Nearly all companies now use online or mobile websites and/or
social media network pages to promote their businesses, sell goods
or services, conduct business transactions, and connect and
communicate with customers, clients, or other businesses. While
these "e-commerce businesses" confront a variety of the
same legal issues faced by traditional brick-and-mortar companies,
they also must manage other challenges that are unique to
conducting business operations and transactions in an electronic
environment. The range of legal issues to consider and manage
continues to grow, and ignoring this reality could lead to
financial liability, regulatory penalties, or unauthorized
exploitation of company intellectual property. Set forth below is a
non-exhaustive list of potential legal issues to consider in
connection with minimizing the risks associated with operating an
e-commerce business.
Consider Agreements with Online Service
Providers
Negotiate carefully all written agreements with contractors that
provide website design, hosting, advertisement, or other related
online services. Consider the use of provisions that address
intellectual property ownership, third-party rights clearance,
information security and confidentiality, and search engine
optimization practices.
Consider Domain Name Selection
Consider carefully any third-party trademark rights that may attach
to a particular URL in order to avoid using a domain name that
violates third-party trademark rights.
Protect Website Content
Protect content and materials appearing on proprietary websites or
social media pages from unauthorized commercial exploitation by
users. Consider using a ", ®, and/or © symbol in
connection with prominent placements of trademarks and copyrights
and register important intellectual property with the applicable
authorities to perfect ownership and obtain enhanced rights and
remedies. In addition, provide notices and conditions for any use
or display of the intellectual property by third parties, and
review publishable material before display or launch to ensure that
no confidential proprietary information has been inadvertently
disclosed.
Create Enforceable Online Contracts
Traditional contract principles apply to transactions conducted
online. This means that each online contract requires an offer,
acceptance, and consideration (i.e., a bargained-for exchange of
detriments and/or value). Ensure that contracts that appear on
proprietary websites (e.g., terms of website use and terms of sale)
satisfy the foregoing requirements.
Utilize Appropriate Protective Provisions in Online Terms
of Use
Prominently post on a proprietary website or social media page
properly customized notices to help mitigate legal risks. For
example, prohibit users from posting content defined as
inappropriate, disclaim responsibility for user-generated content
or third-party advertisements, limit the company's liability
for harm to users resulting from website or webpage use, and
reserve the rights necessary to maintain website or webpage
security.
Seek Available Immunity for Copyright
Infringement
Given the ease with which material can be obtained and posted
online, avoiding copyright infringement based on the use, display,
reproduction, or distribution of content posted on social media
pages or proprietary websites will always be a concern for
e-commerce businesses. The federal Digital Millennium Copyright Act
of 1998 (DMCA) lays out certain safe harbors for Internet service
providers that could provide protection from such claims. Become
familiar with the safe harbor requirements and consider taking the
steps necessary to obtain available immunity from claims of
copyright infringement.
Avoid Trademark Infringement
Unlike under the DMCA, there are no statutory safe harbors for
trademark infringement claims. Care must be taken to avoid misuse
of third-party marks by seeking consent to use marks and
demonstrating a good faith effort to prevent unauthorized use by
implementing and following a takedown policy.
Seek Available Defamation Protection
The federal Communications Decency Act of 1996 offers providers of
interactive computer services safe harbor protection from civil
liability for defamation (and certain other) claims where the
provider is not the content provider. As with the DMCA, implement a
policy for acceptable content and utilize a takedown procedure for
harmful or offensive material posted by third-party users.
Remember the Rights of Privacy and Publicity
Privacy laws, including laws designed to protect medical records,
financial information, and information about children or teenagers,
apply to information collected online. To avoid punitive action
from state attorneys general and/or the Federal Trade Commission,
prominently post on the website a carefully drafted privacy policy
that accurately explains collection practices for personally
identifiable information in accordance with applicable laws at the
state and federal levels, and strictly comply with any such policy.
Similarly, the exclusive right to exploit one's likeness for
commercial gain applies to content available online. Procedures
should be implemented to control the unauthorized use or disclosure
of such protected data and images without permission.
Remember the Impact of Agency Liability
Remember that actions taken by individuals online (even without the
approval of management) can implicate an entity. In particular,
actions of employees can expose the company to liability under
certain circumstances. Adopt guidelines governing employees'
permissible use of company websites, social media pages, and
computer equipment and the content that can be displayed or
published.
Provide Information Security
Implement an information security program consistent with the
standard generally recognized under federal law and any applicable
industry-specific or unique state law requirements in order to
protect sensitive data accessible or stored in connection with
online websites. Ensure data handling procedures align with any
practices described in a website privacy policy.
Be Mindful of Jurisdiction
Because electronic transmissions through the internet reach parties
throughout the world, businesses may become subject to the laws of
many different countries or states within the United States when
engaging in e-commerce activities. Consider refining the scope of
jurisdiction to the extent possible by stating the governing law,
venue, or forum and limiting online activities to only those
jurisdictions in which the e-commerce business is prepared to
comply with applicable laws and regulations.
Know Taxation Obligations
Whether online transactions and sales are subject to state taxes
varies among the states. While certain states have enacted laws
that impose obligations on resident businesses or businesses with
in-state physical facilities to pay such taxes, others do not
currently have a similar requirement. Be aware of those states in
which taxes must be collected for online sales and transactions,
and keep in mind that any such obligation may change at any
time.
Consider Insurance
E-commerce businesses should consider obtaining insurance coverage
in order to limit their financial exposure for information security
breaches, online tort and intellectual property right infringement
claims, and certain website-specific practices such as
hyperlinking, framing, using metatags, and banner advertising.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.