How to Start an App Business in Australia?
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Hi everyone Simon here. Today we are going to learn about how to start an app business in Australia.
Say you’ve got a mobile app you want to commercialize it and make some money. Good idea.
We’re going to work out or I’m going to give you some information about how you should do that. So let’s get into it.
How to Start an App Business in Australia: FAQs
Do Apple and Google Legals cover the app that I post?
No they don’t, you need to create your own legals.
If you are to start an app business in Australia, this is the first thing you need to know. If you are going to put out an app it’s most likely going to be Android or an Apple app, iOS app. So, therefore, you’re going to be bound by the Apple and Google Play Terms and Conditions when you post your app into their respective stores.
There’s also the Microsoft Store but that doesn’t get as much traction so we probably won’t talk about that too much. So bear in mind that those companies have their own terms and conditions that benefit them and not you.
You can use some default terms and conditions but I would not do that. This is because they will not protect you as much as your own terms and conditions would. So just bear that in mind as we step through this.
What legal notices do I need for my app?
You need to create the following:
- Terms and Conditions
- End-User Licence Agreement
So when you are going to go live with your app, you need some things that go with it. For instance, you need some Terms and Conditions.
Otherwise, most businesses don’t actually need them. But you can link them to your Terms and Conditions when you launch them in the App Store and with Google Play.
That is actually a good way to show Apple and Google that your app is a bonafide and legitimate app. So it is a good thing to do.
Plus it also gives your clients or users some satisfaction that they know what you’re going to do with their information once they provide it to you.
So they’ll give you things like their name their email address maybe, well obviously the phone number. It will be good if you can tell them what you’re going to do with that information.
Are terms and conditions required for a website?
- Fees for the use of the App
- Rules for subscribers and advertisers
- Indemnity for the App’s use
- Limitation of liability (in the event someone suffers loss from using your App
- Protection of your Copyright and Intellectual Property
- Details when you may cancel a customer’s account
- Governing law and the location of courts in the event of any dispute
Yes, when you start an app business in Australia, it does need Terms and Conditions. That is so you can as far as possible reduce your risk and protect yourself. The sorts of things that your App Terms and Conditions should specify are things like the fees, any rules that apply to people.
So if you subscribe to an app, the obligation’s on you. For instance, you might want to have obligations about posting material that you can’t post material that’s defamatory or contain say pornographic images all that sort of stuff.
You could also prohibit people from sending or posting links to other websites. Or if they do post the link and if you allow that then you can basically ensure in your Terms and Conditions that you have no liability for any links that are posted by users of the app.
You can then and you should have an indemnity in the app. This is so that the user of the app indemnifies you for any loss they caused you because of their use of the app.
Another important note when you start an app business is you should also limit your liability. So if your app causes loss to someone else you should look to limit your liability in the Terms and Conditions.
And also the T’s and C’s are a good way of protecting your copyright and intellectual property. This is because you can set out in the Terms and Conditions of use that there is a license for them to use your IP being the copyright that subsists in the app.
You want to be able to specify to people what those usage rights are and can the license be revoked etc. You probably want more mundane things in your Terms and Conditions as well.
State things like when or how you can cancel a customer’s account? For instance, if they don’t pay money, if it’s a subscription-based thing or their conduct is such that you don’t want to have them on your app.
You should spell out or specify all of those sorts of things in the Terms and Conditions.
It’s always good to have the governing law and choice of law courts in there. So that in the event a dispute does arise you want to be able to use a court system that’s close to you. That means it’ll be cheapest for you as opposed to the other party.
Okay so do you need Terms and Conditions for your app? Definitely yes.
Do I need a disclaimer?
Yes. It is needed as for your future protection from customers or users who will try to sue you.
This is a definite yes as well and that should be built into the Terms and Conditions. So that is a statement that will disclaim any liability that you have, where a user uses your app.
It might not sound like a big deal before you start an app business. But it is a big deal in the sense that something small like a disclaimer can go a long way to substantially reducing your business risk. So basically why wouldn’t you do it?
