Who Owns the Web Site? Preventing Disputes Between You and Your Web Designer

In the digital age, it is essential for a company to have a Web site to both promote its goods and services and to communicate with its customers. Many companies, rather than keeping their Web design, development, and hosting services in house, have hired an outside company to provide design and hosting services for their Web site. While this arrangement can save costs and result in a more professional final product, it also poses a number of risks when the company's relationship with its developer comes to an end. Possibly the greatest risk is a dispute over who owns the copyright in the Web site code developed by the outside developer. Even if the company provides all the actual content for its Web site to the developer, the developer may be able to claim copyright protection in the development work it has done, such as the HTML code that makes the content display correctly in a Web browser. If the developer, rather than the company that hired the developer, is deemed to own that copyright, the developer can seek to enjoin the company from further use of the Web site, potentially crippling the company's business. This article provides a brief exploration of these issues, including how to prevent such a dispute from arising and appropriate litigation strategies when such a dispute does occur.

Preventing a Dispute

The easiest way to prevent these sorts of disputes from arising is simply to cut them off at their beginning, by carefully drafting express agreements with the designer relating to the copyright in the Web site content that he will develop. As a general rule, the designer, as the creator of the source code for the Web site, would own the copyright in that content unless the designer is an employee of the hiring company or the agreement concerning the Web site's design expressly designated the work as one made for hire. 17 U.S.C. '101. To avoid any ambiguity, the designer's client should require that the designer sign an agreement that clearly states that the content being developed for the client's Web site constitutes a work for hire under the Copyright Act or that otherwise expressly acknowledges that the client will own all copyright in the Web site, and the designer should be required to place an appropriate copyright notice on the pages that he designs, indicating that the client owns the copyright. The client may also want to register the copyright in the Web content as a further pre-emptive measure, if such an agreement exists.

If the designer insists on owning copyright in the content he develops, an alternative can be an express licensing provision in the development agreement, guaranteeing the client a perpetual, royalty-free license to use whatever work the designer creates. By having an express license provision, the designer may own the copyright in the work he has created, but the client will have the right to use it, protecting both parties' interests, and at least limiting the possibility of litigation over copyright issues. As discussed below, courts have shown some willingness to imply such a license when litigation over these issues ensues. Having an express licensing agreement makes litigation at least far less likely, and certainly less costly.

As these examples illustrate, companies should make sure to carefully review agreements with their current or prospective Web developers in an effort to ensure that the appropriate balance is struck with respect to copyright in the content the developer creates and the ability of a company to make use of the Web site after its relationship with the developer comes to an end. Equally importantly, companies should make sure that it is clear that if they provide content to the developer to be placed on the Web site, they retain their rights in that content, such as product descriptions, information about the company, and the like.

When It Goes Wrong

Of course, many Web designers work on a freelance basis, performing work without any written agreement as to who will own the copyright or whether the client has a license to continue using the developer's work once the relationship ends. As a general rule, the copyright in the Web design and development performed by the developer would then rest in the developer rather than in the client. When the developer-client relationship breaks down, this can lead to significant problems ' the developer can sue his former client, claiming copyright infringement, and seek not only damages, but also an injunction against further use of the developed content. For many businesses, an inability to make use of the Web content developed for them could be crippling, as it would effectively shut down their Web sites.

However, all is not lost when such litigation ensues. Courts, reluctant to hamstring businesses in this way, have begun to develop a theory under which the client of a Web developer has an implied license to continue using the Web site content developed for it, provided certain criteria are met. This doctrine was first articulated in Holtzbrinck Publ'g Holdings v. Vyne Comm., Inc., No. 97 Civ. 1082, 2000 WL 502860 (S.D.N.Y. Apr. 26, 2000). Holtzbrinck publishes Scientific American magazine, and provided content for an associated Web site. Holtzbrinck hired Vyne to design and maintain the Web site. Eventually, the relationship broke down when Vyne sought to renegotiate its contract for design and maintenance services, and claimed ownership of the Web site. Holtzbrinck commenced an action seeking a declaratory judgment that it did not infringe upon Vyne's rights, and Vyne counterclaimed for copyright infringement.

