords, customer lists, blueprints, prototypes, source code, software products, business plans, and analytical data that’s shared with another party.
- NDAs help minimize and reduce the risk when working with external specialists, such as freelancers, independent contractors, and consultants.
- An NDA allows you to effectively develop a product or software program while keeping it secret from public view.
- An NDA ensures everyone involved in the software development program is on the same page in regards to confidential and sensitive information.
At the end of the day, a non-disclosure agreement is designed to protect your company and protect your software idea from unloyal or untrustworthy parties. If you care about your idea and what’s best for your company, signing an NDA should become a standard practice for you.
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When Should You Sign an NDA for Software Development?
Many companies are likely asking themselves when a non-disclosure agreement should be signed for software development. The truth is there are plenty of scenarios and situations where an NDA is recommended, and it’s better to be prepared for those situations when they arrive.
Let’s take a look at some of the most prominent situations that often call for an NDA for software development:
- You’ll be sharing sensitive or confidential information with the other parties involved.
- You want to keep your software project private, hidden, and away from the public eye.
- You’ll be working with someone for a short duration and want to ensure they don’t leak anything important, confidential, sensitive, or private.
- You’ll be working with independent contractors, freelancers, or consultants.
- You’re seeking investment from an investor and need to share additional info to spark an interest.
The best time to have someone sign an NDA would be before revealing any private, confidential, or sensitive information. It’s always a good idea to get it out of the way as soon as possible, but it’s never too late to have someone sign it — even if they’ve already been hired for the project.
When Shouldn’t You Sign an NDA for Software Development?
Of all the reasons why you should sign an NDA, it might come as a surprise that they’re not needed 100% of the time. Believe it or not, some situations aren’t going to be as threatening to your software project or plan as others — and won’t always call for a non-disclosure agreement.
To ensure you understand this, let’s take a look at some of the situations where an NDA for software development isn’t necessarily required:
- You’re in the initial stages of hiring a contractor and won’t be sharing any sensitive information.
- You only have an idea that you don’t necessarily plan on following through with.
- You’ll be sharing public information that won’t compromise the integrity of your project.
While an NDA might not be required in these situations, that doesn’t mean you can’t have one signed. It can still serve a variety of purposes in the off-chance that sensitive information is leaked by accident. It’ll let the other party know what’s protected and what’s not protected.
Who Should You Sign an NDA With?
Now that you know when and when not to sign an NDA when developing a software program, it’s time to discuss who you should sign an NDA with. Since there are likely going to be a wide variety of people working on the project, you want to make sure everyone’s on the same page.
Here’s a quick breakdown of the parties that should be involved in signing a non-disclosure agreement, especially if they’ll be exposed to private, confidential, or sensitive information:
- Software Developers – these are the people that are building and developing the software. They’ll have access to most information, including the source code, which you’ll want to keep protected.
- Software Designers – these are the people that are designing the software. They’ll be highly involved throughout the software development process and will likely learn a lot of information that you’ll want to protect.
- Quality Assurance – these are the people that are testing your software for quality assurance. Much like the designers, they’ll have access to a lot of sensitive information that you’ll want to protect.
- Investors & Stakeholders – if you’re seeking investors or have stakeholders that are either involved in the development process or request certain information to gain interest, you’ll want them to sign an NDA for confidentiality.
- Employees & Contractors – anyone else you have working on the software development process, including employees and contractors, should sign an NDA to ensure they understand what’s confidential and what’s not.
What’s most important here is that you protect yourself from anyone that will have access to your most sensitive information. Every situation and project is different, so make sure you think hard about who you’ll be coming in contact with throughout the software development process.
Pros and Cons of Signing an NDA For Software Development
Every decision you make prior to, during, and after the software development process comes with its own set of pros and cons. Being able to identify those pros and cons is vital to making the right decisions for you and your idea — especially when introducing an NDA to the process.
Don’t worry, we’re going to detail some of the most prominent benefits and downfalls that come with signing a non-disclosure agreement for software development.
Let’s first take a look at the pros of signing an NDA:
- Protects sensitive or confidential information from being leaked to the public or to competitors
- Reduces the amount of risk involved when outsourcing software development to a third party
- Keeps everyone on the same page when referencing confidential information
- Allows two parties to work towards a common goal without the fear of certain secrets being leaked
- Ensures specific and exact retribution when confidential information is leaker or used improperly
- Helps protect your software during the early stages and throughout operation
- Preserves the relationship between two parties, especially if grievances were made public
- Allows you to build a software program in stealth mode, without the public knowing
Now, let’s take a look at the cons of signing an NDA:
- Not everyone is open to signing an NDA, which could limit your options when seeking a developer
- NDAs aren’t always easy to police, especially if a breach is made and you’re not aware of it
- If the language isn’t exact and precise, it leaves the door open for misinterpretation and loopholes
- You might choose to have some things left confidential that are better made public
- Can be difficult to write and often requires the help of a true professional to ensure all angles are covered
With these pros and cons clearly identified, you can easily make a better decision when trying to decide whether a non-disclosure agreement is worth it for your project. It comes with some benefits that can save your company’s idea from theft, but it won’t come without some risk.
Different Types of Non-Disclosure Agreements
A non-disclosure agreement is an essential part of software development, but many companies aren’t aware that there are several different types of NDAs that each serve a unique purpose. Understanding which one is relevant to your project is very important before you create one.
