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In the Palm of Your Hand: Unraveling the Legalities of Mobile App Ownership

Jelena Đukanović

Attorney at Law

12/06/2023

In today’s world, there is a noticeable trend in the increase in the number of mobile applications. Many human activities are being automated, and tasks that used to require our physical presence can now be solved with a few clicks on a mobile app. Even computer programs and software are being modified and moved directly to devices that are constantly accessible in our pockets. The growth of the mobile app market has reached such magnitude that it’s hard to imagine any aspect of our lives for which an app hasn’t been invented. Nowadays, apps can be downloaded for virtually everything.

However, even though we are sure that installing and using apps on smartphones is not an issue for anyone, as they tend to be user-friendly, there is a serious development process behind them. Apart from the effort required to develop an application, developers should also ensure that these projects are profitable and comply with numerous legal regulations, as well as protect their work from other competitors.

In the following text, we will address the legal issues and general legal aspects of mobile app development that their owners should be aware of.

Which Rules Apply to You?

Before delving into legal questions such as the legal protection of your digital product and compliance with specific legal regulations, it is necessary to determine the law of which country or countries will apply to your business.

The question that needs to be asked in this case is: To whom will my mobile app be available? If you plan to make your product available to users in only one country, then you should focus solely on the legislation of that country.

Additionally, it is important to consider the country where your company is based and where the developers working on the app are located in order to properly protect your intellectual property rights and ensure the best tax treatment.

On the other hand, if you are developing an app for the European or global market, you would need to analyze the rules applicable in other jurisdictions as well, requiring a higher level of caution. For example, the General Data Protection Regulation (GDPR) of the European Union can have an extraterritorial application to controllers who are not based in the EU but offer goods or services to individuals physically located within the Union or monitor their behavior taking place within the Union.

Limiting Your Liability

Owners of mobile applications can be individuals, entrepreneurs, or legal entities. If you are not developing an app for personal use but for a wider range of users with the aim of generating revenue, it is necessary to establish a business entity. Answers to what is the best form of business for you and how to establish a company in Serbia can be found in our blog “One-stop guide to company formation in Serbia in 2023.”

Regulating Business With Developers

The owner of an application can develop the app on their own. However, this is usually not the case. Typically, the person who organizes the entire project will hire developers and other service providers, either through an employment relationship or other forms of cooperation (e.g., business cooperation agreement, copyright license agreement, etc.).

  • When an employee’s or contractor’s work can result in copyrighted work or other intellectual property subject matter, it is crucial to regulate who will be the holder of the rights related to these creations.
  • When entering into a mobile app development agreement with contractors, it is also necessary to precisely define your rights and obligations, as well as the rights and obligations of the other party. It is particularly important to pay attention to and regulate the use of open-source code.
  • In any case, concluding a non-disclosure agreement (NDA) is crucial to ensure that your trade secrets, know-how, and ideas remain accessible only to you and designated individuals. This step actually protects your original idea from competitors. On the one hand, it ensures that no one overtakes you during the mobile app development phase. On the other hand, even after the release of the final product, the non-disclosure agreement can serve as a barrier to prevent competitors from gaining access to your secret recipe and prevent their unfair practices.

Protection of Intellectual Property Rights

Various forms of intellectual property rights can be incorporated within a mobile application, i.e., rights that protect one’s ownership of intangible assets. If you are developing a mobile app, the most significant rights falling into this category are:

1. Copyright

Many smart device applications can be protected by copyright. In order for a work to be considered a copyrighted work, it must be a human creation with intellectual content, expressed in a specific form, and it needs to be original.

The key aspect of copyright is that it arises together with the copyrighted work, which means that no formal procedure is required to register or claim it. Among other things, copyright allows the author to be recognized as the creator of the copyrighted work, to prohibit or allow the use of that work, and to economically exploit their creation.

2. Patent

Unlike copyright, the conditions for patent protection are rarely met in the case of mobile applications. A patent grants its holder the right to allow or prohibit others from using their invention for commercial purposes. To obtain this right, you would need to register your invention with the competent state authority. Additionally, the invention would have to meet the requirements of sufficient inventiveness and applicability in the industry to be protected as a patented invention.

3. Trademark

Another right requiring prior registration with the competent authority is a trademark, which grants you a monopoly over the use of a specific mark. When you obtain a trademark, you ensure that your product stands out from competitors’ products by being the exclusive user of a specific name, logo, design, slogan, or even sound. Anyone planning to embark on new business ventures should do so with the intention of achieving their goals, and once you achieve that, you will definitely want to prevent parasitic behavior by competitors who may want to falsely represent themselves as you, or who may misuse the power of your brand.

Although intellectual property rights can provide the necessary protection for your mobile app, there is also another side of the coin: intellectual property rights held by others. When releasing your app, you need to be careful not to infringe on someone else’s rights. This can happen if, for example, someone else has registered a certain logo or technical solution before you. Of course, if you want to incorporate other people’s creations protected by appropriate rights, you could achieve that through the use of certain legal instruments such as a license agreement.

Personal Data Protection

In recent years, many legislations have emphasized the importance of the protection of personal data and the privacy of individuals, making the protection of citizens’ privacy and their personal data one of the most pressing issues both in the EU and globally.

An increasing number of users are cautious about their data and share it over the internet with greater caution in order to protect themselves from various scams, identity theft, and more. In order for your mobile app to be competitive in the market and gain the trust of users, it is necessary to ensure an adequate level of data protection and inform users about it in a clear and transparent manner.

1. Privacy Policy

Since you collect and process user data or other individuals’ personal data through the mobile app, you must inform those individuals about this fact.