You’d actually be a little bit mad if you didn’t. Anyway, this is that’s just my view of things. So let’s keep going.
What is an end-user license agreement an example of?
An End User Licence Agreement (EULA) states exactly how you are authorising the use of your app to end users and puchasers.
So an End User Licence Agreement – let me just break it down for you. Most apps when they are created rely on copyright. So the intellectual property in the app is protected by copyright.
You can protect the name of the app via a trademark. And if the app incorporates some new and fancy process, you could get the process protected by a patent.
But because your app is based on copyright and you should own intellectual property rights then in the app, you want to or you need to allow parties of the right to use your IP when they use the app.
So you’d want to have an End-user License Agreement when you start an app business. It should be just a component of the Terms and Conditions.
But the EULA will specify the rights to use that you are giving someone. And that’s important so that it lets everyone know that you are maintaining the control of your IP. And if any disputes arise around it, then you want to be able to have the ability to terminate that license and stop users from using the app.
As I said, it is best to just have that End-user License Agreement built into the Terms and Conditions. That way it’s easier for users to sign up to use your app because they will only have to tick one or two boxes in terms of agreeing to a license or a right to use as opposed to for five or six boxes.
Where should legal policies be displayed?
You need to post your App legals so they are visible before download, usually in the footer. You need to think about how you would prove that the customer actually agreed to your App legals.
This should be common knowledge but it may not be to a lot of people. If you want to bind someone to your Terms and Conditions because your Terms and Conditions are a contract, you need to bring it to their attention before they do anything.
So before they start using the app, you have to bring the Terms and Conditions to their attention. You need them to take a proactive step to agree to those Terms and Conditions.
The proactive step that they take could be something like ticking a box to say they agree to the Terms and Conditions.
Even better, you can force people to scroll down the length of your Terms and Conditions and you don’t actually allow them to tick a box saying they accept the Terms and Conditions until such time as they’ve scrolled it to the bottom.
So that means they’ve got to scroll to the bottom and then tick a box. And if you want to go even further you can actually force people to scroll.
You can also force people to tick boxes next to certain important clauses as they scroll down the Terms and Conditions. Then you can also compel them to tick the box at the bottom saying that they agree to all the Terms and Conditions.
Courts have found that the more proactive steps that users are required to take to show their acceptance and agreement of Terms and Conditions, then the more likely the Terms and Conditions are found to be binding.
So it’s in your interest to at least put someone to the effort of ticking a box but just consider whether you want to do more in terms of compel them to scroll to the bottom and then tick or tick boxes as they scroll and then take a final box at the bottom.
So I think it’s actually a good idea to get one and they’re generally not expensive documents. So it is a wise thing to do.
How do I protect my apps from being copied?
Make sure you have a Confidentiality Agreement to people you are working with the App (partners, investors, App developers, marketers, etc)
So now I just wanted to talk to you about the app creation process which is, and their numerous questions that arise here but one of them is. How do I stop someone from stealing my app idea?
So let’s say you’ve got an app idea and you’re wanting an app developer to develop it. Then the best thing is you can get them the app developer to sign up to a Non-disclosure or Confidentiality Agreement. This prohibits them from disclosing any information you provide to them about your app.
Can also be good to provide this to other parties like any partners you only go in the business with. So when you’re discussing whether you want to go into business with someone, not a bad idea to have a Confidentiality Agreement in place.
With the investors, you can ask them to sign but a professional investor probably sees ten to a hundred potential ideas each week. They won’t want to sign any NDAs. So don’t be too concerned if you’re an investor does not want to sign.
But let me preface that by saying I am assuming that the investor is a professional investor and that’s all they do. If it’s just friends of your mum and dad or something like that it’s not a bad idea to get them to sign an NDA.
But if you’re dealing with a professional investor I wouldn’t be so concerned because they’re too busy doing other things to worry about your little app.
But yes, good idea or so for app developers when you’re having those initial discussions whether with them as to whether you want to engage an app developer. Before you start an app business, it’s a good idea at that stage to have a Confidentiality Agreement in place to help protect your app and your app idea.
