Legal Guide for App Developers

Last updated: 31 May 2023

Legal Guide for App Developers – This legal guide is aimed at helping Australian mobile application developers, designers and coders. The guide covers various legal issues that you may encounter, including:

• Protecting your app development work
• Selling your services online, and
• Structuring your app development business

If you are a web developer, designer or coder, have a look at our Legal Guide for Web Developers, Website Designers and Coders. Or if you provide graphic design services, we have a separate legal guide especially for you: Legal Guide for Graphic Designers.

Legal issues covered in this guide

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

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

Protecting Your App Development Work

Who owns the app code once it is completed?

It depends. You may own it, or your client may own it. It will be a question of what was agreed between you and your client and what Terms & Conditions apply to your relationship.

If you don’t have a written agreement with your client, ownership of the app code may be ambiguous and even contentious. The circumstances of the project, the relationship and the intentions between you and your client would have to be interpreted – and in a worst-case-scenario, decided by a court.

If you were engaged by the client through a freelance platform like Upwork or a design competition platform like 99designs, then ownership of the app would be determined by their own Terms & Conditions. In the case of 99designs, full ownership of the app is transferred to the client once final payment has been made and the terms are clearly laid out in their ‘Design Transfer Agreement’.

We recommend that you always have a signed App Development Agreement with your client that clearly spells out ownership of the final app code and the associated rights that accompany that ownership.

Who owns any custom reusable code that has been developed?

Again, this will depend on what was agreed between you and your client and what Terms & Conditions apply to your relationship.

Many app developers want to retain ownership of their custom code, so that they can copy it and reuse it when building similar apps for other clients in the future.

On the other hand, many clients want to make sure that they own the complete code once the work is done. In this way they can use it however they like, including making their own code modifications, copying the code and reusing it for other projects or selling the app to a third party. If you agree to Terms & Conditions which say that the client will own the code, then this may prevent you, as an App developer, from reusing the code yourself.

If it is important to you that you retain ultimate ownership of any custom code so you have the right to reuse it, even after handing it over to a client, then you will need to have Terms & Conditions that make this clear. The code could be provided to your client under a licence – permitting them to use the code in accordance with the terms of that licence – but not actually transferring ownership of the code.

In some cases, app developers and their clients reach an agreement that some of the code will be owned by the developer, but some of it will be owned by the client. For example, this might occur if the developer uses some of their standard code as a starting point (which the developer will own), but then builds custom features for the client on top of it (which the client will own). Obviously this sort of arrangement can be complicated and only works if you are able to provide a very clear description of which code is owned by each party.

Do app developers own the copyright to their work?

Copyright protection is free and applies automatically when ‘work’ (such as code) is created.

The JavaScript, Objective-C, PHP, HTML, CSS, etc. you develop is protected by copyright and you own the copyright. In addition, if you created any photographs, artwork or logos for the app, then these are also protected by copyright.

Obviously, if you copied somebody else’s creative work – for example, downloading from a code repository on the internet – then you will not own the copyright to this work!

How can I protect my app designs and code from being copied?

There are a few practical steps that you could take to protect your app designs and code from being copied:

• Encrypt your code and add extra security layers
• Use other technical protection mechanisms, such as internet-product activation, dongles or registration keys
• Disable the copy/paste functionality on the app
• Place a Copyright Notice prominently on the app, etc.

Then actively pursue any unauthorised copying of your apps or code. Start with Google searches for the app name, unique text, images or code snippets that you have used and, if necessary, use a professional service. Once found, ask them to take down the copyrighted material and lodge ‘take down’ requests with Google.

Making it a habit to routinely conduct these searches can help you to find any copycat apps or websites early, and to mitigate any damage that they cause.

What should I do if my app designs or code are copied without my permission?

Both the Apple App Store and the Google Play Store have systems for reporting copyright infringement. If you find an app on either of those platforms which has copied your code, then you may report the app and ask for it to be removed.

To report an app on the Apple App Store, use this link. And to report an app on the Google Play Store, use this link.

Alternatively, if the app is made available elsewhere (such as by direct download from the app owner’s website) you may try to track down the owner of the app and make contact with them. The website owner’s information will usually be available somewhere on the website or use a service like WhoIs.

In some cases, the owner of the app simply may not realise that the app has been copied. For example, they might have hired somebody to build the app for them and might be unaware that the app has actually been copied.

A similar situation actually happened to us at Legal123 – when we discovered that someone had copied our website! (and, yes, we did get the whole website taken down)

If the owner does not respond to your initial contact, or refuses to take the app down, then you may send a more stern message such as a cease and desist letter, notifying them that if they do not take the app down, you will be taking legal action and outlining the repercussions that they may face. A lawyer can help you prepare a cease and desist letter.

