Canada: Going Mobile: Seven Key Considerations For Acquiring Mobile App Assets

Last Updated: February 28 2017
Article by Jake Gilbert and David Feldman

As more industries look to capitalize on mobile platforms, and as smartphones and tablets increasingly become the "first screen" for customers, mobile apps will continue to play an integral role in connecting businesses with their customers, whether through the marketing of products and services, facilitating transactions and communications or enhancing customer engagement. To get a sense of the popularity of the mobile channel, according to App Annie's 2016 Retrospective (a business intelligence company and analyst firm), total time spent in apps increased by over 150-billion hours in 2016 on a worldwide basis, and worldwide app downloads reached over 90 billion in 2016, with Canada ranking in the top 10 for iOS app downloads.

Where a buyer is acquiring a business to which a mobile app is critical, the buyer should avoid simply lumping the mobile app asset in with other intellectual property (IP) assets. Instead, there are a number of issues and considerations specific to mobile apps and their related functionality that a buyer will not want to lose sight of. This article looks at those issues and considerations in more detail.

First, the Basics: What Are You Buying?

Essentially, a mobile app is software that operates on a mobile device, such as a smartphone or tablet, and more specifically, on a mobile operating system (i.e., Apple's iOS, Google's Android, Microsoft's Windows 10 Mobile, BlackBerry® 10 OS, etc.). However, a buyer should not overlook other assets beyond IP that are essential to the operation of the app, such as historical customer data and related data analysis and modelling, licence agreements with the mobile app distribution platform (i.e., the App Store), any app development agreements where app development was outsourced, licensing agreements that power app features, arrangements with advertisers and other contracts that may support in-app reward programs and marketplaces (i.e., payment application). Understanding how the app works and interacts with the mobile app ecosystem will inform what app-related assets should be in-scope for the purposes of the transaction.

Unless the back-end servers on which data collected or otherwise used by the app are included in the deal, the buyer will need to transfer the related data to its own platform or to a third-party platform. If this data transfer cannot be done at the same time as closing, then the buyer will require some form of transition support from the seller until alternate arrangements are implemented.

Further, as part of the buyer's overall due diligence, the buyer should understand generally how the app has evolved and been updated over time to address historical bugs, security vulnerabilities or other problems. The buyer should also review the app's end user licence agreement and the applicable store listing pages, including the customer reviews, to understand any unique terms or potential limitations in the app's performance.

The App Store: How Is the App Distributed (or Intended to Be Distributed)?

The app's value is often tied to its distribution or projected distribution. The buyer will want to ensure that the app has been designed and maintained and is, or can be distributed in compliance with the applicable guidelines and terms for the mobile app distribution platform (i.e., Apple's App Store, Google Play, Microsoft's Windows Store, BlackBerry® World", etc.). These guidelines and terms are typically onerous and non-negotiable, but they must be complied with in order to distribute the app. Mobile app distribution platforms generally reserve the right to terminate the app distribution agreement with any app developer (which would then prevent any further distribution of the app on the mobile app distribution platform) where there is a breach of terms. It may be appropriate for the buyer to seek certain representations and warranties from the seller to confirm that the app is, or can be distributed in compliance with all applicable third-party terms and conditions, as non-compliance could diminish the app's value and potentially lead to fines, penalties or other damages.

IP 101: Who Owns the Mobile App?

It will obviously be critical to ensure that the target actually owns the app, including all intellectual property with respect to the app's source code, algorithms and design. As with any other IP asset, anyone involved in developing the app would have ideally signed an appropriate assignment agreement to ensure that the seller owns all the intellectual property in the app, as well as a confidentiality agreement to protect the confidentiality of the source code. Furthermore, any individual involved in the app development would have ideally also waived their moral rights under copyright law. If the mobile asset was developed by a start-up or early stage company, there might be a greater risk that these protections have not been properly documented. If that is the case, then there is a risk, post-closing, of another party claiming ownership and seeking royalties or even attempting to shut down the app.

