WEBSITE DEVELOPMENT AGREEMENTS

Web site development involves the creation of a presence on the Internet and so introduces the customer to the myriad of legal issues that must be considered. A web site development agreement should determine which legal risks the customer is taking and which risks the developer will bear. A written agreement is an important first step to be completed.

The Internet contains Web sites for an ever increasing range of businesses and individuals. Many businesses use the Internet as a form of advertising and customer support by developing a Web site.

As part of a relatively new and rapidly expanding industry, Web site developers have many issues to consider in order to protect their own interests. Being a new industry, the legal perils of Web site development have yet to be fully examined by the Courts around the globe but there are some dangerous trends developing for developers. There are also a number of commercial and legal issues for businesses to consider when engaging a Web site developer, for example:

• the contractual issues involved in a Web site development agreement are similar to those to be considered in a software development agreement;
• the agreement should be in writing and should clearly spell out the rights and obligations of the parties; and
• while a more informal agreement may be suitable for a basic Web site, informal agreements often ignore many critical issues, which become more important should a dispute arise.

Legal issues arise for the developer even before a formal contract is negotiated. The developer may be asked to put forward a proposal, which outlines their ideas for the format of the Web site. This can be an unrewarded, costly and time-consuming exercise if the developer is not eventually engaged to build the Web site. Without an agreement prohibiting disclosure or use of the developer's proposal, the developer may be left without recourse should they discover that their site plan has been incorporated into a site created by another developer.

Copyright ownership is another important consideration, particularly in relation to library code. The Australian Copyright Act 1968 (Cth) sets out:

“Section 10

'literary work' includes:

• a table, or compilation, expressed in words, figures or symbols (whether or not in a visible form); and

• a computer program or compilation of computer programs; . . .

'computer program' means an expression, in any language, code or notation, of a set of instructions (whether with or without related information) intended, either directly or after either or both of the following:

• conversion to another language, code or notation;

• reproduction in a different material form; to cause a device having digital information processing capabilities to perform a particular function . . .

Section 35
. . .
(2) . the author of a literary, dramatic, musical or artistic work is the owner of any copyright subsisting in the work by virtue of this Part . . .

Section 196
. . .
(3) An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.”

Accordingly, unless the copyright in the Web site is assigned to the customer in writing, the copyright will normally be owned by the developer provided that they are not a full time employee of the customer and acting within the scope of their employment at the time when the Web site was developed.

If a variety of different works are incorporated to form a multimedia presentation, the copyright protection becomes slightly uncertain. The extent of the copyright protection is more difficult to determine as the complexity of the Web site design increases. Many Web sites will include graphic, audio, musical and literary works in addition to the computer programs, which hold the site together.

While each component clearly has copyright protection, when you examine the definitions above, the multimedia product as a whole does not, in its own right, neatly fall into any existing category of copyright works, save for possibly being classified as a computer program.

Once the developer has been engaged, the following points should be considered for inclusion in their Web site development agreement:

• Has the customer provided clear development specifications; a required development timetable; and details of any acceptance tests? Are there any penalties for delay? Is time of the essence? Any ambiguities in the responsibilities of the developer should be removed, for example, if development is to occur at the customer's premises does the developer have to provide their own hardware and software?
• If the customer provides any materials for inclusion in the Web site, an intellectual property indemnity should be obtained from the customer. If the customer provides the developer with an unauthorised copy of a musical recording, for example, the developer may find themselves being sued for copyright infringement if these materials were incorporated into the site design.
• There should be an agreed method to request variations to the original Web site plan. If a number of modifications are requested and the developer has not made provision for increasing the fees to be charged, the project can rapidly become unprofitable for the developer and the developer may find themselves liable for delay, as in any other software development project.
• Particularly for commercial Web sites, from which the customer will hope to derive income, the developer should limit their warranties to the extent allowed by law. Due to the confusion in relation to defining software development as a good or service, warranties for both possibilities should be clearly expressed.
• One of the most successful marketing tools for a developer are Web sites which they have previously developed. The developer should obtain a licence from the customer to use Web site content for their own marketing purposes. The developer should consider the inclusion of a clause in the agreement, which allows them to include information about the developer on the Web site. This may be in the form of a logo or text, which links to the developer's Web site. This form of advertising can generate sales leads from visitors who want a Web site built and are impressed by the developer's work.
• Any additional duties of the developer, such as Web site maintenance should either be incorporated into the development agreement or be included in a separate agreement. This might include periodic updating of material on the Web site, domain name registration or checking hyperlinks.
• Internet privacy issues are a source of possible liability for a Web site developer. Tracking tools such as cookies(1), which determine information about Web site visitors, may result in liability for the developer if the actions of such programs are considered by the Court to be computer trespass or if they otherwise deal inappropriately with data and visitors' computers.
• If the customer requests the inclusion of features such as bulletin boards or a listserver, the developer should disclaim liability for third party actions and recommend that the customer seek legal advice regarding its possible liability which may result from e-mail activities such as defamation and intellectual property infringement.
  
