Non-Disclosure Agreements and Mobile Apps: Are NDAs Necessary?
It's a common story and it goes as follows: someone wants to talk to you about their app. It's probably for an app idea. But here's the thing...it's the app idea of all app ideas. Before any conversation can happen at all, you get the dreaded, "Please send me an NDA." You consider deleting the email and then think of little Billy at home. Billy needs to eat. Should you sign this NDA or does Billy go hungry?
Before I go further, a nice little disclaimer. I'm not a lawyer and none of the following should be considered legal advice. I'm simply sharing our experience at Savvy Apps and approach to dealing with NDAs. Seek counsel if you're not sure what to do.
What is an NDA anyway?
Let's start with the basics. I believe the fundamental issue with NDAs is that people don't know what they really are or what they're supposed to do. They just heard somewhere, maybe on Judge Judy (or if you're over 30, Judge Wapner), "you need an NDA."
"NDA" stands for non-disclosure agreement. It essentially is an agreement by two parties to ensure that confidential information is protected, that is, not disclosed to parties not named in the agreement. Yeah, I just blew your mind.
Why an NDA is somewhat ridiculous, especially for those who have “ideas,” is that they're arguably most useful when there's some tangible confidential information. Many—but not all—with app ideas have their idea solely in their head. They often don't have a business plan, investor deck, wireframes, designs, or anything more than 2-3 sentences about their idea. As I've mentioned before, it's also very possible that within a 10 minute call you have put more significant thought into this app idea than they have
What an NDA Doesn't Do
Many people who ask for an NDA think that by having an NDA they are preventing others from “stealing” their “idea.” An NDA doesn't do that necessarily. Instead, it provides protection against the named party for using or disclosing their confidential information. That means if another person or company approaches a developer or firm to build the exact same app, they absolutely could, provided they did not use that confidential information to do so.
That can obviously become a challenging position. It would be up to the recipient of the confidential information (e.g., a developer, app agency, etc.) to disclose if they felt there was a conflict of interest or if they somehow did not believe they'd be able to be involved because of the knowledge they had
When You Should Not Sign an NDA
If you don't provide your own NDA—which I definitely recommend—don't sign a NDA that is one-sided. A mutual NDA is one where both parties are protected as recipients and disclosers of confidential information. For example, you want to be protected if you share information about your process or comparable proprietary information.
We also typically will not sign NDAs without a term limit. It does not happen often but I have come across NDAs that are effective “indefinitely.” Because of how fast our industry moves, I usually look to have a term be no longer than two years. Many will ask for five years and it simply becomes a point of discussion
When You Should Sign an NDA
If you're dealing with a well-known brand, established company, a startup that has raised funding, or a comparable organization, I'd overall be less concerned about signing an NDA. These companies have more to protect versus those with “ideas.” Provided that their NDA is mutual, has a reasonable term, and does not have any unfair provisions, you can likely safely execute it.
Even in these cases though, our general approach still stands. We always look to get a better sense if there's a good fit on both sides before we put an NDA in place. A handful of high-level email or phone conversations can quickly determine a fit, without any confidential information needing to be disclosed. If someone is extremely pushy about the NDA, they're likely focused on the wrong criteria or paranoid. Neither are good signs
Does My Mobile-focused Startup Need an NDA?
Probably not. As mentioned above, unless you have definitively confidential materials, just sharing your idea does not mean an app developer, agency, or the like can never work on a similar product. In fact, we often get requests from prospects—even ones who want NDAs—that ask if we have experience with similar apps or functionality.
We're extremely careful about conflicts of interest. We're equally as careful about not overexposing our liability risks by providing an NDA to everyone who asks for one
Will VCs or Other Investors Sign an NDA?
The short answer is that investors usually won't sign NDAs for the same reasons I mentioned in the preceding paragraph. What they might do, however, is put language in their agreements should they choose to invest, that provides similar provisions. If you want to read a more in-depth article on this particular subject, John Rampton has you covered at Entreprenuer.com
Going back through many of our customer relationships, especially our best ones, not one of them requested we put an NDA in place at any point in time. Our agreements provide protection for confidential information and intellectual property. These kinds of provisions really make the most sense when proceeding with performing actual work.
If you're serious about working with a certain person, firm, etc. don't lead with asking for a NDA. Those who have reached the point where you'd want them to perform services for you have something more important to protect: reputation. It's likely they have more ideas than they know what to do with already. They're already probably not building their own ideas, so they don't want to steal yours.
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