In a contract for services where something is created, whether a smartphone application, artwork for an ad campaign, a product which will go to market, or other item capable of ownership, establishing who will own the items produced is important for both the creating and receiving parties. It is also important to set expectations at the start of the business relationship, such as privacy and confidentiality requirements and timeline goals. A non-disclosure agreement (NDA) is a written contract that can address issues such as confidentiality, product ownership, and expected timelines. Through the NDA and additional terms in a final service agreement governing the relationship, the parties can create a legal roadmap of their respective rights, obligations, and protections from a project’s inception to its finish, and beyond.
Swipe Right Safely
Think of an NDA as a first date between the creating and receiving parties. Typically, the NDA acknowledges the nature of prior discussions and desired results but does not address production of the end result. An NDA protects the exchange of ideas, processes, trade secrets, intellectual property, and other items important to each party which may have been achieved at considerable time and expense. Additionally, an NDA addressing ownership of products or property created through the relationship helps the parties set clear expectations. An NDA can also protect against others who learn about the discussion of a potential agreement between the parties.
Occasionally, the parties quickly agree on what each can do, and a final service agreement is created. Other times, however, negotiations may stall, or the parties may find that they are not the right fit due to differing capabilities, goals, or expectations, or the price simply isn’t right. In the latter case, an NDA protects the party seeking services by providing a remedy if matters discussed in negotiations are disclosed to other vendors, thereby increasing prices or otherwise negatively impacting contract terms. It also allows the party to approach other vendors who may be more closely aligned or provide a better opportunity.
At Your Service
The terms of any service agreement should establish timelines that drive the completion of performance and set out step-by-step expectations, workflow, and checkpoints in the relationship as products are made, programs created, and deliverables are produced.
An understanding of what is to be accomplished, when it is due, and each party’s rights and obligations are the heart of any contract. Establishing that the created items or processes are work-for-hire, and are ultimately owned by the receiving party, helps alleviate any question of who owns the created work. Additionally, these terms cannot only further protect the intellectual property of both sides, including the processes that drive the relationship along to its ultimate conclusion, but also provide a means of correcting and redirecting should the arrangement encounter any obstacles or mistakes by a party.
In the end, utilizing an NDA allows a party to vet potential business partners and protect its intellectual property and trade secrets. The completion of a service agreement overlying the NDA provides supplemental or new terms, attachments, timeliness, and schedules to further protect and enhance the business transaction, helping those great ideas, and a road map to get there, come to be.
Before going to market with a new idea or seeking out a business partner, having a template for an NDA and a service agreement is an important foundation for the potential business relationship. Consult with an attorney to be certain the terms adequately cover issues such as ownership of the end results and expectations throughout the process.
Simonson is an attorney with Fryberger, Buchanan, Smith & Frederick P.A. practicing in contract and employment law.