War Of The Web

Drawing up a contract with your Web site developer? Fight for your rights before the battle breaks out.
Magazine Contributor
7 min read

This story appears in the October 1999 issue of Entrepreneur. Subscribe »

Your Web site is loaded with appealing graphics, convenient buttons leading to information, and interactive features that enable customers worldwide to order products online. But you're getting more traffic than expected, and the designer you hired doesn't have enough capacity on his server. Your customers have to wait so long to make a transaction, many give up and go elsewhere. Time for a change! Unfortunately, when you tell the developer you want to move the site, he says as creator, he owns all rights to the graphics, content and HTML. Your choices are to either pay up, or start all over.

A well-designed Web site can boost your business and help you reach new markets. Because of the technical nature of Web site design, you'll probably hire an expert to develop the site for you. Be careful with the contract, however, to make sure you not only get the features you need, but that you also end up owning the legal rights to your own site; otherwise, you can't change it without the original designer's permission.

"The law is [currently] playing catch-up with technology," says attorney Timothy Labadie of Butzel Long in Detroit, whose practice specializes in business transactions. "People are starting Web businesses and only drawing up the contract as an afterthought."

Not that your Web site developers won't hand you a contract. Don't assume, however, it will protect your interests. Jose I. Rojas, an attorney with Broad and Cassel in Miami and chair of the firm's Intellectual Property and Technology Practice Group, says clients sometimes contact him after problems develop with a contract. "They'll say `It looked like a form contract,' " he says. "You can make even the most complicated contract look like a form."

Before lining up an expert to develop your Web site, consider the following:

  • The firm's reputation. Scrutinize the firms you're considering. There's no shortage of people and firms offering Web site development; some are excellent, but some are fly-by-night outfits eager to take your money and run. Find out where the company is located, get referrals, and check out Web sites they've created. For a major project, have two or more firms submit proposals.
  • Specifications. Asking someone to develop a Web site for you is just as complicated as asking someone to build you a custom house--and furnish it, too. There's far more to think about than just the site's appearance.

"Get as much detail on the front end as possible," says Kenneth Zucker, a partner with Pepper Hamilton LLP in Berwyn, Pennsylvania, who represents Web site developers. Remember, however, things said in sales presentations aren't binding unless they're in the contract. Include functional specifications, such as the site's loading speed, whether it's compatible with Web browsers customers might use, and whether users will be able to place orders online. Before signing a contract, work with the developer to draw up specifications that include sketches of the site's design and functions of the various buttons.

  • Domain name. Every site needs a domain name, the address customers use to access the site. It's important to ensure that the domain name is registered under your business name, not the Web site developer's. The easiest way to accomplish this is to register it yourself. It's a simple and inexpensive process that can be done online at http://www.networksolutions.com
  • Intellectual property rights. Under the Copyright Act of 1976, all rights to a created work belong to the author or creator unless otherwise provided in a contract. Since a Web site counts as intellectual property, be sure to address the question of rights before it's created.

One way to address the problem is by specifying in the contract that the project is "work for hire," which means the product created belongs to your company. Although this is a common practice in the industry, don't assume it's in the contract. In some states, independent contractors engaged on a "work for hire" basis count as employees, entitled to benefits. Also, it's not entirely clear that every aspect of a Web site fits into one of the categories that may legally be classified as work for hire. A second option is to let all rights remain with the designers during the development process, with a provision in the contract that they'll transfer all rights to the content and HTML to your company upon completion of the project.

  • Licensing of software. A typical commercial Web site might contain "java scripts" that make your trademark dance across the screen, interactive features that enable the user to communicate with the company or purchase products online, or a custom-designed "shopping cart" that the developer wants to use for other clients. The computer programs that make these features possible might belong to the developer or, more likely, to a software company. Have the designer help you obtain licenses to use any necessary software so you can move your site to another host if you choose. Make sure you get copies of the software along with your Web site files.
  • Copyrighted material. Do you have music or photos on your Web site? Have the developer agree in the contract to obtain permission to use any copyrighted material, and warrant that all other work is original and doesn't infringe on the copyrights of others.
  • Hidden fees. Some developers offer low initial fees but raise their prices for updates. "Address that early on in the contractual process," advises attorney Alan Sutin, head of the information technology practice at Greenberg Traurig in New York City. "Or you could be at the developer's mercy."

If the developer hosts the site, the monthly fee agreed to in the contract might include a certain number of updates or changes. Make sure the server hosting the site has enough bandwidth to carry expected traffic.

  • Who's the host? While it's common for designers to host the sites they develop, you may not want to keep your site on their server forever. It's important to negotiate separate contracts, one for developing and one for hosting. Make sure the hosting contract addresses price increases as well as the costs of updates and additional bandwidth.
  • Who's in control? "Include a provision that all content on the Web site is controlled by the client," Rojas says. "Otherwise, for example, the developer could put in banner ads for XXX-rated Web sites."
  • Security. What security will the developer include to guard against hackers? Who will have access to your customers' credit card information? Is the site host free to sell customer names garnered from e-mail communications to other businesses? Any reputable service provider carries insurance, so ask for a provision indemnifying your business in case of security breaches.

"Contact a lawyer who has experience in this area," advises Sutin, who notes that a specialty in Internet law is becoming more and more common. Have the lawyer help you draw up the contract or modify the one offered by the developer. "The better you plan in advance," he says, "the more likely the relationship will be successful."

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

Contact Sources

Broad and Cassel,http://www.broadandcassel.com, (305) 373-9421

Butzel Long,http://www.butzellong.com

Greenberg Traurig,sutina@gflaw.com, (212) 801-9286

Pepper Hamilton LLP, 1235 Westlakes Dr., #400, Berwyn, PA 19312, http://www.pepperlaw.com

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