5 Legal Solutions for App Developers

Dec 19, 2016

App developers face a fierce competitive environment. As developers create, share and collaborate with others, well-intentioned developers may inadvertently create legal issues for themselves simultaneously. Here, a software attorney discusses some legal solutions to help app developers thrive while mitigating legal risks.

Create a Liability Shield

One of the easiest ways for a developer to protect against legal risks is to create a separate legal entity (a.k.a. business formation or liability shield). A common method is to form a limited liability company or corporation. However, choosing the best entity should be the subject of a discussion that an app developer has with a business lawyer because the entity will be the legal foundation for the app development. In the event that a claim arises that the app infringes on another’s software code, designs, trademarks, patents, or other intellectual property, the business can act as a legal shield for the app developer personally.

Adopt an Operating Agreement

Some states require some form of operating agreement or shareholder agreement as part of the maintenance of a business entity. Whether or not a state requires one, it can be beneficial to adopt an operating agreement, even for a business with only a single owner. An operating agreement may even be required in order to obtain a status such as being certified as a Women Business Entity or a Minority Business Entity. These certifications can be helpful for obtaining contracts from government bodies or private companies with an policy for supplier diversity. Additionally, an operating agreement can address many issues that may arise between members or shareholders such as voting rights and what happens when a member or managing shareholder leaves the company.  

Use a Non-Disclosure Agreement

A non-disclosure agreement (NDA) can be a stand-alone document or incorporated into other forms such as independent contractor agreements. Keep in mind that NDAs are not generally accepted by investors because they encounter many ideas likely to overlap with other pitches they have heard. An active investor can review hundreds of prospective deals each year and will not want to be bound by hundreds of potentially conflicting agreements. However, and NDA can be effectively used when sourcing talent, collaborating outside of the business, and using third parties to test functionality. 

Obtain Proper Licenses or Assignments

When using third parties to create something such as a logo, photo, or website, it can be important to obtain an assignment to the work. Under intellectual property law, the author of the work is the owner of the work, even if a third party pays to have it created. Consequently, app developers should ensure that the business has the necessary rights to use what was created for the business in the manner it intended. Having a clear legal paper trail can be helpful even when employing friends and family to create the work. Legally memorialized agreements in licenses or assignments can prevent disputes and provide a means to salvage relationships or resolve legal issues arising between friends, family, and suppliers who have contribute in creating intellectual property for the business.

Implement End-User License Agreements

Before deploying an app for customer or tester use, the business should have all users accept an End-User License Agreement (EULA). A EULA is an agreement that sets out the rights and obligations of the parties and can provide additional liability protection for the app developer. Using a generic agreement template, or worse, another company’s agreement can actually create more liability for the company based on the circumstances. A EULA should be tailored for the business, app, and potential risks to mitigate legal implications. 

The legal issues involved with developing applications can be complex. Considering the legal solutions above while employing the assistance of an intellectual property lawyer familiar with app development and software matters can be helpful for mitigating legal issues for the app developer.

By Brian Kirkpatrick