  The English High Court ruled in the matter of Laurence Godfrey v Demon Internet Limited that an Internet service provider may be held liable for defamation if they allow the publication of material which they know to be defamatory. In this matter an obscene positing, defamatory to Laurence and purporting to have been sent by Lawrence [sic] Godfrey was sent to a newsgroup and published by Demon Internet. Laurence sent a fax to Demon Internet stating that the email had not been sent by him and requesting that it be removed. Despite being able to remove the posting at any time, Demon Internet chose to leave the posting visible to Internet users until the automatic deletion date approximately a fortnight after the message was posted.
  
  Australian ISPs should be wary of this decision. The Judge made the point of distinguishing the law in England from that in the US, where the First Amendment has led to a divergence between US and English defamation law. It is likely that Australian Courts will consider the judgment of an English Court to be more binding than that of an American Court, due to the similarity of Australian and English defamation laws. If an ISP is notified that a posting is defamatory, it would be prudent for the ISP to take prompt action to remove the allegedly defamatory posting from access by Internet users.
  
  
• For large Web site development projects, the developer may want to include a restraint of trade clause to protect its investment in its employees. The customer may decide to move the Web site maintenance in-house and may approach one or more of the developer's employees with an offer of employment. Without a restraint of trade, the developer may not only lose a customer, but possibly a highly trained employee as well.

It is common for a customer to engage a Web site developer to provide a wide range of services including:

• Web site design;
• registering domain names;
• procuring and creating Web art and photographs;
• Web site programming;
• Web site testing;
• Web site hosting;
• submitting Web sites to search engines; and
• reporting on the Web site traffic.

Before any contractual relationship is created, the customer should ensure that they have a definite plan for the scope of the project unless they are prepared to spend a large amount of money on a time and materials basis to investigate the options. In a Web site development project variables such as the style, size and included features should be defined before the project commences.

The customer should ensure that the Web site is thoroughly tested to determine whether all hyperlinks perform properly and that the Web site conforms with all the customer's requirements. When testing is complete, the Web site should be ready to go live. Once the development phase is over, the customer needs to consider ongoing maintenance including updating of material and revisions of links.

Before commencing a Web site development project, a customer should consider the following issues:

• What is the complete list of development specifications? The customer should decide, based upon the developer's advice, issues such as the level of security it requires. It is beneficial for the customer to maintain records such as minutes of meetings to document the fact that it has relied upon the knowledge and expertise of the developer. If the project does not produce a satisfactory end result, the customer may, subject to its contractual arrangements, look to the developer for damages if the suggested specifications were inadequate.
  
  The case of Chippendale Printing Co Pty Ltd v Spunaline Pty Limited (unreported, Federal Court of Australia, 20 September 1985) examined the damages which could flow from an inadequate software development. An award of damages of $26,000 and legal costs was made to Chippendale resulting from a supply of software and hardware which did not live up to the promises of Spunaline. A director of Chippendale, having no knowledge of computers, engaged Spunaline to provide a computerised solution to calculate and record estimates and invoices for print jobs. A director of Spunaline was known to be an expert in the area of costing for print jobs and claimed to have knowledge of computers. It was made clear that the supplier would have to assist Chippendale in implementing the computerised system. The supplied hardware and software failed to provide the capabilities Spunaline had claimed they would (and as a side issue the supplied software and manuals appear to have been unauthorised copies). The director of Spunaline and Spunaline were both found to have engaged in misleading and deceptive conduct.
  
