Should you protect your app idea with a non-disclosure agreement?
The app market is booming. But to make it big in this field, you need to have a viable app idea. It needs to solve a problem in the market and also provide users with a pleasurable experience.
But once you have this idea, how do you protect it from theft?
As you begin to explore your idea, there’s a possibility your work could be stolen by developers, rival entrepreneurs, consultants, project managers and even freelance designers contributing to your project. It’s happened to entrepreneurs before, and it’ll likely happen again.
This is a risk which can be prevented with a non-disclosure agreement (NDA). In this article, let’s take a look at how you can protect your app idea using NDAs.
We’ll even give you a free NDA template for app development for you to use!
Why Should You Use an NDA for Mobile Apps?
Firstly, it’s important that we clear up a common myth about NDA’s – they don’t necessarily protect your ‘idea’. Ideas are just ideas without execution. There’s no way to legally protect a thought in your mind.
NDA’s restrict confidential and intellectual property from being shared with third parties without prior consent. If your app idea is for a personal transportation app and the developer signs an NDA, it doesn’t mean that the same developer can’t work with another client on a similar app.
What it does stop your developer from doing is sharing your intellectual property such as app name, mock up designs, business plans, feature lists and marketing strategies, with other clients. If the app documentations and features are too similar, there may be conflict of interest. If this is the case, the developer will raise this issue with the potential client.
With that being said, here are some of the reasons why you might need an NDA include the following:
Protecting Concrete Proprietary Information:
If your company or organization has proprietary information that could be subject to copyright, it’s ideal to have an NDA signed.
Protecting Proprietary Information of all the Parties Involved:
Partnerships are not easy, and to ensure everyone is assured of confidentiality, all the parties need to sign an NDA. Don’t be surprised if the developer also requests to have their source code, algorithms, and other strategies protected.
Sharing Documents or Data Safely:
When you’re providing information or data such as documentation, you may need to provide a signed NDA. You don’t want your ideas being re-written, changed, or stolen without your knowledge.
These ideas, features, designs and strategies are pivotal to your app. You’ve done a lot of preparation for your idea and you don’t want your competitors to acquire your plans before you have a chance to implement them.
Insist on having an NDA if you don’t want any part of the project exposed to the public. An NDA should restrict freelancers from mentioning or displaying assets, information and documentation on their portfolios when they look for other projects to pick up.
Most of the time, you will find developers quickly agreeing to sign NDAs with a short time frame while vehemently refusing to sign those with no time limit.
Primarily, an NDA serves to protect intellectual property and not an idea. Therefore, make sure the time period you wish your app idea to remain confidential is sensible.
What Are the Different Types of NDA’s?
Now that you have an idea of what NDAs are for, let’s take a look at the different types.
This is a one-way NDA where you, as the owner of the idea reveals confidential information to your developer or designer (second party) who agrees to keep that information away from any third parties for a given time period.
In a bilateral agreement, all the involved parties share confidential information with each other agreeing not to disclose any of the details. This NDA is also known as mutual or two-way NDA and is frequently used in mergers, partnerships, or joint ventures.
When three or more parties agree not to divulge confidential information beyond their circle, they enter into a multilateral agreement. Unanimous consensus must be obtained during the talks before all the parties can append their signatures.
How to Correctly Use NDA’s:
Just because an NDA will prevent your idea from being stolen, it doesn’t mean you are required to use it. For example, many taxi and cab sharing businesses before Uber didn’t thrive. Uber was successful despite the fact that their secret was all in the open.
When used appropriately, an NDA can be a great tool to safeguard your app idea and give you peace of mind while exploring your idea.
Put bluntly, an NDA is initially a sign of mistrust. However, an NDA then becomes a bridge to a legally binding relationship where communication between the client and developer is free and uninhibited. Ultimately, this ensures the developer can provide the client with the best possible service.
Conversely, if you don’t discuss an NDA with your developer before disclosing your idea, you can request an NDA before development begins.
When is an NDA Not Necessary?
The following scenarios don’t necessarily require NDA’s:
Your App Idea is in its Infancy –
If your app idea is simply an idea without any documentation of it’s name, intended features, target demographics or strategy, it’s probably not necessary to request an NDA. An NDA primarily protects your intellectual property – so without intellectual property, an NDA isn’t really necessary.
If your idea has accompanying documentation and an NDA is signed, your developer won’t be able to talk about the specific details, names or features to outside parties without your approval.
Regardless of documentation, a good developer will always be willing to send through a pre-signed NDA before discussions commence.
