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Buying A Website Problems with Intellectual Property

Published Tuesday, July 29, 2008 by bloggerblognet83280 | E-mail this post

There are many ways to make money online including buying another website that may be a competitor or compliment to yours. When doing so, you need to watch out for IP problems.

The creation of a web business tends to be a herky-jerky event. Things can go full blast for a few months, sit gathering dust for a year and then get rolling again. This can lead to a certain lack of organization in the business. In particular, it can lead to nightmares with intellectual property.

Intellectual property is often the true value of an online business. IP rights include things like copyrights, trademarks and patents. As you can imagine, the Google trademark has just a slight bit of value as does the patent for its process in producing search results. This tends to be true for most sites, which mean you need to be careful when buying one.

As mentioned previously, a site is often started in a herky-jerky style. This leads to big problems when it comes time to determine who owns the intellectual property rights. You might think the LLC for the entity owns them, but this is often not the case. Why? Well, the owner will often file the applications and then never transfer the IP rights to the LLC. Alternatively, no applications may have been filed and the IP rights rest in whoever created the thing at issue.

As you can imagine, this can lead to huge problems when it comes time to sell/buy a site. How do you know if the business has the right to sell the copyrights, trademarks and so on? Most form legal agreements include a clause whereby the selling party warrants they have said ownership and authority. These clauses should be included, but do not resolve the problem. If someone else did the site design and database code, they are not bound by the agreement because they are not signing it!

The only way to really avoid problems of this sort is to get an inventory of IP rights. If you are going to spend money on a site, identify the IP rights associated with it. Next, ask the seller for written proof of ownership of the IP rights. This means applications with the relevant authorities such as the Library of Congress for copyrights and Patent and Trademark Office forwell, I wont insult you on that one!

If you decide to buy a site, make sure you identify the key aspects of that site and then verify that the seller actually has the authority to sell it. If you dont, you could be throwing money away.

Richard A. Chapo is an internet attorney with SanDiegoBusinessLawFirm.com

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