by Ronald N. Weikers, Esq.

Background

Estimates indicate that approximately $3 billion of on-line transactions are being conducted annually over the Internet, and that advertising fees alone are in the range of $500 million. In addition, many companies have invested substantially more money developing web sites for the on-line sale of their products and services.

Some companies have also developed Internet systems that host other companies’ web sites, and process on-line orders and payments. These hosting companies are referred to as "commercial service providers" ("CSPs"). After receiving the order from the CSP, a client typically ships "hard" goods directly from its own facilities to the customer or provides the requested services, and the CSP is no longer involved. However, where the client offers software, "softmusic" or "CyberMusic", "softbooks" or "CyberBooks", or other computer-stored intellectual property, the CSP delivers goods on behalf of the client through the Internet to the customer.

This article presents an agreement which is geared toward CSPs for the development of a web site, the hosting of a web site, and the forwarding of customer orders and payment information to clients. This agreement may be tailored to fit the needs of companies that are engaged solely in web site design, web site hosting, on-line purchasing, or any combination thereof. It may also be tailored for clients who need only an Internet service provider ("ISP") agreement, because a portion of this agreement deals with ISP services, which are ancillary to CSP services. Comments and alternative clauses are interspersed.

As web sites become increasingly entertaining and functional, they also become increasingly difficult to design and program. For example, some of the world’s most complex database programs are being adapted to "interface", or tie into, the Internet in order to allow far-flung customers and corporate divisions to share data. Similarly, some of the world’s most powerful games are being played simultaneously over the Internet by multiple contestants located all over the globe. This agreement approaches web site development from the standpoint of a relatively complex software development project, and is therefore technical in nature. As such, it is highly recommended that the legal practitioner consult with his/her client regarding key terms and clauses, many of which are preceded by asterisks.

Internet World Wide Web Site Design, Hosting and Commercial Services Agreement

THIS AGREEMENT, dated , is between Commercial Service Provider, Inc. ("CSP"), and ("Client").

A. WHEREAS, CSP designs web sites for use on the Internet’s World Wide

Web, provides web site hosting services and provides on-line interactive ordering and payment services;

COMMENT: Not all Internet companies provide all of these services. If CSP provides -- or if the Client desires -- only a subset of these services, then the agreement should be tailored accordingly.

B. WHEREAS, Client desires CSP to design a web site for Client, to provide web site hosting services to Client and to provide on-line ordering and payment information forwarding services;

C. WHEREAS, CSP desires to retain all rights, title and interest in and to all software, documentation, derivative works and other intellectual property developed, designed, created or contributed by CSP pursuant to this Agreement, excluding Client’s domain name, and excluding the graphics and data supplied by Client; and

COMMENT: Client may negotiate to acquire Intellectual Property Rights in the software underlying the Web Site. Alternatives are discussed in Paragraph 3., below. Unless expressly granted to the Client in writing, Intellectual Property Rights attendant to any software that CSP develops remain the property of CSP, assuming that CSP is an independent contractor.

D. WHEREAS, Client shall pay CSP an hourly fee for helping to conceptualize Client’s web site, a fixed fee for developing Client’s web site, a monthly fee for hosting Client’s web site and a royalty for CSP’s forwarding of Client’s customer order and payment information;

COMMENT: This Agreement provides that CSP will be paid by Client for five primary tasks. First, Client will pay CSP an hourly fee for helping to conceptualize Client’s web site, as provided in Paragraph 2.1.2. Second, Client will pay a fixed fee for CSP’s coding and development of Client’s web site, as provided in Paragraph 2.5. Third, Client will pay a monthly fee for hosting Client’s web site on CSP’s Internet server, as provided in Paragraph 3.1. Fourth, Client will pay a monthly royalty for CSP’s forwarding of customer order and payment information to Client on a daily basis, as provided in Paragraph 4.4. Finally, Client will pay a monthly fee to CSP for providing e-mail and Internet access services, as provided in Paragraph 5.2. Client will pay other assorted fees -- such as an hourly fee for fixing bugs and making Web Site changes after Client’s acceptance, as provided in Paragraphs 2.6.3.1. to 2.6.3.3. --, and various financing charges.

NOW THEREFORE, the parties agree as follows:

AGREEMENT

1. Definitions

1.1. "Alpha Version" means the first test system of Client’s Web Site, which is tested on a computer that is not connected to the Internet.

COMMENT: Alpha testing is the first testing phase to determine whether software works as specified.

1.2. "Agreement" means this written agreement between CSP and Client.

1.3. "Beta Version" means the second test system of Client’s Web Site, which is tested through the Internet by Client.

COMMENT: Beta testing is the second testing phase to determine whether software works as specified.

1.4 "Bug" means an error in a Web Site that causes repeated and repeatable malfunctions.

COMMENT: A Bug is a piece of illogical code that causes an otherwise logical computer program to periodically make the same or similar mistakes or malfunctions.

1.5. "CGI" or "Common Gateway Interface" means the standard method of writing computer code to enable an interactive computer program on one Internet server to communicate with users located at remote Internet servers.

COMMENT: CGI works in conjunction with HTML Code to enable interaction between computer programs and Internet-based users. CGI is "scripted", or written, in the following computer languages: C++, PERL, Windows shell language, Java, ActiveX and more.

1.6. "Commercial Service Provider" or "CSP" means a Web Host, as defined below, that also processes orders and payments by Internet users on behalf of third-party Web Site owners.

1.7. "Cookie" means a file stored on the user’s computer into which data which is transparently transmitted by a Web Site regarding a variety of information.

COMMENT: A Cookie may store on the user’s computer the following types of information: the date of the user’s last visit to a particular Web Site; the different Web Pages the user downloaded during its previous visits; data the user typed into forms contained within the Web Site; and more. Cookies are used by various Web Sites to generate and gather demographic data on the user. Users of popular Internet browsers have the option of refusing to permit Cookie data to be stored and retrieved from their systems.

1.8. "Derivative Work" means any modifications made to any computer source code, object code, CGI code or HTML code.

COMMENT: Under the Copyright Act, only the owner of a copyright has the right to prepare a work that is derived from the original, and the copyright owners therefore also owns those portions of derivative works that are copied from the original work.

1.9. "Domain Name" or "Name" is the alpha-numeric name associated with Client’s web site, web pages or electronic mail.

COMMENT: Some recognizable Domain Names include: "http://www.mcdonalds.com", or "mcdonalds.com" for short; "http://www.ibm.com" or "ibm.com"; "http://www.cnn.com" or "cnn.com".

1.10. "Electronic Mail" or "E-Mail" means any communication transmitted via the Internet which is stored in the recipient’s e-mail box.

1.11. "Hour" means one hour spent by one developer.

1.12. "HTML Code" means hypertext mark-up language, which is the language commonly used for developing the appearance of Web Sites.

COMMENT: HTML is the standard Web Site development code that enables developers to: incorporate coding for displaying text and images in different sizes, fonts and colors; embed links to other Web Sites; and much more. HTML code is relatively easy to code and to incorporate into a Web Site.

1.13. "Intellectual Property Rights" means:

1.13.1. Rights in any patent, copyright, trademark, trade dress, and

trade name;

1.13.2. Related registrations and applications for registration; and

1.13.3. Trade secrets, moral rights and goodwill.

1.14. "Internet" means the global computer network comprising interconnected networks using standard Protocols.

COMMENT: The Internet is comprised of thousands of interconnected computer networks around the world, and it reaches millions of computers in many different countries on all continents. The Internet was originally developed for the United States military. It was subsequently used by the government and academia for research purposes. It is now more commonly used by commercial and casual users for research and entertainment purposes. The Internet is comprised of large "backbone" networks, and thousands of smaller networks that link to them. The major portion of the backbone is maintained and funded by the U.S. National Science Foundation. The more numerous, smaller networks are privately maintained and funded by corporations, ISPs and individual users. Estimates indicate that there are over ten million Web Hosts -- or individual computers -- on the Internet that each support the standard Internet Protocol.