Don’t worry, we’re going to detail the three most popular types of NDAs that are commonly used throughout the software development process:
- Unilateral NDA – also known as a one-way non-disclosure agreement, these are utilized when you’re the only party sharing private, confidential, or sensitive information.
- Mutual NDA – in some cases, a mutual NDA is needed. This is when both the disclosing and receiving party have private, sensitive, or confidential information to protect.
- Multilateral NDA – this is needed when there are more than two parties involved in the software development process that are sharing confidential or sensitive information.
To summarize, you’re going to want to write a unilateral NDA if you’re the only one that’s sharing sensitive information. If both parties have confidential information to share, a mutual NDA is needed. If there are more than two parties involved, then you’ll need to sign a multilateral NDA.
How to Properly Ask a Software Developer to Sign an NDA
Believe it or not, there’s an art to properly asking a software developer to sign an NDA. In fact, not asking it properly could result in the software developer not feeling comfortable about having to sign one and could result in that developer losing interest in being included in your project.
If you want to ensure your potential software developer — as well as anyone else you have signing the NDA — is comfortable with the presence of an NDA for software development, follow these important tips:
- Be polite and avoid sounding ‘pushy’ when asking someone to sign an NDA
- Be open about the reasons why you’re having them sign an NDA
- Let them know that while you don’t think they’ll leak your information, you’re doing this to protect the integrity of your idea
- Let them know that they aren’t the only ones being asked to sign an NDA
- Answer any questions they have regarding the NDA, that way they fully understand its purpose
- Make it extremely easy for them to read and eventually sign the NDA
At the end of the day, you don’t want to offend the other party when asking them to sign an NDA. Instead, you want to make them feel comfortable and confident that signing an NDA is both a good decision and necessary for a successful working relationship. Here’s a perfect example:
In an effort to sustain, preserve, and protect the integrity of our objective with future investors, developers, and contractors, we politely ask that everyone closely involved with our idea during this stage of the process sign an NDA as a formality. We highly appreciate your cooperation.
Should You Get a Lawyer’s Help With an NDA for Software Development?
Getting a lawyer’s help when writing an NDA isn’t necessary, but that doesn’t mean it can’t help you. Lawyers are extremely talented and knowledgeable when it comes to fitting the right language in an NDA. They can also ensure you add the right pieces of information in the NDA.
With that said, the use of a lawyer largely depends on how complex you’re trying to make the NDA. In most cases, the NDA will be rather simple and straight to the point, meaning a lawyer won’t be needed. In other cases, a lawyer can certainly help make your NDA more in-depth.
Of course, you have to keep in mind that a lawyer will cost money and it’ll add to the cost of getting your project started. It might help you protect the right information, but you have to weigh that against the cost of their services.
Sample of an NDA for Software Development
At CodeBright, we fully understand the benefits of signing an NDA prior to the software development process. We have experience as both the receiving party and the disclosing party, so we’re no strangers to the use of an NDA and fully recommend them in most cases.
If you’re convinced it can help you find success with your software project, especially after reading through all the valuable and useful information we’ve provided above, then you’re likely looking for a sample or a template to follow when creating your own non-disclosure agreement.
Don’t worry, we’ve got you covered. Follow the link below for an editable NDA template that you can start using with your software project today!
Download NDA for Software Development (editable doc):
Download sample PDF (not editable).
Related Questions
By now, you’ve pretty much learned everything there is to know about an NDA for software development. Of course, you likely still have several questions running through your mind. To ensure we don’t leave any information behind, we’ll answer some of those questions below!
- What should be avoided with an NDA? You should avoid including information that isn’t considered confidential, such as general industry knowledge, information that can be found in the public domain, anything the other party already knew about, information from a third party that they had a right to disclose, and anything shared independently.
- What happens if an NDA is breached? While it’s not a civil crime, the breaching party could be subject to being sued by the other party and face financial damages, as well as any other punishment stated in the original NDA.
- How long does an NDA last? Every NDA is unique and will have its own time frame or duration. With that said, anything between 1-10 years is standard, with 2-3 years being the most common in software development.
- How much does an NDA cost to write? In most cases, an NDA won’t cost anything when writing it yourself. With that said, hiring a lawyer to help with the NDA creation process could cost anywhere from $100 to several thousands of dollars.
- Do both parties need to sign an NDA? In order for an NDA to be valid in a court of law, both parties would need to have signed the NDA. Until it’s signed by both parties, it’s just a piece of paper with no purpose, meaning, or weight to it.
- Can an NDA be broken before it comes to an end? Once both parties sign the NDA, it’s valid for as long as the duration states in the NDA. With that said, an NDA can be broken before that time frame comes to an end, but only if both parties agree to break it, or if a party breaches the agreement.
- How do you write an NDA? Writing an NDA can be complex or simple, it’s really up to the disclosing party. If you’d like to get started with writing your NDA, follow our template above for a quality head start. You can add amendments as you see fit.
If you’re looking for a software developer that takes your confidential information seriously, you’ve come to the right place. CodeBright is one of the highest-rated software developers today and we’re excited to have an opportunity to share our passion with you and your team. Contact us today for more information or to schedule a consultation!
Disclaimer: This post is provided for informational purposes only and should not be considered legal advice. It is recommended to consult with the appropriate legal professionals or licensed attorneys for advice pertaining to specific business needs.
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