This article, which focuses on the iOS Developer Program License Agreement, is the second of two articles geared at helping app developers understand the fine print of the agreements they are asked to enter into with the companies that distribute their products.
When it came to market in July 2008, Apple, Inc.’s (“Apple”) App Store created the first centralized market for applications for mobile devices. It was an instant hit. In the App Store’s first year alone, users downloaded over 1.5 billion applications. And the numbers have only grown from there. The App Store now currently hosts approximately 1.3 million unique applications that have been downloaded a staggering estimated 85 billion times, resulting in payouts to app developers of more than $13 billion. With numbers like these, app developers cannot afford to overlook this market. But what does Apple ask in return for this impressive distribution opportunity? This article examines some of the major terms of the iOS Developer Program License Agreement (the “License Agreement”).
The first thing one notices about the License Agreement is its length. While Google’s equivalent agreement is approximately 12 pages long, the License Agreement is a whopping 95 pages.
And while this length can be daunting, not all of it may be applicable to you based on the type of app you are developing. The body of the License Agreement itself and Schedule 1 are applicable to all apps. Schedule 2 applies only to paid apps while Schedule 3 is applicable only to those apps that will be marketed in Apple’s Volume Purchase Program, primarily used by business-to-business customers.
Like Google, Apple allows developers to set the price of their paid app in their sole discretion (with bundle and subscription pricing options being available). And like Google, Apple takes a 30% commission on each sale. Unlike Google, however, Apple collects and remits sales and use taxes relating to any sale directly to the relevant government authority (though the ultimate responsibility for these taxes remains at all times with the developer). Payments are made to developers, net of these amounts, within 45 days of the end of each month in which a sale occurs.
Enrollment in Apple’s developer program currently requires payment of a fee of $99 per year.
The License Agreement imposes a number of obligations on the developers that enter into it.
As may be expected, developers are obligated to comply with the terms of the License Agreement and requiring that the people that work for them do so as well. This compliance includes ensuring that their apps comply with all of Apple’s program requirements for app design, which span over 6 pages of the agreement and may be changed by Apple from time to time in its sole discretion. Some of these requirements include a prohibition on using non-Apple application programming interfaces and installing executable code, mandatory cross device compatibility and consent requirements with respect to data collection.
The License Agreement also requires developers to undertake certain confidentiality obligations that survive perpetually. Confidential information protected under these obligations includes features of pre-release software as well as the terms and conditions applicable to the license agreement for paid applications.
Developer must also provide their contact information to end users for purposes of answering questions or complaints.
Intellectual Property Licenses
There are three types of intellectual property licenses contemplated by the License Agreement.
The License Agreement creates a non-exclusive and royalty-free intellectual property license from the app developer to Apple. This license includes all of the facets necessary to allow for distribution of the app to end users, including hosting and displaying the app, making copies thereof and allowing end user downloads. What may be less expected, however, is that this license also includes the right for Apple to use excerpts of an app in its promotional materials (unless the developer notifies Apple that the developer itself does not possess these rights due to incorporated third-party intellectual property).
Pursuant to the License Agreement, Apple also grants the developer a limited, non-exclusive, personal, revocable, non-sublicensable and non-transferable license to use Apple software for developing and testing apps. Apple retains the right, however, to limit the number of devices this machines this software may be installed on.
Finally, the License Agreement details the intellectual property license to be created between the developer and the end user of the app. The License Agreement provides for the developer to create its own end license user agreement subject to certain minimum conditions, including. In the event the developer does not provide such an EULA, however, the end user will be subject to Apple’s stock EULA which is contained in the terms and conditions of the iTunes Store.
According to the iTunes Store Terms and Conditions, which are binding on users of the App Store, all sales are final and no refunds are allowed.
The License Agreement is more lenient with respect to refunds, however. Pursuant to this Agreement, Apple can choose to issue refunds to users within 90 days of the date of download or the end of an auto-renewing subscription period or at any time if an app fails to conform to specification or legal requirements. Note that in the event a refund is issued, the developer is required to reimburse Apple for the full sale price of the app in question, without deduction for Apple’s commission, which it is entitled to retain.