The most appropriate way to do this is by publishing a privacy policy in an easily accessible place within the app’s interface. The privacy policy should provide detailed information about the processing of personal data, including what data is collected, processed, and shared with other parties, from whom the data is collected, and for what purposes.

Keep in mind that the processing you or someone else does on your behalf must have an appropriate legal basis. If you are still not convinced that a mobile app should have a privacy policy, you should know that major mobile-app distribution platforms such as the App Store and Google Play require this document for all apps available on their platforms.

2. Cookie Policy and Cookie Settings

Many mobile apps use cookies or similar technologies. Cookies are text files containing information that mobile devices download when visiting an app or website. After the initial visit, cookies are sent back to the app with each subsequent visit, aiming to enhance the app’s usability and adapt it to each individual user.

If your app uses cookies and similar technologies, you should transparently disclose a cookie policy and enable users to adjust their cookie settings according to their preferences. This means that you can only use cookies necessary for the app’s functionality without obtaining the user’s consent, while additional consent is required for statistical and marketing cookies. Failure to fulfill these obligations can lead to significant financial penalties. For example, Google was fined €100 million because it did not adequately inform users in its cookie policy about the data collected for personalized advertising.

3. Data Processing Agreement

The data controller, the entity determining the personal data to be collected and the purpose for which they will be processed, can process the data on its own, but it can also entrust this task to another entity, a data processor. In the latter case, you must conclude an agreement with all parties to whom you provide personal data for processing.

This obligation is established to ensure an equal level of data protection even when the data is not processed solely by the data controller. Additionally, special protection through standard contractual clauses is required when international transfers of personal data are made to countries with less restrictive regulations in this area. You can read more about the obligations related to international transfers of personal data in our blog.

Publishing Your Mobile App on Platforms

In order for your final product to be available to a wide range of users, you will need the assistance of leading mobile-app distribution platforms such as the App Store, Google Play, and Amazon Appstore. Although it is unlikely that you will be able to influence the terms set by these platforms, it is still important to familiarize yourself with them in advance to prevent the possibility of your app submission being rejected.

These platforms always retain the right to modify and update their terms and introduce new provisions into the agreements they conclude with developers. Therefore, the process of compliance is not completed after publication. You will need to stay up-to-date with all changes to ensure that your mobile app is not removed from the platform or, in extreme cases, to avoid other legal actions.

Certain categories of apps often have stricter requirements than usual. This can apply to apps related to gambling, lotteries, and video games, as well as VPN (Virtual Private Network) and MDM (Mobile Device Management) apps.

Therefore, it is important to carefully review the content of the terms and conditions set by these platforms.

End-User Agreements

One of the most important aspects is regulating your relationship with end-users of the mobile app, regardless of whether your app is B2B or B2C. The ways in which you can manage your relationship are:

a) Terms of Use

Terms of Use should generally be available in mobile apps. This agreement ensures that end-users comply with the rules specified in the document when using your app. The content of the Terms of Use includes general information about the app, the allowed usage, and the consequences of violating the provided rules. The content should be tailored to your business and should not involve copying someone else’s Terms of Use, which can lead to risks and consequences. You can read more about the risks and consequences of reproducing someone else’s Terms of Use and other documentation in our blog on this topic.

b) End-User License Agreement (EULA)

This agreement can be confused with the terms of use. While the terms of use govern the relationship between the app owner and users at a general level and reduce the risk of disputes, the license agreement specifies the conditions under which users can use the software. This agreement is applicable to mobile apps since the development of each mobile app starts with software programming, which is later made available to users for their use. Generally, this agreement will prohibit further distribution, copying, and sharing of the software that is the subject of the agreement.

Free or Paid Mobile Applications?

The decision of whether to make a mobile application available to users with or without appropriate compensation will depend on the developer or app owner and their interests. There are pros and cons to both options.

From a legal perspective, the choice of model is very important. Owners of seemingly free applications often generate revenue by allowing advertising within the app. In this case, users practically pay for the app with their personal data, so it is necessary to regulate the processes of data collection and processing with utmost caution. Even the tech giant, Meta, whose apps are mostly free, overlooked the importance of aligning its business with relevant data protection regulations. Meta had to pay a fine of 390 million euros simply because it did not adequately obtain consent from its users for collecting personal data for personalized advertising purposes.

On the other hand, if an app must be paid for upon download or if in-app purchases are possible, you should align your business with consumer protection regulations in the countries where your services or goods are available. This, for example, entails supplementing the terms of use provisions so that users receive appropriate notices about their rights, complaint procedures, and possibilities for alternative dispute resolution.

Why You Should Not Neglect the Significance of Legal Compliance

Aligning with all relevant regulations and securing your rights in the best possible way is something to consider from the early stages of mobile app development. If you maintain control over the legal aspects of creating a mobile application from the beginning, you will save time and money in the long run. When you invest a lot of effort and resources into something, the last thing you need is to face certain risks associated with non-compliance with legal regulations.

The list of benefits of legal regulation throughout the entire process of mobile app development, from the idea itself to its long-awaited use, is extensive. We will summarize only some of these benefits:

  • Limiting material liability in case of risk realization.
  • Protecting your ideas, copyrighted works, inventions, trademarks, and other intellectual property from parasitic behavior by competitors in the market.
  • Minimizing the risk of legally prescribed monetary penalties, such as in the field of personal data protection.
  • Ensuring that the app is consistently available on major distribution platforms, thereby eliminating the risk of app removal from those platforms.
  • Avoiding any potential disputes with end-users.
  • Securing a better procedural position in the event of a dispute.

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