Last updated: 27 June 2023
How to Start an App Business in Australia – This guide deals with the legal issues of developing an App and setting up a profitable App business.
Starting an App Business can be exciting – you’re enthusiastic, you’ve got a vision for your App and you want to dive straight in, designing and coding. The boring business and legal issues often get overlooked in this flurry of activity. But this is actually the best time to consider them and avoid problems like:
- Not owning your own App source code
- Having your App idea stolen by a potential investor
- Being sued by one of your App users or customers
- Having your App development costs blow out, or
- Not having your App delivered by your developer
You don’t want to make these mistakes, so let’s start with the Legal123 guide to setting up and structuring your Australian App business.
TLDR: Quick Summary of this Legal Guide
- When starting an app business, you face four critical legal issues: having the right legal notices, protecting your intellectual property (IP), having a contract with your App Developer, and structuring your App Business.
- Owning and protecting the IP on your App is critical for your business success and will make it easier to get investor funding or claim any intellectual property rights, so we recommend that you sign a legally binding App Developer Contract with your developer, have your developer give the open App source code to you, and sign over ownership and Copyright to you.
- To protect your App idea from being stolen or copied by people you have discussions with (such as partners, investors, App developers, marketers, etc.), make sure you have them sign a Confidentiality Agreement.
Legal issues covered in this guide
Click on any of the questions below to jump to that section of this legal guide.
- App Legal Notices
- Protecting Your Intellectual Property (IP)
- App Developer Contracts
- What is an App Developer Contract?
- Why do I need an App Developer Contract when I hire my App coder?
- What are the risks of not using an App Developer Contract?
- What clauses should my App Developer Contract include?
- How can I ensure my App developer delivers on time and within budget?
- What happens if there is a disagreement on the progress or quality of the work?
- What is an App Developer Contract?
- Structuring Your App Business
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.
App Legal Notices
What legal notices do I need to post with my App?
You need a Disclaimer that disclaims liability if somebody suffers loss from downloading your App and tries to sue you.
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!
App Legal Package
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 does 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.
Privacy has become an important focus of Australian regulators and the move to cover Apps has become necessary as Apps are accessing 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.
Does my App need a Disclaimer?
Yes. You need an App Disclaimer to cover you if customers or App users try to 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 with the permissions needed for your App to function.
- 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.
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 you make it clear they cannot modify or use the App in any way that is not within 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 Australian App marketers use their own EULA, as the standard Apple EULA uses Californian law and it’s unclear how far 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 downloading. 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 to that effect, it will be much more difficult for the customer to argue that they never saw and never agreed to your terms.
Protecting Your 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?
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, such as a logo or symbol. 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 can help you do your searches to ensure your planned App name and logo are not taken and then register your trademark so your App is protected.
Should I Patent my App?
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 design of an ergonomic chair or a new drug for dealing with 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, one single international application can be filed under the Patent Cooperation Treaty, which the World Intellectual Property Organisation administers. 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 if you choose this path rather than doing so individually for several countries.
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?
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 some loss because of an error in the code (for example, if there is a security breach and a user loses money), then you, not the Developer, would be responsible for it, even though 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 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 in the Philippines 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 disagreement on the progress or quality of the work?
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 developing your App in stages helpful. For example, once the first stage has been achieved, 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 whatever the arbitrator determines and pay their own costs.
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 minimize 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 sole trader, partnership or trust. Before deciding you should really check with your lawyer and accountant. Plus familiarize 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.
We hope you found this legal guide on how to set up an App business in Australia helpful.
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 promoting the benefits of your App, explaining the App’s functionality and listing some FAQs is all that is needed.
We hope you found this guide to setting up your App business in Australia helpful.
App Legal Package