Your App Idea is Already Public Knowledge –
Many entrepreneurs and enterprises derive their app ideas from existing apps which have already proven their success or potential for disruption. In this case, it’s not necessary to require an NDA before initial discussions as the idea itself is already common domain.
Again, regardless of this fact, a good developer will always be willing to send you a pre-signed NDA.
Your Pitching to a Venture Capitalist –
If you require venture capitalists to fund the development of your app, it’s not a great idea to request an NDA pre-pitch.
Venture capitalists receive hundreds of pitches, proposals and expressions of interest each week. If a venture capitalist needed to sign an NDA before each pitch, they would be unnecessarily entangling themselves in possible legal complications.
Due to the overwhelming amount of opportunities which don’t require a pre-signed NDA, a venture capitalist is likely to ignore your request. At the end of the day, venture capitalists aren’t looking to steal your idea and develop it themselves. Venture capitalists are looking to fund ideas which will make them income in the future.
Business ideas need to be viable, but more importantly, venture capitalists are looking for teams and individuals who they trust to successful build and manage the endeavour. Demanding an NDA from a venture capitalist pre-proposal could be the mistake which costs you the funding to make your app idea a reality.
To learn more about venture capitalists and securing app funding, click here.
What if the Developer Refuses to Sign an NDA?
Sometimes the developer will refuse to sign an NDA. If so, you probably dodged a bullet. Any developer who will refuse to sign an NDA because your budget is too small or the project time is too short are not reputable and probably don’t have your best interests at heart.
Your idea and confidentiality should always come first. If you are refused an NDA, don’t walk away from that developer, instead, run quickly.
So what’s in an NDA?
Here are a couple of terms and conditions that are found in typical NDAs:
This is the time period your idea is legally required to be kept confidential. This time period begins from the moment the signatures are added. It’s unrealistic and sometimes harmful to expect your idea to be kept confidential indefinitely, so defining a reasonable time period is necessary. Generally this time period is one or two years in duration.
Within the NDA, you must highlight all the details and information you wish to protect as confidential material. This may include future business plans, trade secrets or marketing plans.
Responsibilities and Obligations of Individuals:
An NDA should explicitly highlight the duties and responsibilities of all who are involved. Ensuring each parties duties and responsibilities are defined brings clarity and expectations for the remainder of the relationship.
Consequences of breaching the contract:
The developer and all other relevant parties involved must know the consequences of revealing confidential information. This usually involves the project creators reimbursing you for your idea, all the expenses incurred, amongst other things.
Getting back all the info shared in an NDA:
When the agreement expires, it’s okay to ask all those you shared documentation with to return all the sent and received details or destroy it. If they cannot destroy the documentation listed in the NDA contract, then a clause that restricts them from sharing proprietary data in the future could be added.
The intention is to make the NDA as comprehensive as possible and avoid leaving out loopholes that developers can use to escape with your idea. Where possible, let an attorney draft it for you so there are no errors at all.
Draft an NDA Only if You Can Enforce It
The core reason for having developers sign an NDA is to hold them accountable in case they run off with your app idea. So the question is: will you go after them or throw in the towel?
Enforcing your NDA involves putting aside time and money, determining what claims to make, and hiring the best lawyer for the prosecution process. If you’re not prepared to hold a developer or freelancer accountable, don’t go through the process of drafting an NDA.
While putting up a good non-disclosure agreement gives you an advantage, things can get slippery if you don’t document all the details. Make sure that you have prepared a separate contract which contains all your app codes, the length of the app, the brainstorming session, and all the nitty-gritties.
But, remember, they aren’t added into the non-disclosure agreement. Simply because an NDA is generally a smaller contract that states the basics that we’ve mentioned above.
All these details will prove helpful should the developer breach the terms of the agreement.
Non-disclosure agreements are pertinent in scenarios where intellectual property and other business secrets are at stake.
It’s generally a good idea to get your NDA template reviewed by your attorney before you sign it.
An NDA is signed at the beginning of a project, before the discussions and brainstorming sessions begin. This is done to make sure that the developer does not share your ideas with a 3rd party from the get go.
Don’t trust developers who aren’t willing to sign an NDA at the beginning. Find another developer who is willing to protect your confidential documentation.
But that does not mean that your attorney needs to be present when you’re signing your NDA. It’s okay to use templates like the one below if you don’t have a lot of resources to throw on the best lawyers.
Last but not least, always remember that a good developer will only want what is best for you and that involves taking measures to protect your idea.
Download our free NDA Template for Apps Here.