If that still does not work, then you may consider issuing a “takedown notice” to the relevant internet service provider. This is a notice, provided in accordance with Schedule 10 of the Copyright Regulations 1969, requesting the internet service provider take down the infringing content. Upon receiving a takedown notice, the internet service provider will remove or block access to the app and then issue an infringement notice to the offending party.

If the infringing app is available on an app store which is hosted in the USA (such as the Apple or Google stores) then you may also consider issuing a “DMCA Takedown Notice” – which is a takedown notice under US law.

Don’t send false or misleading takedown notices – this may be a criminal offense and you may face civil penalties or have to pay compensation. So if you’re in doubt, seek professional legal advice.

App Development Agreements

What is an App Development Agreement?

An App Development Agreement or App Development Contract is an agreement between an app developer and their client. It is a very important document and sets out the entire scope of the app design project, the relationship between the app designer and client, timing for the different phases of development, payments and completion and other important rights and obligations of each party. Having a professionally drafted App Development Agreement can help an app design project be successfully completed and can help avoid any disputes.

Should I use an App Development Agreement with my clients?

Yes, definitely!

Problems can arise in an app development project if there are misunderstandings between you and your client. Misunderstandings can arise for a variety of reasons especially if there are ambiguities which have not been properly discussed between you and the client.

Misunderstandings could relate to the actual specifications of the app that you are going to deliver to the client, variations that the client requests along the way (which were not in the initial design brief), timing of delivery (especially if delays occur for reasons outside your control), ownership of the code, payments (especially if you are charging on a time and materials basis) or a variety of other reasons.

A professionally drafted App Development Agreement will set out these matters clearly and will ensure you and your client understand your various responsibilities and undertakings.

Without a sound App Development Agreement, you significantly increase the probability that you will encounter a dispute with your client down the track.

What are the risks of not using an App Development Agreement?

There are many. But at a basic level, the risk is that there are misunderstandings between you and your client in relation to the project. This could lead to a legal dispute which would be expensive, stressful and time consuming. A disgruntled client could also do serious damage to your professional reputation, even if you have not actually done anything wrong.

Some common misunderstandings include:

• You may discover that you and the client had different ideas about how much work you were actually going to perform, or the scope and specifications of the work you were actually undertaking.
• The client may change their mind and may demand extra work or numerous variations from you, which goes beyond the scope of the original project as you understood it.
• The client may dispute your fees or your method of payment or simply refuse to pay you.
• The client might suffer a loss as a result of the work (for example, if the app is not finished by the deadline date and potential revenue is lost). Without appropriate limitation of liability clauses, you could become liable for these losses.
• You may inadvertently give away ownership of your code and designs.
• There may be a misunderstanding about timing and delivery dates.

In many cases, well-meaning parties may end up in a dispute, simply because they failed to discuss these issues upfront and later discovered they had misunderstood one another. An upfront discussion about the terms of an App Development Agreement can ensure that both parties are on the same page regarding the project.

What clauses should my App Development Agreement include?

A well-written App Development Agreement should include the following clauses:

• Services to be provided and specifications of the app project
• Project timeline and any deadlines
• How the work is to be delivered with specific output formats
• Responsibilities of the client (e.g. to provide copy, images, logos and feedback in a timely fashion).
• Total fees, any milestone payments and method of payment
• Ownership or licensing rights over the final work, code and images
• How the client may request changes in scope and any additional fees that may apply
• Dispute resolution, particularly in the event that the client does not think the finished product meets the brief
• Confidentiality of any client material provided or code written
• How the contract may be terminated
• Limitation of liability, disclaimers, etc.

Unless these aspects are clearly stated in your contract, you could find an ugly misunderstanding between you and your client!

Can I include ongoing services like app maintenance and code updates?

Yes, ongoing services like app maintenance, app store updates, social media marketing, etc. can be included in your App Development Agreement if necessary.

Some basic apps might not require any additional services after the app is delivered. But for more complex apps, such as ecommerce platforms, the client might need you to provide ongoing assistance and maintenance.

