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Indiana Supreme Court Considers Website Design Ownership

By Jad Mills – Edited by Ezra Pinsky
Conwell v. Gray Loon Outdoor Marketing Group Inc., May 19, 2009, No. 82S04-0806-CV-00309.
Slip Opinion

On May 19, 2009, the Indiana Supreme Court affirmed the Vanderburgh Superior Court and Indiana Court of Appeals decisions ordering Piece of America (POA) to pay Gray Loon Outdoor Marketing hosting fees and website redesign charges and denying POA’s conversion claim for the loss of its original website. Writing for the majority, Chief Justice Shepard held that POA contracted for the redesign, and although Gray Loon’s project design proposal specifically and unambiguously represented that POA “owned the work product,” this did not vest ownership in POA. The proposal gave POA only a non-exclusive license because it was not properly signed and carried insufficient weight and certainty to transfer the copyright.

Ex©lusive Rights and Eric Goldman each provide an overview of the case. Juliet Moringiello summarizes the case, but also criticizes the court for restricting the analysis to copyright law simply because the asset in question is intangible, when they should focus instead on whether the asset “can be exclusively controlled.”
After completing POA’s website according to its own design proposal, Gray Loon prepared a second phase of the website in accordance with a subsequent request from POA. When POA later refused to pay the bill for the second phase, Gray Loon posted the second phase website without retaining a copy of the original website. After several more months of non-payment, Gray Loon removed the website completely. Gray Loon then sued POA for non-payment and POA countersued for conversion of the original website.

The court agreed with Gray Loon on both issues. Chief Justice Shepard first concluded that the common law of contract applied to these transactions because the “predominant thrust” of the transaction involved the performance of services, not the transfer of goods. He justified this conclusion because “the arrangement between POA and Gray Loon contemplated a custom design for a single customer and an ongoing hosting relationship.” He rejected POA’s assertion that price was essential to the agreement, and held that Gray Loon had a binding contract with POA for the second-phase website “even though Gray Loon had not provided a cost estimate.” Therefore, POA was liable for non-payment of Gray Loon’s fee.

The court also denied POA’s conversion countersuit despite Gray Loon’s specific and unambiguous representation that POA “owned the work product.” The court restricted its analysis of POA’s conversion claims to property rights receivable under the Copyright Act of 1976. Because Gray Loon was an independent contractor and had not “expressly agree[d] in a written instrument … that the work [should] be considered a work made for hire,” Gray Loon owned the website copyright as its author. POA could only acquire that ownership if Gray Loon transferred it through a signed writing.

Although Gray Loon’s phase-one proposal contained its philosophy that the clients’ purchase of goods and services inherently entailed ownership of those goods and services, the court held that the proposal lacked the “weight and certainty required by the Copyright Act.” Additionally, it failed to meet the signature requirement. Therefore, the transfer was ineffective and POA never acquired ownership of the website. The intention to transfer ownership effectively created a non-exclusive license in the first phase of the website, but nothing more. Because a non-exclusive license does not convey actual ownership, it cannot support a claim for conversion.

Though Justice Boehm agreed with “the majority’s analysis and conclusions,” he wrote separately to stress that the decision implies that “website design is personal property and is subject to a conversion claim.” He also stressed that POA “did not forfeit its [non-exclusive] license to the original website code and content” when it neglected to pay the hosting fees. Therefore, POA would have had a valid defense to the unpaid fees had it asserted a breach of license claim in court.

This case emphasizes the need for website-designer clients to 1) contract through an express, written agreement that the website is a work made for hire; 2) sign a written contract clearly transferring copyright ownership to the client; and 3) assert breach of a non-exclusive license in cases where the validity of the copyright ownership transfer is contested.

Posted On Jun - 9 - 2009 Comments Off

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