LEGAL SIDEPIECE

Are you Breaking the law? In this Article, we navigate the legal maze of App creation and discuss how to protect your App from legal challenges.

An Application software, popularly called an App, is a computer program designed or created to perform specific activities or tasks.

In the United States, there are different legal requirements that App creators must comply with when developing new Apps. These requirements range from intellectual property issues to privacy and consumer protection laws. It would be helpful for App creators to consider these requirements at the various stages of the App creation.

The following are the legal issues to be considered within each stage of App creation:
Idea stage: App creators should explore every applicable intellectual property issue like copyrights and trademarks.
During Development: App creators should comply with privacy and data protection laws and ensure that the App complies with applicable industry standards.
Pre-launch stage: App creators should ensure compliance with advertising regulations and consumer protection laws.
Post Launch stage: App creators should address user complaints and monitor and update compliance.

Let us take a look at these issues in detail.

1. Intellectual Property Issues

Intellectual Property (IP) is a class of property that pertains to creations of the human intellect such as inventions, literary works, and artistic works including designs and symbols. With the endless possibilities of the human mind, there are different categories of IP depending on the scope of work and whether such a category is recognised by the country where recognition is sought. Nevertheless, the most popular categories of IP include; patents, trademarks, copyrights and trade secrets.

Patent: A patent confers an exclusive right on the owner of an invention, which could be a product or a process, as long as it offers a new technical solution to a problem. This means that the patent owner has the exclusive right to prevent other persons from commercially exploiting the patented invention without the patent owner’s consent. Generally, once a patent has been granted, the patent protection lasts for twenty years from the date the application was filed.

In the U.S., App creators can apply for a patent through the United States Patent and Trademark Office (USPTO). Furthermore, information about whether a prior patent on an invention has been obtained can also be accessed through the USPTO. This can eliminate the legal risk of developing an App whose patent already belongs to someone else. The reason that this is important is that if an App creator proceeds to launch and commercialise an App without considering whether their App infringes on an existing patent, they may be subject to legal claims and may incur liabilities in damages, court fees and attorney fees which may prove detrimental to their business. For instance, in the recent patent infringement case brought before the United States International Trade Commission between Sonos and Google for allegations of patent infringement on five audio technology patents held by Sonos, the Commission ruled that Google infringed on the said patents and violated Sonos’ intellectual property rights. As a result, Google had to remove features from their devices that operated based on the technology that violated Sonos’ patent.¹

Trademarks: A trademark is a sign capable of distinguishing the goods or services of one business from those of others. A trademark can be any word, phrase, symbol, design, or a blend of these that identifies your goods or services. Its purpose is to protect your brand legally and help guard against counterfeiting.

A trademark registration confers an exclusive right to use the registered trademark. However, registering a trademark does not mean you legally own the trademarked words, phrases, or symbols and can prevent anyone from ever using it. In effect, the right to the trademark only applies to how the words, phrases, or symbols are used in relation to your specific goods or services. This implies that you can prevent others with related goods or services from using a trademark that is similar to yours.

The USPTO is also the regulatory agency in charge of registering trademark applications in the U.S. Since the USPTO does not register all marks, it is helpful to consider its guidelines for selecting a trademark.

It is pertinent to state that the U.S. does not make it compulsory to register a trademark even though it may be beneficial to do so. However, registering a trademark provides broader rights and protections than an unregistered one; it creates nationwide rights in your trademark and offers wider protection to your brand. The USPTO’s database of registered trademarks also allows you to search and find marks that may prevent registration due to a likelihood of confusion.

Copyright: A copyright protects the authors of original literary, dramatic, musical and artistic works fixed in any tangible form of expression. U.S. laws do not make it compulsory to register copyrights since a copyright is secured automatically once the work is created and fixed in a tangible form for the first time. Provided that the work contains a sufficient degree of originality. However, registering a copyright with the U.S. Copyright Office (the agency in charge of registering copyrights) has several benefits which include the following:

• It establishes a public record of the copyright.
• If the work is of U.S. origin, registration is necessary before a copyright infringement suit may be filed in court.
• In the event of a dispute, registration helps to establish ownership of a work and the date on which the work was first created.

