Confidential

NDA for Software Development Outsourcing: What should we do to make it really work?

admin — Tue, 27 Sep 2022 11:11:40 +0000

NDA for Software Development Outsourcing: What should we do to make it really work? admin Tue, 09/27/2022 - 18:11

Before you kick off with the software outsourcing project or the IT recruitment processes, you should consider signing an NDA, meaning a Non-Disclosure Agreement. What is NDA, why is it important in software outsourcing and how to prepare it?

What is NDA?

A Non-Disclosure Agreement, also called NDA, is a specific type of contract that helps companies to protect the confidential information that they share with their contractors from being revealed to a third party.

There are two basic types of non-disclosure agreements in software outsourcing:

Unilateral NDA – only one of the parties agrees to protect the information received from the other party. This is the most common type of non-disclosure agreement that allows companies to protect their business and strategic information.
Mutual NDA – both parties agree to protect each other’s sensitive information. In software development, mutual NDA may protect both company’s strategic information and the contractor’s technological information.

An NDA is not mandatory in software outsourcing or the recruitment processes. However, this kind of agreement helps to protect the company’s innovative projects, trade secrets, business strategies, and other sensitive information (related to finances, marketing, HR policies, etc.). Signing an NDA with the contractors, third-party companies or newly hired employees mitigates the risk of making confidential information public.

Non-disclosure agreements can be signed by multiple parties (including investors as a third-party) and at any time. But it is wise to sign a confidentiality agreement BEFORE you reveal the details of your future project.

Typical NDA may:

include a written agreement not to disclose information.
protect patent rights or intellectual property rights.
include exclusions from confidential information.
include a duration NDA stays valid (How long are NDAs valid? Typically it’s 2, 3, or 5 years).
set remedies for a breach of contract.
specify a governing law under which jurisdiction issues will be resolved.

Some countries like India, Vietnam... requires NDA to be stamped in order to be valid. In other countries, NDA can be just signed by a CEO in order to become a valid enforceable document.

In Vietnam, parties require NDA to be stamped in order to be valid.

Non-disclosure agreement software outsourcing

So, how to prepare a non-disclosure agreement? What kind of information must be included in an NDA?

Name of the parties

Although it’s an obvious part of every agreement, in the NDA it’s particularly crucial. The contract must precise who is receiving the confidential information and is obliged to protect it. So, in case of cooperating with a software development company, it is recommended to mention all the team members that may require access to sensitive information, such as graphics or UX designers, product or account managers, etc.

Definition of confidential information

Not every information shared with a partner or contractor is confidential. A non-disclosure agreement should precisely define what kind of information is considered sensitive, and in what form of communication (oral or written).

The extent of using confidential information

Sensitive information is never shared for no reason – usually, there are revealed to be used in performing required tasks. An NDA agreement can be then used to limit the scope of using confidential information, for example only to tasks essential to complete the project.

Duration of the agreement

The duration of the agreement shouldn’t be unlimited. It is usually defined as a period from 2 to 5 years. Moreover, the NDA may become inactive in case the information considered confidential is being made public.

Liability for financial damages

In order to protect the sensitive information even more effectively, the disclosing party may impose contractual penalties that the contractor is obliged to pay in case of breaching the agreement.

Confidentially exceptions

The NDA may also precise the cases in which the information cannot be kept confidential, and its revealing cannot be held accountable. For example, it may be applied when its publishing is required by the authorities in order to conduct a legal investigation, or when the receiving party got access to the information from a third party that was not bound by the NDA.

Legal Penalties in the U.S.

These penalties will usually be related to the nature and severity of the actions that violated the NDA. For example, some typical penalties for breaking a non-disclosure agreement include:

A fine
Contract termination
Loss of future job prospects
Restitution of the value of the stolen information

NDA software outsourcing tips

So, before you proceed with writing your non-disclosure agreement, we have a few tips for you. We highly recommend to:

Verify whether signing NDA is essential. In the case of simple projects that don’t require sharing sensitive information, an excess of legalities may severely slow down the process.
Secure your confidential information yourself. In case the information is being revealed on your side, the NDA becomes ineffective.
Collect evidence of agreement breaches. In order to execute receiving compensation, you will be obliged to prove the agreement violation to the contractor.

Bottom Line

A typical outsourcing development company spends thousands on marketing activities and client acquisition. Therefore, NDA penalties and fines can be nothing compared to the reputational damage a client can inflict.

In addition, keep in mind that there may be little to no profit a company can gain by revealing the client’s information. If you still want to play it safe, we can sign a Non-Compete Agreements (NCA) that will forbid us to work with any other company over the same idea.