It is important to remember that if ongoing services are being provided, then a number of clauses of the App Development Agreement will need to be changed. For example:

• Fees will be paid on an ongoing (weekly/monthly/annual) basis, whereas many app development projects are billed on a fixed fee basis
• The Agreement will continue for an indefinite term (or until the parties choose to end it) rather than ending on delivery of the app
• It might be harder for the parties to anticipate what work is going to come up in future, so the App Development Agreement will need to be flexible enough to anticipate varied future tasks
• Response times and clear communication channels are usually very important when you are providing ongoing services, so these will also need to be addressed

As you can see, it is certainly possible to include ongoing services like app maintenance in your App Development Agreement but you might also want to consider a separate Agreement for the ongoing services to make it simple.

Protecting Custom Code

Should I license the custom code I develop to my clients?

The question of whether you should license your custom code to your clients is a matter of personal preference and the agreement you reach with your client.

If you need to be able to reuse the code for multiple clients, then you will need to license it, rather than transferring ownership absolutely. This means that you own the code (and are therefore able to reuse it for future projects) but your client is permitted to use it in accordance with the licence.

In many cases though, clients want the freedom to be able to do what they like with the app and code you’ve developed for them. For example, they might want to sell it to a third party or to modify it at some point in the future. Therefore, they might insist on owning the code outright. In this case, you no longer own the code and are not able to reuse any parts of it for other clients.

What is a Custom Code Development Agreement?

A Custom Code Development Agreement is a contract under which an app developer agrees to provide custom code to a client.

The Agreement should include a detailed description of the code, ownership and intellectual property rights, timelines for production, pricing and payment schedule, warranties, details about any ongoing maintenance arrangements, etc.

Should I license the apps I develop to my clients?

This is an option, however, it’s not very popular. Most clients want to “own” their app, so that they are free to modify it themselves, use another developer or to sell it to a third party at a later date, and are not tied into a perpetual app maintenance contract.

However, if you do choose to license the app to the client (rather than transferring ownership of the app to the client) make sure your client knows exactly what they are agreeing to. If this is not clearly understood by your client it could easily look like an unconscionable agreement, that a client signed without proper knowledge or understanding.

In addition, if the client is not aware that the app is only licensed to them rather than having full ownership rights, then there is a higher risk that the client might breach the licence agreement (e.g. by making copies of the code or sharing it with other people).

Selling Your App Development Services

How do I ensure there are no disputes over services provided or the project terms?

Most disputes arise, not through any malicious intent, but through the parties simply misunderstanding one another. A well drafted App Development Agreement can help you to avoid these misunderstandings.

Your Agreement should accurately outline how you will provide your services and what your client should expect. It is important that you understand what the Agreement says, how it works and that you actually provide your services in the manner set out in the contract.

It is also important that your clients understand the terms of your Agreement. Clients may find it helpful if you provide a summary explanation of your key terms by email.

What happens if there is a disagreement on progress or quality of the work?

You should look at your contract to see what it says about how these disagreements should be resolved. A good contract will explain the required process and quality of work, and will make it easy to determine whether or not you are in breach of the contract. It should also explain how such disagreements should be resolved.

If a dispute has arisen and you do not have a signed App Development Agreement, then the procedure will be more complicated. Review all email correspondence, meeting and telephone notes to clarify where the miscommunication has taken place.

What happens if my client and I can’t resolve an issue?

Seek legal advice immediately.

There may be a number of ways in which to address the issue, including mediation. A good lawyer will be able to advise you about your options, so that you are able to embark on a course of action which is most likely to lead to a positive outcome.

How do I collect overdue app development fees from clients?

Many failures to pay occur through genuine oversight or misunderstanding. So before diving into any aggressive debt recovery procedures, you should consider whether this could have occurred in your case.

First start with a gentle payment reminder to your client – in many cases this is enough to prompt your client to make payment. If the client still fails to pay your fees, then consider issuing a Letter of Demand. This is a formal letter notifying the client that you will be taking further action if they do not make payment promptly.

If that does not work, you may consider referring the matter to an external debt recovery agency. Lastly, you may consider commencing legal action against the client. Both of these options can be costly.

Can I subcontract app development or coding to another freelancer?

This depends on the terms of any agreement between you and your client. Some contracts permit this, while others do not.

Importantly, if you do engage subcontractors or freelancers, then you should make sure you have a Contractor Agreement with them. This should cover: ownership of the work, failing to complete the project, client confidentiality, liability in the event that the contractor makes a mistake which costs the client money, etc.

Website Legals

What Terms and Conditions should my website include?

Normally your website is for your visitors. So it should include a Privacy Policy, Website Disclaimer and your general Website Terms & Conditions.

Your specific app development terms (i.e. your App Development Agreement) are usually provided to your clients only. You can still publish them on your website but “hide” the link and only provide it to clients when they engage your services.

