How to Start an App Business in Australia

Quick Answer

To start an App business in Australia, you need to get four legal foundations right:

1. Publish your own App legal notices (Terms of Use, Disclaimer, Privacy Policy and EULA)
2. Own the intellectual property in your App, including the source code
3. Sign a written App Developer Contract before any coding starts, and
4. Choose the right business structure, usually a Pty Ltd company.

The Apple and Google App Store agreements protect Apple and Google, not you, so you need your own App legals in place before launch.

In our experience working with over 10,000 Australian businesses, the most expensive App business mistakes, like not owning your source code or having your idea copied, happen before launch and are all preventable with the right documents.

This guide explains the legal issues involved in developing an App and setting up a profitable App business in Australia: the legal notices you need, how to protect your IP, what your App Developer Contract must cover, and how to structure the business.

Click on any of the questions below to jump to that section of this legal guide.

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If you still have a question after reading this guide, get in touch as we’d love to keep adding your questions to this comprehensive guide.

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What legal issues should you consider before developing an App?

The main legal issues to consider before developing an App are: protecting your App idea with a Confidentiality Agreement, retaining evidence of your Copyright ownership, signing an App Developer Contract before any coding begins, registering your Trademark (and possibly a Patent), and publishing the appropriate App legal notices before launch.

Here is the sequence to follow, in order:

1. Use a Confidentiality Agreement to protect your App idea. Before discussing your idea with investors, developers or business colleagues, have them sign a Confidentiality Agreement. It confirms that the idea is yours and, in some cases, allows you to seek damages for any breach of confidence.
2. Keep evidence of your Copyright. Sketch a mockup of your App design, idea and functionality. Copyright is automatic in Australia, and this evidence proves the idea, design and functionality were yours first. It also helps brief your developer.
3. Sign an App Developer Contract before coding starts. Most developers do not pass ownership of the final code to you unless the contract requires it. Your App Developer Contract should cover specifications, pricing, delivery timing, IP ownership and confidentiality.
4. Protect your App IP with Trademark registration. Register your App name and logo with IP Australia using a Trademark registration service. If your App has unique functionality, consider Patent protection as well.
5. Get your App legal notices in place. Terms of Use, Disclaimer, Privacy Policy and EULA, published before your App is released on the Apple or Google stores. Our App Legal Package covers all four.
6. Launch and promote your App. Promote your App on social media and keep early users informed of updates and new versions.

We designed the Infographic below to explain what to think about at each step of the App development process and how to protect yourself and your App idea. Each of these legal issues is covered in detail in the sections that follow.

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Prefer video? Here is a short video explaining the legal issues involved in developing an App:

App Legal Notices

What legal notices do I need to post with my App?

You need a set of Terms of Use (also called Terms and Conditions) which outline the terms on which the customer is permitted to use your App.

You need a Disclaimer that disclaims liability if somebody suffers loss from downloading your App and tries to sue you.

Australian law requires you to have a Privacy Policy stating how your App accesses personal data, how it’s used, and whether it’s stored.

You need an End User Licence Agreement (EULA) which states exactly how you are licensing your App to end users and purchasers.

These legal notices are discussed in more detail below. But if you want to get started immediately, we have an App Legal Package that includes everything you need for your mobile App. All you have to do is fill in a simple online form, copy and paste your customised legal notices and you can literally be done in less than 10 minutes!

Do the Apple and Google App Store legals protect me?

No. The Apple and Google App Store legals protect Apple and Google, not you! You need your own legals.

Promoting your App in the Apple and Google App Stores is a given. But what do the App Store legals you agree to when registering cover you for? Nothing. Apple and Google have their own Disclaimers to protect themselves from you and your customers. They do not protect you or your App business from being sued by your users or customers. Hence, you need your own legals.

Does my App need a Privacy Policy?

Some Apps are required to have a Privacy Policy under Australian law. You should include an App Privacy Policy to look more professional to users and customers. Your Privacy Policy must state what personal data is accessed, how it’s used and if it’s stored.

Privacy has become an important focus for Australian regulators, and the move to cover Apps has become necessary as Apps access personal data (through App permissions) that users are often unaware of. Ensure that the permissions your App needs to work are limited to absolutely necessary ones and that your App developer has signed off on them in your App Developer Contract. If you don’t have this to rely on, it will be difficult to show you have appropriate Privacy compliance in place.

The Legal123 App Privacy Policy meets both Google Play and Apple iTunes requirements.

Does my App need a Disclaimer?

Yes. You need an App Disclaimer to protect you if customers or App users sue you.

