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Apple's Secret App Contract: Developers Pay Apple Even When Users Don't

The Electronic Frontier Foundation obtained an Apple (AAPL) iPhone developer contract and posted commentary along with a copy of the document. EFF staff attorney Fred von Lohmann made some interesting points, but I think he omitted some additional ones. I've also obtained detailed information on the contract's still-confidential part governing paid apps -- and there are some eyebrow raisers in it as well.

von Lohmann makes some great points:

  • Although the main contract and schedule 1 aren't confidential, developers must refrain from making any public comments on them unless cleared by Apple PR.
  • You can only sell an app through Apple. If it rejects or withdraws the app, you're not allowed to sell it through any competing app store, such as Cydia or Rock Your Phone.
  • You can't reverse engineer anything by Apple, even if to ensure interoperability in a manner that U.S. courts have accepted as legal.
  • Clause 3.2 (e) says that you won't tinker with any Apple technology or software, not just the iPhone. "For example, this could mean that iPhone app developers are forbidden from making iPods interoperate with open source software."
  • Apple can get rid of your app at any time for any reason -- and can do so remotely, even after installation.
  • The most Apple can owe you in damages is $50, even if their arbitrary action causes you to lose your development investment or if Apple " botches an update, accidentally kills your app, or leaks your entire customer list to a competitor."
In addition, there are some other thorny points I found in my reading:
  • Clause 3.2 (e) survives termination of the contract. If you do sign it, you've locked yourself out of potential future business activity that would otherwise be legal.
  • You must agree to the contract before even downloading any of the development tools. That means you can't change your mind and sell apps through one of the Apple app store competitors.
  • You're not allowed to install the software developer's kit on "non-Apple-branded computer," so you'll develop on a Mac.
  • One clause forbids any app that would "commit or facilitate the commission of a crime, or other tortious, unlawful or illegal act." Facilitate is a tricky word, because it could stretch to include something like a text editor that would let a person illegally tamper with an email header. An app could breach the contract even though you hadn't conceived of a particular nefarious use.
  • Your app's end user licensing agreement must explicitly take responsibility for any party claims that your app infringes a third party's intellectual property rights. However, what if the infringing portion is actually part of the iPhone's functions? I'd argue that you're still on the hook.
Now on to Apple's schedule 2, a separate, confidential agreement for developers who sell their apps. I won't link to my information sources because I don't want to see anyone get into trouble. As with most Apple agreements, some sections are common and others may be country-specific. I believe I'm focusing only on common terms and conditions, but can't guarantee it. That said, here are some details:
  • People generally know that Apple takes 30 percent of an app's sale price after any required taxes, but that's in the US. In other countries and currency, the cut can be higher, taking taxes and currency conversion into account. For example, according to Apple's payment schedule, a 3.99 euro app pays the developer 2.43, or 61 percent.
  • If a user returns a paid app, the developer covers the entire cost of the return. Apple keeps its share of the price originally paid.
  • Any app must conform to U.S. restrictions on technology export, including limitations on encryption use. (It's understandable and inevitable, but easy to overlook.)
  • Apple pays app owners monthly, but takes 45 days after the close of a month to do so.
  • If a user doesn't pay Apple, you still have to pay the 30 percent commission.
  • Apple can stop selling your app at any time for any reason.
Given Apple's control freak corporate culture, it's hardly surprising that many of the terms keep developers under the company's thumb. Given the ramp-up of Android handsets -- Apple's attempts to scare off developers aside -- the question is how long Apple will be able to continue enforcing such relationships when developers might have other viable outlets for their work.

Image via RGBStock.com user lusi, site license.