Should You Sign An NDA For Your Mobile App Idea?
App Builder Appy Pie, January 10: If you have a brilliant app idea, there is a good chance that you have either considered signing an NDA yourself or someone might have suggested that you think about it, but it has been on your mind. And this is before you have entered any kind of conversation or discussion that you might have entered with the contractor or app developer that you are planning to hire sometime in the future.
The question at this early stage is, do you even know what an NDA is? Not just the basic concept of it, but what it is actually. Probably not.
Building a mobile app with your own idea is a business, a serious business, and like any other business, you can’t succeed if you isolate yourself and walk with the blinders on. It is important to recognize that there is an immediate need to take actions to cover or protect yourself legally.
The problem here is that most of us are not exactly aware of what kind of legal protection do we actually need! Of course, we would not want to be unaware and leave us vulnerable at any point, but on the flip side we wouldn’t even want to waste our time, money and efforts on doing something that might be completely unnecessary.
What this post will basically share are the experiences and insights that we have garnered in the long time that we have been engaged in developing mobile apps across industries. This is not legal advice and in case you do plan to get an NDA, it is imperative that you seek professional legal opinion.
What is an NDA?
An NDA or Non-Disclosure Agreement is a contractual agreement that binds both the involved parties into working together to protect the confidentiality of information and no matter what the complications are, it is agreed upon that the data would not be disclosed to any third party all through the duration of the agreement.
There are a number of other terms that are associated with the same and listed as under:
- Proprietary Information Agreement (PIA)
- Confidential Disclosure Agreement (CDA)
- Secreacy Agreement (SA)
- Confidentiality Agreement (CA)
All these terms are often used interchangeably in the context of an NDA. There are three different types of NDA that may be executed as per the requirements of the parties:
- Unilateral NDA
- Mutual or Bilateral NDA
- Multilateral NDA
Most of the NDAs fall in the first category that is Unilateral NDAs which mean that one of the parties or person(s) agrees to not share some defined information about the other party. For example you as a business owner, while hiring an employee, a contractor or a freelancer might ask them to sign an NDA with you about not disclosing a certain algorithm to anybody else. After signing this agreement the signee is legally bound to comply to this agreement and if they break it, they might open themselves to prosecution by law.
A mutual NDA is where both the parties involved agree not to share any information with anyone else. This is more common in case when two different businesses collaborate to work on a project.
Multilateral NDAs are applicable in case of three or more parties who would be sharing confidential trade secrets with each other.
NDAs are different form any other legal document in the fact that it is quite straightforward.
Does An NDA Protect Your App Idea?
As someone who is banking on a unique app idea to develop a successful business, it is only natural that you would want to protect the idea for the fear of it being stolen. However, NDAs would not necessarily protect against ideas! This means if you have shared an app idea for delivering stationery, an NDA would not be able to stop them from building an app for the same service unless they are perusing some confidential secrets to do it.
Why an NDA?
In general, an organization would feel the need for an NDA only in case when they know that they would need to share any kind sensitive data or information with the mobile app development company, contractor, or freelancer who they are looking to hire.
It might also be of consequence to go looking for an NDA when your app idea is related to the key process of the business such as in the case of manufacturing businesses, research or businesses pertaining to finance. Let’s get deeper into the issue and list out all the reasons that you may need an NDA for!
- If you have concrete proprietary information that would need protection
In the rare case when you or the organization you represent has some concrete proprietary information that might be eligible for copyright or patent, it is absolutely necessary for you to go for an NDA.
- If both the parties have concrete proprietary information that needs to be protected
This might be one of those situations where both the parties would have some interest in signing an NDA. Just like you might have some proprietary information to protect, the developer too might be evolved enough to have their own proprietary codes, algorithms or marketing strategies that they might want to protect.
- If the contractor or the freelancer is not averse to the idea
If the contractor or freelancer you are hiring has no reservations about signing an NDA, go ahead and sign it, but make sure that the terms of the agreement aren’t too restrictive and in case of any dispute in the court, it shouldn’t appear to be too burdensome.
- If there is a need for the whole project to stay a secret
In case it is important that the project stay completely hidden from the public eye, you may insist on an NDA. This would prevent the freelancer from putting it up on their portfolio or pitch for similar projects with other clients.
- If there is a need for short term confidentiality
There is a possibility that you might be able to serve the purpose of confidentiality in a short or fixed period of time. In such cases, chances are that the contractor or the agency might agree to sign the NDA. An NDA with no time limit would always be something that would bother the developer, and they would vehemently refuse to sign something like that.
When Should You Stay Away From An NDA?
There are times when someone, or an organization with an idea for an app comes looking for agencies or contractors to develop it, are scared that their idea for the app will be stolen by them and used to make a business of their own.
However, trust me when I say, insisting on an NDA can actually spell a bigger disaster for yourself than anyone else. The mobile app that you plan to build is essentially a tool for your business idea and you are going to pour in a lot of money to get it developed and put it out there in the market for users to download and buy your products or services.
What you essentially plan to do in such a case is come up with an idea, hire an agency to develop your mobile app, and signing an NDA with them to basically build in strength. Let me tell you there is no better recipe for disaster!
What happens here is that the idea is untested, not shared with anyone except the developer. Hence you have no feedback about the need and functioning of the app from potential users. There is a good chance in such cases that when you finally let the cat out of the bag, there wouldn’t be anyone interested enough to go ahead and pay for it!
What you need to know is that the best time to share your idea with the maximum number of people while looking for a feedback is before you have put in any money on it! There were numerous taxi services before Uber came in and Uber did not depend upon secrecy to become what they are today!
