Non-Disclosure Agreement and Its Importance
As a custom software development company, we know that almost every business relationship starts with signing an NDA (non-disclosure agreement). In this blog post, we would like to pay attention to its importance, share our vision on what should be included into an NDA and give some tips on how to compile a mutually beneficial NDA.
The notion of NDA
A non-disclosure agreement (NDA) is a document signed by two or more parties (companies or individuals) in order to state which information they are going to share and ensure the confidentiality of this information. It is usually signed by the companies dealing with intellectual property and other valuable information that is generally not available to the public. We can highlight the two types of NDAs: one-way and mutual.
The one-way agreement implies that only one company provides access to its information while the other one simply receives it.
The mutual NDA comes up when both parties share their data with each other, so it protects the interests of everyone.
Why is an NDA important?
NDA is signed at the very beginning of the negotiations between companies, even when it is still unclear whether or not they will become partners and make a project together. Here is why: in order to make evaluations, analyze the market, make predictions about the future project, and many more, the parties have to reveal their sensitive information. In case the partnership fails and negotiations stop, everyone has to be sure that the shared data will not be used against them or transferred to third parties.
What does an NDA include?
A lot of companies have their templates of a non-disclosure agreement but each partnership has its own peculiarities, so the template can be changed to fit the needs of a particular deal. However, the core structure remains the same and each NDA should include the following:
The first thing to be mentioned is the identification of the parties involved. They can be divided into a Disclosing Party (the party that reveals its information) and a Recipient (the party that gets access to information).
Definition of confidential information
The next point to include is the list of things that are considered to be confidential information. Speaking of the software development, it can cover all know-how, data, data formats, computer programs, technical and non-technical materials, designs, concepts, processes, product samples and specifications, strategic and development plans, financial condition, business plans, co-developer identities, business records, customer lists, supplier lists, project records, market reports, employee lists and business manuals, policies and procedures, information relating to processes, app idea, technologies or theory and any other information which may be valuable for parties and generally not available to the public.
This section covers points about what the Recipient can do with the received information and how it should be protected from spreading further. Here are some examples of these points:
- the Recipient has to restrict the access to the Disclose Party’s information so that it can be used only by those employees or subcontractors who need it to perform their work;
- anyone getting access to the information from the Recipient’s side has to sign the same kind of confidentiality statement;
There are still a lot of crucial details to be covered in the NDA including but not limited to the following:
- Ensuring that at any conditions the information remains the sole property of the Disclosing Party;
- Setting terms of the NDA validation;
- Determining the measures to take in case of an intended or not intended breach of the agreement as well as attempts to sell or transfer the information to the third party;
- Establishing which laws will govern the validity, construction, and performance of the NDA (eg. the laws of the United Kingdom).
A Few More Tips
Let us now give some more recommendations about things to include into an NDA.
Include a non-solicitation clause to the NDA. It implies a prohibition to hire other party’s employees for a certain period of time. Such a clause helps to prevent companies from losing valuable people who have access to the company’s sensitive information.
Even when the NDA is signed by both sides, we recommend sharing only those pieces of information that are really necessary for performing tasks.
With 20+ years of experience and more than 600+ successfully completed projects, we strongly recommend signing the NDA that takes into account the interests of both parties. We are always open to new cooperation and negotiations. Feel free to request a copy of our NDA or share yours to start communication. We guarantee the confidentiality of your information and will do our best to turn your ideas into a top-notch software solutions.