You just spent $50,000 or more (oftentimes, much more) on your Web site (or custom-written software, etc.). But do you really own it? The answer may not only surprise you, but it could cause a significant amount of pain. There are vast differences of opinion regarding who should own a Web site. Some Web developers feel that if the client pays for the site, the client should own the site. These developers usually do not grant copyrights, presuming that the client owns the site simply because it paid for it. This is wrong--payment is irrelevant to copyright ownership. Also, payment for the physical Web site (the source code, etc.) may not prove ownership of copyright.

The first step to understanding the ownership question is understanding the difference between the tangible and the intangible. The physical Web site--the source files, graphics files, back-end code, etc.--is the tangible. The copyright embodied within the Web site--the rights to copy, modify, publish, perform, prepare derivative works, etc.--is the intangible. You may not own either.

Let's start by exploring ownership of the intangible. The Copyright Act defines the owner of copyright as the author. Therefore, copyright ownership goes to the author, and it does so at the moment of the work's appearance in a tangible medium. Don't be confused, we are still exploring the intangible. The thing to understand here is that rights to the intangible do not arise until a tangible is created. This is because under copyright law, an idea can't be protected; what is protectable is the tangible expression of the idea.

An understanding of the law and careful forethought are required before you proceed with the Web site's development.

In-house or outside contractor

The author of a work is the person who creates it. This is not always the person with the idea. This concept can be very frustrating to companies that spend a great deal of time and money to develop the concept for a Web site, then discover that they do not own the copyright to the Web site.

One of the first decisions in building a Web site is whether to develop it in-house or hire an outside Web development company. When the work is done in-house by an employee working within the scope of his or her employment, the work is considered a work made for hire. In this case, the company is considered the author and, therefore, the owner of the copyright. If the employee is not working within the scope of his or her employment, then it is not a work made for hire, and the employee owns the copyright.

If an outside Web development firm is used, the Web development firm owns the copyright, and that copyright ownership can only be transferred to the company by a written assignment. The exclusive rights in the copyright are separable and may be assigned in part or whole.

Many mistakenly believe that a work-for-hire agreement transfers copyright ownership; according to copyright law, it doesn't. This is because, aside from employee-created works, the only other works made for hire are made "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," and then, only "if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

To make it clear, if the work is not one of those specified by the Copyright Act, and a Web site is not one of them, then it doesn't matter if there is a "work-for-hire agreement." Ownership must be transferred by assignment. Furthermore, an assignment must also be in writing.

Subcontractors

Web development firms often use outside contractors themselves--subcontractors. If you understand the concept so far, you recognize that the use of subcontractors can be problematic if the Web developer assigns the copyright to its client, but doesn't own the copyright in or to the work created by its subcontractor. Also, as part of any assignment, the assignor warrants that it is the sole author (or authors), or that it otherwise owns all rights, title, and interests in and to the works. Otherwise, how could they assign it? Failure to actually own the assigned work, before it is assigned, would be a breach of a warranty.

Joint works and joint ownership

A joint work is one "prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole." Each contribution must rise to the level of copyrightable expression when standing on its own. In other words, describing what you want the Web site to look like or how it should work is not by itself a contribution, regardless of how specific you are in that description. Also, it is a good idea to memorialize the intention in writing. In many cases, that will be necessary.

The tangible

To help understand the difference between ownership of the tangible and ownership of the intangible, think books. If you are like me, you probably own your very own copies of the Harry Potter books, but you don't own the copyright to any of them.

Ownership of the tangible can be just as important, if not more so, than ownership of the copyright, especially when it comes to Web sites. One reason is Section 117 of the Copyright Act, which provides that an owner of a copy of a computer program can make an adaptation of the computer program if "a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner."

This allows the owner of a copy to modify the program under certain circumstances. But care must be taken to ensure that the owner is really the owner. Transfer of ownership of a copy may be expressed, or implied.

When determining whether a transfer can be implied, careful thought regarding payment is necessary. If payment was made for consulting services (including, incidentally, Web design services), it is unlikely that a transfer took place. If payments are made in exchange for delivered files, however--even if those payments are made on a periodic basis--it is easier to find that a transfer took place.

Periodic payments alone are not evidence one way or the other, however. Periodic payments on a retainer basis probably indicates that services are being performed. This may show that transfer was not intended by the parties, nor did a transfer occur. On the other hand, payments in thirds (one-third upon signing, one-third on concept acceptance and final one-third on delivery) may show that the parties intended that a transfer take place, or that one actually did.

Now what?

Web developers earn fees when they create Web sites. The law of the land provides that, absent a writing to the contrary, they own the Web sites they create. A result of this is that the Web developer has the sole right to make Web sites that are based on the original one. Changes, modifications, and even many additions can only be made with the Web developer's authorization. Giving up that right is giving up the right to future work, and by extension, future fees.

Rights can be negotiated. Copyrights can be purchased. Likewise, licenses can be purchased. For example, a license to modify the Web site can be negotiated, including the Web developer's right of first refusal to make the modifications. These things can be worked out.

Scott J. Fine is a partner with the law firm of Fine Hummel PC in Huntington, N.Y.