Key Contracts in Mobile Applications and Software Development

Key Contracts in Mobile Applications - Silvana & Associates

INTRODUCTION

The needed importance of identifying the contracts that are essential in the development of mobile apps includes:

  1. The number of mobile apps downloads worldwide has significantly increased and the figures are constantly increasing
  2. The legal disputes on IP are expensive
  3. The loss of reputation and user confidence
  4. The loss in business value on future sales in negotiations
  5. The loss of time and redesign costs
  1. Mobile Apps Overview
  2. Composition of apps

A mobile app is software and the contents of it such as texts, graphic, music and data that includes personal data of individuals e.g., Names, addresses, financial details etc. An app has certain elements i.e., Developer code, new code, third party code and an open source.

A brief overview of IP that is involved includes:

  1. Copyright- protects original works of authorship
  2. Patents- useful inventions that are novel and non – obvious
  3. Trade secrets- protects the valuable confidential information
  4. Trademarks- words, logos, slogans, color combinations

Copyright rights are most relevant to software. Copyright protects creative works such as books, movies, pictures, software. The rights granted include the right to reproduce the software in making copies, the right to create derivative works, modifications and the right to distribute or make the work available to the public.

The relevance of different forms of IP protection through the lifecycle of an app

The lifecycle of an app involves:

  1. Conception- the idea of an app
  2. Development- expression of an idea (coding design)
  3. Distribution –valuable IP
  4. Commercialization- to end users here consumer laws are important

Data protection is relevant and impactful in every process of the development of apps. Non- recognition of data protection requirements may result in a significant impact on the brand, redesign costs for the app, fines where data is misused, and brand damage generally.

Setting the foundation by identifying and curbing the challenges and issues involved

It is important to identify and avoid the pitfalls involved. Such as

  • Confidentiality
  • Ownership of IP
  • Rights and consent to use material
  • Terms and conditions involved
  • End-user licenses open source and third-party components
  • Data protection
  • Jurisdictional issues

Types of Contracts and Agreements Required

Learning from one’s own experience is important. Doing it right the first time can avoid time wastage, redesign time and costs, litigations and dispute settlement and reputational damage. The key contracts in software development and setting up an app involve:

  1. NDA or rather a confidentiality agreement- protects data and trade secrets
  2. Assignment or licensing agreements- defines the right to use or right to ownership of material
  3. Contracts in certain matters in the procedure of software development such as party commissioning of the app, software development agency (employees/contractors), the App Store, the users of the app and payments services providers.
  4. Due diligence procedures to identify qualifications and identify risks
  5. Third party contracts such as payment processors, geolocation services, authentication services etc. should save cost, speed, value, convenience, functionality etc.
  6. Ongoing maintenance and updates of the app/software
  7. The terms of the App store- this delivers the app to the end users. Terms have to be complied with hence it is necessary to consider the terms such as payment, middlemen, standard terms, distribution, control over app, privacy and data protection, user experience and security among others.
  8. Advertising and distribution contracts and agreements for marketing the app or products. This involves standard terms and considerations
  9. End user license agreements- this involves consumer laws, privacy laws and availability. It is a combination of the copyright license and the contract.
  10. Open source licenses. This makes the source code available under terms that allow for modification or redistribution. A non- commercial license cannot be an open source and compatibility of licenses is required.
  11. A dispute resolution mechanism in place further than a clause in the contracts.

Out of all these, it is important to ensure license compatibility and also the placement of notices alongside code or documentation to give credit to the authority. Examples of notices include copyright notice, licence notice, attribution notice, modification notices etc.

Another important matter to consider is jurisdictional issues which involve the following:

  1. Consumer laws
  2. Accessibility requirements
  3. Language requirements
  4. Formalities when executing contracts
  5. Variation of IP laws

Kenyan Intellectual Property and Contract Laws

IP rights are generally territorial and in Kenya IP is registered and regulated by The Kenya Copyright Board and the Kenya Industrial Property Institute in Nairobi. An overview of Kenyan IP laws and specific formalities, Contract laws,

  1. Copyright Act 2001
  2. Industrial Property Act 2001
  3. Trademarks Act Cap 506
  4. Common Law on Trade Secrets protection
  5. Law of Contract cap 23- section 2 English law of contract is applicable in Kenya

The registration and protection requirements of IP in Kenya include:

  1. Copyright requires original work that is affixed in material form
  2. Patents requires the element of novelty, inventive step and industrial applicability
  3. Industrial design requires novelty e.g., GUI
  4. Utility models requires novelty and industrial applicability
  5. Trademark requires distinctiveness
  6. Trade secrets requires commercial value and kept secret.

Software Disputes in Kenya

The disputes concerning software development and IP in Kenya include several remedies where a breach of contract is evident such as injunctions, specific performance, damages (either compensatory or account for-profits), declaratory relief, interest, and costs.

ADR mechanisms are advisable for dispute resolution.

CASE LAW:

Iko Solutions Limited vs Mobile Decisions Africa Limited (2021) Eklr

The case involved copyright infringement and the breach of contract of “cubes solutions software”

There was no software development agreement between the parties and when the relationship broke down, the defendant refused the plaintiff access to its servers. The plaintiff went to court to seek an injunction to order the defendant to release its servers.

Some of the documents that were considered by the court since there was no software development contract signed nor executed were the memorandum of association, the mutual confidentiality and NDA agreement, and the draft consultancy services agreement.

This case brought about why it is important to have contracts when parties are getting into the development of mobile apps due to software development and ownership. The court in this case had the regard for the draft contract even where it had not been executed or signed by the parties.

The lesson learnt from such a case is that it is important to maintain proper documentation and agreements between parties in place when it comes to developing of apps and software.

Enforcement of contractual clauses.

The courts in Kenya would be able to consider and adjudication software disputes that relate to Warranties, Indemnities and Standard clauses

Consumer Protection Laws in Mobile Apps

The legal framework in Kenya for consumer protection is:

  1. The Constitution of Kenya 2010- Article 46 rights
  2. Consumer Protection Act
  3. Data protection Act
  4. Computer Misuse and Cybercrime Act
  5. Sector specific laws such as Health Act, Banking Act, Kenya National and Payment Systems Act, Kenya Information and Communication Act and Regulations

Obligations under the Consumer Act

  1. Quality goods and services
  2. Disclosure of information
  3. Provide free support and assistance
  4. Charging of correct fees for a service
  5.  Avoiding ambiguities in agreement with customers
  6. Not advertising internet gaming sites illegal under any law.
  7. Not make false statements or representations to consumers
  8. Not to make unconscionable representation to customers

Rights of a consumer

  1. Class proceedings
  2. Confidentiality
  3. Quality of goods and services
  4. Refund of costs charged illegally (prohibited costs)
  5. Cancellation of credit card payments
  6. Right to rescind agreement made unfairly or unconscionably and recover costs
  7. Disclosure of information in interest agreements, right to cancel the agreements
  8. No obligation to pay for unsolicited goods and services e.g., Material changes not disclosed prior to providing them.

Conclusion

In the development of software and mobile apps, it is important to plan for success and avoid traps. It is very important for an app developer to know their app, to look into the various aspects in the app that are protectable by various IP and to put the relevant contracts in place. The importance of contracts and compliance is addressing the risks in NDAs, IP ownership issues in development agreements, data protection assessment among many other purposes.

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Silvana
Silvana
Silvana & Associates Advocates is a premier medium-sized law firm established in 2014 and based in the Metropolitan City of Nairobi. We offer Corporate and Commercial Law services.
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