The Internet presents a new frontier with unlimited potential. The purpose of this Guide is to ensure that legal issues are properly considered to provide individuals and businesses maximum protection with minimum liability.
This chapter outlines the initial steps towards establishing a business on the Internet. Key issues involved with these steps are identified. As these issues are identified, the reader is directed to relevant sections of this Guide for a more detailed explanation.
A business’ use of the Internet varies. Simple activities such as connecting to the Internet, obtaining external e-mail capability for company employees, and setting up a basic web site are the initial steps. More complicated steps include establishing a web site that can process consumer transactions. No matter what level of involvement, a business must balance the advantages and disadvantages of entering the Internet. Even the basic steps take time and entail a certain degree of legal, security, and business risk. Therefore, venturing into the Internet and into the world of electronic commerce must make financial sense.
- Starting And Running A Web Site
- Legal Issues Related To Using E-Mail and E-Video
- Legal Issues Related To Electronic Commerce
Starting and Running a Website
The first step in establishing a presence on the Internet is to get connected to the external world. Businesses typically select an Internet Service Provider (ISP) with high-speed connectivity. The ISP provides a web server (computer) to host your web site and at least two domain name servers that allow users to find your web site. ISPs can be found in the phone book or at numerous web sites. When selecting an ISP, one should look at possible advancements in technology and whether the ISP will be able to provide these advancements. Businesses should be leery about entering into long-term contracts with ISPs who do not have the capability of expanding and growing with new technology. (See the section of this Guide on Contracts for a detailed explanation of what terms to look for when entering agreements). An examination of the ISP’s capabilities regarding SPAM, privacy policies, and connectivity time should also be considered.
Obtaining a Domain Name
The next step is to obtain a domain name. A domain name serves as a company’s business address on the Internet. One must select an appropriate name for the web site and the appropriate top-level domain name, such as “.com” or “.biz.” (See the section of this Guide entitled Domain Names for a detailed explanation of the domain name system). To register a domain name, a company contacts a domain registrar to determine the availability of a certain domain name. More information on the selection and availability of domain names can be found in the next section of this Guide.
Designing Your Business’s Website
Typically, a business will hire a third party to design a web site. When hiring a web site developer, a web site development agreement should be drafted and signed by all parties involved. The web site development agreement is the central document used to define the relationship between the developer and the client. There are many variables to consider in evaluating this contract. (Issues relating to web site development agreements are discussed in the section of this Guide entitled Contracts – Web Site Development and/or Web Hosting Agreement).
Consideration should be given to the content that will be published on the site. The entire world gains access to this information. Thus, private company information must be closely examined before publication. Companies should be careful not to publish copyrighted information without consent or any content that is unlawful. It is not proper to use content from someone else just because it is on the Internet or because it does not have a copyright or trademark notice. Similarly, the background content or code of the website should not include infringing material. Establishing an Internet access policy detailing the people who have access to publish information on the company web site reduces the chances that inappropriate content reaches the public.
Hosting Your Business’s Website
After the web site has been developed and approved by its owner and is ready to be seen and used by the world, it must be transferred to a server having an appropriate connection to the Internet. While some web site owners will want to operate the site in-house, many others use a third-party hosting service. The terms and conditions of using such hosting services are often the subject of a written agreement between a web site owner and a hosting service also discussed later in this Guide in the section entitled Contracts – Web Site Development and/or Web Hosting Agreement. Negotiations for web site hosting agreements tend to concentrate on anticipated uptime and response time for the site. It is also important to consider possible future transfers to a different host and compatibility with the host platform (typically UNIX, Windows, or Sun).
Increasingly, web site hosting services are offering more than just hosting of web sites. The trend in this area is toward one-stop shopping. In addition to hosting one’s web site, companies are also offering to provide firms with e-mail, file transfer protocol, statistics, and other capabilities. In addition, some Internet companies are seeking to evolve into providers of complete electronic commerce solutions so that clients that wish to enter the electronic commerce arena can do so quickly and simply. Reviewing the contracts of various hosting services and asking for specifics of what is being offered is essential. However, knowing what your company needs and what is unnecessary is just as important.
