Why Smart Clients Still Care About Signing an NDA?

Rosberry
Rosberry
Oct 7, 2019 · 9 min read

By Vitaly P., a Business Development Manager at Rosberry.

Nondisclosure and confidentiality agreements are absolutely commonplace in today’s world. Since 2010, when Rosberry first entered the mobile app development market, we have signed hundreds of NDAs, but still think they are worth the paper they’re written on. We believe that like no other industry, mobile app development realm needs this document signed every time you approach a new company, team or just a freelancer to negotiate your project or an idea. Let’s just try and understand how NDA could actually help, though not being a silver bullet.

What is an NDA?

As Wikipedia states it: ‘A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA) or secrecy agreement (SA), is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.

What are the types of NDAs?

There are three general types of NDAs:

  1. Unilateral (one-way) — where the Receiving Party agrees to treat the information provided by the Disclosing Party as confidential. For example, when you outsource your project to be implemented by another contractor and it needs confidential information to do the job properly. Whether the third parties become subject to the terms of the NDA or not, disclosing parties should add a clause to the NDA holding the recipient legally responsible for any disclosure of confidential information by its employees or third parties that violate the terms of the NDA.
  2. Mutual (two-way) — used typically when the Parties to the Agreement are exploring a potential relationship, such as a partnership or collaboration and both sides need to share sensitive information with one another in order to make decisions about that relationship. These are less common, but in the mobile app development industry still may be the case for equity-based type of work.
  3. Multilateral — in multilateral NDAs, three or more parties are involved in the transfer of confidential information. One or more parties disclose business information, while all receiving parties are obliged to protect the information. Multilateral NDAs are common when many companies engage in related business opportunities. They are more efficient compared to establishing multiple and overlapping bilateral confidential agreements.

Based on our experience, the most typical for mobile developers, when it comes to outsourced projects, of course, is the unilateral NDA. The reason for that is quite simple — it’s the client who is the main disclosing party, whereas the developer is mostly receiving.

What is the general purpose of an NDA?

Whether you are a solopreneur or a start-up planning to develop a standalone application or an entire mobile and web-based platform, chances are you will be outsourcing a lot of work. Outsourcing might definitely save a lot of effort and money, however, could involve a risk that many people take for granted — your contractor(s) of choice can squander your ideas, sensitive or marketing data which would end up in the hands you wouldn’t expect them to be in. Under the circumstance an NDA could help and serve three basic functions:

To put a prospective contractor in the project context and request a provisional estimate, you are likely to disclose additional details either in writing or verbally. One can talk about a wide range of information, from business processes, customer lists, technical, engineering and scientific research, to ready-made design assets and corporate structure. A good NDA can help you hold onto the rights to a product or idea, but, please, be reasonably balanced in your rush to protect the secrets — remember, your secrets might not be as secret as you think.

If the receiving party finally fails to comply with the negotiated provisions, the NDA would possibly be there to give you legal protection and recourse. Yet, you should understand that trying to prove that its terms have been breached can in many cases be time-consuming and costly and sometimes even hardly possible when it comes to off-shore development. Some people even say that nobody has ever sued anyone on an NDA. Should it be true, an NDA would at least set the tone and expectations and make the Receiving Party think twice before divulging information. Not being trustworthy is still a real reputation risk for those who are serious about business even if they are over the seas.

Any project is usually implemented with lots of information and data involved. Oftentimes, one can hardly remember what is allowable to share/disclose and what is not. An NDA as a document helps to establish good clarity. For example, at Rosberry we might have 5 to 10 projects being implemented in parallel. We use different project-related content for marketing purposes and share it across different channels. So, instead of giving our clients a pain in the neck asking for their permission to disclose this or that piece of information, we refer to the NDA. It really saves time, and the NDA wordings are usually more straightforward than any verbal explanations and arrangements.

What are the widely-accepted NDA elements?

Every transaction is different — and as a result, every NDA might be different incorporating lots of possible edits and changes. However, if you don’t have many trade secrets and just want to feel more legally secure your NDA might be in a way generic and clichéd but containing several key elements:

Talking about a freelancer, a legal name is the name that identifies a person for legal, administrative and other official purposes. As for the company, a legal name is the name that the entity uses when it registers as a business, when it signs official legal documents and when it has to deal with governmental processes.

When it comes to the definition of the confidential information you should remember that for the court to enforce an NDA you should aim for being specific about what you consider confidential or non-confidential information. There’s nothing that the courts enjoy more than striking down an agreement that is unreasonably overwhelming. So, make a list of the information and secrets that you don’t want to be disclosed. In case of mobile app development it could include state-of-the-art feature-sets, ideas behind the concept, unpublished and patentable products, undisclosed logos, design assets, marketing strategies, customer lists, financial information, etc. Bear in mind that a catch-all clause is not a good option.

