App development company

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App development company

An App development group in a software house created a mobile App. We were asked to deal with the intricacies. 

The basis of our instructions

We:

  1. Ensured the company complied with SEIS investment requirements, thus
  2. Protected the company’s intellectual property rights in the game, due to
    • Our tailored employment agreements between the company and each developer; and
  3. Reduced the company’s liability to each user, with our terms and conditions.

You can download the App from each smartphone’s app store. Next, the company will create a sequel app.

Creating the App

The company sought our advice on the creation and exploitation of the App. This App targeted 11 to 18 year olds. Users can create their own group of characters and place them with other users. Users also interact with one another through an online messaging platform.

Our client was quoted £80k for the App development, and did not wish to invest this sum. We advised the company to:

  1. Create a new limited company and seek SEIS investment for the App; and
  2. Employ individual developers to create the App.

Company formation

We incorporated the new company. We then applied to HMRC for advance assurance for the SEIS share issue, which HMRC granted. The new company sought £90k investment.

The company enrolled six investors. We prepared an investment agreement to regulate the relationship between the company, its investors, and directors. The investors required the company to provide warranties that the company would:

  1. Own the App and all intellectual property rights in the App;
  2. Not issue shares to other investors without first offering the existing shareholders the right to acquire additional shares;
  3. Not grant any rights in the App, whether to exploit or otherwise, without all the investors’ consent; and
  4. Have each individual developer sign an agreement confirming they had no intellectual property rights in the App.

Intellectual property rights in the App

We created employment agreements for each App developer. Each employment agreement was different, as each developer:

  • Was responsible for a distinct area, e.g. graphic design/images, user interface, coding, and wording;
  • Reported to the “team leader” who oversaw the App creation; and
  • Had different and defined duties and responsibilities, thus clarifying the division of responsibilities.

Each employment agreement was fixed for 9 months, the expected development period. In addition, the employment agreement contained:

  • Express waivers, that each developer acknowledged, understood, and agreed that they had no intellectual property rights in the App;
  • Details of the fixed fees; and
  • Confirmation that their fees would not increase even in the event of the App’s exploitation.

The App was developed on time.

Mobile app protection

Users download the App, which runs on smartphones. A key risk was the App could damage the user’s phone. Our bespoke “terms and conditions of use” limited the company’s liability. If the App required updates, the company could withhold access.

The terms confirmed the company had no liability for:

  • Any message received through the messaging platform;
  • Any damage suffered from advertisements, e.g. advertisements resulting in downloads which incur fees.

The App stores accepted these terms.

The return on investment

The company is now valued at £750k. It receives royalty payments from the App stores for each download. Currently, the company seeks additional finance to create a new, complimentary App.

Summary

Mobile applications can be valuable, and generate significant returns. However, they can be downloaded by anyone, anywhere, on myriad devices. Thus there is risk. Our commercial expertise reduces your risks, avoids disputes, and streamlines your business processes.

John Deane heads the creative sector team at Gannons. John deals with a variety of matters, from the terms and conditions of use, to the ancillary investment agreement drafted to compliment the corporate structure.