  If the customer makes it clear that it is relying upon the developer's advice it will be more difficult to defend a claim of misleading and deceptive conduct made against the developer.
  
  
• What will the development stages and acceptance criteria be? The development project should have a structured timetable so that the progress of the development can be monitored. The customer should ensure that acceptance tests are performed, possibly by a third party, to ensure that each development stage Unless there is a clear written agreement, the customer and developer can have different interpretations of delivery dates, the development timetable and the liability of the parties for delay. The developer should ensure that their agreement draws attention to the fact that it cannot be warranted that the software is “bug free”. Some customers with little exposure to software development may expect to receive a perfect product on the delivery date. conforms to the required design specifications.
  
  In a UK case, Virgin Interactive Entertainment (Europe) Ltd v Bluewall Ltd, Virgin agreed to a variation of the delivery date, but there was no written agreement prepared which outlined what was to be delivered and when, under the revised agreement. Bluewall was developing two computer games, which they were unable to deliver on the delivery date. They claimed that Virgin had agreed that the revised delivery dates were flexible and that the product was to be delivered at an Alpha version stage. Virgin refuted both these points. The Court found in favour of Virgin. One wonders if the developer had a limitation of liability clause in the contact in order to limit the damages payable in such a dispute.
  
  
• Does the customer want to own the intellectual property relevant to the Web site development? If the Web site development is done by a contractor, the copyright will not be assigned to the customer unless the developer signs an assignment of copyright. If the customer wants to have future control over the Web site, for example changing their Web site hosting provider, it is essential to own the intellectual property in the Web site. In addition to copyright, the customer should consider all other forms of intellectual property, including trade marks. If the customer is not the intellectual property owner, their Web site developer may be able to reproduce the customer's Web site design for another customer. Further, owning the intellectual property and not having possession of the source code can be a very frustrating and potentially disastrous situation. Escrow should be considered when the developer is not prepared to supply the source code.
  
  The long term use of the developed Web site by the customer could be compromised if they do not own the intellectual property. Without a written assignment of copyright, the customer's continuing use of artwork or other copyright works, will be dependant upon the copyright owner granting them a licence to do so. Many people consider that artwork prepared for a business is the business. property but this is usually not the case.
  
  In the Victorian case of KMA Corporation Pty Ltd v G&F Productions Pty Ltd, this issue was examined with an earlier decision being appealed by KMA. G&F had supplied artwork to Bingo 2000 and at Bingo 2000's request to KMA for an express and limited purpose. KMA used the artwork, without licence, in newsletters it produced for Bingo 2000 and G&F successfully sued KMA for infringement of copyright. The Court originally ordered that KMA be restrained from using the artwork without the express consent of G&F and that KMA pay to G&F a sum equal to the sum paid by Bingo 2000 to KMA for producing the newsletter. KMA was unsuccessful in its appeal and the Court reiterated that G&F had not granted a licence to Bingo 2000 or KMA to use the artwork in the newsletters.
  
  To be binding, the Copyright Act requires that an assignment of copyright must be in writing and signed by the owner. In order to have continued use of copyright works, either a licence or an assignment should be obtained. If no agreement is in place, there may be nothing to prevent artwork prepared on the customer's behalf being used by other parties if the copyright owner authorises such use.
  
  
• The Web site developer should provide the customer with an Intellectual Property indemnity. If materials are incorporated into the customer's site which infringe a third party's intellectual property rights, that third party may commence legal proceedings against the customer for loss and damage caused by the customer's use of their materials. The customer should ensure that the developer indemnifies it against such a claim.
  
  Through the use of frames, materials from a Web site may be imported into another site. This form of linking is considered to be a possible source of copyright and trade mark infringement. Customers should consider prohibiting their developer from framing any third party materials to avoid the legal ramifications which may arise from this form of reproduction. It is always advisable to obtain permission from the owner of a Web site before linking to their Web site. The customer should clarify with the developer that all links have been approved by the target Web sites' owners.
  
