Piliero Mazza &
Pargament, PLLC

Vol. V, Issue 7
October 1999

An Update for Federal Contractors and Commercial Businesses


Legal and Business
Regarding the
Development and
Maintenance of
Internet Web Sites

Recent EEOC Policy
Guidance on Reasonable
Under the ADA

Protecting Trade
Secrets from Misuse

by the Government



Legal and Business Considerations Regarding the Development and Maintenance of Internet Web Sites

As the use of the Internet’s World Wide Web (the "Web") becomes an increasingly accepted forum for conducting commercial transactions, many businesses, government agencies and other entities are attempting to take advantage of this new and ever-changing venue. To that end, many businesses are hiring developers to construct and maintain Web sites, through which the businesses may advertise and render certain services on the Web.

Because use of the Internet is still a relatively new phenomenon for most businesses, establishing a presence on the Web can present some novel issues and considerations. The purpose of this article is to highlight several legal and business issues encountered by government contractors and other businesses that are contemplating establishing a Web site, as well as those businesses that already have established a presence on the Web.

Businesses contemplating designing a Web site, as well as those maintaining a site, must have a clear objective with respect to the purpose of the site. Businesses should also consider the intended users of the site. For example, will the site be geared towards particular customers? Additionally, businesses should consider the frequency with which they will need or desire to update the content of the site. This will often depend, in part, on whether the purpose of the site is to provide a general overview of the company’s business, or to provide users with current and detailed information regarding a particular topic.

The objective of the Web site, in turn, will often dictate the type of Web site developer whom a business hires. Because many developers have not been in business for very long, it is important to choose a developer that has sufficient capital and resources to ensure its longevity. Therefore, in deciding whether to hire or to continue retaining a particular developer, businesses should ascertain the developer’s resources, and also inquire as to the clients with whom the developer has worked. One way to learn about the developer’s clients, as well as to review the quality of the developer’s work, is to review the Web sites that the developer has developed and maintained in the past.

Other considerations relevant to the issue of whom to retain to develop and maintain the site include the developer’s fees. Costs vary depending on such factors as number of pages included in the site, the graphics employed, whether the site must be "secure" such that information submitted by customers remains confidential, and whether the site to be maintained is interactive with customers. Therefore, Web site development costs can range from several thousands of dollars to hundreds of thousands of dollars, and it is important to ascertain the costs of Web site development before beginning development of a site.

After selecting a firm to design the Web site, businesses must negotiate the terms of the development agreement. Several key points must be kept in mind when negotiating the agreement. First, it is extremely important to note that, if ownership of the materials created for the site is not spelled out in the agreement, the developer, as an independent contractor, will likely own all rights to the materials. Many businesses, therefore, often find themselves in the unenviable position of discovering that, because their development agreements do not address this issue, they do not own the materials created for their own Web sites. Businesses confronted with this situation should consider purchasing the developer’s intellectual property rights to the materials, including such rights as copyrights, or, at a minimum, negotiating a buyout price exercisable at some point in the future.

Additionally, rather than paying some or all of the developer’s fees up front, businesses should make payment contingent upon the developer reaching certain performance milestones. Very often the time required to set up a site is of critical importance to a business. Therefore, by tying payment to the developer’s fulfillment of certain objectives in accordance with a performance schedule, a business can strive to ensure that the site is established in a timely manner.

The development agreement should also allow the business to terminate its relationship with the contractor for any reason whatsoever. Like a company brochure, the Web site must accurately reflect the business’ particular style. Therefore, the business should be free to terminate its relationship with the developer if it is dissatisfied with the developer’s performance, or if a personality conflict develops. Additionally, businesses should secure warranties of quality, materials and workmanship from the developer with respect to tools utilized to create the Web site, as well as for the Web site itself.

Because the Web site is often a "living thing" that will evolve as business plans are implemented, businesses should also consider entering into a maintenance agreement. The maintenance agreement can be with the initial developer of the site, or with a third party. This agreement should cover, amongst other things, registering the site with "search engines," or directories that will allow users to find the site, changing site functionality, monitoring the number of users of the site, and specifying the amount of "download time" it takes for a Web page to appear on the computer screen.

