Side Hustle Your Own App: An Intellectual Property Guide
Written by: James “Bud” Sheppard
“Perhaps the only thing harder than taking your idea for a great app from concept to successful reality is watching someone else take your idea for a great app to successful reality.” (Bryan Wheelock, A Guide for Protecting Your App with a Patent, Trademark, Or Copyright, App Developer Magazine (Dec 29, 2020, 5:30 PM).
In an ever-evolving digital age, during a time where technology is essential for our connectedness, and on the cusp of a revolutionary entrepreneurship boom during the COVID-19 pandemic era, protecting your app effectively and efficiently is more necessary now than ever.
Connor Ellison, the owner of Side Hustle Gaming, provided a non-lawyer individual’s experience navigating intellectual property hurdles surrounding his app to provide perspective for this intellectual property guide discussing the necessary strategy, market, organization, and security for best practices.
Strategy
The strategy must be a proactive plan to utilize intellectual property to maximize business objectives effectively. Objectives may include aggressive protection in the early stages of development, a tactical trademark or patent application filing initiative, and creating strategic business relationships to acquire intellectual property. Identifying the present and potential market for the strategic plan is imperative.
Proactive communication measures to integrate the strategy include shareholder education, press releases, and patent publication. Press releases to announce pending trademark or patent applications are an inexpensive tool to communicate strategic development. Patent publications can serve as tangible proof that resources were devoted to furthering a specific patent strategy. Finally, educating shareholders is important because intellectual property awareness is a relevant factor in a company’s valuations. Thoughtfully considering a strategic plan to safeguard the app early on is crucial.
Market
Entrepreneurs must identify their market to successfully protect their app. Market considerations include doing business with trustworthy partners, sharing information selectively, and preparing non-disclosure agreements when confidential information is shared with a select market.
A Non-Disclosure Agreement (“NDA”) is a document that will ensure all shared information is confidential between two parties. An NDA will protect your app idea from being shared or reused by the contracting party. Whether it is outsourced contractors, consultants, associates, potential clients, or investors, an NDA provides you with a certain level of protection; however, it is not a guarantee your idea is entirely safe. Before you have a detailed conversation, an investor may be hesitant to sign an NDA. You may need to offer minimal information about your app before requiring an executed NDA to remedy this. Alternatively, a well thought out business plan incorporating a confidentiality agreement can be provided to potential investors.
Organization
Building the app and the organization structure immediately is one of the best ways to protect your app idea. Once the app is developed by you or a third-party, implement copyright protection to prevent reverse engineering. Then, confirm that the third-party freelancer or development agency releases the rights to you when the project is complete. Meaning, the intellectual property is yours – once you have paid the bill.
The entrepreneur should consider these business entity alternatives for their start-up: sole proprietorships, partnerships and limited partnerships, corporations, and limited liability companies. Each of these entities has distinct advantages and disadvantages. This critical decision involves state-specific research on filing requirements and thoughtful consideration of tax consequences. Depending on the business entity formed, ownership interests will need to be carefully recorded to reflect the business owners’ funds and rights.
Security
Due to the universal popularity and competitive nature of the app industry, creators must protect their creations through intellectual property law to prevent others from infringing and profiting from their work. There are four types of intellectual property protections: trade secrets, patents, trademarks, and copyrights.
Trade Secrets
Trade secret law protects corporate information from being made public. For information to be a trade secret, the data must be: (1) commercially valuable information, (2) guarded from disclosure, and (3) not general knowledge. When adequately protected, formulas, patterns, compilations, programs, devices, methods, techniques, and processes may be trade secrets. Trade secrets protect patentable and unpatentable processes. They protect any confidential information that provides the company with a competitive advantage. For many businesses, customer lists, pricing information, and marketing strategies may be ideal trade secret protection subjects.
Federal law does not protect trade secrets. Nevertheless, forty-three states and the District of Columbia have enacted the Uniform Trade Secrets Act (UTSA), and the remaining states have enacted similar protections.. To win a trade secret lawsuit, entrepreneurs must prove four elements: (1) the information had economic value, (2) the information was not generally known to persons with the legitimate means to discover the information, (3) the information was misappropriated, and (4) the information was guarded in a reasonable manner considering the circumstances. State law interprets each of these elements in greater detail and can differ depending on the jurisdiction.
Entrepreneurs who suitably guard their proprietary and confidential information can legally enforce the information as trade secrets. Owners bring many claims involving trade secrets against employees or competitors. The court can award monetary damages where there is proof of misappropriated trade secrets and enjoin a defendant from using or further disclosing the trade secret.
Trade secret protection can be a useful legal tool to protect a business’s intangible assets. Because trade secrets have no statutorily defined time limits, they can save information indefinitely. Furthermore, trade secret protection can be inexpensive; however, to do so, entrepreneurs must take strict security measures such as restricting access to the information and requiring all employees to execute non-disclosure and non-compete agreements. Essentially, the entrepreneur must generally keep the information secret.
Patents
According to the United States Patent and Trademark Office, a patent is a limited duration property right relating to an invention, granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Apply for a patent of your app to protect your idea. It is not an easy endeavor; it often takes more than two years to issue the app patent. Once you have the app patent, you still need to protect the app’s functionality and protect the app against independent development. Before you make a public announcement, file all the critical information.
A drawback of applying for a patent is the high price. Patenting the app could cost you more than your investment in developing and implementing the app. To overcome this issue, you can apply for a provisional patent to protect your app idea for one year. Even if your app idea is not objectively valuable, the provisional patent will buy time to improve your app during the course of the provisional year.
Trademarks
Trademarking the app is another effective way to protect your app idea. Trademarking helps restrict other developers or entrepreneurs from using your app’s name, icons, and logo. The features and functionality of your app can also be trademarked. Trademark laws protect source identifiers. So, your logos, taglines, and website will be trademarked to identify your brand with your app once it’s published.
Although a trademark does not protect your app’s idea, the documentation required to register a trademark does serve to mark a set point-in-time. If someone tries to dispute idea development timing, this documentation will be essential to display the timeline.
By protecting the app’s brand, app developers can control the app’s consumer perception by differentiating the developer’s app from other comparable apps on the market. Trademark protection provides developers an exclusive right to use the mark connected to the app. However, the developer must ensure that the name, logo, or slogan chosen for the app does not infringe another app owner’s right in a mark, so the developer must follow proper clearance procedures before choosing a brand.
Copyrights
Copyright law is critical in the development and protection of apps. Copyright is the protection given to the creators of original works of authorship, including literary, dramatic, musical, artistic and other intellectual works. A person that exploits the exclusive rights of copyright without the copyright owner’s permission commits copyright infringement.
Software applications are designed with a unique source code that allows them to run on the intended platform. Source code is specific instructions for computers and mobile devices written in a human-readable computer language that facilitates the actions of the computer or mobile device. Source code meets the copyright protection standard when it is deemed an “original work” created by the app developer and fixed in a “tangible medium.”
Copyright law protection kicks in once the source code is written. By registering the source code with the U.S. Copyright office, developers establish public notice that they own the work and have the standing to litigate infringement in federal court. Beyond creating the presumption that the developer is the creator and sole owner of the work, registering source code with the Copyright Office allows the owner to collect monetary damages from infringers in court.
Equipped with a baseline for the best practices for the necessary strategy, market, organization, and security considerations, you can side hustle your app.
Edited by: Melanie Mitchell