Given certain circumstances, it is equally as important to define what is not confidential. Information that is often excluded from an NDA include, but is not limited to, publicly available information, information lawfully known prior to receiving it from the disclosing party, information lawfully received from a third party on a non-confidential basis. Also in some cases the confidential information must be disclosed. Such disclosure might be mandated by administrative or legal proceedings. In these instances, the NDA can outline the notice requirements to the disclosing party. Information does not lose its confidential status merely because a court or government agency has the right to demand access to it. That right only implies that that specific disclosure must be permitted.

No doubt, taking appropriate steps to keep the information secret is an absolute obligation of the receiving party. Yet, another important thing you should always be careful about is the recipient’s use of the information for its own benefit. The NDA should specifically address this obligation and prohibit the receiving party from making use of the information in such a way that would be damaging to the vital business interests of the disclosing party. That means the information is shared with the other party or mutually between parties only for evaluation and negotiation of the potential transaction. Also add language to make it clear that information exchanged is owned by the supplying party.

Signing an NDA can not prevent every possible conflict between business parties. We are just humans — misunderstandings happen and breaches occur. So, cover your bases — include a clause in your NDA that specifies which court has jurisdiction over any resulting legal action. Normally, in a one-way NDAs, the jurisdiction and choice of law is determined by the disclosing party. In a mutual NDA the jurisdiction and choice of law normally comes down to who has the biggest bargaining power.

No potential contractor would like to get tied with an agreement for an indefinite period, so every NDA should have a clearly defined timeframe. If an NDA is created for exploring a potential business relationship, it will normally have a short term of about one to five years. If an NDA is a part of a larger ongoing agreement, then the term should be for the length of that agreement plus some period of time after the termination of the relationship. On the other hand, under this type of clause, it’s important to keep in mind that most jurisdictions won’t enforce unrealistic time limits on any legal agreement, including non-disclosures.

Ways to Sign an NDA

If you outsource the project, there is every likelihood that your contractor will be in a different city or even a country and you will hardly be able to exchange signed paper copies in a fast manner. So, what options will you then have? One of the much used and generally accepted ways to sign an NDA, like any other type of contract though, is the following:

  1. Compile your NDA and have it approved by both Parties.
  2. Print it out and sign.
  3. Scan your NDA and email it to your contractor to have it countersigned.
  4. Receive a countersigned copy and file it.

However, if you are environmentally friendly and do not want to waste paper, the best way to sign your NDA is to use some online e-signature service. We’ve made a short list of the most trustworthy and popular of them. In this or that way they help you send, sign and approve documents, materials, and transactions on the go. Some of them, integrate very well with third-party services such as Dropbox and Google Drive and even offer templates. But we know ‘Many men, many minds’, so choose the service you like best based on your needs and preferences:

NDA templates

An NDA made by a professional legal attorney or a legal company is by no means the best option whatever transaction you might enter into. On the other hand, sometimes you just need to start with something, so boilerplates you can find online could really help. Here is a couple of services offering typical templates:

When Your NDA Has Been Violated

A document like an NDA is nothing if nobody monitors its enforcement. So, if you start your cooperation with a contractor with signing an NDA, keep an eye on how the information is treated and shared. Should you discover or suspect that confidential information has been shared publicly, it is important to act quickly to gather evidence of how the information was leaked, who has it, and what is being done with it, as well as who is responsible. If you suffer a financial loss as a result of a breach of an NDA, you may be able to get a court to award money damages to you, though the procedure would be time-consuming and costly.

Our 10-year cooperation with hundreds of clients shows that if you are in business for long and ready to treat your clients with proper care and respect, you will hardly have any NDA violation issues.

More to read

It wouldn’t be wise to write a TLDR kind of article describing all possible ins and outs of preparing and signing an NDA. Cases are many, situations are different. If you really want to sift this matter to the bottom, you can keep on reading other FAQs and pieces of content like the ones below:

  1. Major Issues to Consider When Drafting or Reviewing a Non-Disclosure Agreement (NDA)
  2. Clauses-to-Include-in-Every-NDA
  3. NDAs and Confidentiality Agreements: FAQS

Disclaimer: This article is only outlining some general guidelines based on certain personal experience and must not be regarded as a professional legal advice. The author and Rosberry disclaim any liability in regard to the use of these docs and materials without a certified legal attorney.

@RosberryApps

Mobile app design and development insights

Rosberry

Written by

Rosberry

Particularly good at developing lifestyle apps → develop@rosberry.com

@RosberryApps

Mobile app design and development insights

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