1.15. "Internet Service Provider" or "ISP" means an entity that enables the uploading and downloading of data between remote computers and the Internet.

1.16. "Kilobytes per second" or "Kbps" means 1,000 bytes of data transmitted in one second.

COMMENT: The term "kilobytes per second" ("Kbps") refers to the speed at which data is transmitted between modems. One byte equals one character of text. Thus, the word "byte", actually contains four bytes of data. Graphics and other images contain a large number of bytes, and their download time is much greater than text’s download time. Many Internet users’ modems operate at a "baud" rate of 28.8 Kbps, which is roughly seven pages of text transmitted per second. This baud rate is not exact, however, because the users’ telephone line may have defects in it, causing the "true" baud rate to be lower.

1.17. "Project Manager" means one of Client’s employees who shall be deemed as Client’s liaison with CSP, and who shall have the power to act as Client’s project manager in order to make ongoing decisions under this Agreement which are binding upon Client.

1.18. "Protocols" means a set of rules that regulate the way data is transmitted between computers.

COMMENT: Internet standards are referred to as TCP/IP protocols, including, among other things, standards for HTML Code and CGI.

1.19. "Robot" or "Spider" means an automated device used by a searching service to gather pieces of information about Web Sites.

COMMENT: Robots and spiders are used by search services such as "Yahoo®", "InfoSeek®" and "Excite®", which then index each piece of information so that users can readily locate Web Sites that satisfy their search requirements.

1.20. "Web Page" means each individual screen display contained in Client’s Web Site.

1.21. "Web Site" means all Web Pages and domain names associated with Client and its products or services, and which are stored on CSP’s Internet server computer.

1.22. "Web Site Hosting Service Provider" or "Web Host" means an entity that stores third-party Web Sites on its Internet server computer, receives or stores commands or data transmitted by Internet users, transmits Web Page data to users’ Internet addresses, and performs related maintenance.

1.23. "World Wide Web", or "WWW", is a subset of the Internet, and is a common system for browsing Internet Web Sites.

COMMENT: The "Web", as it is often called, derives its name from the millions of Web Sites that are linked together on the Internet, enabling users to travel from one site to another by clicking their mouse on links contained within each Web Site.

2. Web Site Development

2.1. Design

2.1.1. Preliminary Specification Sheet. The parties recognize that Client has previously provided to CSP a specification sheet which graphically and textually illustrates all Web Pages that Client wishes to incorporate into its Web Site -- including images and graphics --, the functionality Client desires between multiple Web Pages, and the functionality Client desires between each Web Page and users. A true and correct copy of the specification sheet is attached hereto as "Attachment A".

COMMENT: During the early stages of negotiations, but before any agreement is entered into, CSP should prepare and provide to Client a standardized template which provides guidance for Clients’ preparation of their web site specification sheet. This will include flow charts and rough drafts of desired images. The template may keep clients within the boundaries of designs that are technically and logistically feasible. Because there are an infinite number of ways to design and program the functionality of a web site, this article does not offer instruction on preparing such a template.

2.1.2. Modified Specification Sheets. CSP shall prepare a First Modified Specification Sheet by reviewing Client’s Preliminary Specification Sheet, consulting with Client in order to make suggested changes and improvements, and drafting a First Modified Specification Sheet. Client shall inspect CSP’s First Modified Specification Sheet, and shall approve it, reject it or make additional changes. [Where time is of the essence, the following sentence should be added: "The parties expressly recognize that time is of the essence, and expressly agree that each successive Modified Specification Sheet shall be drafted by each party and delivered to the other party within no more than five (5) business days."] Client and/or CSP may make additional subsequent changes, and each resulting Modified Specification Sheet shall be sequentially numbered, and shall not become a Final Specification Sheet in the absence of the parties’ mutual written assent. CSP shall assist Client with the preparation of Modified Specification Sheets, and Client shall compensate CSP at the rate of [choose from the range of: forty dollars ($40.00) to one hundred and twenty dollars ($120.00)] per Hour for CSP’s preparation of Modified Specification Sheets.

COMMENT: CSP and Client should prepare modified specification sheets, because CSP may determine that Client has included in its Preliminary Specification Sheet some designs that are technically or logistically unfeasible, and that Client has excluded some improvements that can be readily incorporated. CSP should be careful, however, not to incorporate features from its other clients’ web sites where those clients have retained the attendant intellectual property rights.

With regard to the optional "time is of the essence clause", this may help to reduce delays by either party. Delays are the most common cause of strain in software development projects of any type.

Although Client will have delivered one-half of the development fee to CSP contemporaneously with the signing of the Agreement, see Paragraph 2.5 below, it is standard practice for CSPs to be paid hourly for their time spent preparing the Modified Specification Sheets, because it is impossible for CSP to fully know in advance the level of Client’s expertise. Thus, the more time that CSP must spend teaching Client about Web Sites during the specification process, the more that CSP should be paid. The choice of hourly fees in this clause -- and in subsequent clauses -- depends upon at least two factors. First, the complexity of the programming underlying the Web Site -- and the developer’s commensurate level of expertise -- is the key determinant of the hourly fee. For example, a developer who creates a static, non-interactive Web Site using only HTML Code should receive the lowest hourly fee, because such Web Sites are relatively easy to develop, particularly in light of the recent introduction of automated Web Site development software that makes knowledge of HTML almost completely unnecessary. Thus, the law of supply and demand dictates that, because there are a plethora of HTML-knowledgeable developers, they can demand only the lowest hourly fees. On the other hand, a developer who competently creates a fully interactive Web Site using a variety of CGI commands is far more knowledgeable than his/her pure-HTML counterpart, is much more rare, and is able to command a higher hourly fee. This is particularly true for the very rare CGI developer who is capable of interfacing Web Sites with complex databases. Data acquisition and distribution are the primary goals of most commercial Internet users and Web Site owners, and their presence on the Internet will soon exceed that of casual users, many of whom are on-line for entertainment purposes. As such, the increase in demand for database CGI developers is exceeding their increase in supply.

Second, the developer’s creativity is the second most important determinant of the hourly fee. Web Sites are so numerous, that they often overlap in terms of their function and content. As such, owners must differentiate their Web Sites to capture users’ attention, often by incorporating new and imaginative images and functions. Developers who are more creative can therefore command higher hourly fees than those who are less gifted.

2.1.3. Final Specification Sheet. When the parties have inscribed any Modified Specification Sheet with the term "Final Specification Sheet", and the parties have signed it, then CSP shall undertake to develop the desired Web Site according to the specifications contained therein. Client hereby expressly represents that by signing the Final Specification Sheet, the specifications contained therein shall be deemed complete and accurate.

2.2. Coding

2.2.1. Method. CSP shall create the code underlying Client’s Web Site in accordance with the Final Specification Sheet, Protocols and CGI.

COMMENT: It is difficult to predict what coding language will be used in advance of any project. As such, those decisions rest primarily with CSP. Where Client is technically adept and desires that a particular language be used, it should be provided for in this paragraph.

2.2.2. Project Management. The parties recognize that Client’s participation in all phases of the development of the Web Site is essential. As such, Project Manager shall, in best faith, work with CSP to complete the project on schedule.

COMMENT: Most clients assume that developers can work in isolation. However, this is rarely the case, because developers do not know the intricacies of every industry, which may affect the Web Site’s content and design. Thus, Client must be willing to devote some of its employees’ time to answer CSP’s questions. The "best faith" clause may be too onerous, and Client may wish to change it to "good faith" or "reasonable"; however, it must be understood by Client that its participation is still necessary for the completion of the Web Site.