How do you copyright a mobile app?
Copyright protects the source code, artwork, design, text and other content of your App.
Copyright is automatic and registration is not required. You might add a Copyright symbol to your App, but it is not necessary.
So how do you protect your app? Well, easily enough in Australia the laws in relation to copyright protect your app. So as soon as you put your app ID and the app in writing and then it automatically attracts copyright and you do not have to do anything.
You do not have to seek registration, you do not have to do anything like that. Once your app’s created I would whack a copyright symbol on there, the year that the app was created and also the party that owns that copyright.
So your business name or your company name, copyright and then the year. In other words, I could claim copyright and I could put
© The Contract Company 2020
One thing to bear in mind is that inserting that copyright symbol is just an evidentiary step. This means it’s just a step you’re putting out or showing the world at large that you are asserting copyright in the information.
If you don’t have the copyright symbol that’s not fatal. It just means that if you ever
were sued or wanted to sue someone, you’d potentially just have to show that you’re taking steps to protect your copyright. Anyway not a big deal but it’s just safer to do it than not do it.
Is it better to trademark a name or logo?
The answer is yes, if you believe your app is going to get large and be commercially valuable. It is about protecting your IP.
So potentially it is about protecting your IP. I would get a trademark for the app and even for the logo. You can get two trademarks. You can get just a word mark for the name or you could get a logo trademark. Or you could get a logo trademark that includes the name but that’s just one trademark application.
What I would do when I start an app business is that I would start off by not having a registered trademark. Just put the initials TM next to the name. This tells the world at large that you are asserting a trademark a common law trademark in that name and that’s a free thing to do.
If your app becomes commercially successful, I would then definitely look to try a register the app as a trademark. But that’s just my view. If you think it’s going to go gangbusters from the start then, by all means, lodge a trademark application.
Protect the app name it’s the safest thing to do but I’m just trying to give you the reality of what I see. A lot of people who go into the app development business don’t have a lot of money.
And to me, this is one area you could potentially save some money on. Just flag it as something you may need to do in the future if and when the app goes really well.
Do apps need patents?
You should consider patent registration if your App has some unique functionality, rather than relying on Copyright protection.
Patents will protect the process and then any methods or new inventions that the app performs. I think it’s actually quite rare to get patent applications in relation to an app because really it’s a patent application in relation to software is a bit harder to get.
I actually spent three or four years working in a patent attorney firm. It can be done but I would bundle this in the same category a trademark which I was going to say don’t do it at first instance.
But with a patent, you’ve actually got a patent to that front before you put it out in the public domain.
So I’ll say that say it this way. If you think you’ve created a new and novel invention, then, by all means, ring a patent attorney and see if it’s worth patenting.
This is because you will need to get that put in place before you go out to market with your patent. As soon as your patent or the concept in your patent is in the public domain then you lose rights to patent things.
So talk to a patent attorney at first incidence before you start an app business. See what they think.
I would stress that if there’s a way to potentially keep the novel or inventive step in your app secret I’d probably on the side of caution of doing that.
Take Google as an example. If the Google search platform was just an app, no one really knows how Google or all the algorithms that Google has and what runs in the background when you do a search on Google.
So if Google went and lodged a patent application they have to tell the world at large what all those algorithms do.
Right whereas at the moment, if you go on Google and you do a search you don’t know what’s happening. They’re not going to tell you what’s happening and they change it because that’s what they do with these you know [major] Google updates that happen every once to twice a year.
So what I’d be suggesting is if you do have a novel and inventive step in your app, you might consider not disclosing it and just being a little secretive with what it does and how it works.
That way you’ll have protection for your concept you know for more than 20 years which is better than a patent. Anyway, just something to think about.
Let’s move on and talk about app development.
What is an App Development Contract?
This contract will set out the terms of the project, including:
- App specifications (to confirm what you expect from your developer)
- Pricing and payment schedule
- Timing of deliverables
- Dispute resolution process
- Protection of your intellectual property
- Confidentiality of your idea. etc.