On a motion for summary judgment on Vyne's claims, Holtzbrinck asserted that it had obtained an implied license to continue to use the Web site content created by Vyne. The court noted that such an implied license may exist when '(i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute his work.' The Holtzbrinck court concluded all of these factors were met. First, the court found that Holtzbrinck had clearly requested that Vyne create the work. Second, the court concluded that since Holtzbrinck had paid Vyne considerable sums (in excess of $100,000) for the creation of the work, and the work was provided to Holtzbrinck, there had been delivery. Finally, the court concluded that there was an intent to allow Holtzbrinck to copy. Vyne provided Holtzbrinck with password access to the source code for the site, copyright notices in the name of Holtzbrinck's subsidiary, Scientific American, appeared on the site, and other documents and testimony established that Vyne intended to allow Holtzbrinck to have rights in the code.

Also illustrative of the developing 'implied license' doctrine is the decision in Attig v. DRG, Inc., 75 U.S.P.Q.2d 1614 (E.D. Pa. 2005). In Attig, plaintiff contended that he had designed and developed Web sites for the defendant, registered the copyright in the Web site design, and filed suit after his services were terminated. On the defendants' motion for summary judgment the court concluded that an implied license existed, barring an action for copyright infringement. Plaintiff conceded that he was instructed to generate the work by the defendants and that his launch of the revised sites constituted delivery of the work. The court concluded that there was intent to copy because Attig had referred to the Web site as 'your site' and 'your new website' in correspondence with the defendants, and because plaintiff apparently intended to give defendants password access to the site to make changes. Accordingly, the court concluded that an implied license existed barring the copyright claims and granted the motion for summary judgment.

While the 'implied license' doctrine continues to be developed, it is uncertain whether it will ultimately be adopted by a wide range of courts. In the meantime, clients of Web developers can take affirmative steps to ensure that an implied license can be found in the event of a dispute. First, all requests to the developer to create work product should be in writing, clear, and specific, and outline the scope of the work to be performed. Not only does this help satisfy the first prong of the implied license analysis, but it also may prove useful in the event of a billing dispute to show precisely what the developer was instructed to do.

Second, clients should ensure that delivery has taken place ' ideally, the designer should provide updated files to the client for hosting at another location, but some designers will also offer hosting services. If the hosting is also being done by the developer, clients should request copies be delivered in the form of CDs or otherwise, so that the source code is in their possession. Equally importantly, the client should ensure that it has paid meaningful consideration for the work done by the designer. If no payment has been made, a court will understandably be reluctant to imply a license, and if sufficient payment has been made, courts seem to be eager to grant a license and reluctant to place the developer's client at the mercy of the developer.

Finally, clients should attempt to make efforts to clearly ensure that their designer intends there to be a license for them to continue to use the design. These steps can include requesting that the designer place a copyright notice in the client's name on the Web site, that the client make clear in its correspondence at all times that it has rights in the code, and, if the product is housed on servers in the designer's control, requesting access to those servers through networks.

Conclusion

Hiring an outside Web designer can be an efficient and effective way of ensuring a high-quality Web site for a company. However, when the relationship with the designer ends, the question of who owns the copyright in the Web site can lead to contentious and costly litigation. By making clear in the agreement with the developer that the client has rights in the Web developer's work, a company can limit its exposure and ensure that it will continue to be able to use the work it has paid for. In addition, courts have begun to develop an implied license theory wherein a party will continue to have the right to use work that it paid for, but clients must be careful to take steps to make such a finding more likely.

Paul W. Garrity is a partner in the intellectual property and technology group at Kelley Drye & Warren LLP. He has extensive experience litigating disputes involving trademark infringement, patent infringement, false advertising, trade secrets, copyright infringement, the DMCA, dilution, trade dress, parallel imports, and counterfeiting. Garrity can be reached at [email protected]. Matthew D. Marcotte is an associate in the same practice group. He focuses on intellectual property and commercial and complex litigation. Marcotte can be reached at mailto:[email protected].

In the digital age, it is essential for a company to have a Web site to both promote its goods and services and to communicate with its customers. Many companies, rather than keeping their Web design, development, and hosting services in house, have hired an outside company to provide design and hosting services for their Web site. While this arrangement can save costs and result in a more professional final product, it also poses a number of risks when the company's relationship with its developer comes to an end. Possibly the greatest risk is a dispute over who owns the copyright in the Web site code developed by the outside developer. Even if the company provides all the actual content for its Web site to the developer, the developer may be able to claim copyright protection in the development work it has done, such as the HTML code that makes the content display correctly in a Web browser. If the developer, rather than the company that hired the developer, is deemed to own that copyright, the developer can seek to enjoin the company from further use of the Web site, potentially crippling the company's business. This article provides a brief exploration of these issues, including how to prevent such a dispute from arising and appropriate litigation strategies when such a dispute does occur.

Preventing a Dispute

The easiest way to prevent these sorts of disputes from arising is simply to cut them off at their beginning, by carefully drafting express agreements with the designer relating to the copyright in the Web site content that he will develop. As a general rule, the designer, as the creator of the source code for the Web site, would own the copyright in that content unless the designer is an employee of the hiring company or the agreement concerning the Web site's design expressly designated the work as one made for hire. 17 U.S.C. '101. To avoid any ambiguity, the designer's client should require that the designer sign an agreement that clearly states that the content being developed for the client's Web site constitutes a work for hire under the Copyright Act or that otherwise expressly acknowledges that the client will own all copyright in the Web site, and the designer should be required to place an appropriate copyright notice on the pages that he designs, indicating that the client owns the copyright. The client may also want to register the copyright in the Web content as a further pre-emptive measure, if such an agreement exists.

If the designer insists on owning copyright in the content he develops, an alternative can be an express licensing provision in the development agreement, guaranteeing the client a perpetual, royalty-free license to use whatever work the designer creates. By having an express license provision, the designer may own the copyright in the work he has created, but the client will have the right to use it, protecting both parties' interests, and at least limiting the possibility of litigation over copyright issues. As discussed below, courts have shown some willingness to imply such a license when litigation over these issues ensues. Having an express licensing agreement makes litigation at least far less likely, and certainly less costly.

As these examples illustrate, companies should make sure to carefully review agreements with their current or prospective Web developers in an effort to ensure that the appropriate balance is struck with respect to copyright in the content the developer creates and the ability of a company to make use of the Web site after its relationship with the developer comes to an end. Equally importantly, companies should make sure that it is clear that if they provide content to the developer to be placed on the Web site, they retain their rights in that content, such as product descriptions, information about the company, and the like.

When It Goes Wrong

Of course, many Web designers work on a freelance basis, performing work without any written agreement as to who will own the copyright or whether the client has a license to continue using the developer's work once the relationship ends. As a general rule, the copyright in the Web design and development performed by the developer would then rest in the developer rather than in the client. When the developer-client relationship breaks down, this can lead to significant problems ' the developer can sue his former client, claiming copyright infringement, and seek not only damages, but also an injunction against further use of the developed content. For many businesses, an inability to make use of the Web content developed for them could be crippling, as it would effectively shut down their Web sites.

However, all is not lost when such litigation ensues. Courts, reluctant to hamstring businesses in this way, have begun to develop a theory under which the client of a Web developer has an implied license to continue using the Web site content developed for it, provided certain criteria are met. This doctrine was first articulated in Holtzbrinck Publ'g Holdings v. Vyne Comm., Inc., No. 97 Civ. 1082, 2000 WL 502860 (S.D.N.Y. Apr. 26, 2000). Holtzbrinck publishes Scientific American magazine, and provided content for an associated Web site. Holtzbrinck hired Vyne to design and maintain the Web site. Eventually, the relationship broke down when Vyne sought to renegotiate its contract for design and maintenance services, and claimed ownership of the Web site. Holtzbrinck commenced an action seeking a declaratory judgment that it did not infringe upon Vyne's rights, and Vyne counterclaimed for copyright infringement.