  The dangers of using content from another party's Web site without their permission is examined in the US case of Ticketmaster Corporation v Microsoft Corporation. Microsoft linked one of its Web sites (http://seattle.sidewalk.com) to the Ticketmaster Web site (http://www.ticketmaster.com). Ticketmaster claimed that this linking enhanced the value of Microsoft's Web site while diminishing the value of Ticketmaster's Web site by, amongst other things: depriving Ticketmaster of advertising opportunities, publishing erroneous information and diluting the value of Ticketmaster's relationship with MasterCard, a major advertiser. Ticketmaster pressed claims for, amongst others, trade mark infringement and misleading and deceptive conduct. Even if your intentions are to bring more business to the linked site, you should obtain permission before establishing a link to the site to avoid possible legal disputes. As income derived from advertising on the Internet continues to grow, so too do the risks and potential damages that may be awarded against an infringing party.
  
  The owners of a Web site should also carefully consider their liability for copyright infringements, which occur on their Web site. In the US district court case of Playboy Enterprises Inc v Webbworld Inc, Webbworld, who operated a Web site from which you could download R Rated images, was sued for copyright infringement by Playboy. It was proven to the Court that Webbworld had copied 62 images, which had previously appeared in Playboy publications. The Court awarded damages in Playboy's favour in the sum of $310,000 (62 x $5,000) as a result of the copyright infringement. Webbworld's principal operators, Bentley Ives and Benjamin Ellis were found to be vicariously liable for the actions of Webbworld and it was ordered that they be held jointly and severally liable to Playboy for the payment of the $310,000 damages. WebbWorld, Ives and Ellis were unable to rely upon defences, which are available to Internet Service Providers (ISPs) in the US, as they charged a monthly access fee which did not include Internet access at large. Similar laws apply in Australia with respect to liability for copyright infringement and company directors should not operate under the misapprehension that they are protected by the corporate veil against legal actions for copyright infringements initiated against their company.
  
  
• The customer should consider whether they want their developer to have professional indemnity insurance and if so whether their policy will provide adequate protection for software development. If the developer does not have professional indemnity insurance, an indemnity with respect to intellectual property, as mentioned above, may be of little significance if the developer is unable to provide the customer with adequate financial compensation.
  
  The extent of coverage offered by insurance policies and the statutory protection provided by the Trade Practices Act 1974 ( “TPA” ) to those involved in the sale and purchase of goods and services depends upon, amongst other things, whether goods or services are being provided and whether or not the customer is a “consumer” of goods or services. The definition of “consumer” under the TPA includes a purchaser of goods or services for less than $40,000 or alternatively a purchaser of goods or services which are of a kind ordinarily acquired for personal, domestic or household use or consumption.
  
  The categorisation of computer software as goods or services for relief under the TPA is not clearly defined and may fall into either category, although recent case law tends to suggest that it will be considered to be a service. Some insurance policies may limit the coverage of the policy to either the supply goods or the supply of services. If a policy is limited in its coverage to loss and damage arising from the supply of goods, it may not be adequate to cover the activities of a Web site developer. If Web site development is considered to be a supply of services, different protection is afforded by the TPA to the consumer than if the supply of such software is considered to be a supply of goods.
  
  The customer should consider whether the scope of the warranties offered by the developer is adequate for its needs.
  
  
• The development and maintenance of a Web site may involve the disclosure of confidential information by the customer to the developer, for example, customer information regarding impending product releases. The customer should ensure that the development agreement includes a clause governing the use and disclosure of confidential information.
• If the Web site will involve a complex design which could be adapted easily for direct competitors, the customer should consider including a clause which prevents the developer from using a similar design for another customer in the same industry.

When drafting the Web site development agreement, an analysis of the potential sources of liability should be used to ensure adequate legal protection is afforded by the agreement.

