Partner Article

The Legal Minefield of App Development

Mobile app production is an exciting, fast moving growing industry, involving tech minded entrepreneurs and innovative business ideas. The emphasis lies in the development process in anticipation of huge revenues rolling in. Far less interesting legal issues often don’t take priority, until it’s too late. Amy Tindall, Senior Commercial Lawyer at Genus Law guides you through the potential legal pitfalls involved in the app development process and how best to avoid them.

Whether you are a small partnership with a great idea or a larger organisation, wanting to get your house in order before securing further investment, developing apps can be a legal minefield. Whilst you concentrate on the creative and technical aspects of developing the ‘next big thing’, spare a moment to make sure you’re covered in case the worst happens. Whatever your size, addressing these key issues is essential to minimise your risk and pave the way to the success of your business.

If you are already working or are thinking about operating in this area, ask yourself the following four questions: 1. Are you comfortable that you have structured your business in the best way to minimise your personal liability if things don’t go as planned? 2. Have you properly protected your confidential information and app content to reduce the risks of your partners and competitors copying your work? 3. Have you clearly explained to your app users what they should and should not be doing with your app and limited your liability if things go wrong? 4. Are you obtaining personal data from your customers and do you know what your legal obligations are when using this information?

The right set-up

Businesses are often started by friends and colleagues, sharing skills and ideas based on a mutual “understanding” of how the business will run. Little thought is given at the outset to what might go wrong. You could risk personal liability and conflicts with your partners at a later date about ownership, responsibilities and revenue share.

To avoid this consider the legal structure of your business and the best way to reduce your personal liability. Put in place written legal agreements setting out your respective ownership, responsibilities, and revenue share in connection with the development and exploitation of the app.

Keep it to yourselves…at least at first

The groundbreaking nature of this industry makes protection of confidential information essential. Putting in place an NDA (non-disclosure agreement) serves as a useful deterrent to someone stealing or sharing your confidential information and sets out your intentions about how you will protect it.

Before you begin negotiations with any third party you are considering working with (e.g. developers, designers, copywriters, consultants), ask them to sign an NDA and agree that they won’t disclose any confidential information about the project.

Protect what’s rightfully yours

The source code, designs, graphics, app name, app icon, and any written content within the app are all considered intellectual property. You should consider taking steps to protect your intellectual property against competitors, for example by registering your app name and logo as trademarks as soon as they’re developed.

It’s wise to speak to specialists about properly protecting your intellectual property which is essential to your business. Don’t assume that your business owns any intellectual property which has been created for you by third parties (e.g. contractors and consultants) who are not your employees.

Key points for you to consider are: • ensuring all IP that your business generates is owned by your company, and not the people generating it • if you outsource a process (e.g. development, marketing, sales), include an “IP assignment” provision to specify that your business owns whatever work is created.

Own your goal

If you engage a software development professional to design and develop your app, ensure you enter into an app development agreement which, as a minimum: • vests ownership of the app’s underlying software in your business • includes acceptance procedures allowing you to reject an app that fails to meet agreed upon specifications • includes warranties from the developer about the functionality of the app.

If you don’t have these arrangements in place you risk disputes over ownership of the underlying software of the app and a product which fails to deliver what you had envisaged.

Trying to keep the customer satisfied

Apps are licensed, not sold, to end users. Before distributing your app, put in place an appropriately tailored End User License Agreement (EULA) including: restrictions on use of the app; limitation on your exposure to claims from your users; requirements specified by your app platform e.g. Apple currently requires all iOS App producers to include certain terms in EULAs. You should also require end users to agree to the terms of the EULA prior to download or installation of the app.

If you don’t have an appropriate EULA you risk exposure to open ended claims from users. If your app collects or transmits end users’ personal data (e.g. names, emails, phone numbers or other data which is used to identify an individual) we recommend that you: • put in place a privacy policy explaining what data is collected, why, and how it is used • research, implement and adhere to good security practices.

If not, you risk non-compliance with data protection legislation which carries large fines, not to mention bad press. The risks are even greater if your app is aimed at children so you need to be fully aware of your legal responsibilities.

What starts as a simple idea and a lot of ambition, can often become a legal minefield. But taking on board the above advice will help you navigate your way through.

This was posted in Bdaily's Members' News section by Pamela Weeks .