WEBSITES are becoming ever more sophisticated in offering excellent choice, convenience and 24/7 availability and allowing online shoppers to price-compare effortlessly.
The Office of Fair Trading estimated that UK consumers would spend more than
£14 billion online over the 2007 Christmas period and affordable internet means that almost 90 per cent of UK users, or half of all UK homes, now have access to a broadband internet connection. Websites also continue to be an essential part of a brand identity and play a significant role in the sales and marketing strategies of most businesses.
Despite their obvious importance in modern commerce, websites often aren't prioritised during large corporate and property deals. Sometimes they are overlooked altogether until the late stages of a commercial transaction.
For the uninitiated, the transfer of a website can be more complicated than it first appears. A website can be comprised of a range of intellectual assets (underlying website code, but also content) from a variety of sources. There are, therefore, many factors to be considered.
Determining the developer and the owner of the website is key to a transaction. Was it developed in-house, or have independent web developers or consultants been involved in its creation? It is often incorrectly assumed that, a party commissioning external developers to create a website will be the owner of the intellectual property rights.
However, in the absence of written terms transferring ownership, the commissioning party is likely to have only a limited licence, impacting on its ability to transfer or modify the website without the consent of the developer. Often, the parties will have signed an agreement or standard terms relating to the development of the website and it will be important for this to be made available to a purchaser for review. In any event, certain basic legal assurances about ownership and entitlement to transfer are likely to be sought in the deal documents.
Establishing the registrant of a relevant domain name is the next step. Basic online searches can usually be carried out to determine this, whether involving top-level domains, like .com, or country-specific domains, such as .co.uk. If the registrant is not the vendor, then steps may need to be taken to address this issue pre-completion. These steps, plus any associated fees, will vary depending on the registrar concerned. Again, the deal documentation should address this as a separate issue.
Arrangements for hosting, supporting and/or maintaining the website should also not be overlooked. If third parties are involved in providing these services, there ought to be contracts governing the terms upon which they are provided, such as applicable service levels and support hours. The purchaser will want to see such contracts and the parties may need to make arrangements to terminate or assign them – noting the implications of doing so – depending on whether existing arrangements are to continue post-purchase or not.
A final consideration is that the purchaser will want to check the website is broadly compliant with applicable e-commerce legislation, for example that relating to distance selling and privacy. This will be relevant for ongoing compliance if the site is to remain relatively unchanged going forward, but also ensures that any related pre-transfer liability is dealt with appropriately in the deal documentation.
All of these factors merit careful attention in the early stages of a deal. From a purchaser's perspective, this will usually involve due diligence to determine that the vendor has all of the necessary rights in the site and is entitled to transfer them in a way that ensures continuity. For the vendor, it will be about preparing in advance to ensure that such diligence will not yield anything problematic.
Ultimately, this exercise will inform the process of preparing the necessary transfer documentation.
If the sale of a business, property or other asset involves transfer of a related website, parties involved should ensure that due priority and attention are given to these issues and take appropriate specialist advice.
• Callum Sinclair is a specialist in technology and intellectual property at DLA Piper Scotland.
The full article contains 687 words and appears in The Scotsman newspaper.