• Consideration should be given to the possible loss and damage, which may arise from defective code being used in the construction of the Web site. In Australia, without a limitation of liability clause, the developer will be liable, if it has breached its Web site development agreement, for all loss, which is foreseeable as result of such a breach, for example lost sales or lost profits.
• If the customer's Web site allows visitors to download files and/or applications and the customer does not have control of the Web site content, the customer should insist that the developer screens all files with the latest anti-virus tools. The customer should seek an acknowledgment from the developer that virus checks are being carried out on a frequent basis.
• If the Web site allows visitors to submit entries to a guest book which is displayed or offers a question and answer page, the customer may find themselves being sued for defamation if the material included in publicly accessible areas is not monitored carefully.
• Due to the massive proliferation of Web sites and the resulting competition to attract potential visitors to the customer's site, in preference to numerous other similar sites, the developer may employ various techniques to maximise the popularity of the customer's Web site. One method used is to include meta tags on the pages that constitute the Web site. Meta tags are analysed by the search engines, but are not visible in the normal viewing layout of a Web site page. Commonly, meta tags will include subject headings that visitors may use to find the information contained on the Web site. The customer should carefully monitor the meta tags which are used for their Web site, not only to determine the relevance but also to avoid potential legal liability.
  
  An American law firm, Oppedahl & Larson, which offers information in regard to intellectual property law on its Web site, issued a complaint against a number of domain name owners who used the words “Oppedahl” and “Larson” in their meta tags. Effectively the domain name owners were alleged to be profiting from the reputation of Oppedahl & Larson and diverting visitors who were attempting to visit the Oppedahl & Larson site to their own sites instead. Although the Internet is often described as being a lawless jurisdiction, the laws, which protect intellectual property, still apply. The damages which may potentially flow from an infringement of intellectual property on the Internet may be far greater than other forms of infringement because the potential audience is so large and the speed of transmission so great. Tempting though it may be to profit from other successful Web sites, care should be taken not to infringe copyright, trademarks or other intellectual property.
  
  
• The use of a Web site to sell goods and services outside Australia may present some legal issues for the customer to resolve. The laws governing the sale of goods and services are not the same in all jurisdictions and the legal aspects of doing business on the Internet are still being established. The US Courts are providing most of the case law at the moment but similar matters are now before the Australian Courts.
  
  In December 1996, the Minnesota District Court ruled that the State of Minnesota had jurisdiction over Granite Gate Resorts Inc and its President, who are based in Nevada. Granite Gate provided a commercial sports betting service which is illegal in Minnesota but represented that such a betting service was legal. The agreement between Granite Gate and its customers provided that all claims against Granite Gate must be commenced in Belize, whereas claims against customers could be brought in the customer's home state. The Court used a five-factor test (this test differs in Australia and other US States) to determine whether Minnesota Courts had jurisdiction and considered:
  • the quantity of contacts;
  • the nature and quality of the contacts;
  • the connection between the cause of action and the contacts;
  • the interest of the State in having the matter before the Courts of Minnesota; and
  • the convenience of the parties.

Records produced by Granite showed that Minnesota residents had both Internet and telephone contacts with Granite and as the defendants had an advertisement on the World Wide Web, accessible by Minnesota residents, it was ruled that the State of Minnesota had jurisdiction to take consumer protection action against the defendants. The customer should consider whether visitors from any jurisdictions should be barred from ordering goods or services from the Web site.

In a similar case, Georgia Tech Lorraine which is the European platform of the American Georgia Institution of Technology was sued by the French-Defence Association because its Web site home page was only presented in English. A 1994 French law requires that public communications such as advertising and restaurant menus must be written in French and if they are also translated, it must be into more than one language.

In another US matter, Cybersell Inc v Cybersell Inc it was suggested that if your Web Site acts only as a means of advertising or as a source of information, the US Courts will not be able to assert jurisdiction. If, however, you sell goods and/or services over the Internet, it is possible that a US resident or business could issue legal proceeding in the US against you or your business. To reduce the risk of such litigation, you should consider having a requirement that the potential customer submits to the laws of Australia governing the agreement before the transaction has been completed.

