How Non-Disclosure Agreements For Mobile Apps Work

Outsourcing your app development project for business raises concerns regarding the secrecy of your mobile app idea and other integral information. Ideas are stolen as often as ideas are developed. On the contrary, legal systems around the world have established many laws on the protection of intellectual property. A Non-Disclosure Agreement (NDA) is one such instrument that safeguards your app idea. It is vital to understand how NDA works before entering into an agreement as such.

As an entrepreneur or a business executive, you must consider whether you need to sign a mobile app non-disclosure agreement (NDA) before acting on your business idea. Before sharing the idea with a potential partner, a company, or an organization, it is essential to ensure your idea remains yours. Let’s take a detailed look at what an NDA is and whether your idea needs one in the article.

What is the Non-Disclosure Agreement (NDA)?

NDA, or a non-disclosure agreement, is a legal contract signed between two or more parties (individuals or companies) binding them under the law to maintain the confidentiality of information. The document lays down the details on the applicability of the agreement on confidential data and beyond if included. It also outlines the legal actions and punishments under the law upon breach of contract.

Terms like Confidentiality Agreement (CA), Confidentiality Disclosure Agreement (CDA), Proprietary Information Agreement (PIA), and Secrecy Agreement (SA) are used interchangeably in the case of NDAs for software development ideas.

How To Protect Your App Idea?

NDA in mobile app development ensures the privacy and security of confidential information that sits at the core of the app idea. To clarify, the NDA puts the developers or the company to which the project has been outsourced under a legal obligation to ensure the secrecy of sensitive information. For instance, the world’s largest tech company, despite having a net worth of $3 trillion, Apple Inc., firmly believes in the fortification of product secrets until it’s ready to be released. On broader applicability, NDAs mandate outsource companies to keep the list of clients with projects under process private.

Do You Need an NDA for an Existing Application?

For a mobile application that is under development or information is yet to be shared with different parties, it is strongly recommended to implement a non-disclosure agreement. This infers the necessity of NDAs for instances when confidentiality might be breached.

However, the application has already gone into production, an NDA is not required. Even in such a case, it is important to secure information that has not yet been shared with other parties. To add to this, if your business is planning to enter a collaboration project for a new product, the vitality of secrecy increases and signing an NDA becomes crucial.

Examining Different Types of NDAs

Non-disclosure agreements (NDAs) can be categorized into three types depending on the length and number of parties involved. This classification also applies to software and mobile app development NDA. Moreover, if the app development contract involves parties across the border, and there are different languages at play, the agreement must be properly translated and streamlined with the laws of the country of residence of the parties. Alternatively, you can prepare the NDA for both sides: the client and the developer.

Unilateral NDA (One-Way NDA)

This is the most commonly established form of a non-disclosure agreement. It involves two parties: two individuals, an individual and a company, or two companies. However, only one party, usually the original owner of the idea or concept, exacts the confidentiality of information and data. For instance, a mobile app development agreement is required when the expectant is outsourcing their idea to a tech solution company (who would be the signatory).

The expectant thereby puts the signatory under a legal obligation to protect the secrecy regarding trade and ideas. As per the specifications of a unilateral NDA, the signatory can be prosecuted in case of a breach of the agreement. These particulars are at the essence of how NDA works.

Bilateral NDA (Two-Way NDA)

When it requires both parties to be signatories of the contract, a comprehensive non-disclosure agreement for mobile app development is constituted. Both parties are legally bound to prevent sharing or exchange of crucial information with companies or individuals outside. The impact of bilateral agreements works best if the parties involved are businesses entering into joint ventures or cross-border partners. If you are outsourcing your project to a company located in another time zone, you should consider constituting and signing a bilateral NDA.

Due to the fact that it prevents either party from exposing any secret information, a two-way NDA is regarded as being fair to both parties. As a result, both parties attain the right to prosecution if another is found in breach of the contract.

Multilateral NDA

If your idea has the potential to establish a scalable business, it would require the involvement of various parties. In such a case, a multilateral non-disclosure agreement for app development is applicable. It roots out the need to sign several unilateral or bilateral agreements and holds all the parties in agreement at once.

The only challenging aspect of a multilateral contract is reaching an agreement that is in compliance with everyone’s interests. This leads to delays as negotiations and parleying are prolonged as the business grows and more stakeholders are added.

At What Stage Should You Sign The NDA?

Prior to development or production, a non-disclosure agreement for app idea is necessary to safeguard disclosing of sensitive information to rivals. Given the cut-throat competition in the industry, there are high chances of your ideas getting thieved. Therefore, the NDA should be signed right before entering into collaboration with other parties, outsourcing your project to a freelancer or a company, or hiring developers.

