In the age of apps: Is your business ready?

The “app” is probably best associated with Apple Computer’s iPhone and iPad and Google’s Android devices, but put simply, an “app” is short hand for application software. Apps are usually made available for purchase and/or download from websites or “app stores”.

As apps continue to bring convenience and accessibility to consumers, businesses need to be wary of unscrupulous third parties attempting to hijack their intellectual property (IP) in order to gain a competitive commercial advantage, make a quick dollar, or at worst, do irreparable damage to the reputation and integrity of a brand.

There are a number of common sense strategies that a business can adopt in order to maximise the potential of its own apps, and mitigate the potential for damage caused by a third party “app-jacker”.

Trade Marks

From a trade marks perspective, businesses that are already active in the electronic space should check the scope of their existing trade mark registrations to determine whether their monopoly in relation to software related classes is broad enough to cover their new app-related activities.

For those businesses that are contemplating venturing into app-land, it would be prudent to first conduct searches to make sure any proposed use will not infringe any existing trade mark rights. Provided the searches do not reveal impediments to use and registration, businesses may wish to file new trade mark applications for protection in software related classes.

Copyright

It is important for businesses to have in place the necessary procedures to capture ownership of, or the right to use, the various copyrightable elements that may be present in an app. If a business owns copyright, it has the right to exercise that copyright (provided it has not sold or licensed that right to anyone else), and to prevent others from doing so.

Some key components of an app that are likely to be protectable under copyright include the underlying source code of the app, the text and other visual content contained in the app.

In Australia, the starting point for determining the ownership of copyright is identifying the author, or creator of the material.

When material is created pursuant to the terms of an employment contract, an employer will generally own any copyright in that material, unless otherwise agreed.

However, if the author of the copyrightable material is not an employee, but a contractor doing work for the business (or an employee of the contractor), then, unless the copyright has been expressly assigned to the business, the contractor will own the copyright.

Although there are times when the distinction between an employee and contractor is clear, at other times, this boundary may be blurred, particularly if the contractor’s duties and benefits raise queries as to whether they would be legally regarded as an employee.

If an agreement with a contractor is silent as to copyright ownership, a business may merely have an implied, non-exclusive, right to use the source code that is developed (and exercise the copyright in it) for the purposes for which it was commissioned i.e. for the app. The contractor could be entitled to license this material to third parties, including competitors. Businesses should therefore ensure that wherever possible all IP in an app is assigned by its developer.

Businesses should also give due consideration as to how an app is developed. If open source software is used, then the business may have to make the source code available to others.

To minimise risk of a copyright infringement claim being brought against your business, care should be taken to ensure that the content of the app is original and has either been created by or on behalf of the business and where any material has been taken from a third party, permission has been granted to use it in the app.

Patents

Although the general concept of an app would not be patentable (given its lack of novelty and inventiveness), business methods and software related inventions are patentable in Australia (and the U.S.), provided they meet the formal requirements for a patent.

These include that an invention must be a “manner of manufacture”, novel (i.e. not have been publicly disclosed), involve an inventive (or innovative, in the case of an innovation patent) step when compared to the prior art, and be useful.

It is the “manner of manufacture” requirement that software applications can often struggle to meet. As patenting can be an expensive and complicated process, if a business believes that its app is novel, and has the potential to be patentable, advice should be sought from a patent attorney prior to disclosing the app, or the idea behind the app, to any third party.

Confidential Information

As many businesses do not have the in-house capability to develop and write the code for apps, it may be necessary to engage a third party to write this code. This will require disclosing the idea to that third party in order for them to determine the likely cost and, importantly, whether it can be done.

Businesses should seek to prevent the disclosure of an idea under cover of a confidentiality agreement, or non-disclosure agreement (NDA). An NDA generally binds the recipient of confidential information from using that information other than for the purposes for which it was disclosed. This reduces the risk of that third party taking your idea and using it themselves, and provides you with a course of action if they do so. The use of an NDA is of even greater importance where the underlying invention may be patentable, as it reduces the risk of public disclosure of the invention prior to making application for protection.

Passing off and Trade Practices

Imitation may be the sincerest form of flattery, but not when it damages your brand and revenue stream.

The passing off of goods or services as those of a third party is as illegal online as it is offline. Consumer protection legislation and the prohibition on misleading and deceptive conduct also applies equally to apps as it does to other goods and services.

With over 300,000 apps available to download from Apple’s “App Store”, to be successful, an app needs to stand out from the crowd. A third party developer may try and do this by imitating your business’ app, or making unauthorised use of your business’ trade marks or brand, confusing customers into thinking they are purchasing an app associated with your business.

So what does all this mean?

As apps become an increasingly popular and sophisticated tool and businesses grapple with the best way to capitalise on apps, being aware of and properly protecting the IP in your app is an essential area that should not be overlooked.

It also pays to be vigilant to monitor apps available from the most popular sources to assure that your IP and business reputation are not being app-jacked.

More information

If you would like to discuss further, please contact us.