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Some Legal Considerations For App Start-Ups: (Dear Donald)

Some Legal Considerations For App Start-Ups: (Dear Donald)

Congratulations, you have an idea for a smart device Application. It’s an amazing App, the best App… but I hope you don’t prepare to run it the way Donald prepares for debates. In other words, although you’re operating on a tight budget and could use all the resources at your disposal to invest in your App, it’s best you cringe through having to pay those legal service fees to properly structure and protect it. And no, this isn’t just so you can have a lawyer draft your App’s ‘Privacy Policy’ or your ‘Terms & Conditions’, which your honourable self thought you could find with a simple Google search (definitely not advised).

Many people will warn you, you can’t afford to wing it too long because when that intellectual property infringement suit comes slipping under your garage door (since you really are ‘the next Steve Jobs’), you’ll be scrambling to call every inexperienced law student you’ve had drinks with, only to hear all of them ask you: “Why didn’t you get a lawyer from the beginning?”… while you sit there regretting that you were too stingy.

Moving on now…

Ownership and Incorporation

llc

When profits have not been made yet, everyone is friendly and focused on the mission. But when profits finally roll-in, and are due for distribution, conflict arises. Therefore, it is best to reach an agreement on what each business partner’s share is going to be. This can be done when completing the essential task of setting up your company.

In legalese, a limited liability company (‘LLC’) is a legal person that enjoys an autonomous and distinct legal personality with the capacity to own assets and incur debt. Incorporating also protects you from being personally held liable for any of your business’s debts. Hence, if you can’t pay that 30K business loan because your idea ends up being a bust (no shame in that), the bank can’t seize your personal assets (house; car; bank accounts; and God forbid – your FIFA 2017). Additionally, you earn street credit because the impression brought to any negotiating table is that you are serious and diligent enough to operate your business under a distinct entity to which you have dedicated the necessary capital.

Don’t be fooled, looks matter. Much like the club bouncer seeing you in a good pair of shoes, business affiliates (including financiers) are more likely to let you in the door when they see an “Ltd” title attached to your company’s name. So save yourself any agony and make sure you establish and register your new LLC, or better yet – corporation (but let’s not get ahead of ourselves).

Intellectual Property Protection

In the tech industry, you are your ideas. So protecting them serves your professional wellbeing as well. The last thing you want is someone leaching off of your intellectual labour by illegitimately using your brand’s name to promote another business or by stealing your idea to make a profit off it; only to sting you further by lessening your market share. Protecting these essential intangible assets that today constitute over 80% value of the S&P’s top 500 corporations can be done through identifying and safeguarding your intellectual property rights (‘IPRs’):

1) Trademarks

Trademarks

These are unique marks that represent your company or product. The law recognises that a trademark represents an identity that should not be commercialised without the consent of its owner. Fit for your marketing ambitions, trademarks can include a word, logo, and/or even colours. The phrase ‘Just Do It’ is trademarked by Nike; the bitten apple logo belongs to – you guessed it, and a famous example of trademarking colours is Burberry. You too can make sure that your App title is recorded as a trademark within the relevant public register. Not only is legal assistance necessary to register your trademark, but it’s also important to understand how to commercially exploit it. You think those Angry Bird shirts are allowed to be sold by other parties without the trademark owner being entitled to his/her share of the bread crumbs? Pun intended. Speak of the devil, Rovio, the maker of Angry Birds successfully sued Angry Clubs, a golf club manufacturer whose logo had similar characteristics to the former’s.

2) Copyright:

Source Codes

This IPR protects the expression of ideas. As the means of expressing an idea are several (writing, painting, speaking, dancing etc.), copyright protection can encompass a wide variety of subject matter. This can include your App’s ‘original’ images, sounds, texts and videos. More importantly, and fortunately for App-owners, this also includes the App’s programming. As any software engineer will tell you, Apps are created through a set of source codes (instructions) given to perform a specified task within a specified time. In simple terms, ‘when I click on this, the angry bird will fly within one second’. Furthermore, source coding is a language that only tech geeks will understand, but as the App-owner, you need to know that these source codes are capable of copyright protection, enabling you to prevent and monetarily punish other App-competitors from reproducing your source codes. Hence, if they want their ‘Sad Turtle’ to crawl (good luck with that), they will have to do it using a different set of source codes from yours. Also, if you get a good enough software engineer, you can make sure that’s easier said than done, such that if they infringe your copyright (reproduce your source codes), you sue (exceptions your lawyer is aware of apply). In addition, because many of you App start-ups are students of your predecessors, getting legal advice to make sure that you don’t infringe your rival’s copyrighted source codes is essential. The last thing you want as a humble beginner is to step on your already-established competitors’ toes. This avoids you using your budget to fight off a costly copyright infringement suit, requiring you to reach out to your oh-so-distant legal connects with my ‘I told you so’ echoing in the back of your head.

3) Patents:

software-patent

Come on now Donald, your idea is new, inventive, and useful; isn’t it? Ofcourse it is… Well in 162 countries (who are part of the international ‘TRIPS Agreement’), those are the benchmarked legal requirements that exist for you to get yourself a patent. This entitles you to the exclusive right to monopolise the exploitation of your invention, which makes technology great again! However, because meeting the ‘inventive’ step is more difficult in the world of Apps than other industries (such as in pharmaceuticals), you should seek a legal assessment of whether or not your idea is patentable. But hey, if Amazon managed to get a patent approval for its ‘one-click’ method of purchasing products, you might be able to at least do the same with whatever genius idea you have in store.

4) Designs:

Poke A design is what makes a product look the way it does. It includes shapes, configurations, patterns and ornamentations. Creating your own App design entitles you to commercially exploit this form of intellectual property. Simple, isn’t it? Well unfortunate for App start-ups, that’s also a very broad legal definition. This is why hiring a highly influenced App-designer who may ‘accidentally’ reproduce someone else’s App design may leave you liable for design infringement. It’s best to obtain legal advice to ensure that your design is new and has enough authenticity to be distinguished from someone else’s registered design. Although copyright may be relied upon to protect such artistic material, registering your own design grants an extra layer of IPR protection against any potential infringers.

Personal Data Management

data-protection

Personal data is any information that relates to a person’s identity. Many App-owners strive towards selling their users digital products (e.g. Candy Crush) or realistic ones (e.g. Amazon), which imminently summons requesting the user’s personal information (name, address, card details, date of birth etc.).

Modern day societies have  laws and regulations in place that dictate what can and cannot be done with such personal data, which as a collective, can prove valuable in the ‘era of big data’. This is especially relevant in the EU, within which the ‘Data Protection Directive’, existing to protect such information, applies across its 28 (soon to be 27) Member States.  Furthermore, EU law prohibits transferring personal data to outside of the EU without, inter alia, the consent of the relevant person (subject to criminal and civil sanctions). Facebook, among others, were once prevented from conducting such transfers (see ECJ case of Schrems v Data Protection Commissioner C-362/14).

In Brief

Do your homework Donald. A lot is at stake here…

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