Do you really own your app?

Do you really own your app?

Are you developing a new app, but using someone else to write the code? A “work for hire” contract isn’t enough. Make sure you get an assignment of ownership from your developer. This is to avoid “phantom founders” that later may come back to get a piece of the app.  

Are you developing an app? If you are, by taking a few simple precautions early in the development cycle—ideally before you start development—to make sure that you own the app, you could avoid major headaches later.

For example, you could find yourself in the situation where someone whom you don’t expect to have ownership rights in the app claims that they have rights to the app or an interest in your company. This person could be someone who claims that they were involved in the founding of your company and therefore should be entitled to share in its success (the so-called “phantom founder” issue). Or they could be someone who claims that they own some, or even the entire, app by virtue of somehow having been involved in its development. Or it could be your or your colleague’s current or former employer who claims ownership of some or all of the app because it was developed while you or your colleague were employed by the company. Or it could be someone who claims that you included some of their code or other intellectual property (IP) in your app without their permission. You’ll often hear from one of these people once the app or your company is a success, the way someone who wins the lottery suddenly hears from a “long-lost relative.”

Also, if you’re fortunate enough to find an investor in your app or your company or a publisher or distributor of your app, they will probably require you to make “representations and warranties” (basically, assurances on which they can rely) that you own the app free and clear, and to indemnify them (that is, cover their losses and damage claims) should it turn out that you don’t own the app free and clear. It could be very risky to give these representations, warranties, and indemnities if you haven’t taken the proper precautions, especially if you already received one of the claims described above. So if you failed to take the appropriate precautions in advance, you could find yourself having to go back to others involved in developing the app to obtain all of the rights you need to comfortably give these representations, warranties, and indemnities in order to save the deal. To put it mildly, your bargaining power at that point would be much less than before development started.


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