Last year, global mobile app revenues grew to a record $45 billion. By 2020, revenue across all platforms is predicted to exceed $101 billion. Given the success of the industry, it is not surprising that there has also been a significant uptick in mobile application development companies. We have assisted several of our client companies that were traditional companies who have now developed ways to grow their businesses and engage new consumers with apps that complement existing products and services.

While the target audience and app content can dictate a number of specific compliance concerns, there are several issues that all app developers should address, including:

  • Business structure: For start-ups, it is essential to have a partnership agreement or other written agreement in place that sets forth the ownership rights, responsibilities, and revenue share of the shareholders or partners. To limit liability, and, in some instances, to simplify fund raising to finance the expansion into this new business, existing businesses may form a separate subsidiary as a new entity that is dedicated to app development and sales. Having an existing traditional business demonstrates to potential investors that management has skills and experience needed to develop and grow a business.
  • Vendor agreements: In many start-ups, the business owners and the app programmers are one and the same. However, if employees or outside developers are used, it is important to execute an assignment or a vendor agreement. Among other key terms, the contract should specify that all intellectual property and use rights will vest in the company paying the employee or outside developer. In addition, the contract should also include non-disclosure provisions that protect the confidentiality of the app being developed.
  • Intellectual property rights: App developers must also secure the required licenses for any trademarked or copyrighted content used in the app or risk facing an infringement lawsuit. Companies should also be mindful that the use of open source software still requires specific licensing procedures
  • End User License Agreement (EULA): Consumers who purchase mobile apps are technically receiving a license. The terms of use are typically set forth in an End User Licensing Agreement or EULA. While Apple provides a standard agreement for apps sold on the iOS platform, developers should consider drafting a custom EULA that addresses risks or needs specific to the particular app.
  • Data collection and privacy: Regulators are increasingly scrutinizing the data practices of mobile app developers. Therefore, it is important to have a detailed data privacy policy that specifies what information is collected; how is it stored; how the company uses the data; and whether it is shared with third parties