Negotiating Website Agreements

by William S. Galkin, Esq.

(biography at end)

At one extreme of the cyber spectrum, a website can serve as a mere low cost billboard - hoping to catch the attention of passersby. At the other, a website can be a mult-dimensional business outlet, capable of servicing numerous customers with a great variety of goods and services. Most websites will fall somewhere in the great middle.

There are many issues that website developers and their clients might want to consider when negotiating a website development agreement. A number of issues are discussed below. For the purpose of this article, it is assumed that the developer will also provide the server for housing the website.

How concerned the parties should be regarding any particular issue will often depend upon where on the spectrum a website lies. Some of the issues discussed will be of more concern to developers - and others to their clients. However, during any negotiation, it is useful for each side to understand the other's concerns. At the end of the day, a good agreement is one that anticipates and resolves disputes - before they arise.

*** OWNERSHIP - A website is composed primarily of text, programming codes and graphics. Who owns the copyrightable work product of the developer? Most developers will have the status of independent contractors. Under U.S. copyright law, independent contractors are the owners of copyrightable work they create, unless there is a written "work-for-hire" agreement. The developer might want to reuse some or all of the elements in future projects, and therefore, would want to retain the ownership. On the other hand, the client might want ownership to prevent such reuse. Additionally, the developer might be using graphics created prior to the current project. In such a case, a "work-for-hire" agreement would not be enough to place ownership of such graphics with the client. Rather, the developer would need to transfer the rights through an assignment agreement.

*** CONTROL - Often, the developer will house the website on the developer's server. The developer will thereby be maintaining the site and will be responsible for adding or changing the content of the site, when requested by the client. By doing so, the developer could be accused of assisting the client in the perpetuation of a crime or causing damage to a third party, such as where there is copyright infringement, defamation, or obscenity. Therefore, the developer will want the right to delete or refuse to add certain problematic content. Additionally, if the client is not paying the maintenance fees, the developer will want the right to close down the site. These rights need to be clearly spelled out so that the developer cannot be sued by the client for lost profits and other damages when exercising these rights. Additionally, a developer cannot always be aware of the potential liability posed by certain content, therefore the developer might also want the client to indemnify the developer against any such liability.

*** ACCEPTANCE - Creating a website is like having custom software developed. Therefore, it is best if the agreement contains specifications as to the desired appearance, components and functionality of the website. Prior to final payments being made, the client will want to perform some acceptance tests to verify that the site was designed correctly. The process whereby the developer and client agree on the specifics of the acceptance testing usually serves to educate both parties as to what the client expects and what the developer is capable of delivering.

*** RESPONSE TIME - When a web page opens slowly, it has the same effect as slow service in a restaurant - customers will not come back. There are many factors that can cause this slow response. Some are under the control of the developer, such as how the site is designed and the technology used on the server. Clients can require that those elements under the control of the developer should result in pre-defined acceptable response times, while taking into account factors that the developer cannot control.

*** MAINTENANCE - Where the developer is maintaining the site, the client will want to know that changes to the site that the client requests will be made in a reasonable amount of time. Furthermore, links in a site, which will bring a visitor to other relevant sites, need to be reviewed and updated otherwise they become dead. Finding a lot of dead links at a site is like going to a restaurant and finding that they are all out of a lot of things you want to order. The parties need to agree who is responsible for keeping the links current.

*** CLIENT PUBLICITY - After a developer works hard and creates a great new site, it will usually want to place a link on at least the home page identifying the developer in order to attract new clients. What if the client says that it does not want the developer's name to appear anywhere on the site? To avoid this problem, the developer should have this right of publicity set forth in the agreement. This right can be more valuable to the developer than the actual fee received from the client.

*** DEVELOPER PUBLICITY - Putting up a website does not mean anything unless people know it is there. Various levels of effort can be expended to publicize a new website. For instance, there can be minimal effort exerted merely notifying search engines of the new website. On the other hand, substantial time can go into making sure that the site is indexed on the search engines in a manner likely to be found by the desired customers. Clients should understand what level of publicity, if any, the developer is providing.

*** BACKUP - The client will want to make sure that the developer is regularly backing up the site, so that if the developer's server crashes, the site can quickly be installed on another server. Furthermore, the client will want possession of a current backup copy so that if the client decides to move to a different server, the client does not have to wait for the developer to deliver a disk. This is especially important where the reason for the client changing servers is as a result of a dispute with the developer. *** NON-COMPETITION & CONFIDENTIALITY - In some instances, a developer may have earned a reputation for developing websites for a particular industry. In such a case, a client knows that the developer might create a site for one of the client's competitors. In other cases, a client might be introducing the developer to a new industry. In such a case, the client might want to restrict the developer for a reasonable amount of time from creating sites for the client's competitors. This can be accomplished through non-competition and confidentiality provisions. *** SOLICITING EMPLOYEES - In the course of a long and expensive project, it might occur to a client to simply terminate the development agreement and hire away one of the developer's key employees to complete the work. Developers can contractually restrict the client from doing so.

*** LIABILITY - When a company depends on its website for a large portion of its business, then it can incur large losses when things do not go right. Developers can contractually shield themselves from liability for such losses.

*** LAW & JURISDICTION - Cyberspace poses problems for courts to decide which state law to apply and in which state a party can be sued. To avoid spending a lot of time and money resolving these issues, the parties should resolve these issues in advance in the agreement.

Not all issues can be anticipated and covered in a website development agreement, especially given the speed at which the technology is changing. Nevertheless, both parties are best served when important issues are resolved early on.

ABOUT THE AUTHOR:

Mr. Galkin can be reached for comments or questions about the topic discussed in this article as follows:
E- MAIL: wgalkin@earthlink.net
TELEPHONE: 410-356-8853/FAX:410-356-8804
MAIL:
10451 Mill Run Circle, Suite 400
Owings Mills, Maryland 21117

Mr. Galkin is an attorney in private practice. He is also the adjunct professor of Computer Law at the University of Maryland School of Law. He is a graduate of New York University School of Law and has concentrated his private practice on intellectual property, computer and technology law issues since 1986. He represents small startup, midsized and large companies, across the U.S. and internationally, dealing with a wide range of legal issues associated with computers and technology, such as developing, marketing and protecting software, purchasing and selling complex computer systems, launching and operating a variety of online business ventures, and trademark and copyright issues.