A Disclaimer states that you are not responsible for any issues associated with downloading or using your App. This includes corrupting data or programs when using your App and agreeing to the permissions your App needs to function.

Does my App need Terms of Use?

App Terms of Use state the terms under which your App is available to users and protect you and your business. Your App Terms of Use should include the following:

• Fees for use of the App
• Rules for subscribers and advertisers
• Indemnity for the App’s use
• Limitation of liability (in the event somebody suffers loss from using your App)
• Protection of your Copyright and intellectual property
• Details of when you may cancel a customer’s account, and
• Governing Law and the location of courts in the event of any dispute.

In the Legal123 App Terms of Use, there are options for advertisers, subscribers and links to other sites. For example, if you have a restaurant listing App or a classified advertising App, you want to be indemnified and not be responsible for any complaints or issues with the advertiser’s website, services or information.

If your App is a paid App or enables ecommerce, you need Terms that comply with current Australian Consumer Law.

What is an End User License Agreement or EULA?

An End User License Agreement (EULA) states exactly how you license your App to end users and purchasers.

Your users and customers don’t own your software when they download or buy your App. You have to ensure it’s clear they cannot modify or use the App in any way outside your EULA terms.

Both the Apple and Google App Stores make you agree to a standard EULA. The Apple App Store has recently allowed App marketers to upload their own EULA. We recommend that Australian App marketers use their own EULA, as the standard Apple EULA is based on California law and it’s unclear how well you are protected under Australian law.

And in the event of any claim by a user anywhere in the world, you would be required to engage Californian lawyers and may have to travel to California to settle the legal dispute!

Where do I need to post the legal notices for my App?

You need to post your App legals so they are visible before users can download. You need to consider how you would prove that the customer agreed to your App legals. If the legals are hidden on an out-of-the-way page of your website, then the customer may find it easy to argue that they never saw the legals and therefore never agreed to them.

If the App legals pop up and the customer is forced to scroll through them and click a box that says “I agree” or something similar, it will be much more difficult for the customer to argue that they never saw or agreed to your terms.

If your App has anything to do with dating, finance or fitness, you must be extra careful about potential user claims. Cover yourself by having users “actively agree” to your Disclaimer and Terms of Use. But if your App is something like a simple game, then you don’t necessarily need “active agreement” by users. Just having the Terms readily available to users is likely enough.

In the Google App Store – under your developer listing – you can link to your App Privacy Policy that should be posted on your App website. In the Apple App Store – again under the developer listing – you can link to your App Privacy Policy and your EULA.

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How do you protect your App’s Intellectual Property (IP)?

How can I make sure I own the code for my App?

Have a legally binding contract with your App developer and ensure you own the code.

This is probably the most overlooked detail in starting up an App business.

It is critical that you own the source code for your App. Without it, your business is worthless – and you might become hostage to your App developer. We’ve seen this – with overseas App developers charging outrageous monthly code maintenance fees and threatening to keep the code and App distribution accounts if you don’t pay.

In addition, if you do not own the code, getting investor funding or claiming any intellectual property rights will be difficult. Worse, the App developer could use the code, sell it or develop a similar version for someone else and then you’ll have no right to sell your App or register its intellectual property.

You need to have your developer give you the open App source code, sign over ownership, and assign the Copyright to you. You will need this to engage any other App developers to make updates, changes or enhancements. This requirement should be included in your App Developer Contract with them.

How do I stop someone from stealing my App idea?

To stop someone stealing your App idea, have everyone you discuss it with sign a Confidentiality Agreement before the discussion starts. This applies to partners, investors, App developers and marketers alike.

Before you start working on your App, you will probably need to have discussions with various other people – partners, investors, App developers, marketers, etc. If you are not careful, any of these people could take your App idea and create their own product. You, therefore, need to take steps to protect your idea.

So before you start any discussions with these people, you should have them sign a Confidentiality Agreement. The Agreement will confirm that the idea is yours and prevent the other person from using it for their own purposes or disclosing it to anybody else.

A Confidentiality Agreement doesn’t need to become a stumbling block. Use a short agreement – email or 1-pager – for preliminary discussions. Then, as discussions progress, particularly with App developers who need to understand the technical details of your App, ask them to sign a more detailed and comprehensive agreement.

How do I Copyright my App?

Copyright protects your App’s source code, artwork, design, text and other content. Copyright is automatic, and registration is not required. You might add a Copyright symbol to your App, but it’s unnecessary.

