It’s December 14, heart of the holiday season. You rely on your website for most of your company’s sales and it just crashed! Every hour the site is down costs you thousands of dollars in lost sales. You just called the company who designed your site to get them to send you the code so that you can have your CTO fix the bug that apparently caused the crash. To your stupefaction, they respond that they –not you- own the code and they will fix the bug themselves if they receive a substantial additional payment. What do you do? a) cave in because you have no choice; b) call your investors to tell them you might need a bridge loan in the next 24 hours; c) promise yourself to never sign another contract without reading it first; d) ask your friends if they know a good lawyer; e) all of the above…
You’ve no doubt heard horror stories about what can happen if someone builds a website for you and you don’t have a good contract in place. Inevitably, something goes wrong and you’re stuck. What to do? In short, you need a web development agreement so you’re not at the mercy of your web developer before or once the initial work is completed.
What is a web development agreement?
Any company that wants to have a credible web presence must have their website designed by a professional. Large companies might have the staff and resources for in-house web development, but smaller businesses will typically resort to hiring an external web developer. A web development agreements sets out the obligations and expectations between you and the developer including – most importantly-, ownership of your website’s code, and licensing of any intellectual property contained within the website. Since designing a website entails technical as well as artistic creation, you will need to address both aspects carefully.
I want to own my own website, including the code.
It only seems fair: you hired a developer to build a website for you, so the website - and its code - belongs to you. Right? Not necessarily. If your company lacks any written agreement with the developer, or if the one in place is inadequate, your ownership interests are very much at risk. Courts have held that if the web development agreement doesn’t clearly spell out that ownership of the code lies with the client, then the client has no legal recourse for conversion (including loss or erasure) of the code. See Conwell v. Gray Look Outdoor Marketing Group, Inc.
How could this be, you ask? It seems so counterintuitive. Well, under copyright law, in the absence of an agreement to the contrary, a web developer will by default retain copyright title to the code they developed. For this reason, web development services are usually placed under a “work made for hire” contract, which endeavors to shift that default ownership to the client, the party commissioning the work, and further assign said rights to the client. Incidentally, a mere clause that “the work is made for hire” will generally not suffice and you need to add a specific IP assignment provision in the contract.
The case of State of New Mexico v. Kirby is a rather extreme illustration of a developer’s ownership of the code in absence of a written agreement to the contrary. A dissatisfied web development client was convicted of criminal fraud – and sentenced to jail time! – after refusing to pay the developer and blocking access to the website (and consequently the code). The court held that, unless expressly agreed otherwise, the “owner of the website” is usually the creator of the web pages – i.e. the website designer – rather than the client who hired the developer and for whom the website is developed.
Perhaps you want to make edits to the code yourself, or hand the reigns over to a different developer. As the client, you stand to forfeit a substantial investment if don’t have a copy of the code, because you may have to start over from scratch. Remember that the developer is not automatically obligated to provide you with that code, unless your entitlement to a copy of the code is included in the ownership provisions in the contract.
From the developer’s perspective, signing away ownership of code can be very disadvantageous ,, since they often reuse and recycle code components from previous projects for efficiency and standardization reasons. You can see how code ownership provisions can quickly become a tug-of-war between developer and client. So for the web developer, the less said the better, since the default rule is that they own the content he created. Hence, developer-drafted agreements tend to be very short and plain and may indirectly encourage the client to forego legal review as a result. That’s a mistake.
The bottom line is this: if you’re the client, the web development agreement should clearly specify that you have ownership of the code, or at least a broad license to use and modify the code with no further obligations. If you don’t negotiate that web development agreement carefully, you may find that you don’t own and/or can’t modify your own website!
I want artwork on my website.
Website development and design agreements address licensing issues too. Since websites usually contain a strong artistic component, they may contain artwork, photos, plug-ins, videos, text, or other intellectual property owned by third parties, and they could be improperly licensed. If the developer provides any intellectual property at all as part of the website, you need to know whether or not they really own it, and what rights you're getting to use that intellectual property. You also need representations, warranties and indemnity language to help protect you in the event that a third party is unhappy with some of the content on the website and seeks legal redress.
Make a list, and check it twice.
A good website development agreement must also address a lot more issues than just ownership of code and licensing of intellectual property. There should be language about client vs. designer responsibilities (who provides what?) and the acceptance process (when is it good enough?). As stated before, a website is both a technical and artistic creation, so client satisfaction can be very subjective, and writing clear specifications is paramount.The agreement must also address delivery schedule and payment terms, including deadlines and cost overruns, as web development often takes much more time and resources than originally anticipated. It should cover who si responsible for technical support and the expected SLA. Finally, outsourcing website development overseas could expose you to a variety of other risks and ambiguities. Choice of forum and choice of law clauses are important to make sure any dispute that arises can be settled close to home and in a cost effective manner (i.e., mediation and arbitration).
The pitfalls and resulting headaches outlined above are easily avoidable through proper contractual communications. Don’t make the mistake that so many startups make: signing that short and sweet contract without understanding the terms and implications. Refuse to sign anything less than a carefully vetted and fairly negotiated agreement. A competent attorney can rapidly review the contract you are asked to sign and help you and include some language that protects your rights and meets your legitimate expectations.
As a modern business, your online presence – your face to the customer – is one of your most valuable assets. Don’t give it away!