As the world moves more and more online, functions of our day-to-day lives are increasingly becoming virtual. If you build virtual reality applications, you have likely seen a boom in business over the past few years. One recent success story was the rise of Zoom during the throes of the COVID-19 pandemic. However, as your business grows, it also means that there is more risk. A key way to mitigate this risk is by having clear contracts with your clients that establish the terms of the arrangement. Below are some primary considerations to include in your development agreement when building a virtual reality application.
Scope of Work & Deliverables
Disputes commonly arise when a development agreement is unclear about what parties are creating. Defining a clear scope of work and deliverables is crucial in development agreements. This is because, generally speaking, clients do not have the technical expertise to understand the elements of app development, such as the underlying code.
Therefore, when setting out a scope of work or describing a deliverable, it is essential to note the application’s intended functionality and manage the client’s expectations regarding what is achievable and what is just a pipe dream.
Timelines
Time is always of the essence in development agreements. The sooner clients can use their virtual reality applications, the sooner they can start making money. From a commercial point of view, it is important to be realistic about the turnaround time. Development agreements often use the concept of “milestones”. These set out key dates for completing each stage of the application development. This might include a milestone for finalising the design, the first version or the completion of acceptance testing, as applicable.
As good as any goal can be, you need to prepare in the event of a delay. The contract should specify what happens when you do not meet a milestone or deadline. Additionally, it should specify who is responsible for additional costs and what the client can do if they are unsatisfied with a delay.
Continue reading this article below the formFees
The fees are a commercial decision, but there are various options to choose from. For example, you could provide virtual reality application development services at an hourly rate, a daily rate or a total fixed fee. How you structure your fee will impact other important aspects of the agreement. This includes:
- what happens in the event of a delay if you are providing the services at a pre-agreed-upon fixed rate; or
- if the customer is liable to pay for additional daily rates if the development takes longer.
Payment Terms
Payment terms relate to when the fees are payable. Most clients will want to pay on receipt of the deliverable, but this is not always feasible for app developers. If they insist on paying in arrears, establishing a milestone arrangement is a good way to meet them halfway. Otherwise, you might invoice the customer monthly for services you provide in the preceding month.
Acceptance Testing
Acceptance testing allows the customer to test the application and confirm they are happy with it before finalising it. The goalposts will inevitably shift over the development period or even before you begin building it. By including a concept of acceptance testing in the agreement, the client will know their obligations and how much time they have to review each stage of development.
Intellectual Property
There are several intellectual property considerations to take into account when developing a virtual reality application.
Branding
Suppose you are using the client’s branding, logo, trade mark or otherwise. You need to ensure that the contract contains the appropriate licence for you to do so.
Ownership
Consider who will own the intellectual property in the finalised virtual reality application. If it is the client, as is market standard, you can assign the intellectual property to them. Alternatively, you can grant the client a licence to use the application if you retain ownership. The licence you provide can be as comprehensive or as limited as appropriate for the context.
Pre-Existing Intellectual Property
One final inclusion in your intellectual property clause is the concept of pre-existing intellectual property. You want to ensure that you retain ownership of any intellectual property you have developed previously or outside of the specific development agreement that is being discussed. Again, this is important for ongoing business.
Confidentiality
Confidentiality is pertinent for both parties in a development agreement arrangement. For the customer, you will potentially have access to important data and maybe even their clients’ personal information. Therefore, they will likely want to see a confidentiality provision within the development agreement to protect this data. For you, you might want to keep your processes and fees confidential. Accordingly, a confidentiality provision provides similar protections.
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Key Takeaways
When building virtual reality applications, your development agreements should clearly outline what you are providing. You should also include an approximate timeline, the fees, and other protections necessary for each of the parties to the agreement.
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Frequently Asked Questions
Either party can own the intellectual property in the finalised virtual reality application, but it is important to clarify with your customers who that will be so that you can effectively manage everyone’s expectations.
It is strongly recommended that you have a development agreement when providing development services. This reduces the risk of a dispute down the line and ensures both parties understand what is being provided.
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