2.2.3. Pre-Final Version Modifications.

2.2.3.1. Modification Method. During the coding and testing process, CSP or Client may propose modifications to Client’s Web Site in writing. Any proposed modification shall be signed by both parties prior to the performance of any work by CSP on such proposed modification.

COMMENT: Modifications occur during all software development projects. However, they often go undocumented, result in delays, and cause tension when delivery dates are missed. Thus, this paragraph provides a method for avoiding disputes.

2.2.3.2. Additional Development Time. Written modifications shall expressly include an additional amount of time for the development of Client’s Web Site, and the delivery schedule shall be delayed by the same amount of time. When such modifications are necessary for CSP to continue working on the development project, and when no other coding can be done during the interim, the delivery schedule shall also be delayed by the amount of time between when such modifications are first proposed until the time when they are signed by both parties.

COMMENT: This paragraph helps to avoid the tension that results from modification delays.

2.2.3.3. No Liability Against CSP for Delay. The types of delay enumerated in 2.2.3.1. and 2.2.3.2., above, shall not result in the imposition of any set-off, liquidated damages, penalty or other liability against CSP during that additional period of additional development time.

COMMENT: When modifications are very extensive, and delays are substantial, clients often feel justified in withholding payment or even in filing suit against the developer. As such, this paragraph helps to avoid CSP’s liability from delay due to Client’s suggested modifications.

2.3. Schedule.

COMMENT: CSP may wish to exclude any delivery schedule. As such, all of Paragraph 2.3 and Paragraph 2.2.3.2. should be excluded.

2.3.1. Alpha Version.

2.3.1.1. Delivery. CSP shall provide an Alpha Version of Client’s Web Site for Client’s testing at CSP’s facilities within [choose from the range of: thirty (30) to sixty (60)] days after delivery of the Final Specification Sheet by Client to CSP.

COMMENT: Web Site Alpha Versions are commonly delivered within approximately 30 days, but CSP may want to negotiate a longer time frame where substantial, complicated CGI is involved. Alpha Versions are traditionally tested at the developer’s facilities. However, where a simple Web Site is being developed, it can just as easily be delivered to, and tested at, Client’s facilities.

2.3.1.2. Testing. Client shall perform complete testing of all aspects of the Alpha Version within [choose from the range of: ten (10) to fifteen (15)] days after CSP’s provision of the Alpha Version.

COMMENT: This paragraph makes it clear that Client must play an integral part in testing the Web Site in order to avoid misunderstandings between the concepts contained in the Final Specification Sheet and the resulting Web Site. Depending on the complexity of the Web Site, Client may wish to negotiate a long testing period. This is actually advantageous to CSP, as well, because a Client who spends a longer amount of time testing a Web Site cannot later be heard to argue that the Web Site did not meet its expectations.

2.3.1.3. Acceptance. Client shall indicate its acceptance of the Alpha Version in writing, or Client shall make suggested, written modifications which shall be incorporated by CSP into Client’s Web Site according to the terms of 2.2.3., above. CLIENT EXPRESSLY WAIVES ANY RIGHT TO REVOKE ACCEPTANCE.

COMMENT: As discussed above, written modifications are necessary for completion of the project. It should be noted that this clause also conspicuously waives Client’s right to revoke acceptance. The National Conference of Commissioners on Uniform State Laws is currently drafting proposed legislation entitled "Uniform Commercial Code Article 2B - Licenses", which specifically addresses software licenses ("Proposed Article 2B"). Proposed Article 2B provides the same acceptance and revocation of acceptance procedures permitted in U.C.C. Article 2. See Proposed Article 2B, Section 2B-613. The full text of Proposed Article 2B may be viewed at: "http://www.lawlib.uh.edu//ucc2b".

2.3.2. Beta Version.

2.3.2.1. Delivery. CSP shall host on its Internet server the Beta Version of Client’s Web Site for Client’s testing over the Internet within [choose from the range of: fifteen (15) to thirty (30)] days after Client’s acceptance of the Alpha Version.

COMMENT: As discussed above, CSP may wish to negotiate a longer time frame for creating the Beta Version, depending on the complexity of the Web Site. After completion, the Beta Version is put on CSP’s Internet server which is accessible only to Client by means of a password. This enables remote testing by Client, but prevents usage by unauthorized third parties.

2.3.2.2. Testing. Client shall perform complete testing of all aspects of the Beta Version within [choose from the range of: ten (10) to fifteen (15)] days after CSP’s provision of the Beta Version.

COMMENT: Client may wish to negotiate a long testing period, depending on the complexity of the Web Site.

2.3.2.3. Final Acceptance. Client shall indicate its acceptance of the Beta Version in writing, or Client shall make suggested, written modifications which shall be incorporated by CSP into Client’s Web Site according to the terms of 2.2.3., above. CLIENT EXPRESSLY WAIVES ANY RIGHT TO REVOKE ACCEPTANCE.

2.3.3. Final Version. CSP shall deliver Client’s completed Web Site within [choose from the range of: five (5) to ten (10)] days after Client’s Final Acceptance.

COMMENT: Like all of the preceding paragraphs which contain deadlines, this paragraph is subject to change, if any modifications are made. Also, CSP may wish to make some finishing touches to the Web Site.

2.4. Deliverables. CSP’s delivery of Client’s Final Version shall consist of CSP’s posting of Client’s Web to CSP’s Internet server.

COMMENT: Client may wish to receive all source code, flow charts and other material necessary to revise the Web Site, if further development is done in-house or by another developer. However, this may or may not conflict with the parties’ respective ownership of certain Intellectual Property Rights and licenses, which are discussed more fully in Paragraph 3., below.

2.5. Fees and Payment. Client agrees to pay to CSP the amount of [choose from the range of: two thousand dollars ($2,000.00) to fifteen thousand dollars ($15,000.00)] for any and all work performed by CSP between the time of Client’s delivery of the Final Specification Sheet to CSP and until the time of Final Acceptance by Client (the "Design Fee"). One-half of this amount shall be delivered by Client to CSP contemporaneously with Client’s endorsement of this Agreement, and one-half shall be delivered by Client to CSP contemporaneously with Final Acceptance. The Design Fee is not consideration for any other services provided by CSP to Client, and additional fees shall be paid by Client to CSP for other services.

COMMENT: Most Web Site development projects cost in the range of $2,000.00 to $5,000.00, particularly those that are comprised primarily of HTML, which is relatively easy to code. However, Web Sites that incorporate primarily CGI and database interfaces are more time-consuming, require a greater degree of expertise and are therefore more expensive. Most "expensive" Web Sites fall in the $10,000.00 to $15,000.00 range; however, Web Sites can be even more expensive than that if the associated databases require a large amount of time or particular developer expertise.

2.6. Modifications Subsequent to Final Acceptance.

2.6.1. Method. After Final Acceptance, Client may desire to modify the Web Site in order to fix Bugs, to conform to the Final Specification Sheet, or to enhance its appeal. Client shall submit its desired modifications in writing to CSP, and the parties shall sign the written modification prior to the performance of any modification work by CSP.

COMMENT: Modifications can occur even after software has been completed. Modifications occur for at least three reasons: the software contains Bugs, causing it to "crash" or generate errors; the software operates without crashing, but it fails to satisfy all of the elements specified by the client; or the client wishes to change or update some functionality or content in order to make it more appealing to users.

2.6.2. Time. For a period of [choose from the range of: two (2) to twelve (12)] months following Final Acceptance, CSP shall make necessary and reasonable modifications to Client’s Web Site.

COMMENT: Bugs and missing components can manifest themselves long after software has been delivered. Thus, developers can be expected to fix bugs and make other modifications for only a reasonable period of time after delivery. Two months is a reasonable period of time for a simple HTML-coded Web Site, and twelve months is a reasonable period of time for a complex CGI-scripted Web Site. To impose a longer or an unlimited de-bugging duty upon developers may also be impracticable. Employee turnover is high in the software industry, and those developers with essential knowledge about particular software may have moved to another company before Bugs surface.