Term and Termination
The License Agreement has an initial term of one year. However, the agreement will automatically renew for successive one-year terms, provided, that a developer pays the then-current enrollment fee for the successive year.
Notwithstanding the foregoing, Apple retains broad termination rights, allowing the company to immediately terminate the License Agreement if, among things, a developer: (a) fails to cure a breach of the agreement within 30 days of becoming aware of such breach or receiving notice thereof, (b) breaches the confidentiality obligations imposed under the agreement, (c) commences a patent infringement action against Apple, (d) fails to accept any amendment to the License Agreement imposed by Apple or (e) engages, or encourages others to engage in, any misleading, fraudulent, improper, unlawful or dishonest act relating to the License Agreement, which includes trying to hide functionality from Apple in his or her app’s code or falsifying app reviews.
If a developer wish to terminate the License Agreement, he or she may do so at any time and for any reason by providing Apple 30 days’ written notice of such termination.
While the License Agreement may last perpetually as discussed above, it provides rights for both Apple and the developer to take down apps previously uploaded to the App Store during the term of the agreement.
Removal of an app from the App Store by its developer is allowed at any time using tools provided on the iTunes Connect site. In general, removal only prevents further downloads of the app, but does not remove previously downloaded copies from a user’s device. Apple retains the right to delete such previously downloaded apps remotely in the event that, among other things, a developer does not have the legal right to enter into the License Agreement or distribute the program, it infringes third-party intellectual property or contains obscene or offensive materials or the developer attempts to bring a legal claim against Apple other than in accordance with the dispute resolution procedures detailed below. In all instances, removal of an app does not eliminate the developer’s obligations under the License Agreement to either Apple or the app’s existing end users.
Apple retains an absolute right to remove apps at any time without notice. Though this removal may occur with or without cause, the License Agreement details certain instances in which this right may be exercised, including: (a) the receipt of complaints regarding regulatory compliance, (b) Apple has reason to believe the app violates the intellectual property rights of Apple or third parties, (c) the developer breaches any term of the License Agreement, (d) Apple has reason to believe the app contains a virus, (e) the developer fails to renew the License Agreement or pay associated fees, or (f) Apple believes that such take down is prudent or necessary.
Apple has extremely broad indemnification rights under the License Agreement. When a developer accepts this agreement, he or she agrees to provide an uncapped indemnification with respect to any and all claims relating to the developed app, including, without limitation, the developer’s violation of the License Agreement, claims that the app violates third-party intellectual property rights and even Apple’s permitted use of the app (which includes using snippets of the app in advertising).
Apple does not provide indemnification to developers pursuant to the License Agreement. Instead, in the event that Apple breaches its obligations under the agreement, a developer would be required to initiate a lawsuit for breach of contract pursuant to the dispute resolution mechanisms discussed below. By accepting the License Agreement, however, the developer acknowledges that their use of the App Store and Apple’s software is at his or her own risk with a full disclaimer of warranties, limiting the type of actions that can be brought. Additionally, the License Agreement caps any monetary damages (other than those relating to personal injury) that can be obtained against Apple at $50, effectively removing one of the primary motivations to commence litigation against the company.
In general, any disputes involving the License Agreements are required to be resolved through litigation in Apple’s home turf, the Northern District of California, by a court applying California law. As jury trial waivers are not enforceable, both bench and jury trials are available to the parties. Somewhat surprisingly, the License Agreement does not provide that the loser in any litigation pay the prevailing party’s attorneys’ fees.
Apple maintains unilateral control to amend the terms of the License Agreement at any time (though such modifications may not apply retroactively). Developers must accept the revised terms by clicking the accept button. However, if the proposed terms are not accepted, further use of the App Store may be suspended or terminated immediately by Apple.
Apple’s App Store created, and in many ways still defines, the modern app marketplace. With users downloading over 7.8 million apps per day, distributing your product through this online store can give you instant access to consumers all over the world. As even a cursory review of the License Agreement will reveal, however, Apple retains significant control over every product offered in the App Store. Such control is the price of entry for access to Apple’s famous walled garden and one that over 9 million developers have gladly been willing to pay.