Up-front attention to these issues when Web sites are first being developed and hosted can save time, money, and legal wrangling later. Here, Benjamin Franklin was right! "An ounce of prevention is worth a pound of cure."
Read on for some of the important legal issues to consider regarding Web sites. Also, check out the Resource Notes at the bottom.
Ownership and Control
One may view Internet domain names as a form of intellectual property, that is, an intangible property right belonging exclusively to the owner of that right. One establishes the property right by registration with a domain name registrar, such as NSI (formerly Network Solutions, Inc.), or by purchasing the domain name from an intermediary or auction sites, such as SnapNames.com. As strange as it may seem in dealing with a property right, the ownership and control of Web sites are common problems faced by many businesses.
For example, individuals may purchase an existing business, believing that the domain name by which that business is promoted online was part of the acquired business. They may later discover that title to the domain name, i.e., the registration, did not rest with the seller, but rather with the business’s former Web site developer, who decides to try to usurp the value of the business for his own aims or to leverage his control of the essential domain name to extract exorbitant Web hosting or other fees from the new owners.
Other businesses may hire a marketing or Web development company to acquire one or more domains and to build a Web site for it. Conflicts arise over payment, quality, or other issues, and the business now finds itself having invested thousands of dollars into an e-commerce site tied to a crucial domain name that its vendor owns and controls.
Just as issues arise as to domain name ownership, there can be issues as to the ownership of the source code that makes up the Web site. Many smaller businesses may contract out for the development of their Web sites and may rely upon oral contracts or contracts comprised of oral and electronic mail exchanges. These informal agreements leave much to be desired and are rife with ambiguity.
Businesses may assume that they own the Web site’s source code when indeed that title remains with the Web developer. This ownership issue can create problems where the ongoing maintenance of the Web site remains tied to the Web developer, perhaps at an inappropriate price for the business. Even where formal Web development contracts are executed between the parties, these may be drafted to the Web developer’s advantage, and ownership rights may not transfer under those agreements.
Many Web site developers now use Open Source tools for their development activities. There are many dozens of Open Source license agreements that govern what can be done with the Web sites and other products that result from the use of various Open Source components. These agreements may permit some ownership rights to be transferred to the business purchasing the Web site development services.
More frequently, however, these agreements prohibit or severely restrict the transfer of ownership rights. (Indeed, version 3.0 of the GNU General Public License is far more restrictive in this regard than version 2.0.) This means that a business may pay a Web developer to create a certain look-and-feel or special navigational aids for the Web site, but may not have absolute or any ownership rights therein. In such an instance, the business may have no ability to legally prohibit the Web developer’s use of that customization for subsequent clients.
Intellectual Property Liability
Business owners may select corporate names and purchase domain names for their businesses without considering whether the effect that selection may have on their risk profiles. For example, the selection of a corporate or domain name may infringe upon existing trademark rights. If it does not infringe an existing mark outright, the company may still face liability from allegations that the domain name dilutes the value of famous trademarks.
Copyright infringement is another concern principally regarding the content of the Web site. Here, there are issues as to whether the textual content of the site was copied from another source. Images and other graphical or visual content on the Web pages may be purchased through Web sites like BigStockImages.com. Because the license agreements that govern those purchases are generally very one-sided to favor the purveyor of that content, one must exercise care to understand and retain a record of the agreement and to ensure that the content is being used in accordance with the terms of the agreement. For example, the inbound license agreement may permit the use of the purchased images online, but not in printed collateral marketing materials.
Terms of Use
Many businesses fail to set forth on their Web sites the terms of use that govern the Web visitors use of the sites. Others may incorporate some terms of use in the text of some Web pages, but may not set forth a single contract encompassing all use of the site. Still others may have terms of use that deal with more traditional aspects of a brick-and-mortar business, such as return policies, but may not consider the intellectual property aspects of the business’ online presence. As an example, the Web site may set forth an invitation to call a contact person for licensing the business’ trademarks. Such vague language engenders the position that a mere phone call to the named individual suffices for the caller to obtain a royalty-free, inbound license to the logos contained in, and often easily copied from, the Web site.
Linking policies are another contractual control that businesses often fail to include. These policies set for the terms under which other Web sites can link to the business’ Web site. Absent these policies, linking may occur freely, and the business may find itself associated with Web sites offering questionable health remedies and other products or services not to the business’ liking.
Privacy Matters
Web sites may collect information about visitors, whether through an online registration or order form or secretly through the capture of the visitor’s Internet protocol, or IP, address. Businesses often fail to put consumers on notice that these data are being gathered and as to the uses to which the data will be put. This opens the door for disclosures of consumer information that can lead to unsolicited email complaints and identity theft. Further, where the Web site may attract youthful populations, federal law requires parental consent and other important measures to protect children and their privacy.[2]
Advertising Claims
Just as in the real world, consumer protection laws govern claims made in advertising, testimonials, statements comparing competitive products, and more. Because the Internet puts these claims in the global arena, international, federal, foreign domestic, and a variety of state laws may apply. Businesses must carefully weigh the costs and the benefits in the form of risk avoidance presented by the potentially applicable patchwork of laws. Fortunately, federal and state consumer protection laws in the United States are harmonized to a significant degree. The harmonization is not complete, however.
Conclusion
Web sites present an abundance of legal issues for consideration. Some, such as the issues presented by linking policies, are wholly unique to the Internet. Other issues are more traditional in nature, but emerge in new and thought-provoking ways in application to Web sites. We hope this article serves as a useful issue-spotting guide to entrepreneurs and businesses.
[1] Netcraft, October 2007 Web Server Survey, http://news.netcraft.com/archives/2007/10/index.html (visited Mar. 23, 2008); Netcraft, New York Internet and ThePlanet Most Reliable Hosting Companies in December 2006,
[2] See generally Federal Trade Commission, Implementing the Children’s Online Privacy Protection Act: A Report to Congress (Feb. 2007).
RESOURCE NOTES:
BigStockImages.com offers some terrific resources, including links to free images and tutorials. Check it out here.
Netcraft, cited in the first paragraph, is a great resource for Web-based statistics to include in business plans and pro forma analyses. This English company offers useful statistics worldwide. For an overview and to a newsletter sign-up, click here.
We hope the information here will be helpful to you. Please note, however, that, as always, information posted on this blog does not constitute legal advice, and your visits to this blog or contacts to us regarding the information posted here do not establish an attorney-client relationship. For more information, please contact us at 208.939.4472 or info@technologylawgroup.com.
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