Prior to a SaaS agreement being negotiated with a customer, SaaS suppliers are often required to provide prospects with internal business sensitive information about their prices, polices and software functionality (confidential information) as part of the public procurement, tendering or sales process.
Need for an NDA
If prospects do not sign a non-disclosure agreement (NDA) or confidentiality agreement prior to a SaaS supplier disclosing its business secrets and confidential information, the prospect will have no duty to keep this information confidential. Confidentiality terms in the later SaaS agreement will only protect information disclosed after this is signed. If the prospect does not become a customer, they will be free to use your confidential information as they please.
An NDA should therefore be signed before providing a prospect with any sensitive information and this should include some basic legal clauses to protect your business if you win the sale and more importantly, if you don’t.
Often a prospect will require a SaaS supplier to sign their standard NDA prior to discussing a possible SaaS agreement. More often than not, the prospect’s NDA will only protect their confidential information and not provide the supplier with any protection. It is therefore essential that the NDA includes mutual rights to protect your confidential information.
If the prospect is a public authority this is essential, as under the Freedom of Information Act, your competitors can exercise their right to try to obtain access to your documents via a FOI request if their bid was unsuccessful. If you have an NDA in place with the public authority you may be able to block such requests.
What Information is Confidential?
All information provided by you to a prospect during the sales process should be treated as confidential information. This should also include any documents referred to in the documents you provide as part of your proposal. You will probably have given the prospect copies of price lists, functional descriptions of your software and other internal documents which you do not want third parties to see.
If the proposal does not lead to a sale and the prospect is speaking to your competitors…. it is imperative that you have made your definition of confidential information as wide as possible. Additionally the prospect should agree to keep all information confidential and to return or confirm the destruction of all confidential information, if no sale is agreed.
Who may Access the Confidential Information
If you are dealing with a multi-national prospect, you need to carefully state which companies or individuals within the prospect’s group of companies are entitled to see your confidential information. The prospect should undertake to apply the terms of the NDA to all such parties. Conversely, if companies or individuals within your group of companies need to see the prospect’s confidential information, ensure that you have these rights in the NDA.
Please note that these are just some of the basic clauses that need to be included in a NDA. There are many other clauses which have not been referred to here and legal advice should be sought when negotiating the terms of an NDA.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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