Is Non-Disclosure Agreement Necessary for Your Mobile App
Everyone has heard of a non-disclosure agreement (NDA).
But do you actually know what they are and what they do?
Most people may be familiar with the basic concept of these agreements, but don’t know as much as they should.
When you’re building a mobile application, you can’t just isolate yourself and put blinders on.
There are certain rules that you need to follow.
You’re running a business, and you need to act accordingly.
Part of operating a business means that you’ll need to make sure you’re covered from a legal perspective.
The problem is that people don’t know what they actually need.
On one hand, you don’t want to be ignorant and end up being under protected.
But on the flip side, you don’t want to waste time and money on things that you don’t actually need.
Disclaimer: THIS IS NOT LEGAL ADVICE.
I’m not a lawyer and I’m not pretending to be. I did not go to law school either.
The purpose of this article isn’t to give you legal advice.
As someone who has been through the mobile app development process before, I just wanted to share some personal insight and provide you with an informative resource.
So if you want real legal advice, you’ll need to consult with an actual lawyer.
But for now, I’ll provide you with everything that I know about NDAs and how I’ve seen them used in the mobile app development industry.
Let’s get started.
What are NDAs
Before we get into too much detail, let’s start with some basic information, so we’re on the same page.
These are some other terms associated with NDAs.
- Proprietary information agreement (PIA)
- Confidential disclosure agreement (CDA)
- Secrecy agreement (SA)
- Confidentiality agreement (CA)
So if you hear any of these used in any context, they all mean the same thing.
Here’s an example document of what NDAs look like.
In short, these documents do exactly what the name implies.
It’s an agreement between two people not to disclose things.
There are three different types of these agreements.
- Unilateral NDA
- Mutual (or bilateral) NDA
- Multilateral NDA
Most of the time NDAs fall into the unilateral category.
This means that one person agrees not to share certain information about another party.
So for example, let’s say you own a business.
You may have an employee or independent contractor sign an NDA stating that they won’t give away your secret recipe or formula with anyone else.
Once this document gets signed, the signee is legally obligated to comply.
Otherwise, they could be prosecuted by law if the agreement gets broken.
A mutual NDA is when two parties both agree not to share information.
So if you own a business and you were consulting or working with another business, you may both have some secrets that need to be kept confidential.
Multilateral NDAs are written when there are three or parties sharing confidential trade secrets with each other.
Unlike other legal documents, NDAs are fairly straightforward.
They are pretty easy to write up and don’t require too much time or effort to become legally bound.
When it comes to app building, people may be afraid to share their ideas with other people for the fear that it will get stolen.
But NDAs don’t necessarily protect against ideas.
So for example, say you had an app idea for a coffee delivery service.
If you share your idea with someone, an NDA won’t be able to prevent them from building a similar app, as long as they didn’t use confidential secrets to do it.
As another example, let’s take a look at two popular transportation apps.
Hypothetically speaking, let’s pretend a former Uber employee works for Lyft or visa versa.
They aren’t necessarily in violation of an NDA as long as they’re not sharing confidential information or a trade secret.
It has to be specifically outlined in the NDA.
Trying to prove that an idea was breached is much harder to prove and specify in an agreement.
So it’s tough to legally protect a concept or idea.
Why do you use NDAs
As I started to say earlier, people use NDAs to protect secrets.
It’s easier to use an NDA if there is some sort of tangible information like a formula or code rather than just an idea.
You could consider using an NDA with your employees, independent contractors, other businesses, or anyone you’re consulting with about your app.
Businesses recognize that their employees are not necessarily going to be working with them for life.
Older generations may have gotten a job when they were 14 years old and worked there until the day they retired, but those days are over.
But take a look at how many different companies younger generations are working for.
They bounce around.
It may be within the same industry, or it may be something completely different.
Either way, businesses use NDAs if they fear their employees will take their trade secrets and proprietary information to their competition.
Or they could leak secrets to their friends, family, media, or anyone outside of the company.
Here’s a look at the job turnover rate for some industries that are related to your mobile app and development process.
As you can see, the technology industry isn’t immune to this turnover rate.
So if you’re hiring people for your startup company, you can probably anticipate that they’ll have other jobs after yours.
Another reason to use an NDA is for the psychological effect.
The idea that someone can get legal action taken against them after signing an NDA can put fear into their minds.
This fear that they could potentially be sued in court for disclosing certain information could prevent them from spilling your secrets, even if you never planned to hold them to it.
Non-disclosure agreements also let people know that information is confidential.
That way it’s clear from the start.
It lets everyone know that you mean business and things aren’t meant to be taken lightly.
When to use an NDA
Non-disclosure agreements are meant to be used when you have something to protect.
Usually it has to be some sort of tangible secret.
For example, maybe you have a competitive advantage over someone because of a proprietary algorithm.
Everyone with a website is trying to figure out how to improve their search engine optimization.