2.6.3. Additional Fees.

2.6.3.1. Fixing Bugs. Where Client’s desired post-Final Acceptance modifications are to fix Bugs, CSP shall provide up to [choose from the range of: ten (10) to forty (40)] Hours of development time at no additional charge. Additional development work shall be performed by CSP, and Client shall pay CSP [choose from the range of: forty dollars ($40.00) to one hundred and twenty dollars ($120.00)] per Hour of additional development time.

COMMENT: Regardless of the amount of time over which CSP agrees to fix Bugs after Final Acceptance, it is reasonable to expect that CSP will perform free de-bugging work for only a reasonable number of Hours. Ten hours is reasonable for a simple HTML-coded Web Site, and 40 hours is a reasonable period of time for a complex CGI-scripted Web Site. However, where additional work is required, CSP should be paid for its time. In some situations, Client may believe that the Web Site is so fundamentally flawed that CSP is required to perform any and all work necessary to de-bug it. However, the Agreement does not provide for this contingency, because it gives CSP the opportunity to refuse to perform unlimited amounts of work, especially where CSP believes that Client failed to fully cooperate in the development project or test the Web Site prior to Final Acceptance. Thus, in some situations it may make economic sense for CSP to refuse -- and thereby breach the Agreement, from Client’s perspective --, and Client must resort to its available legal remedies, which are discussed below.

2.6.3.2. Conformance with Final Specification Sheet. Where Client’s desired post-Final Acceptance modifications are to cause the Web Site to conform to the Final Specification Sheet, CSP shall provide up to [choose from the range of: five (5) to ten (10) Hours of development time at no additional charge. Additional time shall be paid by Client at the rate of [choose from the range of: forty dollars ($40.00) to one hundred and twenty dollars ($120.00)] per Hour for development time.

COMMENT: Those clients who fail to fully test software may discover missing elements long after Final Acceptance has occurred. Naturally, CSP may refuse to offer free assistance, but it is reasonable to expect that CSP will give five or ten hours of free time. Beyond that, Client should be held responsible, and should pay CSP for making changes for shortcomings that Client should have noticed before Final Acceptance.

2.6.3.3. Deviations from Final Specification Sheet. Where Client’s desired post-Final Acceptance modifications are to cause its Web Site to deviate from the Final Specification Sheet ("Improvements"), CSP shall be paid by Client at the rate of [choose from the range of: forty dollars ($40.00) to one hundred and twenty dollars ($120.00)] per Hour for development time. The parties agree that Client is not obligated to engage the services of CSP for Improvements, and that CSP is not obligated to perform work on Improvements.

COMMENT: Clients often change the content of their Web Sites in order to use improved Internet technology, to create more appealing designs and to add updated content. Some modifications may be so complex that they require CSP’s services. Some modifications may be so minor, that Client can perform them. Alternatively, Client may choose to use the services of another developer. This paragraph permits all such options.

2.6.4. CSP Not Liable for Caching. Client expressly recognizes that some ISPs may continue to cache unmodified versions of Client’s Web Site after modifications or Improvements are made, and Client expressly agrees to indemnify and hold CSP harmless for any damages caused by such caching.

COMMENT: Many ISPs store commonly-used Web Pages on their own Internet servers in order to save processing time in transmitting such information to its users. This is known as "caching", and it is a tremendous way for an ISP to reduce response time and to more efficiently use its resources. Without caching, some sections of the Internet would slow to a crawl, because so many users would be requesting so much information from the same Web Sites, that an electronic bottleneck would occur. However, caching has created some problems for users and owners of Web Sites. First, for example, where ISPs fail to regularly update their caches, some users may receive outdated Web Pages. This may cause users to believe that a particular Web Site owner is lackadaisical about updating its content, and users may tend not to do business with the owner. Second, where information is harmful -- such as it is defamatory or it infringes someone’s intellectual property rights --, it may continue to be published by ISPs for as long as it is cached. This is an impossible problem to surmount, because it is impossible to know which particular ISPs have cached which particular outdated Web Pages. Third, where incorrect information causes a user to act in an incorrect manner -- such as buy or sell stock based on an outdated quote, or transfer a credit card number to an incorrect Internet address --, serious financial consequences may occur. Thus, it is imperative for CSP to be indemnified by Client for caching of Client’s old Web Sites, which is beyond CSP’s control.

2.7. Copyright and Intellectual Property Ownership

COMMENT: Ownership of software is the source of much litigation, however relatively little litigation has erupted, thus far, involving ownership of Web Sites. Nonetheless, careful attention must be paid to the language underlying distribution of ownership rights, because Web Sites are becoming increasingly complex and code-intensive, and increasingly lucrative.

2.7.1. CSP’s Retained Rights

2.7.1.1. Works Created by CSP.

[ALTERNATIVE 1] The parties expressly recognize that the Web Site is not a "work made for hire", that CSP is an independent contractor, and that CSP is not an employee, partner, joint author or joint venturer of Client. CSP shall be deemed the sole author and owner of CGI, HTML Code, graphics and data, and their attendant Intellectual Property Rights, that are created or acquired by CSP and incorporated into the Web Site, or incorporated into any work embodying or derived from any portion of the Web Site. Client shall be deemed the author or owner of Client’s Domain Name, and any graphics or data provided by Client and incorporated into the Web Site, or incorporated into any work embodying or derived from any portion of the Web Site.

[ALTERNATIVE 2] The parties expressly recognize that the Web Site is a "work made for hire", that CSP’s work on the Web Site has been specially ordered and commissioned by Client as a contribution to a collective work, supplemental work or such other category of work as may be eligible, to the greatest extent available under the law, for treatment as a "work made for hire". Client shall be deemed the sole author of the Web Site, its contents and any work embodying or derived from any portion of the Web Site. Client shall also be deemed the owner of the Web Site and its attendant Intellectual Property Rights. To the extent that the Web Site is not properly characterized as a "work made for hire," then CSP hereby irrevocably grants, assigns and otherwise transfers exclusively and in perpetuity to Client, its successors and its assigns, all rights of CSP in the Web Site whatsoever, now existing or hereafter discovered, in all media and forms of expression.

[ALTERNATIVE 3] Client expressly recognizes that it is not the author or owner of any CGI, HTML Code, graphics or data provided to Client by CSP, nor their attendant Intellectual Property Rights, where such CGI, HTML Code, graphics or data was created or acquired by CSP prior to the date first written above ("CSP’s Toolset"). The parties expressly recognize that CSP’s work on the Web Site, except for CSP’s Toolset, has been specially ordered and commissioned by Client as a contribution to a collective work, supplemental work or such other category of work as may be eligible, to the greatest extent available under the law, for treatment as a "work made for hire". Client shall be deemed the sole author of the Web Site, its contents, any work embodying or derived from any portion of the Web Site, and their attendant Intellectual Property Rights, except for CSP’s Toolset. To the extent that the Web Site is not properly characterized as a "work made for hire," then CSP hereby irrevocably grants, assigns and otherwise transfers exclusively and in perpetuity to Client, its successors and its assigns, all rights of CSP in the Web Site whatsoever, except for CSP’s Toolset, now existing or hereafter discovered, in all media and forms of expression. CSP also hereby irrevocably grants, assigns and otherwise transfers non-exclusively and in perpetuity to Client, its successors and its assigns, the right to reproduce CSP’s Toolset, to prepare derivative works therefrom, to publicly perform or to publicly display CSP’s Toolset.