The problem with Copyright and App code is that it doesn’t offer much protection. For example, source code can easily be added to or altered enough to look new and may be considered “unique” and not infringe on your Copyright. So if you’re serious about protecting your intellectual property, you should consider patenting your App functionality.

Should I Trademark my App’s name and logo?

Yes. Once you decide to proceed with your App concept, you should consider protecting your Intellectual Property (“IP”).

At a minimum, you should register your App trademark with IP Australia. Trademarks are used to protect your business’s brand name and identity, including logos and symbols. Trademarking prevents anyone else from using that name, logo or symbol.

We have a separate feature article that describes Trademarks in more detail here. And here at Legal123, we offer a trademark registration service to ensure your planned App name and logo aren’t already taken, and we file your trademark with IP Australia so your App is protected.

Should I Patent my App?

You should consider patenting your App if it has unique functionality, because Copyright alone offers limited protection for App code. A Patent protects the innovation itself from being copied.

A Patent is used to protect new inventions, methods, processes, substances or devices. For example, a patent might be used to protect a new business software application, a new ergonomic chair design, or a new drug for treating high blood pressure.

You should consider patent registration protection if your App has unique functionality rather than relying on Copyright protection. Patent registration protects innovative products or processes from being copied by others. This is more costly and usually a longer process, so you need to start it early and before your App is in the public domain.

An Australian patent provides protection only within Australia. IP protection is country-specific, so you’ll have to register a patent in each country you wish to be protected in.

You can lodge separate patent applications in each country you plan to market and sell your App. This is the most cost-effective method when you are only filing in a few countries. Alternatively, a single international application can be filed under the Patent Cooperation Treaty, which is administered by the World Intellectual Property Organisation. This means you can apply to over 180 countries with one application. Each country will still have to examine your application separately. Still, you can save significant time and costs by choosing this path rather than doing so individually across several countries.

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App Developer Contracts

What is an App Developer Contract?

If you are hiring a Developer to code your App, you need an App Developer Contract. This Contract will set out the terms of the project, including:

• App specifications (to confirm what you expect to receive from your Developer)
• Pricing and payment schedule
• Timing of deliverables
• Dispute resolution process
• Protection of your intellectual property
• Confidentiality of your idea, etc.

Why do I need an App Developer Contract when I hire my App coder?

You need an App Developer Contract to guarantee that you own the finished code, keep your idea confidential, and set the price, timeline, and deliverables before any work starts.

If you have come up with a great idea for an App and need someone to design and code it for you, you want to ensure you hire someone who will keep the idea confidential. You want to ensure you both understand exactly what work is to be completed, when it will be completed, how the App will function, how much you will pay, and when you will pay. You also want to be protected, for example, to ensure they provide professional work and do not use other people’s material.

Importantly, you need to ensure that you own all the source code, work and material at the end of the project. Unfortunately, we have seen many situations where an unwitting entrepreneur has paid to have an App developed, only to discover down the track that in doing so they agreed that the Developer (rather than the entrepreneur) owns the code.

What are the risks of not using an App Developer Contract?

You could receive a finished product that is nothing like what you needed or expected. If the App specifications were not clearly set out in an App Developer Contract, you might be stuck with it. You could have the confidentiality of your idea compromised, and someone could steal your idea before you can launch it.

You might not end up owning the App code, meaning the Developer can do what they like. Effectively, you may have given your idea away – and paid the Developer simultaneously!

You would have no indemnity for any actions of the Developer. This means that if a user of the App suffers a loss due to a code error (for example, a security breach that causes a user to lose money), you, not the Developer, would be responsible, even if it was the Developer’s mistake.

What clauses should my App Developer Contract include?

Your App Developer Contract should include the following:

• Full App specification and functionality
• Permissions the App accesses and personal data used
• Delivery timing and response time for bug fixes
• Payment schedule and dispute resolution process
• Protection of your IP and confidentiality of your idea, etc.

Be aware that if you use an overseas App developer and things do not work out, you will find it more difficult to enforce your legal agreement with them. For example, many entrepreneurs are tempted to hire developers from places like India or the Philippines, where costs are much lower.

If things go wrong, you may be successful in legal proceedings in an Australian court. But then, what will you do when the developer ignores correspondence from you and the court? A judgment from an Australian court will not affect a developer sitting in India or the Philippines who is ignoring you.

This does not mean that you should forget about an App Developer Contract altogether – it is still an extremely valuable tool for ensuring that the project is completed correctly and for ensuring that you and your idea are protected. However, you should be aware of these risks when using non-Australian developers.

How can I ensure my App developer delivers on time and within budget?