Template - Software/R&D Outsourcing Non-Disclosure Agreement (NDA) Sample

admin — Fri, 16 Sep 2022 15:12:56 +0000

Template - Software/R&D Outsourcing Non-Disclosure Agreement (NDA) Sample admin Fri, 09/16/2022 - 22:12

We are very concerned about our clients and potential clients' business health. Here is an example of NDA that we used to sign with our partners:

NON - DISCLOSURE AGREEMENT

Effective today, TIGOSOFT LTD. (hereafter referred to as "the Subcontractor") shall be an independent contracting firm, working as a software developing company for ___________________ (the "Company"). The Subcontractor's work may involve any such skills that they are fit to accomplish, including documentation, web programming, and software development.
The Subcontractor is free to accept or decline any project offered by the Company and agrees to dedicate such time as is reasonable to fulfill the duties under this letter of agreement. The term of this agreement is indefinite and may be terminated by either party with or without cause, by written notice given seven (7) business days prior to cancellation. Notwithstanding the preceding sentence, if Subcontractor is actively working on a project for the Company, Subcontractor may not terminate this agreement, as to that specific project except upon forty five (45) days prior written notice; however, if Subcontractor gives notice, this agreement shall terminate 7 business days after such notice, except as to the specific ongoing project.
The Subcontractor shall be compensated, either hourly or per project, based on a given, per project scheme reasonably agreed to before the inception of any particular project. No allowances shall be made to the Subcontractor for expenses of any kind even though incurred in connection with the Subcontractor's duties unless by prior approval from the Company given in writing.
The Subcontractor shall be an independent contractor with respect to the Company. This letter of agreement shall not render the Subcontractor partner, agent of, or joint venturer with the Company for any purpose . The Company shall not be responsible for withholding taxes with respect to employees of the Subcontractor's compensation hereunder. Employees of the Subcontractor shall have no claim against the Company for vacation pay, sick leave, retirement benefits, social security, worker's compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. When corresponding with clients of Company, the subcontractor will represent himself as part of the company team.
The documentation, ideas, source code, software, copyrights, trade secrets, patents, any other intellectual property interests or improvements thereon developed or produced by the Subcontractor specifically for the Company under this letter of agreement ("Intellectual Property") shall be work made for hire, of which the Company shall be the sole owner. The Subcontractor further agrees that, to the extent required by applicable law, in the event any Intellectual Property is ever determined not to be work made for hire, the Subcontractor will, and do hereby irrevocably assign, free of any liens or encumbrances, all of the Subcontractor's worldwide right, title and interest in and to the Intellectual Property to the Company, its successors and assigns, including without limitation, any and all copyrights and all physical elements of said Intellectual Property, to have and to hold unto its successors and assigns, and this document shall be proper evidence thereof.
"Confidential Information" means any information disclosed by the company to the subcontractor, either orally or in writing. The Company may disclose to you Confidential Information. The Subcontractor shall not disclose Confidential Information to third parties without the express permission of the Company. Information designated as Confidential Information shall remain confidential until the Company designates it as non-confidential.
The Subcontractor covenants that while the Subcontractor is an independent contractor for the Company or in any other representative capacity and for a two year period from the date of Subcontractor's last contact with such person, the Subcontractor will not directly or indirectly solicit any current or former employees of the Company, that Subcontractor worked directly with pursuant to this agreement, to encourage or otherwise entice such persons to work for other entities.
The Subcontractor covenants that while the Subcontractor is an independent contractor for the Company or in any other representative capacity and for a two year period from the date of Subcontractor last contact with such person, the Subcontractor will not directly or indirectly solicit any current or former clients of the Company that Subcontractor worked directly with pursuant to this agreement to encourage or otherwise entice such persons or firms to employee the Subcontractor for any form of work.
We agree that in the event the Subcontractor breaches or threatens to breach the provisions of sections 4, 5 , 6, 7, 8 such breach or threatened breach would cause irreparable harm to the Company, and the Company shall be entitled to injunctive and other equitable relief to prevent such breach or to remedy an actual breach, in addition to any other remedies which may be available to it.
The Company warrants that it has the right and authority to enter into this letter of agreement. The Subcontractor warrants that it has the right and authority to enter into this letter of agreement, that the Subcontractor's work will be of professional quality, and that, to the best of your knowledge, any Intellectual Property the Subcontractor produces does not and will not infringe upon any patent, copyright, trade secret, or other intellectual property interest of any third party. The Subcontractor warrants that it will take all reasonable care to avoid infringing any patent, copyright, trade secret, or other intellectual property interest of any third party. Each of us agrees to defend, indemnify, and hold harmless the other from and against any liability, suits, claims, losses, damages and judgments, and shall pay all costs (including reasonable attorney's fees) and damages arising from a breach of our covenants and warranties under this letter of agreement.
The Company makes no representations or covenants with respect to future subcontracting opportunities for the Subcontractor.
This letter of agreement reflects our entire understanding and cannot be changed except in writing signed by both parties. The letter of agreement shall be governed by and construed in accordance with the laws of USA without regard to its conflict of laws rules. We agree to submit any claims or disputes arising under and in connection with this letter of agreement to binding arbitration, and such arbitration shall be under the rules of the American Arbitration Association. No failure or delay (in whole or in part) on the part of either party hereto to exercise any right or remedy hereunder will impair any such right or remedy, operate as a waiver thereof, or affect any right or remedy hereunder. All rights and remedies hereunder are cumulative and are not exclusive of any other rights or remedies provided hereunder or by law.

If you are in agreement with all of the above, please so indicate in the space provided below and return the signed copy to us. This letter shall then constitute our agreement in the matter.

ACCEPTED AND AGREED TO: