Client Web Sites, Licensing and breach of contract

Yesterday I spent a hour and a half with a local developer who develops websites for local firms. He called because of my earlier posts on copyright issues. After getting a night to sleep on it, I suddenly said “dung, it’s a legal mine field today”. I will scenario two cases:

• A site using some form of open license software (i.e. JQUERY etc)
• A site using some 3rd party component that the developer is licensed for (for example, FLASH, TELERIK etc)

“Our contract says that the customer owns the code”

Without a lot of clean legal qualification of what the exactly means – you are in breach of contract with both of the above scenarios! The customer would need to sign the dozen of pages of legalesse required to qualify this. Why????

• If you are giving them ownership of the code and using JQUERY, then you are saying that they own JQUERY and can legally sue anyone else that uses the JQUERY.
• If you exclude 3rd party components but supply code that sets or alter properties of these components, you are effectively granting a developer license to the customer.
• If the customer purchases the software, then it is better – provided the customer is the purchaser of record and after you finish it, the “Developer licensee” of record is transfer back to the customer.
• IDEALLY, the developer would have their own license – and the client license would never be temporarily transferred to the developer. It keeps matter clean.

The courts will interpret any contract or note written on an invoice based on what it says and how the common man would interpret it: not what is intended or understood by technical types.

“Our contract says that this is a work for hire”

First, this means that you need to make sure that any UI/graphic designer that you subcontracted work to is done as a “work for hire” and include a copy of their signed contract with papers deliver to the customer. A simple invoice with this scribbled on it leaves things unclear (without both parties signatures on the document – it’s not a contract!).

The United StatesCopyright Act of 1976 states:

A "work made for hire" is— (1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. (17 U.S.C. § 101)

This can potentially cause problems because any libraries of code that your firm has written in the past that is included in the deliverable is now OWNED by the customer and you have no legal right to use it. In fact, if you used it on a different site, you would be obligated to remove the code from those sites – because that usage would breach the copyright that is assigned to the customer by it being a work for hire.

 

For graphic elements there is an additional problem, if the UI person use stock images (they may be legally licensed to do so), they cannot legally grant a work for hire status on items that they do not own a copyright for. This applies to both photography and computer generated images. It can also extend down to the font faces being used in logos and images.

 

“All licenses for you to use the site have been obtained”

The key wording here is “use” – this means that you have not said that they can legally modify the site. Technically, if they want the background image of a page changed, they have not been granted the right to do so. The ideal situation of locking in a customer for simple modifications – if they want to go elsewhere then they need to have a new site developed. Other variation of phrasing could be:

• “Development includes all licensing from 3rd party for you to legally use the site developed”

The term “modify” should not be used without extensive qualification. It would be good practice to explicity state something like “the right to modify the site is not granted. Any future modifications would require the customer or the customer agent to obtain all of the appropriate licenses”. Focus on the licenses issue – so it is clear that you are not the source of pain, the licenses are.

How do I phrase it to give the customer the code?

Get a lawyer, write a 50 page legal contract, have headers in every file identifying who owns which element of code. The contract will be full of lists of items that are excluded, for example. “ownership does not cover:

• Fonts used on the site. Including but not exclusive: fonts referenced in code, fonts appearing on images
• Images used on the site. Modifications of any image is not permitted
• 3rd party open source elements including:
• JQUERY
• list of every JS file used on the site
• 3rd party licensed components
• TELERIK
• list of every dll etc
• Files that you have been granted an unlimited use for:
• Headers read  “….”
• list of every file”

Etc etc etc

 

BE VERY CAREFUL of granting an “unrestricted license” because this means that your code libraries could be legally incorporated into the next web developer’s tool kit, in fact, they could start selling a tool set containing it!

 

Protecting yourself against Sales Person wanting to close a sale

Often a sales person would be asked by a customer for something like “do I own the site” and that may be cited on a bid or invoice.  Draft a written policy indicating that no person is authorize to assign or grant anything except a usage license to any one, and get the signature of every sales person on it.

 

Now, it the sales person does it – send them back to the customer to get it removed. If it goes unnoticed and a legal situation arises, you may have some legal protection --- the sales person needs to be immediately fired, and the defense is simple: the sales person committed fraud – having the signed policy indicates that they were not acting in ignorance etc.

 

As always – NOT LEGAL ADVICE – ALWAYS CONSULT A LAWYER