How to Write an NDA for Software Development [Template Included]

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NDA stands for a non-disclosure agreement. This document ensures that when you share your proprietary information (ideas, trade secrets, etc.) with another person, they will keep it a secret. In terms of software development, a non-disclosure agreement is usually signed between a client (a company owner) and an outsourcing company before they enter into a business relationship.

There are two types of an NDA: unilateral (only one party agrees to protect the other party’s information) and mutual (both parties agree to protect each other’s information). Unilateral NDAs are the most popular.

When Should I Ask Someone to Sign an NDA for Software Development?

An NDA for software development is often surrounded by controversy, but there are a few strong reasons to sign this document before sharing any confidential information with third parties: 

• To secure your trade secrets. Trade secrets make your business stand out among its competitors. Whether it is your secret ingredients, original marketing strategy, or an innovative manufacturing technique, disclosure may ruin your business.
• To keep your project secret before release. An NDA for software development can also be very helpful when you are working on a novel product, and you don’t want your competitors to be aware of it before its release. Keeping it a secret will allow you to remain the “first-mover.”
• To protect other sensitive information. Even if your business doesn’t have any trade secrets, and there are no revolutionary products under the hood either, an NDA for software development can help you secure your financial, marketing, or other sensitive information. 

You don’t always have to sign an NDA, though. For example, if you commission a software development company to build a generic mobile app or a website based on WordPress, the entire legalese thing will only slow down the process. If you don’t have to share any confidential information to complete your project, an NDA is not necessary either.

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What Does an NDA for Software Development Look Like?

There is no single, universal template of a non-disclosure agreement. Nevertheless, any NDA for software development should include the following information.

Parties to the Agreement

If it is a unilateral agreement, Parties to the agreement will include only the Disclosing and the Recipient parties. But there’s a catch: double-check whether you need the Recipient party to share confidential information with their affiliated companies, partners, or agents in order to complete your project successfully. If so, make sure that your NDA covers all of them.

In terms of software development, it is recommended to sign an NDA not just with developers but also with anybody who has access to the source code, mind maps, product features, and other sensitive information. These may include QA experts, designers, project managers, or product managers. It’s critical for outsourced experts to be the only recipients of confidential information. It’s also advisable to sign this agreement with your in-house team. 

What Is Deemed Confidential? 

This section of an NDA for software development identifies what kind of information is considered confidential. Is it only written information? Is oral information supposed to be kept a secret, too? As the Disclosing party, make this definition as broad as possible to prevent the Recipient party from using any loopholes. It’s essential to clearly identify what kind of information is confidential.  

The Scope of Confidentiality

This section is the “main body” of your NDA. It consists of two types of obligations: 

1. The confidential information must be kept secret. This also means that the Recipient party is expected to take reasonable measures to keep the lid on sensitive information. For example, only certain employees of the Recipient’s company will have access to confidential information (the Recipient party should also make sure that these people are familiar with the restrictions outlined in your NDA for software development). 
2. The Recipient party may not use the confidential information themselves. This is one of the key reasons behind agreements like this. If you don’t want to wake up bankrupt, make sure that your NDA restricts the Recipient parties from using the confidential information for the purposes not outlined in the NDA.

Exclusions from Confidentiality 

There are instances when keeping certain information secret is troublesome for the Recipient party. If the Recipient party discloses such information, they won’t be subject to lawsuits. These instances typically include:

• publicly accessible information
• information already known to the recipient
• information independently generated by the Recipient party without using any confidential information specified in the Agreement
• information disclosed to the Recipient party by another party without any NDA obligations.

Obligations of the Parties 

This section of an NDA for software development usually covers the recipient’s obligation to maintain the confidentiality of the shared information and restricts its use. Restrictions might include:

• using the confidential information only for the purposes specified in the agreement
• sharing the confidential information only with persons who need this information to serve the purposes listed in the agreement
• making sure that these persons treat this information in line with the restrictions specified in the agreement
• taking appropriate measures to keep this information secret.

Consequences of Breaching the Contract

Your NDA for software development will be pointless unless you identify the implications of a possible breach. 

Typically, the Disclosing party seeks financial compensation – a fixed amount set by the contract. Some include attorneys’ fees and court costs, too, which can be collected from the breaching party if the claimant wins the case. It’s best to avoid unrealistic penalties.

Additionally, it’s recommended to include a few methods of alternative dispute resolution. ADR that allows settling legal disputes out of court is classified into three types:

• Mediation. A neutral person helps the parties find a satisfactory solution
• Negotiation. The parties resolve the dispute themselves
• Arbitration. A “private” court where a neutral person listens to both parties and then finds a solution.

From a business viewpoint, ADR is more efficient than litigation, which is a public proceeding. ADR guarantees that your sensitive information will remain under wraps.

Software Development NDA Template

Creating an NDA for software development from scratch can be time-consuming. To avoid loopholes, you have to consider every single word carefully. But we are here for you to speed up this process. 

At Relevant Software, we work with international clients and understand perfectly your urge to keep your valuable business information safe. We have an NDA template that we sign with our clients when building software for them. We can’t share it with you as it is our legal asset, but here is a good one from the Internet.

Conclusion

In software development, you often have to share confidential information with another person, team, or even company. The best way to secure this information is to sign an NDA for software development. With this document, you can protect your trade secrets, as well as financial, technological, marketing, and other sensitive information. 

Even though there is no universal template, every NDA should cover the following details: information about the Parties, what information is considered confidential, the scope of confidentiality, the exclusions from confidentiality, the obligations of the Parties, and the consequences of breaching the contract. 

If you’re looking for a software development vendor who takes legal documents very seriously, why not contact Relevant Software? We will help you bring your ideas to life, taking care of your valuable information along the way. Success stories of our clients are the best proof of our efficiency and expertise.