There are several categories of work for which App creators can obtain copyright for digital content such as computer programs, software codes, texts, databases, blogs, websites, photographs, visual arts and music.

Trade secrets: A trade secret may be a formula, a manufacturing process or a specific technology. For App creators, their trade secret can include the following: developer codes, marketing analytics or strategies, and any other information utilised in the development/commercialisation of the App.

A piece of information can only be considered a trade secret if it possesses the following distinct elements:

• It contains information that has economic value by not being publicly known.
• The information is valuable to persons who cannot legitimately obtain the information.
• The owner of the information has actively taken reasonable steps to maintain its secrecy.

All three elements must exist at all times. If any element ceases to exist at any time, the information will cease to be a trade secret.

Furthermore, App creators should consider trade secret implications in their personal use of information and when third parties that work with or for them utilise such information.

In the former case, the App creator must ensure that they are not breaking any prior confidentiality agreements by utilising information that makes up the trade secrets of another person or business. Whereas, in the latter case, the App creator must ensure that in their dealings with third parties, all information regarded as trade secrets is treated as confidential. This can be achieved by utilising contractual arrangements like – No Competition clauses, Non-disclosure and Confidentiality agreements or by inserting specific clauses in employment or service agreements. By doing this, the App creator has guaranteed that anyone who obtains confidential information will keep it a secret. If they fail to do so, the App creator can enforce his/her rights in court for breach of contract and receive monetary compensation under the U.S. Defend Trade Secrets Act of 2016.

In summary, developing an App imposes an obligation on the App creator to address both their IP rights and minimise the risk of infringing the IP rights of others. Therefore, the App creator must conduct an IP investigation to evaluate whether their App requires a license for its uses and ensure that it secures all necessary licenses.

2. Privacy and Data Protection laws

Most countries require App creators to have and implement privacy policies because consumers care about the privacy of their personal information. In the U.S., different laws like the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, and the Federal Trade Commission (FTC) Act all require businesses to provide reasonable security for the personal information of their customers.

There are additional requirements under the Children’s Online Privacy Protection Act (COPPA) if the App targets children. The COPPA requires App creators to explain their information practices clearly, provide direct notice to parents about their information practices, get parental consent before collecting personal information from children and keep the personal information collected from children confidential and secure.

Also, if the business collects data from the European Union (EU) then the App creator should also consider provisions of the EU – U.S. Data Privacy Framework and the EU General Data Protection Regulation that both provide a mechanism for companies to transfer personal data from the EU to the U.S. in a privacy-secure way that is consistent with EU law.

To fulfil the Federal Trade Commission Act’s privacy obligations, the FTC advises App creators to practice the following:

• Privacy considerations should begin from the inception of the design of the App so the privacy practices of the business as stipulated in the privacy policy, can be applied in the default settings and functionality of the App.
• In relation to third-party sharing of information, App creators should get the user’s express consent when it is not apparent that their information would be shared.
• Ensure transparency of their data practices by explaining what information would be collected and how such information would be used.
• Fulfil all privacy assurances stated in their privacy policies.
• Collect sensitive information like medical, financial and geolocation with the user’s consent.
• Take reasonable steps to keep sensitive information secure by taking precautions against common security risks, limiting access to the data to a ‘need-to-know’ basis and safely disposing of data that is no longer required.²

3. Industry Standards

App creators should also consider industry-specific criteria and obligations. These obligations differ from industry to industry and cover a myriad of issues. For instance, in the U.S., the Gramm-Leach-Bliley Act, which applies to financial institutions or companies that offer financial products or services like loans, investment advice or insurance, requires these institutions to explain how they share customer information and safeguard sensitive data.

Also, where the App relates to the health sector, there are specific requirements from the applicable laws like the Health Insurance Portability and Accountability Act and the Health Breach Notification Rule requiring App creators of mobile health Apps to report instances of data breaches to their users and the FTC.