You need to make sure that your website legal notices (i.e. Privacy Policy, Website Disclaimer and Terms & Conditions) are easily found and not hidden from website visitors or potential clients. The internet norm is to link to these notices in the footer of your website – and make sure they are available from every page of your website.

Should my website include my App Development Terms and Conditions?

This is up to you. Your App Development Agreement is just between you and an individual client. Your App Development Agreement may also contain specifics that vary depending on your client and the services you are offering. This is different from your Website Terms & Conditions, which are more general and apply to anyone who visits your website.

One way or another, when a client engages you, you will need to provide a copy of your App Development Agreement to your client and have the client agree to these terms.

From a practical perspective, you can either provide a “hidden” link to your Agreement for your clients to agree to online. Or simply email a copy of your App Development Agreement in PDF format for your clients to sign and send back.

What other legal agreements or notices should I use in my app development business?

In previous sections of this feature article we’ve highlighted the importance of having:

• An App Development Agreement with your clients, and
• Privacy Policy, Website Disclaimer and Terms & Conditions for your website

If you have employees in your app development business, you should consider having the following:

• Employment Contracts with each of your employees that include well written confidentiality and non-compete clauses, and
• Employment policy documentation, including Employee Handbook, OH&S Policy and Social Media Policy

If you hire freelancers or sub-contractors, then you’ll need:

• Contractor Agreements with each of your freelancers that also include well written confidentiality and possibly non-compete clauses

How to Start an App Business

What business structure should I use for my app development business?

In Australia, there are generally 4 options for structuring your business:

• Sole trader
• Pty Ltd Company
• Partnership, and
• Trust.

The best business structure for you will depend on your personal circumstances – and getting this decision right is very important. So talk to your accountant about the pros and cons of each option. Here’s a quick summary of each option.

Being a Sole Trader is the simplest and least expensive option. Designed for business owners who are the sole proprietors of their companies, this structure doesn’t give you much protection if things go wrong. Your personal assets are unprotected from any claims arising from your business.

Incorporation (i.e. forming a Proprietary Limited Company orPty Ltd) effectively makes your business a separate legal entity from you. This structure involves quite a bit of paperwork and can be more expensive to maintain but it offers your personal assets protection from liability. Only your Company assets are at risk in the event of any legal actions and Company debts.

Creating a Partnership allows you to go into business with multiple people and share income. Partnerships are easier and less expensive than Companies to set up. However, all partners together are personally responsible for business debts and actions against the Partnership. And each partner is individually liable for debts incurred by the other partners. This means you have unlimited liability, unlike a Company structure.

A Trust isn’t an organisation at all, but instead a legal structure to hold assets. For example, you might set up a Trust to hold your business assets, then appoint a Trustee to manage them. Typically, the Trustee is a Company and the Trust provides asset protection and limits liability from operating the business. Trusts are very flexible for tax purposes. However, a Trust is a complex legal structure and establishing a Trust costs significantly more than a Sole Trader or Partnership.

For more detailed information on each of these business structures, see our feature article: How to Choose the Right Business Structure in Australia.

Should I trademark my app development business name and logo?

Just because you set up a Pty Ltd Company or registered your business name with ASIC, this does not protect your brand name if it is not trademarked. Any business can use your brand name. The only way to protect your brand name and restrict its use, is to register it as a trademark with IP Australia.

This concept is one of the most misunderstood aspects of starting or running a business. And business owners frequently contact us because someone has started using their brand name – which they thought they owned!

For more detailed information on the process and costs of trademarking, see our feature article: How to Trademark Your Business Name and Logo.

Should I register my app development business for GST?

If you expect that your app development business is going to generate more than $75,000 per year in revenue, then you will need to register for GST.

Do app developers or coders need professional liability or business insurance?

Evaluating whether you should take out insurance is a complex business and personal decision. Here are some of the risks in running your app development or coding business that you might want to mitigate with professional liability or business insurance:

• You might inadvertently use some copyrighted material
• There might be one or more errors in your code, which results in harm to the client or their business
• You might be accused of plagiarism, piracy or copyright infringement
• Somebody might claim you have committed slander or libel against them
• A client might accuse you of negligence or of errors in your work, and might claim that this has harmed the client’s reputation and cost their business
• You might suffer a security breach and loss of data or personal information
• If you have a physical office or showroom somebody might be injured on your property
• Your equipment might be damaged or stolen
• If you have employees then one of them may suffer a work related injury, etc.

Exactly what forms of insurance you require will depend on the nature and structure of your business. You should discuss your situation with an insurance broker as well as getting legal advice.

We hope you found this Legal Guide for App Developers 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.

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.