Buying a Website

In some cases, rather than recreate the wheel it may be a good idea to buy an existing website. This would make the most sense if you want to enter the business already being operated on the website, or if you find a site for sale that could easily by altered to suit the needs of your own business.

Website owners offer sites for sale directly or through brokers. In addition, you can search the Internet for sites that appear to be dormant and attempt to contact the owner to make an offer to buy. The other instance where websites are purchased and sold is in connection with the sale of an ongoing business.

Purchasing a website is much the same as purchasing any other asset that includes technology and intellectual property. You should perform your own due diligence to make sure the website and all of its components are owned or licensed by the person selling the site, that the seller has the right to sell or assign licenses to the website and associated assets, and that the site functions the way it purports to.

In addition, if you are buying the business associated with the website, you need to investigate and test whether the site is receiving the traffic and generating the revenues and profits claimed by the current owner.

If you are satisfied with the results of your due diligence and have agreed on a purchase price with the seller, you will want to enter into a Website Transfer Agreement. Here are some of the typical provisions of such an agreement:
  • Sale, assignment and transfer of website and associated assets
  • Purchase price
  • Payment procedure
  • Representations and warranties
  • Indemnification
  • Further assurances
  • Confidential Information
  • Non-compete

The sale, assignment and transfer provisions should be inclusive enough so that the purchaser receives ownership of, or a license to, everything necessary to operate the website as intended.

This will include the website, all of its associated pages and content, all of the associated software used in building and/or maintaining the site, all lists and databases containing user information, all associated trade secrets, all website designs, all trade marks and copyrights associated with the website, any other intellectual property or content related to the websites, and the domain name and registration.

The purchase price can be paid up front, or part of it can be paid in stages as part of a negotiated earn-out amount base on the website’s future performance. Most often, the purchase price will be paid into an escrow account, and then released when all of the assets have been transferred and assigned.

Depending on the size and complexity of the website, the transfer and assignment procedure may be as simple and straightforward as executing the Website Transfer Agreement, or as complicated as the sale of an ongoing international business, including the necessity of filing trade mark and patent transfers and obtaining consents to numerous license assignments. In any event, it is important that the seller give further assurances that it will provide any future assistance necessary to complete the intended transfer and assignment.

Due to the nature of a website, which involves an interwoven network of technology, computer programs and content that often involves every form of intellectual property, it is important that the seller represent and warrant that it owns or has a valid license to all of the assets being transferred and assigned, and there is no infringement of any third party rights. The seller should also warrant the website operates properly according to specifications, i.e. there are no underlying defects.

If the representations and warranties turn out not to be true, the seller will be required to indemnify the buyer for damages, and the buyer may want to keep a portion of the purchase price in escrow for a period of time to ensure it can collect.

Regardless of whether a website is developed internally, externally or is purchased from a third party, it is clear that having ownership in or a license to all of the associated software is vital to protect your business from claims of infringement, and potentially from orders to shut down the infringing site. Therefore, we will now look at the importance of using licensed software in your business.

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