So unless you’re blessed with technical skills most likely you have to pay someone to develop the app for you. I would strongly suggest an App Development Contract. The reason I would strongly suggest it is because of IP.
So in Australia, the common-law position meaning judge-made law on the subject of IP where it’s created for you by someone else. Where that third party creates something for you that third party actually owns the IP.
But because they’ve created it for you and you’ve paid for it you are then granted a right to use the IP for the purposes for which it was created.
However, you can overturn that by having a written agreement before you start an app business. This agreement basically says whatever Mr. developer creates for me I own all the intellectual property rights in that creation.
Now actually most app developers actually agree to the client owning the IP. Their issue is they just want to get paid.
So most app development agreements that I’ve seen will say something like you Mr. client will own the IP in you know each milestone as and when you pay for each milestone. And once the entire app has been paid for, you will then earn all intellectual property rights in the app and that protects the developer. So they get paid and it also protects you and that is a fair outcome.
What are the other requirements in an App Development Contract?
But what other things should be in the App Development Contract? The specifications, how much it is, when is the app developer to be paid. Is it at the end of every fortnight, is it at the end of every month? Is it dependent upon them hitting milestones and developing certain things?
There should be a dispute resolution process in the contract. So if anything goes wrong what’s the problem or how does it get resolved.
I have talked about IP and how that is probably the fundamental reason you want one of these App Development Agreements. And also confidentiality you can compel the app developer to keep the concept and the work they’re doing for you confidential.
Do I need an App Development Contract when I hire an app builder?
The main reason you want one is you want to ensure that you will own the IP. in whatever they develop for you. When you hire someone to develop your App, you must ensure that all ideas, design, or code will be subject to confidentiality.
But in saying that if your app is lengthy, if its going to take a long time to develop, it’s complex. Then you will want to ensure some sort of certainty around deliverables. What they’re doing, the specifications, the pricing and all that sort of stuff.
And that’s why you want one of these App Development Agreements before you start an app business.
What are the risks of not drafting an App Developer Contract?
When you do not put an App Developer contract in place, there is a large risk that you won’t own the IP that you will not own the Intellectual Property.
So what are the risks? Well if you don’t put in place an App Development Contract before you start an app business, then as mentioned with IP there is some risk. In fact, it’s quite a large risk that you will not own the IP in the app that you’ve paid for, the developer will.
You will have a right to use it though but where this could become a problem is that if you develop a successful app and you want to sell the app in the Apple business.
Then any investor could be turned off by the fact that you actually don’t own the rights to sell it. You could transfer the license but it wouldn’t be as valuable as transferring ownership of the intellectual property.
Also, other issues could arise in relation to price. They could be discussions or disputes about price and what you’ve paid for and what you should pay for. And the contract goes a long way to ensuring satisfaction with the product or the app that’s been developed.
So, in other words, an App Development Contract helps give you some certainty about what the developer is developing for you. So it helps them understand exactly what they have to do.
It also helps clarify for you what exactly you want the app to do. So that’s an important thing to do and that’s why I’d recommend it.
How do I secure my ownership of my app’s codes?
Have a legally binding contract with your App developer and ensure you own the code.
The code in the app is protected by copyright. Copyright is created as soon as the words are written down. But you want to make sure that copyright is assigned to you and that needs to be done in Australia in writing.
That is the simple reason why you want a binding contract between the app developer and you. This ensures that you own all the intellectual property rights in any code they create for you.
How would you ensure a project is delivered on time and budget?
You need to specify that in the contract. So the contract should specify what is occurring at what point in time. In that way, you at least have the contractual mechanism to force the app developer to do things by the time they say they’re going to do it.
You can actually have in their performance measures if you want to get sophisticated. To basically say look dear Mr. app developer I need this functionality in the app developed by say 1 July. To the extent you don’t have it done by 1 July then I’m going to not pay you a certain amount for every day that you’re late.
So you can do things like that. Obviously an app developer will resist something like that. But then if the costs or the price that they are willing to charge you for the app is significant then they may actually agree to that.
So that is the way to ensure that you can compel an app developer to deliver on time and on budget.
