Website under constructionWe meet a lot of clients that fail to obtain a written agreement, or blindly sign the form provided by the developer – and when a dispute arises, only too late realize the problems created by that lack of diligence.  This post addresses critical provisions in a website development agreement.

First, you want to make sure you will own the material and content created by the developer.  Thus, you want a provision in the agreement (which must be in writing) that recognizes that the developer’s work for you is considered a “work made for hire” and you want a copyright and intellectual property assignment as well.  These clauses ensure that, although the developer is not your employee, you are the owner of the website materials and intellectual property rights.  You do not want to find that your website designer created something unique for you only to discover the same unique layout on another website.  Many businesses are surprised to learn that in the absence of this statement in a written agreement, an independent contractor (in this case the website developer) typically is the owner of work they create, and the business at most would be a licensee of the material. This means you don’t own the work; rather, you only have permission to use it.

Second, you want to have a provision in the contract that states that the work on the website is the website developer’s original work and/or that the developer has the necessary permission/licenses from the owners to use the work on your site.  For instance, the website developer may place photographs on your website – you want the developer to represent that the developer has the right to use those photographs on your website (i.e. either the developer took the photos or it has the permission to use them).  If the developer uses photographs owned by a third party on your website without the third party’s permission, the third party could claim you are infringing on their copyright by displaying their work on your website without their permission, and would demand you cease use of the photos and may demand damages as well.  Thus, have your website developer represent the work is original or that he has permissions to use all work on your website.

Third, make sure to have an indemnification provision in your agreement.  This provision should provide that the developer will indemnify you in the event you incur damages or a loss due to a third party claim that you are infringing their intellectual property rights – where they claim the work on your website is actually their material.  For example, a business thinks the graphics on its site are original, however, it receives a cease and desist letter from a third party alleging that its use of the works on its website without the third party’s authorization is copyright infringement and demands damages.  Under Copyright Law, if the third party is the owner of a registered copyright in the work, the business as an unauthorized user could be subject to statutory damages ranging from $700 to $30,000 for unintentional infringement, and up to $150,000 for willful infringement. Thus, if material placed on your website by your developer is subject to a claim or legal action for infringement, you want your developer to indemnify you for these actions since you are relying on their knowledge, creativity and skill in developing and designing your website.

Finally, it is important that you make sure that the developer periodically delivers all source codes and native files to you, and that you control all passwords and access to critical website assets, such as the domain registration.  You want to make sure that such files and access rights cannot be withheld in the event of a dispute.  Thus, if a dispute arises, the developer’s sole remedy should be money damages.  You should not be prevented from transferring the work done (to the point of a dispute) to a new developer, so you can finish your site, and deal with the dispute separately.

For more information, please contact Kim Grimsley.