Terminating Web Services / IP Rights

[robbct]

Background:

I have a customer in which we provide web hosting & design services. Recently they wanted another site designed and our company to provide the hosting for this new site.

We gave them a proposal and then met with them in person to discuss it. They gave us the go ahead to start and throughout the process gave us very positivie feedback. ( all of which I have documented ) They sent us a final punchlist with 3 items that needed to be resolved in order to be paid. On the same day we resolved those items and notfied the client of our completion.

Roughly 2 weeks later, we received a letter in the mail that they decided everything we did - did NOT meet their requirements and they would not pay our invoice because we were too expensive. In fact some of the graphics we developed for them are being used ( they have altered the originals ) Since we are a small business that operates by word of mouth referrals - we've never had a problem. With that said, I have some questions...

1) Who owns the designs and website html? I'm under the assumption that WE the designers own the material and by virtue of hosting we are licensing the material to them?

2) Can they take graphics that we have created, alter them and reuse without our permission?

3) Can I turn off their other website we host, since we have a payment issue from their company? and if I did can I be held legally responsible for this action? They have no contract with me.

4) I do believe my only recourse is small claims, the amount is trivial ( $450 ) but at this point it's the principle. I'd chalk it up as a lesson learned.

I'm looking for any advice before retaining legal counsel.

Many thanks in advance.

 

[NYClex]

It sounds as if you have two different issues here: a contract issue and a copyright issue.

Regarding the contract, creating, designing etc a website for a customer is a service. It depends on the contract, which can be an oral contract, if you have a duty to perform and if they have a duty to perform (pay). One would have to closely look at the formation of the contract and its promises and conditions. While a party can make satisfaction a condition, they are bound by the principle of good faith to adhere to a certain standard. So they cannot say today, oh I like it, and tomorrow, oh, no, I don't like it.

Hosting the website probably is a separate contract or part of the contract. If a party breaches, for example doesn't pay, the other party's duty can be discharged, in this case the website would not need to be hosted anymore. But this also depends on the details of the facts of the contract.

Now design copyright is a tricky issue in which I am not an expert. There are some rules about how much someone can alter a design to which he does not own the rights and then use it. But here we are back to the contract question: did you offer to sell the rights or not.

Now if you want to do this as a business it might be worth bringing this case to an attorney and have him pursue legal steps and at the same time advise you how to draw up a good contract so you won't have these problems in the future.