On a motion for summary judgment on Vyne's claims, Holtzbrinck asserted that it had obtained an implied license to continue to use the Web site content created by Vyne. The court noted that such an implied license may exist when '(i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute his work.' The Holtzbrinck court concluded all of these factors were met. First, the court found that Holtzbrinck had clearly requested that Vyne create the work. Second, the court concluded that since Holtzbrinck had paid Vyne considerable sums (in excess of $100,000) for the creation of the work, and the work was provided to Holtzbrinck, there had been delivery. Finally, the court concluded that there was an intent to allow Holtzbrinck to copy. Vyne provided Holtzbrinck with password access to the source code for the site, copyright notices in the name of Holtzbrinck's subsidiary, Scientific American, appeared on the site, and other documents and testimony established that Vyne intended to allow Holtzbrinck to have rights in the code.

Also illustrative of the developing 'implied license' doctrine is the decision in Attig v. DRG, Inc., 75 U.S.P.Q.2d 1614 (E.D. Pa. 2005). In Attig, plaintiff contended that he had designed and developed Web sites for the defendant, registered the copyright in the Web site design, and filed suit after his services were terminated. On the defendants' motion for summary judgment the court concluded that an implied license existed, barring an action for copyright infringement. Plaintiff conceded that he was instructed to generate the work by the defendants and that his launch of the revised sites constituted delivery of the work. The court concluded that there was intent to copy because Attig had referred to the Web site as 'your site' and 'your new website' in correspondence with the defendants, and because plaintiff apparently intended to give defendants password access to the site to make changes. Accordingly, the court concluded that an implied license existed barring the copyright claims and granted the motion for summary judgment.

While the 'implied license' doctrine continues to be developed, it is uncertain whether it will ultimately be adopted by a wide range of courts. In the meantime, clients of Web developers can take affirmative steps to ensure that an implied license can be found in the event of a dispute. First, all requests to the developer to create work product should be in writing, clear, and specific, and outline the scope of the work to be performed. Not only does this help satisfy the first prong of the implied license analysis, but it also may prove useful in the event of a billing dispute to show precisely what the developer was instructed to do.

Second, clients should ensure that delivery has taken place ' ideally, the designer should provide updated files to the client for hosting at another location, but some designers will also offer hosting services. If the hosting is also being done by the developer, clients should request copies be delivered in the form of CDs or otherwise, so that the source code is in their possession. Equally importantly, the client should ensure that it has paid meaningful consideration for the work done by the designer. If no payment has been made, a court will understandably be reluctant to imply a license, and if sufficient payment has been made, courts seem to be eager to grant a license and reluctant to place the developer's client at the mercy of the developer.

Finally, clients should attempt to make efforts to clearly ensure that their designer intends there to be a license for them to continue to use the design. These steps can include requesting that the designer place a copyright notice in the client's name on the Web site, that the client make clear in its correspondence at all times that it has rights in the code, and, if the product is housed on servers in the designer's control, requesting access to those servers through networks.

Conclusion

Hiring an outside Web designer can be an efficient and effective way of ensuring a high-quality Web site for a company. However, when the relationship with the designer ends, the question of who owns the copyright in the Web site can lead to contentious and costly litigation. By making clear in the agreement with the developer that the client has rights in the Web developer's work, a company can limit its exposure and ensure that it will continue to be able to use the work it has paid for. In addition, courts have begun to develop an implied license theory wherein a party will continue to have the right to use work that it paid for, but clients must be careful to take steps to make such a finding more likely.

Paul W. Garrity is a partner in the intellectual property and technology group at Kelley Drye & Warren LLP. He has extensive experience litigating disputes involving trademark infringement, patent infringement, false advertising, trade secrets, copyright infringement, the DMCA, dilution, trade dress, parallel imports, and counterfeiting. Garrity can be reached at [email protected]. Matthew D. Marcotte is an associate in the same practice group. He focuses on intellectual property and commercial and complex litigation. Marcotte can be reached at mailto:[email protected].