As can be seen, the development and maintenance of a Web site involves numerous considerations. If a business is cognizant of these considerations, certain pitfalls in the establishment of a presence on the Web can be avoided.


Recent EEOC Policy Guidance on Reasonable Accommodation Under the ADA

The EEOC recently issued its long-awaited policy guidance on reasonable accommodation under the Americans with Disabilities Act (ADA). While this guidance does not have the force of law, it provides an overview of the measures the EEOC will deem appropriate in terms of accommodating disabled employees. Additionally, the federal courts often look to such official EEOC guidance in interpreting the law.

The ADA requires covered employers to provide qualified employees or applicants with disabilities with reasonable accommodations, provided that such accommodations will not cause the employer undue hardship. The terms "reasonable accommodation" and "undue hardship" are ill-defined and have been the subject of much litigation. The new EEOC guidance should serve to clarify a number of gray areas in ADA law.

The following is a brief summary of some of the more significant issues addressed in the new guidance.

1. Requesting reasonable accommodation:

The new guidance clarifies that no "magic words" are necessary. An employee or applicant may make a request for reasonable accommodation either by mentioning the ADA and using the phrase "reasonable accommodation," or by simply letting an employer know that an adjustment or change at work is needed due to a disability or medical condition. The guidance provides various examples of what do and do not constitute adequate requests for accommodation.

The burden is on the employee to provide the employer with notice that an accommodation is necessary. An employer need not provide an accommodation unless an employee requests one or if the employer (1) knows of the disability; (2) knows of the difficulties caused by the disability; and (3) has reason to believe the disability prohibits the employee from requesting an accommodation.

2. Employer's response to a request:

The guidance states that an employer must engage in an "informal" dialogue with the employee or applicant to determine what accommodation is reasonable. The guidance discusses in depth the circumstances under which an employer may request medical documentation and/or subject the employee to a medical examination.

3. Types of reasonable accommodation:

The guidance describes in detail various forms of reasonable accommodation, such as job-restructuring, leave, modified or part-time schedules and modified workplace policies. The most significant guidance, however, relates to the ADA’s requirement that employers consider reassigning disabled employees to vacant alternative positions.

As we noted in an earlier newsletter, the federal courts are divided over the scope of employers’ duty to consider reassigning disabled employees to vacant positions where they can not be accommodated in their regular positions. The new guidance clarifies the scope of this duty, placing significant burdens on employers.

The guidance explains that reassignment is the accommodation of "last resort," where no reasonable accommodation exists to enable the employee to perform his or her regular job.

In the event reassignment is required, the guidelines emphasize that a "cooperative process" should take place, whereby the employer determines the employee’s qualifications and matches them with vacancies. The employer must consider positions equivalent in terms of pay and "status." If no equivalent positions are available, the employer must consider reassignment to a lower graded position.

The guidance also provides, consistent with some recent court decisions, that an employer must consider positions outside the employee’s department and in other facilities, and must consider current vacancies as well as known impending vacancies. In addition, the employer must do more than merely allow employees to seek out and apply for vacancies on their own. Rather, employers are under an affirmative obligation to inform the employee of vacancies.

The guidance further provides that, in the event a disabled employee can be matched with a suitable vacant position, the employer cannot require the employee to "compete" for the job. Rather, if the employee is qualified, then he or she must be placed in the position even if a more qualified non-disabled employee also seeks the job.

Finally, in determining whether the employee is qualified for a vacant position, the employer must consider whether reasonable accommodations are needed with respect to the vacant position

There are limits on the employer’s duty to reassign, most notably the "undue hardship" exception. In addition, employers are under no duty to promote a disabled employee to a higher ranking position, and if no vacant position is available, the employer need not create a new position. Furthermore, employers are not required to "bump" co-workers from their positions to create a vacancy. Finally, employers are under no duty to provide training to enable disabled employees to become "qualified" for a vacant position, unless persons assuming that position ordinarily would receive training.