[ALTERNATIVE 4] The parties expressly recognize that the Web Site is not a "work made for hire", that CSP is an independent contractor, and that CSP is not an employee, partner, joint author or joint venturer of Client. CSP shall be deemed the sole author and owner of all CGI, HTML Code, graphics and data, and their attendant Intellectual Property Rights, that are incorporated into the Web Site, or incorporated into any work embodying or derived from any portion of the Web Site. CSP hereby grants, assigns and otherwise transfers non-exclusively and [choose from the following: "in perpetuity" or "for a period of years after Final Acceptance" or "for a total of Hits/Visits/Users/Identified Users as measured by generally accepted industry standards] to Client, its successors and its assigns, the right to reproduce the Web Site, to prepare derivative works therefrom, to publicly perform or to publicly display the Web Site.

COMMENT: Ownership of Web Sites and their content is increasingly becoming a source of contention among owners and developers. As such, ownership must be clearly defined in the Agreement, and there are several ownership options. It should be noted that CSP never retains ownership of Client’s Domain Name or uniform resource locator ("URL"), an example of which is "http://www.mgm.com", which is a trademark of Metro-Goldwyn-Mayer, Inc.

Alternative 1: This alternative paragraph grants to CSP ownership of the code and graphics created by CSP. However, it also grants to Client ownership of the graphics and data supplied by Client.

Alternative 2: This alternative paragraph grants to Client ownership of the entirety of the Web Site, including all code and graphics, regardless of the author or source.

Alternative 3: This alternative paragraph grants to Client ownership of code and graphics that are created specially for Client’s Web Site. However, CSP retains ownership of its preexisting code and graphics -- commonly known as CSP’s "toolset" --, which it used to create Client’s Web Site. This paragraph also contains a perpetual, non-exclusive license of the toolset for use by Client for any purpose, including hosting by another CSP, but it does not grant any type of ownership rights to Client of the toolset.

Alternative 4: This alternative paragraph grants to CSP ownership of the entirety of the Web Site, but Client retains a non-exclusive license to use the Web Site for a perpetual term, for a defined term, or for a defined number of "hits". The term "hits" may actually mean any one of the following terms: 1) "Hits" means the total number of Web Pages accessed, regardless whether they are read or viewed in their entirety; 2) "Visits" means the total number of occasions on which a primary Web Page is accessed; 3) "Users" means the total number of different users identified as visiting any Web Page; or 4) "Identified Users" means the demographic measure users accessing a Web Site, as determined by the users manually transmitting data to the Web Site such as by filling in a form, or by the automatic transmission of data stored on users’ computers in the form of Cookies.

2.7.1.2. Publicity and Demonstration Rights of Client’s Works. If Client retains any rights in the Web Site, Client hereby expressly grants, assigns and otherwise transfers non-exclusively and in perpetuity to CSP, its successors and its assigns, the right to publicly perform or to publicly display the Web Site only for the purposes of CSP marketing and advertising.

COMMENT: A successfully developed Web Site may serve as an excellent marketing and advertising tool for CSP. Thus, this paragraph is a license for CSP to use any unowned portions of the Web Site for an unlimited period of time, for limited purposes, such as for performing or displaying the Web Site to CSP’s potential clients. This paragraph may be tailored to exclude Internet access, in order to avoid user confusion, if Client’s Web Site is hosted by another CSP.

2.7.2. Client’s Retained Rights.

2.7.2.1. Works Created by Client. Client shall be deemed the author and owner of: Client’s Domain Name and its attendant Intellectual Property Rights; Client’s uniform resource locator, if any, and its attendant Intellectual Property Rights; and any graphics or data provided by Client that are incorporated into the Web Site or any work embodying or derived from any portion of the Web Site.

COMMENT: This paragraph must be excluded or tailored, if any of the alternatives for Paragraph 3.1. are used.

2.7.2.2. Reproduction, Derivation, Performance and Display Rights of CSP’s Works. CSP expressly grants, assigns and otherwise transfers non-exclusively and in perpetuity to Client, its successors and its assigns, the right to reproduce, make derivative works, publicly perform or publicly display the Web Site. CSP does not, however, assign to Client the right to sublicense the Web Site, nor any portion thereof.

COMMENT: This is a license for Client to use any unowned portions of the Web Site for an unlimited period of time, for unlimited purposes and on any CSP. This paragraph may be excluded or tailored, if any of the alternatives for Paragraph 3.1. are used. In the absence of this right, then CSP should probably agree to put the code in escrow, in case of CSP’s bankruptcy. This way, Client may obtain the underlying code if it is still in business, and if it needs to make changes to its Web Site.

2.8. No Solicitation of CSP’s Employees. Client agrees that it shall not solicit the employment of, nor hire, any of CSP’s employees during the term of this Agreement, and for a period of twelve (12) months thereafter.

COMMENT: During the course of an expensive Web Site development project, Client may terminate the project and solicit the employment of some of CSP’s workers. By taking the project in-house, Client may attempt to reduce its costs. This paragraph may prevent such an event.

3. Web Hosting Services

3.1. Fees and Maximum Data Transmission. Client shall pay CSP a monthly Web Hosting fee that is commensurate with the amount of data transmitted from Client’s Web Site onto the Internet:

Monthly Fee Maximum Monthly Data Transmission (Gigabytes)

$100.00 Two (2)

$150.00 Three (3)

$175.00 Four (4)

$25.00 For each additional gigabyte of

monthly transmissions above four (4)

CSP reserves the right to change the rates as set forth above upon sixty (60) days’ notice. Client shall pay the appropriate monthly fee -- as determined by the above table -- in advance, and Client shall be liable to pay the full month's fee, even if service is terminated before the end of the month for any reason. If Client fails to pay all outstanding bills more than seven (7) days after the due date, Client is liable for a ten dollar ($10.00) administrative surcharge, and Client may have its account suspended. If payment is returned or rejected, Client’s account will be suspended and Client agrees to pay a twenty-five dollar ($25.00) charge. Suspension of its account does not relieve Client from its obligation to pay any and all accrued fees, charges and costs due to the Company. Suspended service may be resumed by CSP, at CSP’s sole discretion, after CSP has received full payment of all amounts due, along with a reconnect charge of twenty-five dollars ($25.00). Past due amounts are subject to an interest rate charge of one and one-half percent (1.5%) per month from the date of invoice, or the maximum rate permitted by law. Client agrees to pay all costs of collection, including attorney fees and collection agency fees.

COMMENT: The numbers contained in this paragraph are fairly standard. However, each CSP must be consulted to determine whether they prefer to make changes. One factor involved in determining Web Host pricing is that the more data that is transmitted from a Web Site, the more processor time and, ultimately, the more money CSP is required to dedicate toward that Web Site. As such, a CSP may limit the number of megabytes that it agrees to transmit to the Internet on behalf of Client for a certain fee. It should be noted that the unstated purpose for this sliding scale is to discourage patronage by owners of Web Sites that contain very data-intensive images, such as pornographic Web Sites, because hosting such Web Sites requires a disproportionately large amount of CSP resources. Thus, by making it too expensive for them to operate, such Web Site owners will patronize other CSPs. It should also be noted that some CSPs do not charge according to data transmission, and this paragraph may be tailored accordingly. Also, the parties may wish to include a term for the ISP service agreement, such as twelve (12) months, but this is not typical in the industry, which tends to operate on a month-to-month basis.

3.2. Maximum Hard Disk Space. Client shall be allotted a total of fifty (50) megabytes of storage space on CSP’s hard drive, which may be used to store Client’s Web Pages, ordering information and databases, and user communications. Client shall pay twenty-five dollars ($25.00) to CSP per month for each additional increment of twenty (20) megabytes stored.

COMMENT: The numbers contained in this paragraph are fairly standard, but each CSP must be consulted to determine whether they prefer to make changes. A maximum hard disk storage space of 20 megabytes is sufficient for most clients, but it is insufficient for those clients who store data-intensive images on their Web Sites. According to this table, approximately 80 Web Sites can be stored on the average CSP hard disk. Where an individual Web Site occupies more than its fair share of hard disk space, it must pay an additional monthly fee.

