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Business domain name issues

 

Most businesses understand the importance of a website in today’s markets.  As such, many businesses hire professionals to design their websites. The terms of this business relationship are not always clear for reasons such as the absence of written contracts, or the business owner’s lack of knowledge about this technical arena. Regardless of  a wonderful rapport that may exist between  parties, a written contract is always better than conversational understandings or verbal assurances.  Among other things, the contract should address ownership of the business’ domain name. 

Consider, XYZSPA, Inc. (“XYZSPA”), a medical spa that is to open its doors to the public in the next thirty (30) days. XYZSPA hires a website designer, ABC, LLC (“ABC”),that exclusively designs websites for medical spas. XYZSPA chooses its domain name, www.xyzspa.com, which will identify the location of its website and is perfectly synchronized with its business name for successful branding. The domain name is not owned by anyone else and as such, the registration costs for the next couple of years is less than $100.00. 

As part of its service, ABC registers the domain on behalf of XYZSPA. XYZSPA may not understand anything about domain names or if it does, it assumes that it must own the domain name because it has paid ABC the registration costs for the next two (2) years. However, businesses frequently and unwittingly delegate the domain name registration to the website designer who may register the domain name as its own. Many businesses do not find out about the ownership issue until it is too late.

ABC informs XYZSPA that it will not complete the website in time for XYZSPA’s grand opening. In the absence of a written contract specifying a deadline, ABC may face little or no consequences for tardiness. However, XYZSPA has ordered thousands of announcements to be mailed to potential customers on the date of the grand opening and they all reference XYZSPA’s website. XYZSPA frantically hires another website designer who can guarantee its deadline. However, ABC, who is the registered owner of www.xyzspa.com, demands a hefty payment before relinquishing ownership. XYZSPA’s options are limited to changing its domain name to one that may not be perfectly synchronized with its business name, such as www.xyzmedspa.com, or paying ABC.  As long as ABC owns the domain name, it can sell it to anyone, including XYZSPA's competitors, who may use it to divert XYZSPA's business prospects. 

Although XYZSPA may have grounds to file suit against ABC, XYZSPA's time constraints require an immediate solution, that is not always attainable through the courts. Moreover, few guarantees accompany the costs associated with litigating the issue in the federal court that generally has jurisdiction over these types of cases.   As such, XYZSPA is better off addressing this issue prior to entering into a business relationship, preferably pursuant to a written contract.