App development costs can vary widely – so know what you’re getting.

A basic App can cost $1,000. More complex Apps can cost between $3,000 and $10,000. You might get an App development quote of $5,000 from an Australian App developer – and the same thing might cost you $2,000 from an Indian App developer. And who’s to know the difference (unless you’re an experienced App coder)?

As with everything, you usually get what you pay for. So ensure you know what App functionality you need and then choose wisely.

Here’s a checklist of items to consider when reviewing and deciding between different App developers:

• Is their portfolio extensive and does it include Apps similar to yours?
• Do they have the experience to code the functionality or effects you require?
• Do you like the look and feel of the Apps they code?
• Do they limit permissions and respect your legal requirement for user Privacy?
• Are their Apps available in the Apple and Google App stores?
• Will they submit your App to the Apple and Google App stores?
• Do they have a priority status that fast-tracks listing on the stores?
• Is their fee 100% fixed, fixed with over-run riders or based on hours?
• Do they offer a warranty and guarantee the App will work successfully?
• How fast are their turnaround and bug-fix times?

What happens if there is a dispute with my App developer?

If you have a dispute with your App developer over progress or quality of work, the dispute resolution clause in your App Developer Contract determines what happens next. Without one, your options are limited and expensive.

The best way to minimise misunderstandings and ensure clarity of expectations between both parties is to clearly define the project or services in the App Development Contract. The more detail you can provide to your developer, the more likely it will be understood and delivered. Provide as many sketches, photos, images and examples as you can. Remember, if you are unclear about exactly what you want, leave it up to your developer to take a guess.

If possible, you may also find it helpful to develop your App in stages. For example, once the first stage is complete, you can review the work and make any necessary tweaks. After the second stage, you may be able to make a few more. In doing this, you may find it easier to guide your developer in the right direction.

If you have a genuine dispute about the quality of the work, there are clauses in the Legal123 App Development Contract requiring both parties to submit to an independent specialist arbitrator who will decide the matter. Both parties agree to abide by the arbitrator’s decision and to pay their own costs.

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Structuring Your App Business

What business structure should I use to run my App business?

You should probably run your App business through a ‘Pty Ltd’ company structure.

It’s important to get your App business structure right from the beginning. Changing mid-stream can be costly and create extra headaches you don’t need. We’ve written before about the advantages of using a ‘Pty Ltd’ structure for online businesses – and App businesses are no different.

In short, ‘Pty Ltd’ business structures:

• Provide the most protection for personal risk, particularly if you are going into business with another person
• Maybe the easiest way to bring on investors, raise financing or sell the App business down the road
• Give you flexibility in whether to personally own the App and lease or license the App back to the company, and
• Allow you to minimise taxes by deducting all business expenses and structuring payments to owners of the App

But ‘Pty Ltd’ isn’t the only option. You might also consider a sole trader, a partnership or a trust. Before deciding, you should really check with your lawyer and accountant. Plus, familiarise yourself with the setup and ongoing costs of lodging accountants, ASIC filings, BAS returns, etc.

Should I register my App business for GST?

If your App business has annual revenues of over $75,000, you must register for GST. If you have annual revenues of less than $75,000, talk to your accountant about your options.

Do I need a website for my App?

Yes. Your App should have its own website.

An App website is a great sales tool and does not have to be long or detailed. Something simple, like a single page that promotes the benefits of your App, explains its functionality and lists some FAQs, is all that is needed.

Your App website should also be the home of your App legals. In the footer, link to your App Privacy Policy, Disclaimer, Terms of Use and EULA.

We hope you found this guide to setting up your App business in Australia helpful.

About the Author: Vanessa Emilio

Vanessa Emilio (BA Hons, LLB, ACIS, AGIA) is the Founder and CEO of Legal123.com.au and Practice Director of Legal123 Pty Ltd. Vanessa is a qualified Australian lawyer with 20+ years experience in corporate, banking and trust law. Click for full bio of Vanessa Emilio or follow on LinkedIn.

Need legal documents written specifically for your business? Vanessa and her team draft custom legal documents for Australian online businesses, or you can book a 30-minute call to talk through what you need.

Disclaimer: We hope you found this article helpful, but please be aware that any information, comments or recommendations are general in nature, do not constitute legal advice and may not be suitable for your specific circumstances. Whilst we try our best to ensure that the information is accurate, sometimes there may be errors or new information that has yet to be included. Any decisions you take based on information on this website are made at your own risk and we cannot be held liable for any losses you suffer. Contact us directly before relying on any of this information.