Legal Issues Concerning Your Business’s Website
There are many legal issues concerning the operation of a web site. A web site is open to the world and must be operated with caution. The following is a list of significant issues involving starting and running a web site:
- Selecting and acquiring a domain name which does not duplicate another‘s domain name nor infringe or dilute another’s trademark;
- Obtaining a web site development agreement and hosting arrangement favorable to the business’ interests;
- Respecting the copyrights of others and protecting with copyrights the business’ display of its own material;
- Obtaining patent protection for any of the business’ on line related inventions;
- Understanding the various government regulations of Internet commerce and ensuring that information on the business’ web site is not inaccurate or misleading, false advertising, or in violation of consumer protection laws;
- Forming contracts on-line; and
- Ensuring users’ privacy rights are not compromised.
Legal Issues Related to Using Email and Video
Internet e-mail improves a business’ ability to communicate with customers and other businesses allowing virtually instantaneous communications around the world. E-Video or Internet Video provides visual communications over the Internet. In order to reduce liability, businesses that use these forms of communication must take precautions to ensure that the information is secure.
Employer Email Policy
Establishing an employer e-mail policy is the first step to reducing liability. Such a policy informs employees that e-mail is to be used solely for business purposes and that any e-mail transmitted or received using the company’s hardware, software, or networking may be monitored. Thus, employees should be informed that business e-mail has no reasonable expectation of privacy. Restricting e-mail usage to business use reduces the number of personal messages going across the network and the potential for an unwanted lawsuit. It also increases the bandwidth of the company’s Internet access, creating business efficiency.
Companies should also be aware that correspondence via e-mail might be viewed by third parties to the transactions. The Electronic Communications Protection Act makes it a federal crime to intercept an e-mail transmission during the time it is being sent from the sender to the receiver. As the time period is minimal, however, the Act may not offer adequate protection. Thus, businesses should take affirmative steps to protect online e-mail transactions. One step is to separate e-mail and other network backups onto unique servers. This allows a business to backup the network without backing up stored e-mails. However, e-mails may remain in computer memory or with the company’s ISP depending on the ISP Agreement. A careful review of all agreements dealing with e-mail reduces the risk that an electronic transmission will come back to haunt the business.
Video conferencing or e-video is relatively new as compared to e- mail. However, the same issues are present. Businesses need to establish policies relating to the types of information that can be sent via the Internet.
The following are some of the issues for a business to consider relative to both its internal and external communications:
- Developing an “Employee Internet and E-mail Use Policy;”
- Preventing and avoiding liability for employee use of e-mail that harms another (e.g. defamation, sexual harassment);
- Protecting the confidentiality of e-mail with encryption and digital signatures;
- Protecting on-line materials with copyrights and respecting the copyrights of others;
- Understanding that sending e-mail into other states may create legal jurisdiction over the business in those other states or expose the business to tax liability in those states;
- Understanding that sending SPAM via e-mail may subject the business to anti-spam laws; and
- Ensuring that the business’ e-mail communications with its legal counsel maintain the attorney-client privilege.
Legal Issues Related to Electronic Commerce
As can be seen from the issues above, the movement from a purely passive or descriptive web site to a more interactive one involving the e-mail exchange of information increases the number and kind of issues with potential legal liabilities for a business. The potential for legal liability increases even more when a business begins electronic commerce, or the actual sale (or arrangements for sale) of goods or services, using the Internet. The passage of the Electronic Signature in Global and International Commerce Act (E- Signature Act) signified a leap forward with respect to electronic commerce.
The E-Signature Act was signed into law on October 1, 2000. The law provides that electronic contracts and electronic signatures are legal and enforceable just like a paper contract. Thus, clicking the “I Agree” button in an e-contract or typing the signer’s name into an area designated for a signature on an online contract form accomplishes the act of signing a contract. Businesses should be aware that the transactions entered into online will have a binding effect. At the same time, companies need to be aware of their site’s security and encryption measures to assure clients that hackers cannot gain access to confidential transactions. This topic will be discussed in more depth in the Security On-line and Digital Signatures section of this Guide.
Other considerations for businesses to take into account include the following:
- Federal, state, local and international authorities regulate important elements of electronic commerce like contract formation, electronic payments and consumer protection;
- Interstate electronic commerce may subject the business to lawsuits in other states;
- Interstate electronic commerce may subject the business to tax claims by other states;
- Rights and duties may arise under one or more sections of the Uniform Commercial Code, which generally controls electronic commerce;
- Unsecured or unauthenticated information may lead to breaches of corporate security or the potential loss of trade secrets;
- Intellectual property issues must be addressed to ensure the business’ rights are protected and liability is not created regarding the rights of others.