• The customer should consider the use of trade marks on the Web site. The fact that a trade mark is registered in Australia, does not mean that it will not infringe other parties. trade marks outside Australia.
  In 1981 in USA, Playboy Enterprises Inc obtained an injunction against Chuckleberry Publishing Inc and Tattilo Edtrice SpA to prevent them from selling their magazine Playmen in the US. The injunction prevented Tattilo from using the trade marks “Playboy” or “Playmen” or any other confusingly similar word in conjunction with the sale or distribution of English language publications and related products in the US. Fifteen years later In Playboy Enterprises Inc v Chuckleberry Publishing Inc , the Court found that by offering access to American customers via the Internet, Tattilo was in contempt of Court by breaching the injunction. Tattilo was ordered to:
  • shut down its Internet site in Italy or refrain from taking new subscriptions from US residents;
  • invalidate user names and passwords previously purchased by US residents and refund the remainder of their subscriptions;
  • pay to Playboy, all gross profits earned from its Internet services provided to US residents;
  • revise its Internet site to indicate that no subscriptions are available to US residents;
  • pay Playboy's legal costs; and
  • pay US$1,000 per day until it complies with this order. This order is particularly important as the judgment for damages could most likely be transferred to Italy for enforcement under international convention obligations whereas the injunction may not have been enforceable outside of America.

In the US case of Patmont Motor Werks, Inc ( "Patmont" ) v Gateway Marine, Inc, et al ( "Gateway" ) Patmont issued legal proceedings against Gateway and Anthony DeBartolo ( “AB” ) as a result of AB using Patmont's trade mark on a web site which mentioned Gateway's name and address as a contact point. AB's use of the trade mark was found by the Court to merely be descriptive of the type of motorized Scooters which he was offering for sale. AB and Patmont had also entered into an licensing agreement which had been terminated by AB. A clause of the agreement prohibited AB from using Patmont's trade mark as part of any e-mail address. The Court correctly found that AB's use of the trade mark Go-Ped as part of the URL www.idiosync.com/goped was not a breach of this term.

The use of trade marks on your web site should be considered no differently to the use in any other form of advertising. If the trade mark is merely used to describe a product that you are legally selling, it would be difficult for the trade mark owner to claim that such use was an infringement of their rights. It is always good commercial practice to make a note on your web site or advertising material which states the owner of the trade marks which you have used. If you have any doubts as to whether your use of the trade mark would be permitted by the owner you should obtain written permission before the marks are used. The customer and developer should clarify who has the responsibility to determine whether trade marks used on the site infringe any other parties. intellectual property rights.

• The customer and developer should determine which party is responsible to check whether the domain name used for the Web site infringes any intellectual property rights. The US has seen many recent cases of parties registering domain names which suggest an affiliation with a well known corporation which they hope to sell to the corporation in question.
  As found in Panavision International v Toeppen this practice can violate the US Federal Trademark Dilution Act. Mr Toeppen was ordered to stop using the trademarks “Panavision” and “Panaflex” as domain names and to transfer the registrations of the domain names “panavision.com” and “panaflex.com” to Panavision International. Interestingly, Toeppen who is a resident of Illinois was sued in a California Court as his infringement was directed at a Californian business. If the customer was sued by an international business, for a similar infringement, there could be a large legal bill incurred to settle the matter.
  
  In November 1997, the UK decision in British Telecommunications plc v One in a Million followed US decisions in finding that the registration of famous trade marks as domain names and their use would constitute a trade mark infringement even though the marks were not used by the defendant. The relevant marks were: marksandspencer.com; marksandspencer.com.uk; j-sainsbury.com; sainsburys.com; ladbrokes.com; virgin.org, bt.org; and cellnet.net. The Court ordered that One in a Million be restrained from the use or sale of the domain names in question and be compelled to assign the domain names to the plaintiffs, the trade mark owners. Even though the domain names in question included a number of non-UK names (in that they did not end in the .uk suffix) the UK Court found that actions involving these names occurring in the UK fell within its jurisdiction. If you register a domain name in a foreign country, you cannot consider yourself immune from legal action within your own jurisdiction, if that domain name infringes a trade mark.
  