- Right at the beginning
Even as you are beginning the process of interviewing or holding the first meeting with a developer or an agency, it might not be a good time to broach the topic of and insist for an NDA. This is the time when all you need to do is assess the agency for viability. In most of the cases if you mention the NDA a little too soon the experts or the agencies might lose all interest in you and move on even before determining whether they are interested in the project.
At this stage it is better to share the idea in the highest and brightest of lights and make them want to work with you.
- If what you have is still just an “idea”
You might believe in your idea and believe that it would make a considerable dent in the industry bringing about a revolutionary change, but few mange to do anything remotely like that. It is for this reason that many developers or the agencies stay away from an NDA. Often when the idea fails or runs out of money, signing an NDA means that the developer or the agency is stuck with the confidentiality agreement which eventually limits or completely crosses out any chances or ability to work with other promising clients with similar ideas. An idea simply may not be enough to warrant protection.
- The agreement is unfair or too inclined towards the contractor, agency or freelancer
In the situations when you as an individual or an organization have a lot of work in the pipeline or budget for the developer, you hold some cards and negotiating power in favour of your demand for an NDA to be signed. However, in case you have only a small project, for a short time period, the developer would definitely not be inclined to sign on for the possibility of a legal liability.
- If the expert you really want to work with says “No”
You might have found the right one, the ideal developer for you, but they might be totally against it. In this situation consider the trust factor, their track record, and weigh your need for an NDA vs your preference to work with the same developer before taking the decision.
- If the information you are sharing is essentially public information
It is not uncommon to get inspired from an existing idea that has garnered success. In case most of the information that you want to protect with an NDA is already in public knowledge, then you might not have enough confidential information, making it ineligible to be protected by way of an NDA.
Why Not To Go For An NDA?
Some of the reasons why you shouldn’t go for an NDA maybe listed as under.
- Keeping your app under the covers is one of the toughest market strategies
We can’t emphasise enough on the importance of getting pre-launch userbase and feedback from potential users. In the event of an NDA being in place, the project and the app stays under covers mostly till it is launched, you are robbed of the opportunity to create any buzz around it.
- Your idea probably isn’t even original
It might be true that you have an idea worth billions, but there is a good chance that the same idea is being developed by at least a couple of more developers who might even be ahead of you in their development process. The idea that you have might quite easily be inspired from an existing idea, which has the potential to inspire so many more like you!
- Keeping it undercover as your only defence strategy, it means you don’t really have a defence strategy
It is understandable that you would want to protect your idea from developers copying it or stealing it. However, if an NDA is all you have to protect your idea, then it’s definitely not much! You might be protected from the developer you get to sign your NDA, but as soon as your app is launched, the idea is free for anyone to copy and most of the developers are proficient in reverse engineering any app. Hence to develop a defence strategy, you would have to have something more than a mere NDA in your kitty.
- It is positively a big pain to execute an NDA
So you have an NDA in place with the developer and the agency that you hired to do the job. What do you think happens when they violate or break it? It is you would have to take on the responsibility to enforce it! This process is expensive and harrowing and especially so if the agency you are suing has more money than you! There is a good chance they would keep stringing you along till your accounts run dry while you are mounting legal bills. It is also quite a difficult concept to prove that the developers stole your idea, as they hear hundreds of ideas everyday from loads of existing and prospective client and may claim to have heard it from one of them.
- An NDA would never be able to substitute trust
Trust in any relationship is of paramount importance and this holds true for you and your app development agency as well. Trust cannot be assured by forcing the other one to sign a piece of paper. It takes time and efforts from both the parties involved. Maybe if you were to begin with a 10-minute conversation where you would give a brief of your concept or idea to the developer to gauge whether there is any interest generated, or discuss its validation.
Why a developer wouldn’t steal your idea?
In spite of all your misgivings about the app developer you are hiring there is all probability in the world that the app developer would not really steal your idea, even if they had the opportunity to do so.
- You are building a business with an app, not the other way around
As you approach someone with your app idea, you have to understand that you are not really going to build an app, you would be building a business by way of an app that the developer would do for you. The developers have the tools to build an app, which they would be doing for you, they do not have the bandwidth or the essential tools to build a profitable business from the app they develop.
- A developer is an expert in only his own field
This is a key point to consider. Let’s say you have a brilliant idea for a construction related app and hired a developer or an agency to do the app development for you. Let’s say that they stole it from you, and built their own app. But now what? They don’t have any understanding of the construction business, nor do they have a network that would help them get into it! They would have a tough time finding beta testers, establishing contacts, and getting a knowhow of the industry. Hence even if a developer or the agency did steal your idea, you actually have nothing to fear!
- If an agency or developer were to steal their clients’ ideas, they wouldn’t last long.
In an y industry, reputation matter a great deal. If a developer makes it a habit to steal their clients’ idea, their existence in their own trade would be jeopardized. Software or app development is usually a process that lasts long and sometimes one project leads to another, in such case, most developers would stick to their integrity and do nothing to lose the trust you place in them as a customer. However, if there is any reason for you to mistrust the developer or the agency you are looking to hire, it is maybe a good idea to change the agency altogether, instead of getting them to sign an NDA
Should you sign an NDA with the investors and would they sign it?
This is a practice that used to exist but has become obsolete today. Today, most of the VCs or investors would flat out refuse to sign an NDA especially in the initial stages. At later stages when there is a need to share any sensitive data, the subject may be broached for consideration.
Even in these circumstances, what they might do is include such provisions in the agreement they draw up, in case they decide to invest.
At the end of it all it is you who would have to decide whether you truly have information worth drafting an NDA with the legal assistance, however in the world of apps, it isn’t much needed and might prove to be a futile exercise. If you absolutely must have an NDA, get it drafted by a lawyer, make sure it doesn’t last longer than 5 years, and never sign an NDA that isn’t in your favour!