Have a look at the table below—

Top 5 Reasons to Sign a Non-Disclosure Agreement for App Development

The following pointers lay down the importance of NDA and why your business needs to sign one.

1. To safeguard trade secrets: NDA for app development is utilized by businesses to preserve the know-how of the market and other beneficial information on the economics of the industry vertical they are part of.
2. To prevent sharing of confidential information: Soon as the process of development commences, confidential information between parties is exchanged to facilitate it. These include codebases, market analysis reports, prototypes and schematics, authorization data, etc.
3. To keep the development process private: Businesses prefer keeping the software or app development process private. This is mostly done to pre-empt potential cyber attacks on databases and attempts at disrupting the development process.
4. To minimize the risk of data leakage when outsourcing: When outsourcing your project on app development to companies or freelancers located in another country, a non-disclosure agreement for app idea is needed to assure data confidentiality.
5. To avoid putting your capital and other assets at risk: The transmission of data on your mobile app project would eventually have lasting impacts on your finances and other contributing assets in your venture.

Situations When An NDA Is Not Needed

In 9 out of 10 cases, it is recommended to have an NDA in place. For instance, for a partner who is trustworthy and has an established name in the industry, it is wiser to not sign an agreement. There are instances when an NDA would act more as a hindrance than an essential legal instrument. These include the following.

1. When looking for opportunities to collaborate: There is no necessity to put an NDA in force if there is no involvement of more than one party.
2. When the idea is not thoroughly conceived: Until the idea is on the ground with certain collaboration in place and ready for the next stage of development, it is not advisable to rush into signing an NDA.
3. If your product is generic or built over a pre-existing product: In such cases, the development time is comparatively less, and enforcing an NDA would not only prolong it but also complicate the process.
4. When there is no requirement to share any confidential information: There would be certain aspects of the project that can be developed or worked up without having to share any sensitive information. In such cases, an NDA is not needed.

Does Your Business Need an NDA?

If your enterprise is already an established one but is either considering a joint venture or planning on a new business app idea, a comprehensive NDA must be put in place. In cases other than this, the necessity is low and even a standard agreement can be established.

If you are an entrepreneur and have launched a start-up in the IT sector, a standard non-disclosure agreement would be essential to protect the uniqueness of the business idea. While it’s unlikely that the idea is copied, signing an NDA should be mandated for parties entering into any sort of business with your start-up.

Components To Mention On The NDA For App Development

Once parties have agreed to enter into an agreement, the next step is to draft the NDA. If the non-disclosure agreement for software development is enforced, there is a checklist of components to be included in the contract. It must be noted that the agreement could be lengthy, depending on the location and role of involvement, having all sorts of legalities mentioned. It can also be short and precise if the agreement is signed at an earlier stage.

How To Prepare Your Own NDA

While drafting the non-disclosure agreement, ensure that the following components and legalities are clearly mentioned in the document and that the parties involved have no objections against the same.

1. Details of the parties entering into the agreement: This is basically to identify the parties, whether expectant and the signatory or all signatories.
2. Defining information marked as classified: This is to identify all the information labeled as confidential and covered under the non-disclosure agreement, including notes on exemptions and exclusions.
3. Outlining how to handle confidential information: Defines how the provided information is to be utilized, and necessary observations and actions that must be taken to prevent misappropriation of confidentiality.
4. Duration of the term of the agreement: This component defines the duration of the time till which the agreement would remain in force, and adds specifications on the procedure to be followed upon the termination of the agreement.

How To Sign a Contract With a Developer From Another Country?

Outsourcing projects on bespoke software or app development has become the new norm in the tech industry. The practice of collaborating with a software development company has come to practice mostly due to the huge demand for developers alongside budget constraints to assembling an in-house team. For developers located in another country, a robust NDA along the lines of the laws and regulations of the expectant’s country of residence is necessary.

Legal Force of an International NDA With a Foreign Company

Once you have finalized the app development company from another country, the following aspects are to be considered while signing the NDA —

1. Jurisdiction: Governing laws and competent courts regarding matters relating to intellectual property and non-disclosure of confidentiality must be streamlined. In the NDA, ensure the inclusion of a provision requiring the consent of the developer to the laws of your country.
2. Ensuring Copyright: Rights to alter and reshape the products developed by the outsourced company to suit your business needs. This is to ensure that the copyright over the product remains in your possession.
3. Specifying Arbitration: This is a time-efficient and cost-effective method to resolve issues on the contract. However, the expectant can only initiate mediation if the developer has already consented to it in the NDA.

How To Monitor Compliance With NDA?