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Ouch! You already know what I am going to say about getting a written agreement so I'll spare you. :o
How much is the amount in question? (How much have you invoiced them for?) Was your verbal agreement a fixed bid (we will write the whole program for a total of $X) or time and materials (we will work on the program for $Y per hour)?
Is there any particular reason there was no written agreement? For example, did your contact say "I can't get my boss to sign anything right now but if you do a good job, I'm sure he will" or anything like that? What is the level of your contact, the person who made the verbal agreement? A programmer? A manager? An officer (VP or similar)?
Are you also a US entity?
Can you elaborate a little more on the nature of the disagreement?
Is there any particular reason you don't want to use a lawyer? This is what lawyers do, after all.
Categories: Operations and Legal
We are a small consulting company.
We did some consulting work for Company X without signing any contractual agreement stating that our firm is an independent contractor.
Months have past and several versions of the application were created and uploaded to their servers. All source code have been submitted and deployed to their servers. Application is being used in a production environment.
Then a disagreement occurred between my company and company X. Our access has been suspended on all their servers and they implicitly told us that our outstanding invoices for services rendered will not be paid.
Given that no contractual agreement has been signed, is it our legal right NOT to grant them permission to use the application unless outstanding invoices have been settled? If so, what is the best method of communicating this without hiring a lawyer or going to court?
Both companies are US entities.
Thank you in advance for the advice.
Mike
- member since: 11/06/2001
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- member since: 11/07/2001
- rank: 16 of 53479
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Sorry, but you need to hire a lawyer to sort this out and to reach an amicable resolution, if possible. To say that you donÂ?t want to get a lawyer involved is sort of like saying that youÂ?re very sick, but you donÂ?t want to get a doctor involved.
You did not state that you developed the Â?applicationÂ? from scratch, so IÂ?ll assume that you did just that. Under the US Copyright Act, the copyrights that are embodied in the application are owned by you, the consulting company. This is due to the fact that the consulting company acted in the capacity of an independent contractor, and there is no signed agreement stipulating that the resulting work (the application) is a Â?work made for hireÂ?.
Nevertheless, Company may have an implied license to use the application. After all, they paid for it.
Regardless of ownership, you would have a claim for the unpaid fees on the theory of an open account (among others). Does Company X have any defenses? The facts are silent regarding any defenses.
Without a written contract, there are any number of theories each party may rely on to support their positions. If there is a sincere agreement of both parties to resolve this amicably (it seems that this may not the case), it can be worked out.
Chip
Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.
After all, they paid for it.Have they paid any of your invoices? (I wasn't clear on this point from your original post.) How much have you billed in total, and how much have they paid?
Thank you very much for the very informative responses Chip and Charles!
Chip, you brought up interesting points on what can be implied. When a program is created by a person employed by another party, does this automatically constitute 'work made for hire' regardless of a written contract stating so?
Is there any particular reason there was no written agreement?
Nothing in particular, I think they forgot or we forgot.
What is the level of your contact?
The owner of the business was our main contact. He had been managing the project at their end.
Are you also a US entity?
Yes.
Can you elaborate a little more on the nature of the disagreement?
Constant modifications in requirements which resulted in project delays (2 weeks), but final product revisions were done and submitted.
How much have you billed in total, and how much have they paid?
Billings total to around 45k and where 75% were paid.
Thanks again
- member since: 11/07/2001
- rank: 16 of 53479
- 91 blog entries posted
- 2 forum threads started
- 208 comments
The work made for hire rules of the United States Copyright Act come into play when A employs B to create a copyrightable work of authorship. No agreement is required; the Copyright Act comes into play automatically.
If the relationship between A and B is one of employer-employee, the copyrights embodied all works created by B within the scope of his/her employment will be owned by A (the employer).
On the other hind, If B is an independent contractor, B will own the copyrights unless there is a written agreement, signed by B, stipulating that the resulting works will be Â?works made for hireÂ?.
Chip
Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.
I want to add one thing (for "everyone else" reading this) to what Chip said about contractors and copyright: you still need a written contract that deals with copyright issues. Don't say "Chip said we owned the copyrights anyway, so we don't need a written contract on that point." BTW, there are no excuses for not having a written contract, not even "we can't afford a lawyer." Chip's Digicontracts (see links in Chip's signature) will build you a great custom contract, and the cost is only a few hundred bucks for as many contracts as you want for a year. Cheaper than this OP's problem!
Back to the problem at hand. Chip, what are their chances of recovery, and is an attorney going to make sense to take on a $10,000 loss?
- member since: 11/07/2001
- rank: 16 of 53479
- 91 blog entries posted
- 2 forum threads started
- 208 comments
Generally, it would not be economically feasible to litigate this matter where the amount to be recovered is approximately $10,000.
The best bet is to work this out amicably between the parties.
You start with this scenario:
Developer owns the software (meaning the copyrights embodied in the software).
What was the understanding of the parties at the outset regarding ownership?
If the understanding was that the client owns the software, then developer has a relatively strong bargaining position; he has what the client wants and needs.
If the understanding was that the developer owns the software, then developerÂ?s bargaining position is not as strong, but the client still needs a license agreement stipulating the terms and conditions of use, whether support is an issue (if so, itÂ?s a big bargaining chip), whether source code is included, just to name a few key issues. So, the client still has some wants and needs to satisfy.
Either way, this should be a good basis for negotiation of an amicable resolution of this mess (including payment), which, by the way, would not be a mess if a lawyer had been involved in the beginning (I couldnÂ?t pass this one up).
Chip
Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.
