In Part 1 of this article, I discussed:
- Formats for Website Development Agreements
- Typical phases for website development
- 8 important issues in Web Dev Agreements
I also looked at 2 of the issues (developer's services and website development).
In Part 2, I looked at 3 more issues:
- Delivery & Acceptance
- Term & Termination
Finally, in Part 3 I discuss:
- Ownership of Intellectual Property
Because the Client is choosing a particular Developer to perform the services, and because the Client will be stuck with the result, the Client will want the Developer to warrant (or guarantee) certain things.
Typical “Developer warranties” include:
1. The services will be provided in professional manner by qualified personnel.
2. The completed website will meet the applicable requirements.
3. Developer will fix defects reported in writing within a certain time period. (This time period can be extended via a separate Website Maintenance Agreement)
4. Content supplied by the Developer will not contain any viruses, Trojan horses, trap doors, easter eggs, worms, time bombs, cancel bots or other programming routines intended to damage, surreptitiously intercept or expropriate system, data or personal information.
5. Content supplied by the Developer will not infringe 3rd parties’ copyrights, trademarks or trade secrets and will not violate any law, statute, ordinance or regulation.
6. Content supplied by the Developer will not infringe 3rd party patents, with exceptions.
The issue with this last warranty is that a 3rd party patent could be applied for, but not be public record until granted – which could be 18 months or more after the application was filed.
Thus, a Developer could be infringing a 3rd party’s “imminent” patent rights without knowing it.
Possible resolutions to this issue are (a) the Developer could get a license for the Client to use the patent or (b) the Developer can modify or remove the infringing part of the website and refund part of his payment based on how much of the site was removed and how long it was in use before removal.)
In addition to making warranties, the Developer will want to protect himself by disclaiming any “implied” warranties.
Implied warranties are for the sale of goods, not services, but just to be safe, the Developer will want to disclaim the implied warranties of “merchantability” and “fitness for a particular purpose.”
The Developer will also want to limit their liability exposure only to the price that the Client has paid for the services and the software provided.
Otherwise, Developer could be on the hook for large sums, especially if a Developer error causes huge losses of Client profits.
Ownership of Intellectual Property
It is easiest to think about the IP involved in website development in terms of who created it and contributed it. There are generally 3 categories of IP involved in website development:
- Developer’s IP created prior to the project
- Developer’s IP created for the project
- Client’s IP
Developer’s IP created prior to the project
Developer may have libraries of code and/or graphics she uses from project to project. These “toolboxes” make developing websites much more efficient, and can thus lower costs for Clients.
From the Developer’s standpoint – including this code/graphics in Client’s website should not transfer ownership of that code/graphics to the Client because Developer will likely want to continue to use the code in future projects.
From Client’s standpoint – when it receives the completed website from Developer, it will want to own the website outright because it paid for the website.
Many Clients would prefer the cost savings they receive from increased Developer efficiency than the increased cost of owning every single line of code in their website. Many Clients, however, would find this unacceptable.
At the very least, Clients should try to get a perpetual, worldwide, non-exclusive license to use the “toolbox” code in the website. They may also want to try to get that license to be sublicenseable in case they want to license the website to a third party.
Developer IP created for the project
If Developer creates code or graphics for Client’s specific project – Client will want to own the rights to that code/graphics. To do so – Developer will need to assign its rights in this content to Client.
Developer, however, may want a license to use the code/graphics for promotional purposes (which is often easily negotiable) or for use in future projects (which is often harder to negotiate).
Many Web Dev Agreements state that the Developer will not assign the copyrights in Developer-created content until the Client has paid in full for the Developer’s services.
From the Developer’s standpoint, this makes sense. However, the Client may be wary about conditioning its ownership of content created for the project on full and final payment – especially because payment terms may become issues of dispute.
The Client should make sure it retains all rights to any code, graphics or other content it provides to Developer in the course of the website development.
As with the project-specific content – Developer may want a license from the Client to be able to use and/or display the code/graphics for promotional purposes or possibly in future projects.
Finally, if either party (especially Client) has revealed any information during the course of the website development, such as customer or financial information, they should ensure that the agreement contains a provision that each party agrees to maintain the confidentiality of that information.
It should be very clear in this provision what information exactly is to be deemed “confidential” and what information is not.
Typically, boilerplate confidentiality provisions are quite clear as to what information is NOT confidential, such as publicly known information or information required by law to be disclosed.
It is the information that is supposed to confidential that is usually the trickiest to determine.
The confidentiality provision should cover all confidential information disclosed, whether reduced to writing or not.
Confidential information should include all information that is (or reasonably should be understood to be) proprietary – regardless of whether such information is marked “confidential.”
The Developer may want to include a provision here that nothing in the agreement prevents him from developing a website which may be a competitor of the Client’s website, so long as the Developer does not disclose any confidential information in doing so.
Hopefully this series of articles on Website Development Agreements has been helpful. Remember - whether you're a Developer or a Client, spend the time to put your relationship in writing at the outset.