Do You Own Your SaaS Website? Part 2 - Have You Considered Pre-Existing Elements?

[bholus10]

Back in the day, most websites were developed completely from scratch - consequently, determining ownership was relatively easy.

These days, websites are rarely developed completely from scratch. Today, the typical website consists of some new development, but that new development typically bundles together a number of pre-existing code modules, tools libraries, web services, and content.

The result - in today's component-based development environment, it's much more difficult to pin down who actually owns any given website.

And clean ownership regarding the intellectual property embodied in your SaaS website, including the necessary use rights for pre-existing elements, is essential if you have any interest in licensing or selling it in the future.

Websites Developed From Scratch

As discussed in Part 1 of this series, if you're unlike most of us and have the knowledge and experience to develop your own website from scratch, you'll be the author and copyright owner.

You'll get the same result if your website is developed by your full-time, regular employees who are acting within the scope of their employment, assuming they develop the website from scratch. The website would be "work made for hire" under the U.S. Copyright Act.

However, if you hire a contractor to develop your website, you'll own copyrights to the contractor's work product only if there is a written agreement, signed by the contractor, specifying that the work is a "work made for hire".

Ownership vs. Licensing In

Let's say you own the copyrights embodied in your website under the above analysis. As the copyright owner, you would have the exclusive rights to copy, modify, distribute, and display the works of authorship that are embodied in your website.

Essentially, ownership means control. As the copyright owner, you would be in complete control of all the copyright rights. You could grant licenses, and you could freely transfer the work in the form of an assignment (sale) of all rights to another (hopefully for a significant profit).

What happens if your website is typical - it isn't developed completely from scratch and incorporates pre-existing elements? What rights do you have?

When you license in pre-existing elements, the copyrights in these elements are owned by others. If the pre-existing elements are owned by your developer, then you'll be licensing rights directly from the developer, and at least you'll have the opportunity to negotiate, if necessary.

However, if your developer incorporates pre-existing elements owned
by third parties, you'll take the rights that your developer is authorized to sublicense to you - nothing more.

What Rights Do You Need For Pre-Existing Elements?

First, if you're licensing rights in for pre-existing third party elements, you need to know what these elements are. You accomplish this by requiring your developer to identify the third-party elements and their associated licensing terms, restrictions, and fees (if any).

Generally, if you're interested in licensing in a bundle of rights for the pre-existing third party elements that you'll need to pass on to a purchaser of your website in the future, the following checklist is a good starting point (however, bear in mind that the list may change depending on specific facts and circumstances):

* perpetual, worldwide rights,

* irrevocable rights (they can't be revoked in the future),

* rights to use, copy, display, and publish as incorporated into your website (and its derivatives),

* rights to modify and to create derivative works (if source code is provided),

* license or use fees (if any) should be clearly spelled out,

* right to sublicense (authorize another person or entity to operate the website for a fee), and

* right to transfer as part of a assignment (sale) of all rights in the website (with no transfer fee).

Conclusion

Today's component-based development environment is a double edged sword:

* the good thing -- the incorporation of pre-existing third party elements allows for a more efficient and cost-effective development process;

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[bholus10]

* the not-so-good-thing - incorporation of pre-existing third party elements complicates the process of accounting for use rights for the elements licensed in.

If you have any interest in licensing or selling your SaaS website in the future, you must take the steps necessary to ensure that you not only have clean ownership to the intellectual property, but also that you have acquired all of the necessary use rights for the elements licensed in.