As noted above, the foregoing is only a brief summary of some of the highlights of the EEOC guidance. In the event a disabled employee requests reasonable accommodation, the guidance should be reviewed in its entirety and legal counsel should be consulted. The guidance can be found in its entirety at the EEOC’s web-site: www.eeoc.gov.


Protecting Trade Secrets From Misuse by the Government

Government contractors protect their sensitive, valuable trade secrets in a variety of ways. Confidentiality or non-disclosure agreements are routinely negotiated whenever a company needs to disclose confidential and proprietary information. These agreements usually contain an absolute prohibition on the disclosure or use of the contractor’s trade secrets by a competitor. On government contracts, however, contractors do not have the same bargaining power and usually have to give the government a "limited" or "restricted" license to technical data or computer software. Because the government may assert its rights to the fullest extent allowable by the law, contractors need to be aware of how to protect their rights against unauthorized use by the government.

When contractors give the federal government access to confidential and proprietary information, they expect the government to protect and not misuse the contractor’s trade secrets. Federal contracts usually have clauses which govern the government’s rights to a contractor’s trade secrets. Disputes often arise, however, concerning the government’s rights to those trade secrets. These disputes often concern whether information is secret, or whether the government has any contractual or lawful rights to the information that is adverse to the contractor’s interest.

For example, the government may want to use a contractor’s trade secrets in procurement related actions, such as the evaluation of a competitor’s proposal or in a follow-on competition. The government may also wish to use a contractor’s trade secrets in connection with a research and development project with another company. Additionally, the government may erroneously determine that trade secret information requested by members of the public is subject to disclosure under the Freedom of Information Act.

In any of these cases, the contractor may finds it necessary to protect the disclosure of its trade secrets by going to court. Generally, when a company’s trade secrets are being improperly disclosed, the company seeks to enjoin the misappropriation or theft. If the disclosure can not be enjoined, or it is too late to stop the unauthorized disclosure, contractors may seek monetary damages for the loss of their property.

There are several statutes which give contractors the right to such relief against the government. Specifically, the Trade Secrets Act of 1948 and the Economic Espionage Act ("EEA") of 1996, along with the Administrative Procedure Act ("APA") and the Administrative Dispute Resolution Act ("ADRA") give contractors the right to enjoin the government from releasing trade secrets. The Trade Secrets Act and the EEA are criminal statues which prohibit the misappropriation of trade secrets. Because they are criminal statutes, however, contractors do not have standing to sue under either statute. The APA and the ADRA give contractors that standing.

The APA gives private parties the right to sue the government for, among other things, any violation of law, such as the Trade Secrets Act, committed by government officials. Under the APA, an aggrieved party may obtain injunctive relief but not monetary damages in federal district court. Similarly, the ADRA provides the same standard to obtain an injunction in the U.S. Court of Federal Claims where contract and procurement disputes are often heard.

If a contractor cannot obtain injunctive relief, it may seek monetary damages under the Constitution’s Fifth Amendment’s Taking Clause. Under the Taking Clause, the government may not use private property without providing just compensation to the owner. For a claim under the Fifth Amendment to succeed, the contractor must show that the government’s unauthorized use of the trade secret is a taking and for public use. In order for a contractor to establish that the government has taken its trade secret, it must generally establish that it has an "invested expectation" in the trade secret and that the government’s actions will destroy its value. This can usually be proven by a contractor that has developed a trade secret for the commercial market. In contrast, if the contractor has developed technology which is only for use by the federal government, the claim may not succeed.

Additionally, depending on the government’s rights in the trade secrets, a contractor may seek monetary damages, such as royalties, under a breach of contract theory. Such a claim may be pursued before the board of contract appeals or the Claims Court. A contractor’s likelihood of success in these cases usually depends, however, on the scope of the license given to the government. As noted above, the government usually acquires limited or restricted data rights in a contractor’s trade secrets. In order to prevent the government from asserting those rights beyond those allowed by the law or contract, contractors should understand and negotiate the scope of the government’s license before a contract is awarded. Contractors should also ensure that all information that is given to the government is marked with a legend indicating that the information being provided is "confidential and proprietary information" belonging to the contractor.


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