Another example is the Patient Rights to Know Drug Prices Act, requiring certain commercial agreements, made in the field of biological drugs, to be filed with anti-trust agencies in order to eliminate unfair competition practices amongst businesses.

4. Advertising Regulations

The internet has created a digital marketplace, enabling marketers and business owners to effortlessly reach customers around the globe via digital media channels such as email, social media, and websites. However, this unique opportunity also presents its attendant challenges such as false advertising claims. Therefore, it becomes necessary to have some form of regulation in place to ensure fair and ethical practices in online advertising.

The Federal Trade Commission (FTC) has established the ‘Truth-in-Advertising’ standards to provide an advertising framework for App creators and other business owners. These standards apply to the sale of their Apps or their products and services to customers and also prohibit unfair or misleading advertising; thus, App creators and other business owners must ensure that their adverts are truthful and free of deceit. By the FTC’s advertising standards, App creators are responsible for the claims they make about their products and services. The FTC also holds advertising agencies and third-party marketers liable if they participate in deceptive advertising or know about deceptive claims used in advertising.

In addition, the Children’s Advertising Review Unit (CARU) which is part of the U.S. Council of Better Bureaus has established specific guidelines for advertising that targets children. These guidelines are essential because children may be incapable of evaluating advertising claims or comprehending the nature of the information contained in the adverts.

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act) also mandates business owners who utilise email marketing to ensure that the email adverts meet the stipulated criteria and imposes penalties for violations. It also requires business owners to ensure that customers can freely opt out of email marketing ads if they wish to do so.

There are also industry-specific advertising requirements which should be considered. For instance, Apps relating to wool and textile products are required under the Textile and Wool Act to disclose the country-of-origin information in internet adverts that sell textile and wool products.

It is worthy to note that the FTC periodically monitors the internet for false or deceptive online advertising claims. If an ad does not comply with the FTC’s requirements, the business owners may face enforcement actions or civil suits instituted by the FTC.

5. Consumer Protection laws

Most commercial legislation contains provisions designed to protect consumers from unfair business practices. Some of these laws require businesses to adhere to minimum requirements in their daily operations. Like other businesses, App creators should ensure that their practices are not perceived as unfair and do not fall contrary to laws designed to protect consumers.

These consumer protection laws cut across different sectors some of which are enforced by the FTC. One of such law is the Equal Credit Opportunity Act which prohibits lenders who operate mobile money apps from discriminating based on race, colour, religion, sex, marital status or age.

Another example is the Negative Option Rule applicable to App creators that sell subscription plans. The rule requires adverts to conspicuously disclose material information about the terms of the subscription plan.

Laws on accessibility requirements like the Americans with Disabilities Act that require business owners to make reasonable adjustments for persons with disabilities are geared towards protecting consumers. App creators also fall within the purview of this Act because they need to incorporate features into the design and functionality of their Apps that would make them user-friendly for persons with disabilities.

Conclusion

A well-designed App whose creators have ensured compliance with the requirements of relevant laws and standards can help a business eliminate risks like cyber-attacks and multiple lawsuits. This, in turn, boosts the trust and loyalty of customers resulting in more productivity and profits.

However, due to the dynamic nature of the tech industry, applicable laws and regulations can change rapidly. To meet these changes, businesses must stay up to date with evolving local and international regulations by regularly updating App features and policies to remain compliant.

A great way to ensure that there are few legal challenges to the App and its business is to secure the services of a legal expert at the earliest stage of the App creation and appoint a legal officer who is tasked with the responsibility of periodically updating business policies in line with evolving trends. This guarantees that the App remains compliant and that future compliance issues will be addressed.

Reference List:

1. Dohr, V. (2023) Sonos, Google and Patent Infringement. University of Maryland Francis King Carey School of Law. Available at:
   <https://law.maryland.edu/content/articles/name-681894-en.html&gt; (Accessed: 18 December 2023). ↩︎
2. Federal Trade Commission, Marketing your Mobile App: Get it Right from the Start. Available at: <https://www.ftc.gov/business-guidance/resources/marketing-your-mobile-App-get-it-right-start&gt; (Accessed 19 December 2023). ↩︎