Blog / Business / outsourcing development

Does NDA Really Work if You Sign it With Outsourcing Company?

  • Rating — 5 (4 voices)
  • by Tony
  • Updated on November 22, 2018
  • Read —
    4-5 minutes
what is nda

There is a common sense in such uncompromising protection of your ideas. Especially if you’re running a company like Apple Inc. that builds its marketing strategy around intrigue and conspiracy. Or if you’re investing billions of dollars into R&D. And truth be told no one would violate confidentiality agreement signed with such companies.

On the other hand, ideas worth nothing without execution. In other words, to build a successful business, you need to multiply your idea & its execution. From such point of view, additional precautions just give you a little time before your rivals enter the market.

Ideas are just a multiplier of execution

by Derek Sivers

What is a Non-Disclosure Agreement?

So, what is an NDA? A non-disclosure agreement (aka confidentiality agreement) is a legal contract between two or more parties that outlines confidential information parties are sharing. NDA restricts revealing this information to third parties.

NDA can be Unilateral (one-way), Bilateral (need to be signed by both parties), and Multilateral (when many parties are involved). In this article, we’ll cover one-way NDA that is common for outsourcing development industry.

NDA signing process at GBKSOFT:

  1. Fill in a contact form with general information about your project.
  2. General means nothing specific about your idea, but only facts that are common for every project in this industry. Something, from where we can start our research to save time for communication:
    • Your industry.
    • Techs you’re interested in.
    • Development platform (Web or Mobile).
    • Availability of source materials (specs, designs, research).
  3. We get back to you with a signed copy of NDA, or you can send us your own copy and we’ll sign it.
  4. We’ll get into details and keep our mouth shut.

WE'll keep your idea

Note: 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 a reservation that sets which info doesn’t fall under NDA.
  • 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.
Note: Some countries like India 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.

The Purpose of NDA:

  • Business idea protection.
  • Non-disclosure of source code.
  • Protection against copyright infringement.
  • Protection of trade secrets and any other intellectual property listed in NDA.
  • Client Information protection for the cases when you’re upgrading a platform where your client’s database is stored.

Therefore, signing a non-disclosure agreement for software development is a way to protect your idea or the fact of using outsourcing as a whole.

Consequences of Breaking the NDA

Sadly, but having a non-disclosure agreement can protect you only from leaks made by the contractor, not by other parties involved in the development process.

In the case of NDA violation, there are several types of penalties court can apply depending on the type of violation and the monetary value of damage inflicted.

Case #1
Both parties belong to the same legal space (registered in one country).

Most US laws that protect trade secrets and confidentiality of the information are based on the  (UTSA). This document sets rigid rules about the confidentiality and type of information that fall under its “jurisdiction”, including formulas, code samples, programs, devices, prototypes, charts, etc. In some states, it also protects such trade secrets such as customer lists.

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

Case #2
Parties operate in different legal spaces (outsourcing company is registered in a different country). In such case, it is advised to specifically determine under which governing law the NDA violation issue will be resolved.

If it was determined that, for example, the contract is governed by the laws of the State of Delaware – you should be prepared for the additional expenses that will be required for litigation in the United States.

If an outsourcing company and a customer operate in different countries, there is a common practice to make a contract that will be governed by a foreign law. Under such conditions the answer is YES, NDA lays penalties on outsourcing company.

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 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.

Having an Innovative Business Idea in Your Mind? We’ll Sign an NDA and Get to Work!

 

Tony Sol is the business development manager of GBKSOFT, overseeing the production of all writings for both internal blog and external platforms. He is technical-driven person always looking for new benefits of merging business and software.


Leave a comment
Close

Leave a Reply


Similar Blog Articles

white-label-development

Marketing

White Label App Development 101

Are you an agency looking for an affordable way to offer mobile apps to your clients? Or you already have built an app and need a better way to manage it. Or maybe you need a creative turnkey project for your next ad campaign? Either way, you need to look for a white label app...

Rating — 5 (2 voices)

Business

How We Work With Startups: Outsourcing Development Checklist

Few outsourcing development companies acknowledge that working with startups may be harder and much less profitable than making a product for the established enterprise. Which is why we’ve made our own five-step code, that ensures great results and drives the motivation across our team members when we’re working with startup owners.

Rating — 5 (23 voices)
plagiarism

Business

,

StartUp App Ideas

How To Protect Your App Idea From Being Stolen

It’s a quite common situation for every first-time startupper – to lose sleep worrying about competitors stealing their app idea. And it’s no wonder – you worked so hard doing all the research, brainstorming, searching for funding and choosing a development team, that even mere thoughts about all this being taken away from you must...

Rating — 5 (1 voice)

Categories

All articles Business Company News Development Marketing StartUp App Ideas UI and Design Uncategorized

People are talking about

You've got
a project in mind

What's next?

Send us a message with a brief description of your project.
Our expert team will review it and get back to you within one business day with free consultation and to discuss the next steps.

Testimonials

Andy
I think they do great work. I haven’t yet given them something that they were unable to do. Great
Raphael Lasry
My Project with GBKSOFT gave me the ability to develop my software while keeping a busy schedule. Ana, who was my project manager, was very professional and was always understanding of my vision and what I wanted. I would recommend GBKSOFT again to any other company or person who has a vision for their web application. Thank you GBKSOFT! Recommend
Dave
GBKSOFT’s performance has been very strong. We've referred them twice, which says all anyone needs to know about them. A referral is the ultimate signal we can give that these guys are great. Strong
13
App Futura ExtractGood FirmsClutchAwwwards