3.3. Domain Name.

3.3.1. Registration. Should Client request the assistance of CSP to obtain a Domain Name for Client, Client shall pay two hundred and fifty dollars ($250.00) to CSP, and CSP shall subsequently perform an availability search for, reserve and register Client’s desired Domain Name with InterNIC, and disclose all InterNIC registration passwords to Client. CSP does not guarantee that Client shall be assigned its desired name, and CSP is not responsible for any Domain Name that has been issued to any other entity.

COMMENT: Registration is relatively simple, assuming that Client’s desired Domain Name is available. The fee is currently $50.00 per year, and the first two years must be paid in advance to InterNIC, which is a private organization that has the contract to handle registrations. InterNIC is actually comprised of three companies that contracted in 1992 with the National Science foundation to undertake the task of registering and managing Domain Names. InterNIC’s contract expires in 1998.

Of the $250.00 fee, CSP must therefore pay $100.00 out-of-pocket to InterNIC for Client’s domain name registration. Thus, the $250.00 charge may be adjusted, if CSP chooses a greater or smaller profit than the $150.00 balance.

3.3.2. Client’s Warranty of Ownership and Non-Infringement. Client expressly confirms and warrants that Client is the owner of, or is duly authorized by the owner to use, any trademark or name requested or allocated as its Domain Name. Client further warrants that neither Client’s nor CSP’s use or registration of Client’s Domain Name constitutes infringement of any other entity’s Intellectual Property Rights.

COMMENT: Increasingly more litigation is erupting involving Domain Names that allegedly infringe trademarks. As such, a prudent CSP will obtain Client’s warranties of ownership and non-infringement prior to posting it onto CSP’s server.

3.3.3. Client Indemnification of CSP. CSP shall not undertake to resolve any disputes or litigation on Client’s behalf involving Domain Name registration, and Client agrees that it shall indemnify, hold CSP harmless and defend CSP against any disputes involving Domain Name use or registration.

COMMENT: For the same reason, a prudent CSP will obtain Client’s indemnification of CSP, in case litigation erupts involving Client’s Domain Name.

3.3.4. Jurisdictional Disputes. The parties expressly recognize that, where CSP is acting solely as Client’s Web Host, CSP is not engaged in, and is not actively soliciting, interstate or international commerce. Where CSP is a named party to any type of dispute or litigation involving any acts by Client that affect out-of-state persons or entities, Client agrees that it shall indemnify, hold CSP harmless, defend CSP and challenge the jurisdiction of out-of-state authorities over CSP.

COMMENT: Increasingly more litigation is erupting involving plaintiffs or complainants in one state or country who allege civil or criminal wrongdoing by Web Site owners and hosts in other states and countries. Some courts have asserted their jurisdiction over foreign entities who are doing or soliciting business over the Internet, or who merely maintain Web Sites that are accessible over the Internet from any part of the world, despite the fact that the defendants did not physically enter the forum state. As such, a prudent CSP will obtain Client’s indemnification against such disputes.

3.4. Hit Statistics.

3.4.1. Monthly Reports. CSP shall issue a monthly report to Client indicating the total number of hits to Client’s Web Site according to the following format: hits on all Web Pages; visits to Client’s primary Web Page; users of each Web Page, provided that Client’s Web Site is coded to record user addresses; and identified users of Client’s Web Site, provided that Client’s Web Site is coded to receive and record manual or Cookie data from users.

COMMENT: "Hits" are the number of times that users access a Web Site. Thus, they evidence the level of Web Site usage, and whether a Web Site has established a "presence" on the Internet. Not all CSPs offer hit reports. However, hit statistics are important to Web Site owners, particularly if they permit third-party advertising on their Web Site, and if they charge advertisers according to the number of hits. Thus, Web Site owners often wish to receive monthly reports about such usage, in order to determine whether to change its format or content, whether to change its advertising rates, or whether to "pull the plug" on the project altogether. Generating such reports will require some programming by CSP and some processor time, but it is a value-added feature which my attract additional clients.

3.4.2. Server Logs. Client shall also have the right to review the raw data contained in CSP’s server logs for any immediately preceding six (6) month period, provided that Client pays CSP [choose from the range of: twenty dollars ($20.00) to fifty dollars ($50.00)] per Hour for CSP’s time required to provide such information to Client.

COMMENT: Some clients may choose to perform their own analyses of the raw data contained in CSP’s server logs, and this paragraph provides for fair compensation to CSP for its provision of this additional service. The range of $20.00 to $50.00 fairly anticipates the cost of paying for clerical help -- which is largely a function of the CSP’s geographical area --, with an administrative charge already included.

3.4.3. No Liability for Cached Hits. Client expressly recognizes that the actual number of hits to Client’s Web Site is lower than the numbers reported by CSP, due to caching of Client’s Web Site on the Internet. As such, Client hereby indemnifies and holds CSP harmless for any damages caused by such caching.

COMMENT: As discussed in Paragraph 2.6.4. and its correlative comment, above, Web Sites are very often cached by a multitude of Internet servers. Thus, some statistics and data transmitted by users of cached Web Sites may not reach the Web Site’s true Internet address. This may be damaging to Web Sites that charge advertisers according to the number of hits, and this may also result in lost orders that users may have attempted to transmit.

3.5. No Sub-Web Pages. Client expressly agrees that it shall not permit any person or entity which is not affiliated with Client to maintain any Web Page within Client’s Web Site.

COMMENT: If CSP does not desire to host a particular Web Site -- particularly one that drains CSP resources--, this paragraph prevents CSP’s other clients from agreeing to act as sub-hosts for the unwanted Web Site.

3.6. CSP’s Duties.

3.6.1. Web Site Storage and Internet Link. CSP shall store Client’s Web Site on CSP’s Internet server. The parties expressly recognize that Internet servers and links are susceptible to crashes and down time. CSP warrants that it shall maintain a consistent link with the Internet, but CSP cannot and does not warrant that it shall maintain a continuous and uninterrupted link.

COMMENT: The term "consistent" may be replaced with the word "constant", but a constant Internet link is impossible, because any number of links between CSP and the Internet may crash, causing an interruption of service. CSP’s Web Hosting warranties are discussed more fully below. Server logs, as discussed more fully below, enable Web Site owners to learn information about the accessing habits of users of their Web Site.

3.6.2. Bandwidth. CSP agrees that it shall maintain a dedicated [choose from: T1 or T3] connection to the Internet, however, CSP does not warrant any response rate or download time.

COMMENT: Bandwidth is a measure of system performance; it is the speed of the connection from CSP’s servers to the Internet. CSPs generally maintain a T1 connection (approximately 1.5 megabytes per second ("Mbps") transmission rate) between their Internet server and the next link between them and the Internet. CSPs may also have greater transmission rates by using a T3 connection (approximately 45 Mbps), which is becoming more common, or even an OC-3 connection (approximately 155 Mbps), which is rare. It should be noted that each individual user’s modem baud rate -- which is much slower, and is usually in the range of 14.4 to 56 Kbps -- is the key factor in determining the time it takes for data to download from CSP’s server to the user’s computer. It should also be noted that, despite the user’s modem speed and despite the speed of the link between CSP’s server and the Internet, there are often multiple links between CSP’s server and the core "backbone" of the Internet. Thus, there is no certainty that each link will be as fast as CSP’s connection, and CSP cannot guarantee that users will enjoy a download time that corresponds to their modem speed.

3.6.3. Modems. CSP warrants that it shall maintain a user-to-modem ratio of no more than [choose from the range of: 10-to-1 to 15-to-1], and that each modem shall operate at a maximum speed of no less than [choose from the range of: 28.8 to 56] kilobytes per second.

