So you think you're ready to move your business online and reap the benefits of E-Commerce. Whether you already have an electronic yellow pages Web site for your established brick and mortar business and want to turn it into a click and mortar business, or you have an idea for a start-up B2C or B2B Web business, there are several legal issues which you should consider and decisions to be made before you launch your electronic business. Often, people naively believe that the techy they hire to design their Web site will be educated about and know now to deal with these issues. Technology professionals may have the know-how to make a Web site perform a certain way, but are not likely to have the legal background to ask the right questions or propose solutions to legal issues. This article will summarize the main issues regarding designing Web sites for E-Commerce in demonstrating why legal counsel should be involved in planning and designing the Web site from the beginning.
Intellectual Property. There is a myriad of intellectual property issues surrounding Web sites. From the very beginning of the process, choosing a domain name, one is faced with legal issues. In choosing a domain name care must be taken that the use of the domain name will not intrude on another's trademark rights. We recommend a trademark search be conducted on the proposed name to ensure it is not already used as a trademark. A domain name registrar has no duty to ensure that the domain name you elect is not being used as a trademark. The registrar will only determine that the exact domain name is not already registered. Thus, if "HarleyDavidson.com" were not already registered and you wanted to register it, a domain name registrar would register it to you even though Harley-Davidson is one of the most recognized trademarks in the world. In fact, to have a domain registered you must represent that the name does not infringe on anyone's trademark rights.
Often your Web host, ISP, or Web designer will register your name for you, but seldom will they suggest a trademark search first.
There are also a number of intellectual property concerns with operation a Web site. Posting items on a Web site is publishing, therefore copyright issues arise. Content of Web sites must not violate others copyrights and, where necessary, permission from the copyright holder should be obtained. For example, you shouldn't digitize a print newspaper and reproduce it online without permission. Also, business method patents are becoming quite popular and care must be taken to ensure that your method doesn't violate someone else's patent. Legal counsel should analyze these issues and suggest remedies.
Contracts. Operating a commercial Web site involves a number of contracts which should all be in writing. Your contracts with your Web designer, host, and ISP should be reviewed by legal counsel. Issues such as software licensing, server interruption; data collection; site monitoring; and termination should be set forth in the contract. Likewise, agreements with portals, affiliates, vendors, suppliers and advertisers should be drafted or reviewed by legal counsel. Issues such as who owns what content and data and what are the consequences of a breach should be addressed.
Another critical contract is that between the Web site owner and its customers. Legal counsel should ensure that contracts with customers are enforceable. Effective October 1, 2000, the Federal E-Sign Act sets forth rules which virtually all electronic contracts must follow to ensure that an electronic contract is enforceable. See "E-SIGN ACT BOOSTS E-COMMERCE" in the August Lane Report for a more detailed discussion.
There are special concerns regarding collecting personal information from children under age 13. The federal Children's Online Privacy Protection Act (COPPA) effective April 21, 2000, restricts the types of information which may be collected; requires certain notices be posted regarding the sites collection activities; and requires the Web site operator to obtain verifiable parental consent before collecting, using, or disclosing any personal information of children. The law applies to any Web site that is directed to children under 13 that collects personal information; or any general audience Web site that has knowledge that it is collecting personal information from children.
Further, many states regulate the disclosure of confidential medical records. Legal counsel should analyze whether these laws, or others, apply to your site and help you develop a plan for compliance.
Jurisdiction and Taxes - The aspect of the Internet that has everyone rushing to start their E-business is that for relatively little expense a small business can reach a global customer base. This can be a double-edged sword. Just as the Web allows you to sell products or services to other states and, even countries, such transactions could subject you to income or sales tax in those states. Likewise, if you're not careful, you could be subject to suit in those other venues.
Legal counsel should review your proposed Web site content and your entire operation to analyze these issues and take reasonable steps to reduce your exposure before you launch.
As you can see, as with any other business venture there are a number of legal issues regarding creating a commercial Web site. These issues should be analyzed and addressed by competent legal counsel when you are designing the site. Therefore, it is important to have your legal counsel involved early on to address the legal issues before you launch the site and wind up having it shut down by court order or due to facing expensive litigation.
If you are currently developing a Web site or would like us to review your current Web site, please contact Marc J. Lane.
The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright, 2003 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.