  The US Court of Appeals matter of Data Concepts, Inc v Digital Consulting, Inc reconsidered Data's use of the domain name .dci.com. and the unregistered trade mark “DCI” and whether its use was an infringement of Digital's registered trade mark “DCI”. The Court considered the following issues:
  • The strength of Digital's trade mark
  • The similarity between Data and Digital's goods or services
  • The similarity of Data and Digital's trade marks
  • Evidence of actual confusion
  • The marketing channels used
  • The likely degree of purchaser care
  • Data's intent in selecting the trade mark; and
  • The likelihood of expansion of Data's product lines.

The Court reversed the decision of the District Court to grant a motion for summary judgment based upon the opinion that Data's use of the domain name was likely to cause confusion and found that the matter should be tried to determine the likelihood of confusion. The Court found, amongst other things, that the District Court did not properly assess the significance of evidence of numerous other instances of third party use of the DCI mark such as the incorporation of “DCI” into over ninety web sites. The Court questioned whether Data's use of a domain name was merely a means of communication, or whether the domain name was used to identify its goods and services.
It cannot be assumed that the ownership of a trade mark alone gives the sole right to use the corresponding domain name. However, in some instances, such as for the “.com” domain names, the relevant domain name registry may have a policy that requires a domain name user to justify the continued use of a domain name if the owner of the corresponding registered trade mark objects to the other party's use of the domain name.

In Australia, you may apply for a domain name which has some relationship with your company or business name or which is a combination of two or more common words. Without a pre-existing registered trade mark and/or substantial market recognition of your company or business name it may be very difficult to have a domain name reallocated to you should another party register it before you do.

The allocation of domain names around the world tends to be on a first come, first served basis. It is possible that there will be more than one business or individual interested in owning certain easy to remember domain names. In the UK matter of Pitman Training Ltd v Nominet UK, two businesses which originated from a break up of the Pitman business both claimed they had the right to own the domain name “pitman.co.uk”. Pearson was the first to register the domain name as its own. During the time when Pearson's Web site was being developed, unknown to it, its registration was transferred to PTL. Both PTL and Pearson spent money advertising their Web sites. When Pearson realised its domain name registration had been transferred, it persuaded Nominet, the body responsible for registering domain names in the UK to reassign the domain name to Pearson. PTL commenced legal proceedings against both Pearson and Nominet to regain control of the domain name. PTL was unsuccessful as not only had it been the second party to apply for the domain name, it was also bound by reason of the original break up and sale agreement to only use the word “pitman. in conjunction with the word training, unlike Pearson which was able to use the word “pitman” alone.

In June 1998, the High Court of New Zealand handed down orders in the matter of Oggi Advertising Limited v Cameron Bruce McKenzie and Ors. McKenzie had registered the domain name www.oggi.co.nz, allegedly for a Canadian, Mr Elliot Oggi. Oggis Advertising claimed that McKenzie and two other defendants had sought to take advantage of the fact that Oggi Advertising had not registered the domain name, by registering it themselves and seeking financial gain to relinquish same. Following case law from the US and the UK, the Court ordered, amongst other things, that the first three defendants be restrained from dealing with the word “oggi” or the domain name ”www.oggi.co.nz“, or any similar name or domain name which would be likely to dilute the value of Oggi Advertising's trade name or trade mark and that the domain name ”www.oggi.co.nz“ be assigned to Oggi Advertising.

There is similar case law in many jurisdictions, which suggest that the registration of domain names with the intention to profit from the sale of the domain name to a party whose trade mark or trading name is similar to the domain name will give rise to a claim against the parties registering the domain name for actions including trade mark infringement and misleading and deceptive conduct.

Web site developers and customers need to keep up to date with changes to legislation and new case law as we are seeing rapid change in the application of laws to the Internet. In the coming year, the Broadcasting Services Amendment (Online Services) Act and reforms to copyright laws will be two issues that will need to be considered when drafting a web site development agreement.

Web site development is largely about trade and consequently involves potential disputes. Developers and customers should both make sure that they protect themselves with an appropriately drafted Web site development agreement, which, amongst other things, allocates the risks between the parties and clarifies the ownership and use of the intellectual property created.

STEVE WHITE
WHITE SW COMPUTER LAW
OCTOBER 1999 www.computerlaw.com.au © White SW Computer Law 1999 This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.