Developing a software program is a game-changer for any business or individual. Whether you’re selling that software program to customers or using it to increase performance and efficiency within your own company, your opportunities are limitless with software development.

With that said, software development comes with a great deal of risk and jeopardy — especially when outsourcing development to another company. As much as your idea means to you, there is a wide range of people out there that would love to steal that idea and claim it as their own.

It’s an unfortunate part of doing business, but it’s a reality nonetheless. Luckily, there are ways to protect your idea and maintain the integrity surrounding the software development process. Of all the things you can do, nothing is more important than signing an NDA prior to inception.

What is an NDA?

An NDA, also known as a non-disclosure agreement, is a legal contract between two parties, such as the software developer (or software development firm) and yourself. It outlines the information being shared and requires that information remain confidential throughout the development process.

The use of an NDA comes in handy when two parties are considering entering a business relationship, such as a custom software documentation project. It allows a company to properly evaluate the potential relationship without fear of confidential information being stolen, exposed, or compromised.

In the event a party breaches the non-disclosure agreement by sharing confidential information, such as trade secrets or unique ideas, the other party may seek legal recourse as a form of retribution. It will certainly make the party think twice before sharing sensitive information with someone outside of your company.

What are the components of an NDA?

No two NDAs are the same. Since there’s no standard template when creating a non-disclosure agreement, it’s going to look, read, and sound different every single time. Some are going to be short and sweet, while others will be long and filled with legalese — it all depends on the situation.

While the NDAs language and style will vary depending on the nature of the parties’ relationship and the information being shared, there are several components that every NDA should include:

• Identification of the Parties Involved – it’s important that you list the disclosing and recipient parties involved in the non-disclosure agreement.
• Defining the Confidential Information – the NDA should clearly define what information is considered confidential and therefore covered within the agreement. It should also cover any exclusions from confidential treatment.
• Explanation of Using Information – each party should understand when the confidential or sensitive information can be used, as well as when it can’t be used. It should also explain reasonable measures required to avoid unauthorized disclosure.
• Timeframe for Disclosure – the timeframe in which the agreement is valid (typically 1-3 years) as well as the requirement of return or destruction of confidential information upon termination of the agreement.
• Choice of Court Jurisdiction – in the event a party violates or breaches what’s defined in the NDA, it should list what court will hold jurisdiction over that violation.
• Punishment for Violations – also in the event of a violation or breach of the NDA, the punishment for such violation should be clearly defined in the language.
• Signatures of Both Parties – a non-disclosure agreement isn’t valid unless all parties have signed it. Once signed, the NDA will go into effect, according to the timeframe listed in the NDA.

The non-disclosure agreement can be as complex or as simple as you need, so long as it contains everything you need it to contain and it’s signed by both parties. The more complex it is, however, the harder it will be for the other party to find loopholes and take advantage of it.

Why is it important to have an NDA for software development?

An NDA is becoming more commonplace in the software development industry, largely due to the sensitive nature and purpose of software prior to completion. It’s often the first thing a company thinks of before they start the development process or during the initial interviews.

Let’s take a look at some of the most prominent reasons why an NDA is important when outsourcing software development to an outside company:

• An NDA protects your business’s trade secrets, procedures, processes, marketing schemes, and development strategies from competitors.
• An NDA secures your passwords, customer lists, blueprints, prototypes, source code, software products, business plans, and analytical data that are shared with another party.
• NDAs help minimize and reduce the risk when working with external specialists, such as freelancers, independent contractors, and consultants.
• An NDA allows you to effectively develop a product or software program while keeping it secret from public view.
• An NDA ensures everyone involved in the software development program is on the same page in regards to confidential and sensitive information.

At the end of the day, a non-disclosure agreement is designed to protect your company and protect your software idea from unloyal or untrustworthy parties. If you care about your idea and what’s best for your company, signing an NDA should become a standard practice for you.