What exactly is a Non-Disclosure Agreement?
A subject that regularly comes up in mobile app development is the non-disclosure agreement or "NDA." Simply put, a non-disclosure agreement is a contract to keep a secret. A non-disclosure agreement is often used when two companies want to meet to discuss a joint opportunity involving the exchange of confidential information. In the context of someone wanting to hire a mobile app developer, an NDA would be an agreement between the person with the mobile app idea and the programmers who could bring that idea to life. The idea person would disclose the idea to the programmer to negotiate a contract for programming of the mobile app; the programmer would agree to keep the idea confidential.
Non-disclosure agreements are generally not particularly complex, and most such agreements contain several basic components or parts. At the beginning of the general non-disclosure agreement is a preamble or paragraph identifying the parties. The next section of a typical non-disclosure agreement includes definitions of terms that are used in the agreement. Such terms might include the words "proprietary information," "trade secrets," and "protected technology." Any other terms that might be either ambiguous or key terms of the agreement are often also defined in this terms section.
The next section found in the typical non-disclosure agreement is the exclusions section. The exclusions section generally contains five or six different "carve-outs" to secrets or confidential information that is not covered by the non-disclosure agreement. We'll discuss NDA carve-outs in a later post.
The typical NDA includes a term that each party shall use the same reasonable efforts to protect the confidential information as are used to protect its own proprietary information. Related to this is often a requirement that the disclosure of the confidential information shall be restricted to those individuals in the company who are directly participating in the review of the information and have a need to know such information.
Another term in the agreement might clarify that execution of the agreement does not give a license or other transfer of proprietary rights to the technology, but only is construed to be a sharing of information.
Most non-disclosure agreements have a period of time of effectiveness of the information. This time period or term of the agreement is one, two, three, or some finite number of years. The reason for this is that as time goes on, it becomes increasingly difficult to protect confidential information, as memories of the agreement and changes in personnel often result in accidental dissemination of the confidential information. It is also understood that confidential information typically has a relatively short period of viability. Over time, the value of trade secrets and other technical information diminishes as others independently develop or are able to reverse-engineer products to learn of the trade secrets. Trade secrets naturally disseminate as employees move from company to company, understanding, of course, that there are some trade secrets that can last many years, such as the formula for Coca-Cola©, but generally most confidential agreements expire after some period of time. Non-disclosure agreements are typically signed by both parties and may include an exhibit attached to the end of the NDA, describing in broad terms the specific confidential information that is being exchanged.
An NDA may not be required in all circumstances. Here are some factors to consider when deciding if you need an NDA. If you have questions about NDAs, including whether you need an NDA, consult an attorney experienced in intellectual property law.
We get asked several times a week about protecting ideas. Most of these questions are from people with ideas for new apps and go something like this: "I have an idea for a great app. How do I know the company I hire to develop it won't steal it from me?"or "I want to hire an app programmer, but they'll have to sign an NDA [a nondisclosure agreement] before I'll tell them my idea."
First, as Dave Bates of CompleoSoft noted on NDAs, you should be able to describe your app project in sufficient detail to give the developer an idea of what you're wanting to do without giving away the super-secret aspects of the idea. As Dave puts it, I can describe a soft drink without telling you the secret formula. If I ask you about building a plant to make my soft drink, you shouldn't need the secret formula to tell me about your qualifications, experience, and past projects or what you estimate it will cost to build the plant.
Many app ideas are variations on a prior idea. For example, when we talk to people wanting quotes to develop mobile apps, they'll sometimes tell us things like "My app is a game similar to [insert name of hot game app of the week], but with an interactive sound track that changes based on data supplied by a source at the player's location. I'm going to have to have an NDA to tell you anything else." For this example, the basic structure of the game is not really secret as it is modeled after an existing app. The unique aspect in this example is that the game uses a localized data source to control the game's soundtrack. So, you could discuss your idea with developers in enough detail to determine which developer to hire without necessarily giving away the secret. Could the developer go out and develop a similar app after talking to you? Sure, but if your idea is a derivation of some hot app of the week, that part of the idea is already out there. The value is in the details of how your app is different, all of which you may not have to disclose to identify a developer for your project.
What really makes an app idea valuable is execution. There are lots of ideas out there that never become hot selling apps. In fact, this is not limited to app ideas – here's a recent post exploring this same issue in the context of ideas for movie scripts. That said, there is value in protecting a unique idea during the pre-development period.
So, what can you do to protect your idea when you're trying to hire a mobile app developer?
We're not saying NDAs are never needed when you're trying to find an app developer, just that there's a time and place for them. That time and place will vary depending on your particular circumstances. If you're unsure whether you need one, you may want to hire an attorney to advise you about your rights and how to protect them.
Disclaimer: The information and materials provided for this Moonbeam Development post have been prepared by Moonbeam Development, and Carr & Ferrell LLP for informational purposes only. You should not rely on this post to make decisions critical to your business, as it may be incomplete or inapplicable for your particular circumstances. This general information does not constitute legal advice, and is not intended to replace the counsel of a qualified attorney.