Software Development Non-Disclosure Agreement (NDA): Complete Guide with a Template

What is an NDA?

A non-disclosure agreement is also known as NDA or a confidentiality agreement is an important part of every business relationship. It ensures that two or more parties who have no other contractual obligations will protect confidential information that passes between them. In other words, it’s essential at the outset of a deal if you’re trying to protect yourself and your business ideas. What are the situations that require you to sign an NDA? In case you:

• hire an employee that will be involved in internal processes
• work as a broker who wants to keep insider information private
• include the third party into business operations
• share your business ideas and company operations with an offshore vendor

When it comes to NDA for software development, it is a common legal practice to sign NDA when you are working on a web platform, mobile app, etc. It is done to:

• keep the project secret before launch
• protect any sensitive information
• secure your financial, marketing, or other internal strategies

Once a person signs a software development NDAs, it becomes illegal for anyone to expose any information that is related to the project. Whether it is source code, documentation, inventions, or research results. 

Importance of Signing Software NDAs

One of the foundations of a full-fledged business partnership is signing a mutual agreement and any company owner or startup founder can’t neglect such an important process.

Software or app development NDAs best practices set the basics by:

• defining what confidential information is
• ensuring the sides understand the importance and confidentiality of shared information
• establishing terms on how that confidential information should be protected

If you want to outsource your project and hire a remote team a Non-Disclosure Agreement makes even more sense, so it’s important to discover how to write an NDA for developers. Here are some cases of what it can protect:

• Patent rights
• Сlients’ list
• Business strategy
• Internal processes
• Any financial information (income, expenses, etc.)

If you are looking for ways to improve the sales processes, here is an example of creating an enterprise system.

Benefits of Signing Software NDAs

Smooth Communication

One of the benefits of software NDAs is that it simplifies communication between all sides. Also, it is a useful tool for clarifying the expectations of the parties from the very beginning.

Data security

Another reason to sign an NDA is to provide complete security for the data you share with the vendor after giving him a job. Don’t forget that it also protects trade secrets which can include anything from customer lists to financial reports.

Your company’s name is protected

In case you don’t want to disclose the fact that somebody else helped you to develop your product. Or if you are a promising startup seeking investors, you can easily create an NDA that requires your vendor not to mention your name anywhere.

Risks of Working Without NDA

Working without a non-disclosure agreement can pose several risks, depending on the nature of the work and the information involved. Here are some potential risks:

• Loss of confidentiality: without an NDA, there’s no formal agreement to keep sensitive information confidential, which means that the information you share could potentially be disclosed to third parties.
• Intellectual property exposure: while working on a project with unique business strategy, marketing plan, or any other valuable intellectual property, not having an NDA in place could expose these assets to potential theft or unauthorized use, undermining your competitive advantage.
• Diminished trust and reputational damage: it can signal a lack of professionalism and a disregard for the importance of protecting sensitive information, which may also erode trust between parties and could lead to strained professional relationships.
• Potential for disputes: without a formal agreement, if a dispute arises over the disclosure of sensitive information, it’ll be harder to prove that the information was indeed meant to be kept confidential.
• Difficulty in establishing ownership: in some cases, it may be harder to establish ownership of ideas, inventions, or other creative works that are generated during the course of the work.

Types of Non-Disclosure Agreements

Unilateral NDA

A unilateral NDA, also known as a one-way NDA, is a type of agreement where only one party discloses confidential information to the other. Typically, this occurs when a business engages an external contractor, such as Inoxoft, a reputable software development company, to work on a project. In this scenario, the recipient party is bound by the agreement not to disclose or misuse the confidential information shared by the disclosing party.

Unilateral NDAs provide a sense of security for the disclosing party, as they can freely share their proprietary information with the recipient party without fear of it being shared or misused. This type of agreement is commonly used in situations where one party needs to protect their intellectual property, trade secrets, or sensitive business strategies.

For example, let’s say a pharmaceutical company is developing a groundbreaking drug and needs to collaborate with a contract research organization to conduct clinical trials. The company would require the CRO to sign a unilateral NDA to ensure that any confidential information, such as the drug’s formulation or trial results, remains protected and not disclosed to competitors or the public.

Bilateral NDA

A mutual NDA, also known as a two-way or bilateral NDA, is utilized in scenarios where both parties share confidential information with each other. This type of agreement ensures that both parties have equal responsibilities and obligations to protect each other’s confidential information. Mutual NDAs are often employed in strategic partnerships, joint ventures, or during negotiations for collaborations.