What happens if there are conflicts on progress or quality of the app development?
Well what happens then is everyone goes to the contract. Everyone looks at the contract and everyone tries to interpret the contract in a manner that assists them.
That may sound like a flippant answer but it’s actually what happens. So the best thing you can do is actually be as precise as possible in the contract before you start an app business.
I’ve actually experienced the hard way. So I got an app developed actually in the fly fishing industry. I spent $10,000 with some guys out of the UK and
basically I just wasted my entire money.
This is because I did not at the end of the 10,000 get an app that was useful and they wanted more money to fix it. We had a substantial disagreement. There was a contract in place and this is the weakness with some of these contracts.
While there was a contract in place, you’ve got to have more money to enforce the terms of that contract. If it goes south and I actually just decided that I wasn’t prepared to do that. I just walked away from the project.
I’ve been bitten by it and I’m a semi-sophisticated commercial sort of person. So if it can happen to me it can happen to anyone and that’s just how it is. But as I say an in-depth and detailed contract will go a long way to protecting you.
Does my app need a website?
Not necessarily – but it helps. Sometimes if people want to work out the bonafide user or the legitimacy of your app they’ll go into a search on Google and it is a good thing if a website appears. So you don’t have to have one,but it helps.
So we’ve talked about apps. We’ve talked about how you
- can protect the app in terms of the concept of the app with an NDA.
- can protect the IP in the app to ensure that you own it.
- want your own terms and conditions because once you put the app on Google Play or in the App Store with Apple or even with Microsoft in their store, those terms and conditions aren’t going to be beneficial to you so you want your own terms and conditions.
What business structure should I use for my app business?
It is a good thing to establish a company and run your app through a company. The main reason for doing that is because a company in Australia is a separate legal entity.
That means separate and distinct from you as a person. So if anyone wants to sue I’ll say you but if anyone wants to sue because of the app, they actually end up suing the company.
Then as long as if you’re a director of the company because it’s your app until you control the company through your shareholding and directorship. As long as you’ve acted appropriately as a director then you’ll be shielded from that lawsuit.
Meaning if they win the lawsuit and the app company has to pay out money and the app company has no money, then the company can fold and that’s the end of it.
It doesn’t actually come and affect you personally. The only downside really with forming a Pty Ltd like forming a company is the cost of establishment. This is about 5 or 6 hundred dollars depending on where you get your company.
Then there is the ongoing reporting requirements in terms of fees. You have to pay ASIC each year. Then the fact that you have to get company tax returns done each year.
So apart from those ongoing running costs, I think the benefit of a company far outweighs the cost of having to maintain it.
So if you’re looking to make some money out of your app, I would definitely be suggesting that you put in place a company. And then you can, behind the scenes, do clever things like you could license the company the right to commercialize your app and charge a license fee for that.
And the reason you want to do things like that is that you could then get tax benefits as an individual and get money out of the company that way.
But that’s a bit more complex and probably a good discussion to have with an accountant and use in due course.
Do I need GST for my app business?
If your App business has an annual revenue of over 75,000 then you must register for GST.
You need to if you’re going to collect more than 75,000. If you don’t or aren’t going to, then you don’t need to register and get maybe in.
However, I would say this registering for an ABN and therefore being registered for GST does show a sense of professionalism. It makes the app appear more bonafide and legitimate. It doesn’t cost a lot of money to register for GST.
So I would consider doing it. Just note that you’re not compelled to or you don’t have to do it unless you hit those revenue amounts of 75 thousand per annum or more.
And that really should give you a good understanding as to how to start an app business in Australia.
A Recap on How to Start an App Business in Australia
So let me just quickly recap.
- You want to have your own Terms and Conditions for the app.
- When the apps being created, you want to put in place an App Development Agreement. This ensures that you earn the IP in anything that a developer develops for you
- When it comes to commercializing and making money from the app it’s a good thing to set up a company structure. That way, the company owns the app
- You may potentially need to register for GST if you turn over 75,000 or more.
I hope you found that helpful if you do have any questions please feel free to get in touch. Thank you very much!
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