Google doesn’t reveal their exact secrets, even though people have tried to break down how it works.
While this graphic can give webmasters some sort of direction, it’s not exact.
So Google may get their employees to sign an NDA that prevents them from leaking their algorithm.
Something else that companies want to protect is their customer information.
Businesses keep their client information safe and secure.
However, often times employees have access to these databases and information.
Taking those leads and bringing them to a competitor could be in violation of an NDA, depending on the terms.
This is especially true for companies that are in sales.
Their sales leads are golden and that’s the driving factor for how they make money.
Information like that could also get sold to marketing experts who are conducting research about different types of customers.
Lots of marketing organizations want to acquire customer information and they’re willing to pay a premium price for it.
Social selling is one of the reasons why marketing companies buy big data.
This is definitely something that’s relevant to your app.
You have access to customer information, their habits, and other buying behaviors.
As part of your monetization strategy, you may eventually decide to sell this information to marketing firms.
So you’d want to make sure that anyone else with access to this information, like your employees, doesn’t beat you to it.
NDAs are also used for companies who have a new innovation or invention.
This is a major element for businesses who built an invention to create a competitive advantage.
Being the first person to bring something to market will always give you an edge over your competition.
I’ll give you some examples to prove it.
What do you use to blow your nose?
If you said a Kleenex, then you’re referring to a brand of facial tissue.
Since Kleenex was the first to bring this product to market, the name of their brand gets used for the product in so many instances.
This is a huge advantage over their competition.
Being first to market has helped these companies dominate since their inception, which is why companies go to such great lengths to protect their secrets.
When not to use an NDA
Let’s get back to your mobile application.
While lots of our examples showed viable reasons when NDAs are necessary, that’s not always the case for mobile apps.
More often than not, you don’t need to use an NDA when you’re building and launching a mobile app.
Just because you have a great idea, NDAs won’t always protect you.
So it ends up being a waste of your time.
If you get a lawyer to draft one up for you, which is always recommended when you’re doing any kind of legal paperwork, then getting an NDA will end up costing you money as well.
Whenever you’re discussing your app idea with someone, it’s completely fair game for them to go and develop it on their own, even if they signed an NDA.
As long as they don’t use any confidential information to pull this off, they are within their legal right.
For the most part, it’s safe to say you can manage to develop your mobile app without getting anyone to sign a non-disclosure agreement.
Trying to get someone to sign one of these agreements could even deter them from working with you.
A developer may fear that they could get sued if they build a similar app for another client down the road, which would prevent them from working with you.
So after all the money and effort you spent finding the perfect developer to build your app, you don’t want to scare them away with an NDA.
How long should an NDA last?
If you end up using an NDA, it should never last forever.
I’d recommend keeping it somewhere between two and five years.
Here’s an example clause of a confidentiality clause in an NDA from Accuride Corporation.
As you can see, there’s a section that clearly outlines the duration of this agreement.
They have it set for five years.
Do you need an NDA?
So if you’re on the fence about whether or not you should use an NDA for your mobile app, the answer is probably not.
But it all depends on the following factors:
- What your company is
- What your business represents
- What your app does
- What you’re planning to do with the app
- Who you are talking to
There are more to list, but these will give you a good start.
But for the most part, you don’t need one if you’re just talking with someone.
With that said, you shouldn’t automatically sign a non-disclosure agreement if someone you’re working with asks you to.
Earlier, we talked about the different types of NDAs.
You should not sign one that’s unilateral or one sided.
Make sure that it’s mutual or bilateral, so the other person or company signing it is also bound to secrecy.
Don’t be surprised if people refuse to sign your NDA.
Earlier I gave an example of why a developer may be hesitant to sign one, but that’s not the only person.
If you’re trying to secure funds from venture capitalists or other investors, you’re obviously going to be pitching your app idea to them.
These people probably will not a sign an NDA.
It puts them at too much risk for a conflict of interest with their other investments or businesses, so you’re better off not asking for one in the first place.
For those of you that decide you want to get an NDA drafted regardless, you should make sure it comes from a business lawyer.
You’ll have to pay for it, but they’ll help you make sure that it’s as bullet proof as possible.
While there’s definitely circumstances where businesses would consider using non-disclosure agreements, your mobile app startup probably isn’t one of them.
Ultimately, the decision is yours.
If you think that you have information that’s worth protecting, talk to a lawyer about getting an NDA drafted.
It all depends on your unique situation.
But just make sure that you’re not creating on that lasts forever.
Five years should be the maximum length.
Also, never sign an NDA that’s not in your favor.
If someone asks you to sign one, make sure that it’s mutual.
Again, I’m not a lawyer.
I’m just speaking from personal experience in the app development world.
Use this guide as a reference to determine if your company needs a non-disclosure agreement.
Are you planning to use a non-disclosure agreement for your mobile application?