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Whose Site Is It Anyway?
key provisions of a web site development contract are straight forward

By JEFFREY W. ROSE, Attorney
jrose000@counsel.com

Less than two years ago, hardly anyone had heard of the Internet.  Even now, many people are intimidated by the prospect of using the new technology -- connecting or publishing on the World Wide Web.

Some lawyers are also uneasy at the thought of drafting a contract for the creation of a Web site.  They don't understand the technology and thus are hesitant to practice their trade on seemingly unfamiliar ground.

However, the issues to be addressed in preparing an agreement for the creation of a Web site are straightforward and do not require a thorough understanding of the underlying technology. Rather, drafting such an agreement requires only that the attorney be familiar with standard contract law and become acquainted with some basic intellectual property issues.

A Web site development contract consists mainly of standard provisions used whenever a third party is hired to provide specialized services.   Because a Web site involves the creation and publication of information or other forms of content, intellectual property issues -- ownership of the various elements of the finished site, for example -- also arise. These IP concerns, though novel to many attorneys experienced at drafting contracts, should be fairly simple to address.

The specifics to be addressed in a Web site development agreement include:

  1. Clearly defining what services will be provided and what the finished Web site will include
  2. Pricing
  3. Ownership of and clearance of intellectual property rights for the completed Web site as well as all underlying programming and/or content; and
  4. Providing adequate warranties and representations.  Defining the scope of the work to be provided and then determining who will own the elements of the completed Web site will probably provide the biggest challenge to first-time Web site counsel.

BIT BY BIT

The first issue to determine is what scope of Web site-related services will be provided, including consulting and support for both software and hardware elements. A Web site will require software development services to design and construct the content -- the actual files, or pages, to be displayed.

The site owner will then need to place the content on a computer, or server, which will allow interested parties to access the site. The hardware can belong to an outside provider or be purchased and maintained as an in-house system.

Creating a Web site thus requires both the creation of the content and the maintenance of all necessary hardware -- both of which must be defined in the contract.

Many Internet service providers who offer Web site design services will maintain the site on their own computer. Frequently, however, clients will retain an independent developer to create the content but the completed Web site will be maintained on a computer owned and operated by a third party. The client will still most likely want to use the developer's expertise to locate the appropriate provider and assure that the Web site functions properly.

If the client wants to maintain complete control and have the security and flexibility afforded by maintaining the site on an in-house computer, the client may want to have the developer supervise the selection and installation of the hardware as well as hardwire the connections between that hardware and the Internet.

Ultimately, the choice is one of determining what the client wants and matching those needs with the appropriate providers. Whatever choices the client makes, however, the scope of the services and the client's expectations should be clearly specified in any agreement.

Once the hardware requirements are determined, the client must then specifically define what types of services will be supplied for designing and creating content for the Web site itself. The type of content is limited only by the client's desires and budget. In a marketplace where "major" upgrades in browser software are announced every three months and numerous independent advances are announced even more frequently, both sides should have well-defined -- read: ultra-specific -- expectations as to what will be delivered and at what cost when the agreement is signed. Clear specifications will protect the client from an unexpectedly high bill and an ever-changing delivery date, and will protect the developer from having to deliver more than the agreed budget can possibly allow. Changes made after work has begun should be addressed at the time they are proposed.

The agreement should also provide terms defining what types of training, support and follow-up services will be provided for the Web site's hardware and software. Developers often include a period of limited consulting services in their initial fee to allow the client to make cosmetic changes. Additional monthly or ongoing consulting and support is normally offered at hourly rates.

In addition, many developers will offer assistance marketing the Web site and creating links to the site from other sites. The developer may also assist the client in getting the Web site listed on high-profile index sites and recognized by search engines for greater visibility. If the client wants complete control over the site's marketing, he may not want the developer to establish any links at all. In any event, many designers will not provide these services automatically, and the developer should not be expected to guarantee any specific number of "hits" -- visits to the site's pages. The specific terms of all such services should be set forth in the agreement.

THE BOTTOM LINE

A Web site contract should address pricing. Clients often want to pay a flat fee for a finished Web site. The contract should specify the fee and exactly when it will be paid. The contract should also specify what rate will be charged for consulting and support for both hardware and software maintenance as well as for periodic updates, corrections or additions to materials published on the site. Such fees are generally offered hourly but may also be based on flat rates. Hourly rates will vary depending on the type of services offered.