In this case, both companies would need to share their respective proprietary algorithms, design concepts, and market strategies. To protect their interests, they would enter into a mutual NDA, ensuring that neither party can use or disclose the other’s confidential information without prior consent.

By signing a mutual NDA, both parties demonstrate their commitment to maintaining confidentiality and fostering a trusting relationship. This type of agreement is crucial in situations where collaboration and sharing of sensitive information are necessary for the success of the partnership.

Multilateral NDA

A multilateral non-disclosure agreement is a legal contract that involves three or more parties agreeing to protect and not disclose confidential information shared amongst them. This type of NDA is used in situations where there are multiple entities or individuals involved in a project, and they all need to share sensitive information while maintaining confidentiality.

And, instead of requiring three separate bilateral NDAs between the first and second parties, second and third parties, and third and first parties, you can utilize a single multilateral NDA. This agreement involves three parties, each intending to disclose information to the other two parties.

How to Write a Non-Disclosure Agreement for External Developers

Software non-disclosure agreement rules can take various forms: definite and indefinite. The first one obliges the other party for a specific period, the other one binds a person forever. That means, the signer cannot disclose confidential information even after the contract has ended.

Most importantly in the creation of software non-disclosure agreement is to define answers to the next questions:

• What needs to be protected?
• How should it be protected?
• What are the timeframes of the protection?

Usually, best practices of software NDAs include the following parts and steps:

Define what your NDA covers

The NDA should meticulously define the type of information deemed confidential. This can include, but is not limited to, technical data, company strategies, financial records, customer lists, or any other proprietary information you wish to protect.

By explicitly defining the scope of what constitutes confidential information, you ensure clarity and reduce the likelihood of disputes in the future. This clarity allows both parties to understand the boundaries of what can and cannot be disclosed, providing a foundation of trust and security.

Parties to the Agreement

In an NDA, it is essential to identify all parties involved clearly. This includes providing full legal names, addresses, and contact details to ensure accurate representation of the parties bound by the agreement. For example, when engaging with Inoxoft, the company name and contact person should be accurately stated.

Accurate identification of the parties involved is crucial as it establishes a clear understanding of who is obligated to maintain confidentiality. This ensures that any breach of the agreement can be properly addressed and legal action can be taken if necessary.

Definition of information considered confidential

The NDA should meticulously define the type of information deemed confidential. This can include (but isn’t limited to) technical data, company strategies, financial records, customer lists, or any other proprietary information you wish to protect.

By explicitly defining the scope of what constitutes confidential information, you ensure clarity and reduce the likelihood of disputes in the future. This clarity allows both parties to understand the boundaries of what can and cannot be disclosed, providing a foundation of trust and security.

Extent of сonfidentiality

It is crucial to specify the duration for which the confidential information you must keep confidential. Whether it is for a specific period of time or indefinitely, clearly defining the duration of the confidentiality obligation ensures parties are aware of their responsibilities post-agreement termination.

Additionally, it is wise to outline the permissible circumstances under which the information may be disclosed, such as under a court order or with the written consent of the disclosing party — this provides flexibility while still maintaining the necessary level of confidentiality.

By clearly defining the scope of the confidentiality obligation, both parties can navigate the agreement with confidence, knowing their rights and responsibilities. This clarity fosters a strong working relationship and minimizes the risk of misunderstandings or unintended breaches of confidentiality.

Obligations

Every party signing an NDA must follow previously discussed obligations. Usually, they are concerned to keep the confidentiality of the information and restrict its use. Restrictions also include:

• sharing the confidential information with the external person
• using the information only for the purposes listed in the agreement
• not sharing it with those who can this information to serve the purposes not listed in the agreement

Consequences

Breaking an agreement by any party has consequences that are discussed and outlined in the document. Usually, the implications mean financial compensation (set by the contract). Also, there is a possible alternative to conflict resolution. For example, negotiation to resolve the dispute by two parties themselves. Or mediation that includes a neutral person who helps find a solution.

The Cost Of Violating An NDA

The breach of an NDA can have severe repercussions for the party found in violation: when an NDA is breached, the injured party may seek legal remedies to address the harm caused. This can include the payment of damages, injunctive relief, and irreparable harm to the relationship between the parties:

• Payment of damages is a common consequence of violating an NDA. The injured party may be entitled to compensation for any financial losses suffered as a result of the breach. These damages can include lost profits, lost business opportunities, and the costs incurred in pursuing legal action.
• Injunctive relief refers to a court order that prohibits the breaching party from continuing the unauthorized disclosure or use of the protected information. This can be crucial in preventing further harm and ensuring the confidentiality of the disclosed information.
• Trust and confidence are essential elements in business relationships, and a breach of confidentiality can severely damage these foundations. The party that breaches the NDA may find it challenging to rebuild trust and may face reputational damage within the industry.