COMMENT: The number of users relative to the number of modems is another measure of CSP’s response time. Regardless of CSP’s size and regardless of the number of modems employed by CSP on its Internet server, a 10-to-1 user-to-modem ratio is typical. Some CSPs prefer a different ratio, and, as such, each CSP must be consulted to determine whether it prefers to make changes. The speed of CSP’s modems is yet another measure of response time. Most CSP modems operate in the range of 28.8 to 33.6 Kbps. However, new modem technology enables 56 Kbps, and many CSPs are replacing their older modems with this newer technology.

3.6.4. Processor Capacity. CSP agrees that its servers shall, on the average, operate at less than fifty percent (50%) processor capacity between 8 a.m. and 8 p.m. eastern time every day.

COMMENT: Capacity is another measure of system performance; it is measured by the actual amount of data flowing through CSP’s computers’ processors during some fixed period of time, compared to the maximum amount of data that can flow through the processors during that same period of time. The more computers that the CSP uses, the lower the capacity, and the better the response time the users will experience. The percentage contained in this paragraph is reasonable, however each individual CSP must be consulted to determine the appropriate percentage. Also, it may be useful to identify business hours as the appropriate measurement period, because this is the period of heaviest usage, and Clients will not want users to experience delays during this particular time.

3.6.5. Backup. In case of server crashes, power outages, maintenance, service or improvement, CSP shall host one mirrored image of Client’s Web Site on a backup CSP server, supplied with a backup power supply.

COMMENT: The system performance and the backup and maintenance paragraphs would probably be interpreted as specific warranties, and they may therefore override the general warranty disclaimers which are found below.

3.6.6. Maintenance. CSP may, at its own discretion, temporarily suspend all service for the purpose of repair, maintenance or improvement of any of CSP’s systems. However, CSP shall provide prior notice where it is reasonably practicable under the circumstances, and CSP shall restore service as soon as is reasonably practicable. Client shall not be entitled to any setoff, discount, refund or other credit, in case of any service outage which is beyond CSP’s control or which is reasonable in duration.

3.6.7. Security. The parties expressly recognize that it is impossible to maintain flawless security, but CSP shall take reasonable steps to prevent security breaches in CSP’s server interaction with Client and security breaches in CSP’s server interaction with resources or users outside of any firewall that may be built into CSP’s server. However, Client is solely responsible for preventing password protected pages within its Web Site from being automatically indexed and linked to search engine Robots or Spiders. Client is solely responsible for any damage caused by such unauthorized access, and Client indemnifies and holds CSP harmless for any compromise of Client’s security.

COMMENT: Sometimes password protected Web Pages are indexed by Robots or Spiders, enabling users to automatically bypass passwords and to access protected Web Pages. Operation of these search engines is beyond CSP’s control, and liability for any damage caused by unauthorized access should be assumed by Client.

3.6.8. Privacy. Message and data encryption is enabled on CSP’s server, however Client is solely responsible for encoding its Web Site to conform with generally accepted encryption standards, and Client indemnifies and holds CSP harmless for any compromise of Client’s encryption method.

COMMENT: Encryption enables the coding and de-coding of data and message transmission, making it virtually impossible for other users to decipher

them without the proper "key". Without encryption, Internet users are often reluctant to transmit potentially sensitive information, such as credit card numbers. Thus, encryption is a desirable function.

3.7. Caching Permitted by CSP. Client expressly grants to CSP a license to cache the entirety of Client’s Web Site in RAM, Client expressly agrees that such caching is also deemed "fair use" under the United States Copyright Act, and Client expressly agrees that such caching is not an infringement of any of Client’s Intellectual Property Rights.

COMMENT: Although no reported case has yet dealt with caching as an infringement of a Web Site owner’s intellectual property rights, the prudent CSP will guard against this contingency.

3.8. Export Control. Client agrees that its Web Site shall comply with all export, re-export or import laws and regulations of any jurisdiction from which Client’s Web Site is transmitted or accessed. Client agrees that it shall obtain written authority from all appropriate governmental bodies, if Client intends at any time to re-export any items originating from that jurisdiction to any proscribed destination. Client shall indemnify CSP, hold CSP harmless and provide a defense to CSP for any such compromise of Client’s security.

COMMENT: Certain types of encryption technology are prohibited by U.S. laws from being exported to other countries. Sometimes encryption software is transparently embedded within software, including within Web Sites. Thus, unknown to the exporting party, it is in violation of U.S. export laws by transferring the software or making it available over the Internet to foreign nationals. This clause indemnifies CSP in the event that Client, knowingly or unknowingly, unlawfully exports encryption technology or makes it available over the Internet.

4. Order and Payment Information Forwarding.

COMMENT: This is a simple order and payment processing agreement, which imposes all shipping and some payment collection responsibilities on Client. The Agreement could be drafted to encompass greatly expanded CSP responsibilities, such as providing a physical warehouse, shipping orders, maintaining pre-determined inventory levels, collecting all accounts receivable, and more.

4.1. Order Collection and Storage. Client confirms that its Web Site contains an order entry form, a true and correct copy of which is attached hereto as "Attachment B". Orders shall be collected in accordance with the rules embodied by Client’s order entry form, CGI, HTML Code or other code. The sequence of fields within each record shall follow the sequence of fields in Client’s order entry form, stored as ASCII text, and delimited by a comma character (",") character. Orders shall be stored on a daily basis in a database that shall be identified by the relevant date. Client’s databases shall be kept for one (1) month by CSP, and Client is solely responsible for long-term storage of its own databases.

COMMENT: Where CSP agrees to store orders according to the format contained in Client’s order entry form, the form itself should be attached to the Agreement so that Client cannot later claim that CSP improperly stored order data. Field delimiters can include characters such as a comma, a space, quotation marks (for text), semi-colons, and more. The delimiters should be harmonized in advance so that data is not corrupted when Client uploads it onto its own database system.

4.2. Order Retrieval and Transmission. Client’s daily order database shall be stored on a remote server which is inaccessible by Internet users, and which is accessible only by local dial-up using the following password: . Client is solely responsible for the security and proper use of the password, and must take all necessary steps to ensure that the password is kept confidential, secure, used properly and not disclosed to unauthorized people. Client shall immediately notify CSP, if there is any reason to believe that the password has become known to someone not authorized to use it. Client may at any time retrieve its order databases; however, at 8 p.m. eastern time, CSP shall, on a daily basis, electronically transmit copies of Client’s daily order database to Client’s shipping and accounts receivable departments.

COMMENT: The password and daily transmission time should be specified in advance.

4.3. Client Shall Process Orders and Payments. Client shall be solely responsible for shipping user orders and collecting user payments.

4.4. Royalty. Client agrees that it shall pay to CSP, on a monthly basis, a royalty of [choose from the range of: one-quarter of one percent (¼ %) to one and one-half percent (1½ %)] of Client’s monthly gross sales of all goods sold or services contracted by Client through CSP’s Internet facilities. Gross sales shall be calculated by tallying Client’s daily order databases, and shall not be reduced by any debts which are uncollected or uncollectable by Client. Client hereby expressly grants CSP the right to inspect Client’s daily order databases, and to perform an accounting of Client’s records upon [choose from the range of: ten (10) to thirty (30)] days’ written notice. Client shall, in good faith, assist and cooperate with CSP to perform such an accounting.

COMMENT: The royalty range contained in this paragraph is reasonable, but CSP must be consulted for the appropriate percentage. Client may negotiate for no royalty at all, in which case this paragraph must be removed.

4.5. Client Warranties and Indemnification. Client confirms and warrants that Client is the sole provider of Client’s goods or services, that CSP is merely Client’s Internet communication medium, and that CSP is not Client’s selling agent, distributor, marketer or other affiliate. Client confirms and warrants that Client shall not offer or sell any goods or services that are illegal in light of the purchaser’s age, jurisdiction or other circumstance, that infringe any rights of others, or that are defective. Client hereby indemnifies CSP, holds it harmless, and agrees to defend CSP against any liability which may arise from Client’s provision of any goods or services through CSP’s Internet facilities.

