In case of a mobile app startup a unique idea is the most valuable asset that you want to protect at all costs. In fact, before you have your app ready, all you really have is this extraordinary concept. And no wonder, you just can’t afford to have it stolen.
But not sharing your idea with anybody is not a good idea either. It’s natural you don’t trust anybody with your concept but you cannot do everything on your own, especially if you aren’t an iOS & Android developer, a graphic designer, a marketer, a lawyer, and a startup angel in one person.
So what can you do to protect your precious idea and be able to cooperate with an experienced software house at the same time? Your best bet is to sign a tailored NDA.
What is a Non-Disclosure Agreement?
A Non-Disclosure Agreement (NDA), known also as Confidentiality Agreement, Secrecy Agreement and Proprietary Information Agreement (PIA), is a legal agreement between two parties that defines confidential information that will be disclosed and imposes a legal obligation on the receiving party to keep that information confidential.
You sign an agreement with a software house claiming that you give them certain information about your app, necessary to build it, and that they cannot use this information for other purposes than your mutual cooperation or disclosure it.
If the NDA is not kept, the discloser party (you) can sue the breaching party (for example a software house) for:
- monetary damages, meaning compensation for lost profits,
- injunctive relief – to stop taking certain action,
- or specific performance e.g. apologize officially.
The most important issues to include
A Non-Disclosure Agreement with a software house is a complex agreement and there is no typical formula that fits everybody. It can be as simple or as lengthy as you wish, making certain that all important issues are covered.
In general, there are three most important features that every NDA should include.
1. The Definition of Confidential Information
How can you protect something if you and your coworker don’t know (and state) exactly what it is? You simply can’t. That’s why the definition of confidential information you want to keep safe is a crucial part of every NDA.
If you are not sure what to include here, make a list of all issues that are important to you first. Normally, apart form the general idea, many software house’s clients include things like mockups or graphics (if they had ones before cooperation), business and financial issues and information about customers and partners.
“Confidential Information means information relating to the Disclosing Party regarding its business, partners, customers or financial affairs (including details relating to any software the copyright in respect of which is vested in the Disclosing Party) which is obtained by the Receiving Party, either before or after this undertaking is entered into and either in writing or orally from or pursuant to the discussions with the Personnel of the Disclosing Party.”
2. The Limitation on Use and Disclosure
Once you describe in detail what is your confidential information, you need to point out what can and what cannot be done with it. Of course, your first aim (as the name of the agreement shows) is to prevent the information from disclosure. But you can also clearly state what the software house can do with your idea and what is prohibited.
For example, a common concern is that a software house or its employees will use your idea for their own purposes and steal your innovative idea. Having a signed Non-Disclosure Agreement with your software house, and making sure the company has its own NDAs signed with their employees and coworkers will ensure that your concept is safe.
Such a commitment may look like this:
“In consideration of each Party agreeing to supply the other Party with Confidential Information for the Purpose, and in consideration of the mutual undertakings set out herein the Parties each hereby separately agree and irrevocably undertake to each other that they will only use Confidential Information for the Purpose and otherwise to act in accordance with the terms and conditions hereinafter contained.”
3. The Term of the Recipient’s Obligations
No agreement is valid forever and it is even more important if the legal successors are mentioned. So it is necessary to set forth the time limit on the parties’ obligations. Such term of an NDA may be measured in months or years, depending on the circumstances of the cooperation and the nature of the disclosed information.
Signing any NDA does not mean that your idea is safe yet. It has to be the right NDA. If you give your own document to the other party, have it prepared by a lawyer. It’s really worth it to best protect your business.
And if you sign a NDA given to you by the software house, don’t be like those people who skim the text of an agreement and sign it without having second thoughts. Read it carefully. Usually, a software house won’t try to scam you. After all they are good at what they are doing and don’t want to risk their reputation over some stolen idea. But the NDA they give to you is often standard and you can avoid many mistakes by reading it in detail.
Some popular mistakes include:
- Not mentioning a penalty clause or a defined amount you will get in case of disclosure – it is always better to name what kind of penalty will be in force if your confidential information is revealed. Such statements make a NDA easier to enforce.
- General statements about “protection” instead of a list of certain measures – very often a loss caused by disclosure of information is bigger than any amount of money you can possibly get for it. That’s why listing certain measures that should be taken by your cooperator to prevent such a disclosure is always a good idea.
- Not adjusting a standard NDA to your needs – if you have some information that are not included in a NDA on regular basis, for example graphics or mockups you already had before the cooperation, don’t hesitate to add it to your agreement.
To sign or not to sign?
A Non-Disclosure Agreement with a software house seems to have a lot of advantages. But do you really need one and does it really protect your idea?
Definitely yes – if your idea is very unique and you are afraid that even a small piece of information leaked can be dangerous for its success, or if you have important business data (e.g. about customers or finance) that you want to remain secret.
No – if your app idea is common and you don’t have additional resources such as graphics or business data, that can be revealed. In such a case, just focus on your regular cooperation agreement and make it as good as possible.
Do you want to develop your app idea with the software house which respects your concerns and doesn’t hesitate to sign an NDA? Fill in this form to get a free quote from Ready4S specialists.