How To Set The Duration Of The Non-Disclosure Agreement?

There is no one-size-fits-all approach to setting the duration of an NDA: it involves considering various factors and making informed decisions. Here are points to help determine the appropriate duration:

• Consider the nature of the information: Evaluate the sensitivity and value of the confidential information being shared. More sensitive information may warrant a longer duration.
• Legal and regulatory requirements: Be aware of any legal or regulatory requirements that may dictate the minimum or maximum duration for NDAs in your jurisdiction.
• Balance protection and fairness: An excessively long duration may be viewed as unreasonable. Strike a balance between protecting your interests and being fair to the receiving party. 
• Evaluate the project timeline: Consider the duration of the project or collaboration. The NDA should cover the entire period during which confidential information will be exchanged.
• Anticipate the lifespan of the information: Some information may lose its significance over time. Estimate how long the confidential information will remain valuable and relevant.
• Consult legal advice: If in doubt, seek legal advice to ensure that the chosen duration aligns with legal standards and adequately protects your interests.

Effective NDAs typically account for post-term obligations. They commonly dictate that certain intellectual property rights persist even after the contract has ended. These rights generally extend to the employer or the party seeking to safeguard the confidential information.

Non-Disclosure Agreement (NDA) Example For Software Development

A non-disclosure agreement for software development necessitates a deep understanding of both the technological intricacies and legal aspects involved. Below is an non-disclosure agreement sample that can be customized to fit your specific needs.

Please be aware that this is a simplified example of non-disclosure agreements, and we strongly advise you to seek legal advice in order to tailor this NDA template to your particular circumstances and in accordance with local laws.

Non-Disclosure Agreement (NDA) Template

This legally binding Non-Disclosure Agreement (“Agreement”) is officially established on [Date], solidifying the commitment between [Disclosing Party’s Name, including organizational details] (“Disclosing Party”) and [Receiving Party’s Name, including administrative information] (“Receiving Party”).

1. Confidential Information:

Confidential Information encompasses all data, materials, products, technology, computer programs, specifications, manuals, business plans, software, marketing plans, financial information, and other information disclosed orally, in writing, or through any other medium, to Receiving Party by Disclosing Party.

2. Protection of Confidential Information:

The Receiving Party is bound to utilize the Confidential Information solely for the purpose of [Define Purpose] and is prohibited from disclosing such information to any third party without the prior written consent of the Disclosing Party.

3. Responsibilities of the Parties:

The Disclosing Party will ensure that all Confidential Information is clearly marked as such. The Receiving Party agrees to restrict access to the Confidential Information to individuals within its organization who require such access for the stated Purpose.

4. Exceptions:

The obligations of confidentiality do not extend to information which (a) was already known to the Receiving Party prior to its disclosure; (b) becomes publicly known through no wrongful act of the Receiving Party; (c) receives written authorization for release from the Disclosing Party.

5. Breach:

Any violation of this Agreement may result in irreparable harm, and the aggrieved party is entitled to pursue legal remedies, including but not limited to injunctive relief and damages.

6. Duration of Confidentiality:

This Agreement shall remain effective for a period of [Period] from the Effective Date, unless terminated earlier by either Party through written notice to the other.

7. Governing Law:

This Agreement shall be governed by and construed in accordance with the laws of [insert applicable jurisdiction]. Any disputes arising under or in connection with this Agreement shall be resolved in the courts of [insert jurisdiction].

Amendments:

This Agreement may only be amended in writing and signed by both parties.

IN WITNESS WHEREOF, the parties hereto have executed this Non-Disclosure Agreement as of the Effective Date.

[Signature of Disclosing Party] [Signature of Receiving Party]

[Printed Name of Disclosing Party] [Printed Name of Receiving Party]

Date: [Insert Date]

Consider Inoxoft as Your Trusted Partner

With a legacy of many years in software development, we established trustworthy relationships with our business partners as one of our main priorities. Each document is taken into account and in addition to signing an NDA with our clients, we do the same with every IT expert and other team member related to the project. No need to worry since your data is completely safe with us!

To Conclude

Non-disclosure agreement in software development is an essential part of business relationships. It helps to maintain your trade secrets and secure your ideas safely. Here at Inoxoft, we offer services to companies that are looking for a dedicated coding team with expertise in a variety of technologies. Contact us, so our web and cloud software developers and business analysts provide you with all the insights about the implementation of your business idea and our potential cooperation.