COMMENT: It is possible that a disgruntled customer who has purchased a product from, or retained the services of, Client will name CSP to any litigation. As such, the prudent CSP will obtain indemnification from Client.

5. Internet Service Provider Agreement

COMMENT: This is an ISP agreement which provides for a basic Internet access and e-mail account.

5.1. Internet Account and Access. CSP shall provide to Client a user name, e-mail address and link through CSP’s dial-up Internet server. Client shall be permitted unlimited Internet usage, and shall be limited to [choose from the range of: one (1) to five (5) megabytes of hard disk space for e-mail storage on CSP’s server. CSP shall also provide to Client the following unique password: . Client is solely responsible for the security and proper use of the password, and must take all necessary steps to ensure that the password is kept confidential, secure, used properly and not disclosed to unauthorized people. Client shall immediately notify CSP, if there is any reason to believe that the password has become known to someone not authorized to use it.

COMMENT: The range of storage space if reasonable, but CSP must be consulted for the appropriate space. Also, Client’s account password must be specified in advance.

5.2. Fees. Client shall pay to CSP twenty dollars ($20.00) per month in advance for Client’s Internet account and access. CSP reserves the right to change the monthly rate upon sixty (60) days’ notice. Client shall be liable to pay the full month's fee, even if service is terminated before the end of the month for any reason. If Client fails to pay all outstanding bills more than seven (7) days after the due date, Client is liable for a ten dollar ($10.00) administrative surcharge, and Client may have its account suspended. If payment is returned or rejected, Client’s account will be suspended and Client agrees to pay a twenty-five dollar ($25.00) charge. Suspension of its account does not relieve Client from its obligation to pay any and all accrued fees, charges and costs due to the Company. Suspended service may be resumed by CSP, at CSP’s sole discretion, after CSP has received full payment of all amounts due, along with a reconnect charge of twenty-five dollars ($25.00). Past due amounts are subject to an interest rate charge of one and one-half percent (1.5%) per month from the date of invoice, or the maximum rate permitted by law. Client agrees to pay all costs of collection, including attorney fees and collection agency fees.

COMMENT: The numbers contained in this paragraph are fairly standard. However, each CSP must be consulted to determine whether they prefer to make changes. Also, the parties may wish to include a term for the ISP service agreement, such as twelve (12) months, but this is not typical in the industry, which tends to operate on a month-to-month basis.

5.3. Client Agrees to Abide by CSP Operating Policies. Client agrees that it shall abide by CSP operating policies, which my be amended from time to time at CSP’s sole discretion, and Client agrees to indemnify, hold harmless and provide a defense for CSP against any claims arising from Client’s failure to follow these guidelines:

COMMENT: It is imperative that CSP establish operating guidelines, because Internet users sometimes abuse their privileges or push the limits of their ISP’s hardware capabilities. Following are standard ISP guidelines.

5.3.1. Client agrees not to post or transmit any message anonymously or under a false name.

5.3.2. Client agrees not to post or transmit any message which is libelous, defamatory or which discloses private or personal matters concerning any person.

5.3.3. Client agrees not to post or transmit any message, data, image or program which is illegal, indecent, obscene or pornographic.

5.3.4. Client agrees not to post or transmit any message, data, image or program that would violate the Intellectual Property Rights of others.

5.3.5. Client agrees not to interfere with use of the Internet by any other CSP Clients or other users.

COMMENT: Some Internet users are so technically advanced that they are able to remove Web Site links from the Internet (called removing one’s "POP" or "point of presence") or even to change the content of Web Sites.

5.3.6. Client agrees not to post or transmit any file which contains viruses, worms, "Trojan horses" or any other destructive features, regardless whether damage is intended or unintended by Client.

COMMENT: Some Internet users are able to cause significant damage to users’ computers, such as causing their hard drives to be completely erased.

5.3.7. Client agrees not to post or transmit any message which is harmful, threatening, abusive or hateful.

5.3.8. Client agrees that its use of CSP’s Internet access services is for education or amusement purposes only, and that Client shall not use this service for commercial purposes. Client agrees not to post or transmit any advertising, promotional materials or any other solicitation for goods or services, except in those areas of the Internet that are designated for such purposes, such as marketplace bulletin boards or classified advertisement sections of Web Sites.

COMMENT: This will conflict with Paragraph 3 and should be removed, if CSP is providing commercial services to Client.

5.3.9. Client agrees not to post or list articles which are off-topic, according to the description of the newsgroup.

COMMENT: Sometimes when users post off-topic remarks to bulletin boards that are focused on a particular issue, other bulletin board users will "flame" the user and his ISP by sending such an overwhelming number of derogatory e-mails that they may strain or crash the ISP’s server. Thus, this paragraph is intended to avoid potentially harmful flames.

5.3.10. Client agrees not to list or send unsolicited mass e-mailings to more than twenty-five (25) e-mail users, if such unsolicited e-mailings provoke complaints from the recipients.

COMMENT: The purpose of this paragraph is to contractually permit a CSP to shut down the account of a user who transmits numerous unsolicited e-mails -- often of a commercial nature -- to unsuspecting recipients. This practice is called "spamming", which derives its name from a Monty Python song whose lyrics consist of the word "Spam®" (the processed canned meat), which is sung endlessly. Recipients of spams sometimes complain to the sender’s CSP. However, because it is likely that a frequent user of a CSP’s e-mail system will end up sending an unsolicited to some recipient who complains to the CSP, the Agreement permits a total of 25 spams. This is indeed a very small number of spams, compared to the millions of spams that some commercial users transmit on a regular basis.

5.3.11. Client agrees that it shall be solely responsible for providing its own connection to CSP via a telecommunications service, and that it shall be solely responsible for providing a suitable computer, modem and other hardware or communications equipment necessary to access CSP. Client also agrees that, if it accesses CSP through a LAN or WAN, it shall be solely responsible for providing, maintaining and supporting a network and IP router that interface satisfactorily with CSP.

COMMENT: One of the more time-consuming problems for CSPs is resolving users’ technical questions about hardware and communications equipment. Such issues are essentially unrelated to CSP’s provision of ISP services, and CSP may choose to include this paragraph to absolve itself of the duty of unlimited technical support.

5.3.12. Client agrees that its account shall be used solely by Client. Regardless whether Client has actual control over the acts of third parties, Client agrees that it has the last clear chance to avoid usage by third parties, and Client indemnifies and holds CSP harmless for their usage.

5.4. CSP’s Monitoring and Termination Rights. The parties expressly recognize that CSP cannot and does not screen content provided by any Internet users of the Service, however, the parties agree that CSP has the right, but not the obligation, to remove from its server or block access over the Internet to any communications and materials that CSP believes, in its sole discretion, violate any of the policies enunciated in Paragraph 5.3., above, or any laws of any jurisdiction served by CSP. The parties also agree that CSP may, in its sole discretion, terminate Client’s account for any violation of the policies enunciated in Paragraph 5.3., above.

COMMENT: ISPs have been found liable in some cases for their users’ unlawful activities. ISPs have also been found liable for enabling their users to access remote Web Sites which are not hosted by the ISP, but which contain indecent or illegal content. As such, CSP should reserve the right to remove or block such content, or to terminate the account of the offending user.

5.5. CSP’s Duties.

COMMENT: These duties describe the kinds of services that users can expect when accessing the Internet through CSP’s server. They differ in some respects from CSP’s duties under Paragraph 3.6, which describes the kinds of services that Web Site owners can expect when third party users access the Internet and tie into Client’s Web Site through other ISPs, and not through CSP.

5.5.1. Internet Link. CSP warrants that it shall maintain a consistent link with the Internet, but CSP cannot and does not warrant that it shall maintain a continuous and uninterrupted link.

COMMENT: See the comment accompanying Paragraph 3.6.1., above.

5.5.2. Bandwidth. CSP agrees that it shall maintain a dedicated [choose