Thanks again C & C.
I will visit Chip's website and will definitely spread the word about this awesome resource called SoftwareCEO.com!
Mike
P.S. Chip, pls check your private message.
Though terms and conditions were discussed in email and finalised on google-docs, I was stupid enough to start work without a signed contract. (This is the first time we started without a contract hoping to get it done as we go forward.)
Understanding between all parties (in emails/unsigned docs):
Individual A - resident of California, USA (and erstwhile friend of mine) comes up with an idea for a portal and talks to us (sole proprietorship based in India with 6 employees). He cites low budgets and offers stake in (yet to be setup in USA) firm in return for developing for free in the first few months. He (and other US team partners) agreed to pay the cost (actuals = Indian salary of my employees + facilities) after the first few months.
Sequence:
We developed the site based on his requirements. He gave us the User interface - (theme, logos, icons and colour scheme. font size etc.) Since we were offered a stake we were active participants in suggesting features. Meanwhile he also registered the firm in US without any stake for me citing some legal issues. He promised to give me 25% at a later stage.
After initial development for 5 months, he paid for next 2 months ($600/month - total $ 1,200) and then was 'unhappy with the quality' and started complaining about various issues basically making things uncomfortable for me. I got the hint and to preserve cordial relations between our families, offered to give up stake for free if he just pays the pending India cost price ~ USD 7.5k.
He and his current partners are trying to negotiate this to USD 2k.
The market price for the software will be in the range of $30k-$40k if outsourced. If developed in USA it will cost a minimum of $100k.
The site is up and running on production server.
The final version of the source code is still with us. We are also maintaining the server and can choose to shut it down if required but the US team has a older version of source code which is still functional and can be brought to current state with about 1-2 man months of work.
I am looking to settle this with any of the following options:
1. He pays me pending cost price.
or
2. I refund his $ 1,200 and rip out the UI (and his copyrighted material) which he gave us and gain complete ownership of source code (basically prevent him to get rich on my labour) - We are contributors to the Free software movement and hope to release this source for free use under GNU-GPL. I need clear copyright ownership on code to distribute it for free under GPL.
or
3. If he does not agree to any of above options, I sue him for the full market value of the source code in exchange for the stake
4. I lay no claim to content generated by users on the site.
I am willing to pay reasonable attorney charges based on the worth of the project. But first I want to know if:
1. I have any case at all...
2. Can I legally shut down the running site? i.e. just issue the command from my laptop and leave it to him to initiate action against me.
3. How much will an attorney charge for advising me and/or negotiating on my behalf and settling this without it going to court.
4. What are tentative costs if this does go to court.
Thanks in advance (and kicking myself for postponing legal contract)
- member since: 11/07/2001
- rank: 16 of 53479
- 91 blog entries posted
- 2 forum threads started
- 208 comments
[FONT=Calibri]Sorting out something as complex as this is beyond the scope of an online forum. Nevertheless, IÂ?ll take a shot at a very brief analysis.[/FONT]
[FONT=Calibri]One of the basic issues is: who owns the copyrights to the site? [/FONT]
[FONT=Calibri]In order to begin to answer this question, a couple of additional questions are indicated (there are numerous others dealing primarily with very specific facts).[/FONT]
[FONT=Calibri]1. Who provided copyrightable authorship (i.e. who did the actual development work)? [/FONT]
[FONT=Calibri]If all A did was to provide requirements, then it would appear that you are the author of the copyrightable elements in the site. If A provided a few miscellaneous elements (icons, etc.), then he would be the owner of these individual elements. [/FONT]
[FONT=Calibri]We all know that A will argue that he jointly developed the site and that, at the very least, he is a co-owner of the site as a joint work. (The US Copyright Act defines a Â?joint workÂ? as Â?a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.Â?)[/FONT]
[FONT=Calibri]2. Just for the sake of analysis, letÂ? assume that No. 1 above is sorted out with the result that you are the sole author of the site. [/FONT]
[FONT=Calibri]The follow-up question is: was there a written agreement signed by you stipulating that the developed site was to be a Â?work made for hireÂ??[/FONT]
[FONT=Calibri]The US Copyright Act makes it clear that if you acted in the capacity of an independent contractor, you would be the copyright owner of the site. The work made for hire rules operate for the hiring party (A, in this case) to own the copyrights in authorship contributed by an independent contractor only if there is a written agreement, signed by you, stipulating that the work is to be a Â?work made for hireÂ?. Since you state that there was no written agreement, then the work for hire rules operate in your favor.[/FONT]
[FONT=Calibri]The value of a written agreement up front is that it would have determined all these issues in advance. Without a well-drafted written agreement, itÂ?s impossible to sort out and resolve the complex issues of this matter with any confidence. ItÂ?s all a crap shoot.[/FONT]
[FONT=Calibri]You need to see an attorney to attempt to work this out. If you and Mr. A are reasonable, there are ways to possibly work it out amicably. If either of you are unreasonable, it will be very expensive to resolve this.[/FONT]
[FONT=Arial]Chip[/FONT]
[FONT=Arial]Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.[/FONT]
I appreciate your time. I hope more people stumble upon this through google (as I did). And I would encourage all readers to draw up contracts so that there are lesser issues and personal relatonships are not affected due to stupid omissions.
kc,
Absolutely! Get contracts prepared and signed before any engagements! Learned it the hard way too.
As it turned out, my client was having cash flow problems, but we settled it amicably as Chip Cooper suggested I do.
Sorry, haven't updated this board since then - forgot my password.
I visited the blogs. Great addition to this board!
Mike
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