WHOSE BYTES ARE THESE?

The development agreement should carefully delineate who will own each element of the completed Web site -- for example, the underlying programming and artwork. Original elements created specifically for the client may generally be considered "works for hire," and therefore the property of the client.

However, certain elements will require an assignment of the proprietary rights to secure ownership. Ownership of other elements may be retained by the developer with the client granted a license. For elements created by third parties, the agreement should also specify who is responsible for obtaining the necessary licenses or clearances. As a practical matter, the agreement should provide that the party responsible for obtaining any given element is also responsible for obtaining the necessary rights.

The client might presume that she is the owner of everything that the developer was paid to create, but this is rarely the case. Developers almost invariably utilize existing templates, forms and graphics from prior sites or from third parties. The developer may not be willing, or may not be able, to release ownership of these elements.

With the release of more sophisticated browsers and authoring tools, original programming may be required to implement specific features. Clients and their counsel will want to carefully consider which of these elements will be considered proprietary to the client and which might be retained by the developer to offer to future customers.

A client may, for example, want to include a form on its Web site to allow potential customers to request more information. The designer may already have such a form and easily adopt it for use on the client's site, but he will not want to assign ownership of that existing program. On the other hand, if the client wants to create a new program to allow customers to check inventory or the status of an existing order, he will want to own that original program and prevent the designer from offering it to competitors. The agreement should specify who owns such elements. Clearly spelling out these rights up front will protect both parties from future disputes.

PROMISES, PROMISES

The agreement should include the parties' warranties and representations. The client will want a developer to provide warranties that the developer has not violated any third party's proprietary rights -- including copyrights, trademarks or rights to publicity -- in completing the Web site. And the developer will want the customer to provide identical warranties for any text, graphics or other elements that the client supplies.

Although the client ultimately may not be able to escape liability for failures to obtain the proper licenses, including such warranties will provide an avenue to seek reimbursement from the developer should the need arise. Nonetheless, the client should also conduct adequate due diligence to assure that none of the materials it provides on the site violate the proprietary interests of third parties.

The Web site contract should also clearly define what warranties the developer will provide as to hardware or services provided by third parties, in addition to those offered by the third parties themselves. The developer will naturally wish to disclaim any such warranties. Those items will instead be covered by the agreement between the client and the party from whom the relevant hardware or services are purchased. Nonetheless, depending on the level of involvement of the developer in choosing and using those items, the developer may still be expected to offer some assurances that the selected items will satisfy the client's needs.

WEB SITE BOILERPLATE

The parties should also consider a number of other relevant provisions. An arbitration clause may allow disputes to be resolved more economically. A termination clause could help end an undesirable relationship more efficiently.

A client should also be protected in the event that he decides to move the Web site from one host to another, or if the developer goes out of business. In such circumstances, the developer should be required to deliver the required files on disk or assist the customer in transferring the files to the new location.

Finally, the agreement should define what rights the developer has to include references or credits for itself on the completed Web site. For many developers, credits including graphical icons and hypertext links to their own home page are standard and included without question. Some clients may, however, be offended at the notion of including such an "advertisement" on their Web site.

Once the site is completed, counsel is faced with many new issues. As the site evolves, due diligence procedures should be maintained to assure that no offensive or infringing materials are carelessly or thoughtlessly placed on the site. Any new innovations or additions should also be monitored to determine if registration for trademarks, copyrights or other intellectual property interests are warranted. The need for insurance to protect against any potential liability, errors or omissions might also be considered, depending on the nature and scope of the site.

Even as the Internet evolves and expands, drafting an agreement for the development of a Web site should remain a relatively straightforward and uncomplicated process. Counsel should be able to protect their clients by keeping their focus on the fundamentals -- basic contract law and the most rudimentary IP principles.


JEFFREY W. ROSE is a solo practitioner in Costa Mesa.  His practice includes copyright, trademark and trade secret law as well as general contract, licensing and litigation. He represents a variety of software, multimedia and publishing interests as well as several Internet service providers and Web site designers.

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