The app's source code should be examined to determine whether it includes any open source code, and in particular whether it includes any "copyleft" code that may have a viral effect of making the entire app subject to a copyleft licence that requires public disclosure of the app's source code (which effectively negates the app's proprietary nature), and/or distribution of the app on a royalty-free basis.

A buyer will also want to identify any actual or possible claims that the app (or use of the app) infringes any intellectual property rights of any person. While litigation searches and searches of registered intellectual property can be undertaken as part of a buyer's due diligence, there are limits to how useful and complete these searches are. To the extent that a buyer may consider distributing the app in any jurisdiction(s) where the app is currently not being distributed, the buyer should investigate whether there are other competing apps or other apps with similar names or designs that are already being distributed in such other jurisdiction(s), which may lead to intellectual property infringement claims either by or against the buyer. Furthermore, an intellectual property infringement claim may be grounds for the mobile app distribution platform to remove the app from the distribution platform and/or from devices on which it has been installed.

Data Safety First: Are the App and Data Secure?

Data security is top of mind for all M&A practitioners these days, especially with recent headlines of potentially serious transaction risks and purchase price reductions arising from a data breach. Mobile apps raise important data security considerations, as a security breach or any unauthorized disclosure could lead to widespread user dissatisfaction with the app, as well as potential litigation exposure based on the nature and volume of the data typically collected by the app.

It is important to understand the nature of the data collected, used, and transmitted by the app, where such data is stored (and where it is not stored), whether on the mobile device, in a private cloud, and/or in a public cloud and how such data is secured. A buyer will want to confirm who has access to such data, how such access is restricted, how such data is transmitted and how such transmission is encrypted and secured. Any known security breaches should be identified and examined to determine how such security breach occurred and the likelihood of recurrence of the same or a substantially similar breach.

Privacy Matters: Does the App Comply with Applicable Privacy Laws?

As noted above, mobile apps often collect vast amounts of data, including personal information. The federal privacy commissioner and the privacy commissioners of Alberta and British Columbia have identified good privacy practices for app developers. In a joint publication, the privacy regulators recognize certain unique characteristics of the mobile environment that can present challenges in respect of the proper collection, use and disclosure of personal information and noted there have been reports of unauthorized access to customer information (including contact lists and photos).

A buyer should conduct appropriate due diligence to confirm how the privacy policy is disclosed to app users, that appropriate consents are obtained in respect of notifications and that the collection of personal information does not include non-essential information.

Local vs. International: Where is the App Used?

If the app can be downloaded and used internationally, or if the buyer intends to distribute the app in other jurisdictions, a buyer should consider how such distribution is or will be tailored to foreign markets (i.e., translation of user guides/screenshots, local customer support/resources, etc.). A buyer should also consider what regulatory framework, if any, applies or could apply to the app or the services provided through the app. As a first step, a buyer may want to consider compliance with foreign privacy laws to the extent the app can be used outside of Canada and is used to collect personal information.

If it is determined that there is any regulatory or other risk involved in making the app available outside of Canada, an app developer can choose to implement technical controls to ensure that the app cannot be downloaded or used in specific jurisdictions (including by setting appropriate restrictions in the applicable mobile app distribution platform, if available).

Don't Forget the People: What Will Happen to the App's Owners and/or Developers After Closing?

The app's owners and/or developers likely have considerable knowledge about the app, its users and the business. Where the continued engagement of such individuals is essential to the continued operation and development of the app and/or business, it is important to ensure that the deal is structured in such a way so that there is sufficient incentive for these individuals to continue their engagement. Traditional financial incentives are effective, but a buyer should also carefully consider how these individuals can be integrated into the buyer's business.

We expect that the trend towards mobile is only going to intensify and companies will continue to embrace and move towards more app-centric strategies to grow their customer base and build customer engagement. Accordingly, mobile app assets should be treated thoughtfully as part of any acquisition so that a buyer does not ultimately end up with a key customer engagement channel that is "broken" or materially deficient.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions