Patricia Claire will be speaking on the topic of this article as well as the CANSPAM law at the CPE Mega Conference 3 in Lansing, Michigan on June 22, 2007.

Throughout the U.S. economy, using the Internet for many primary, traditional business purposes has become an everyday practice for multitudes of companies, their customers and suppliers. New business models are developed to take advantage of unique features of conducting business online. However, with the new opportunities the Internet presents to businesses, new problems – legal and technological – arise as well. These issues apply to your business or CPA firm, as well as to a CPA firm’s clients.

Many companies are reassessing fundamental issues of legal protection and liability avoidance to safeguard their online presence. Basic legal principles affecting intellectual property ownership and contracts apply to Internet activity, and new statutes and regulations are developed as new issues emerge.

One of the unique elements of the Internet is that much of the ownership of a web site consists of what is known as intellectual property (”IP”). Basic types of intellectual property are trademarks, copyrights, patents and trade secrets; each is governed by different laws and procedures for protection.

Building the IP Portfolio: Copyright
Reviewing a company’s web site for legal protection immediately raises the issue of who owns the “content” of that web site (for example, graphics, text, underlying computer programs). Businesses often make the assumption that their company owns all of the content of the web site. You may be surprised to find that this very often is not the case. Nothing can be taken for granted when it comes to the ownership of a web site.

To identify and protect ownership of the web site, these among other questions need to be answered: were assignments of rights given to the business by independent contractors? Have trademarks and copyrights been registered? Who is responsible to develop the portfolio of IP assets of the business?

A basic legal issue of ownership of web site content is: who is the “author,” who created the content? If an employee created it in the course of employment with the company, then that company is the owner under an important concept called “works made for hire.” However, any agreement with an outside web site developer or content contributor needs to be carefully reviewed to see that ownership in the content passes to the business, which expects to own it. Just using the words “work made for hire” is not enough to transfer ownership. In addition to assignment of ownership, it is possible to use the copyrighted materials of others on the business web site, under license from the copyright owner.

It is important to verify the source of all materials that will be used on the company web site. The possibilities abound for infringement of the works of others. The company should develop positive measures to avoid infringement and accompanying liability.

Once direct ownership or appropriate licensing is secured, the correct copyright notices would be displayed on the web site, and application for registration filed with the U.S. Copyright Office.

Trademarks
Concerns about web site protection also include the ownership of any trademarks or service marks used on the site, such as slogans, logos or words. A trademark serves to identify the source and to distinguish the goods or services of the owner of the mark from the goods or services of anyone else. Trademark protection is a separate process from copyright protection, and different rules apply.

Fortunately, trademark identification and protection generally presents simpler issues than does copyright. If a business has not previously identified its trademarks, it is advisable to do so, and to screen them for the possibility of infringement, in connection with creating an online presence. Companies that create an online presence using existing or new marks should consider federal registration of the marks.

The standard process of search, refinement and registration applies. Because of the Internet, searching has expanded to include domain name registry and informal searching via search engines for potentially conflicting use.

The Internet provides ample means to search for infringement by others using the same or a confusingly similar mark for similar goods or services. The converse also is true: a company might find a cease and desist letter arriving from another business that believes it has spotted infringement of its mark. Prudence dictates that trademarks to be used online be fully searched and protected so these increasingly frequent claims can be overcome.

Privacy
Concerns about online privacy receive a great deal of public attention, as the spotlight is turned on the unprecedented opportunities that exist for undisclosed online surveillance, profiling, sale and use of personally identifiable information. Government agencies flooded with complaints investigate web sites and take legal action against privacy violators. What steps should every company be taking with regard to privacy considerations of the users of its web site?

Relationships with Web Site Users
A business web site may be a “traditional” commercial web site providing a retail catalog and on-line purchasing opportunities; if not, it still will have some relationship with its users. The site may provide detail about the goods or services of the business, employment opportunities, a portal to other web sites, or general information on topics in the field in which the business operates. The desired users may be other businesses: suppliers, purchasers, retailers, distributors, franchisees or other affiliates. Desired users may be individuals: potential employees, subscribers or consumers of goods or services.

A business may use its web site, in any of these capacities, as a means of collecting information about its users. Or because of relationships with web-based companies such as advertising brokers, the web site of a business may serve as a tool for third parties to collect information about the users, a cause of increasing concern.

Governing Online Privacy
With a few exceptions, the development of privacy policies for web sites has been a voluntary effort. Privacy of personal information is an evolving area of the law, accelerated by the growth of the Internet. Only a few United States and foreign laws affect web site privacy, and affected companies should have implemented a compliance plan.

In the absence of new laws specifically targeting web site privacy policies, federal and state agencies alike are making use of existing laws to prevent unfair and deceptive trade practices in the operation of web sites. The Michigan Consumer Protection Act has been used against business web sites that fail to disclose, or that misrepresent, their privacy policies.

A Web Site Privacy Policy
Some businesses are surprised to find how extensively their web site has been set up to collect information about the users. Lack of knowledge about information collection practices can lead to legal problems for the web site owner, which is responsible for the accuracy of the privacy policy stated on the web site as reflected in actual practices.

Because so many web sites already state privacy policies, there is a tendency to simply copy the written policy of another, comparable site. This rarely will result in a company’s actual information privacy practices being expressed in its written policy, yet accurate expression is a key to avoiding complaints of unfair and deceptive trade practices.

Often the process of writing a privacy policy for its web site prompts a company to assess its information privacy practices and its relationships with third party collectors of information about its users. Attempting to meet the basic, voluntary FTC standards can have positive effects for a company: defining the business purposes for which it is collecting, using and keeping user information through its web site; creating and posting a clearly stated privacy policy that it adheres to; and creating a competitive edge amidst companies that fail to take these measures to the satisfaction of consumer and business users.


About the Author
Patricia F. Claire, MPA, JD, practices trademark, copyright, licensing and Internet law with Willingham & Coté, P.C. in East Lansing, Michigan. Pat will be speaking on the topic of this article as well as the CANSPAM law at the CPE Mega Conference 3 in Lansing, Michigan on June 22, 2007. She can be reached at pclaire@willinghamcote.com.

Copyright © 2007 Willingham & Coté, P.C. All Rights Reserved. No copying or distribution of this article without written permission of the firm. This article is intended to provide general information and does not constitute legal advice. Readers should not use this information as the basis for action without consulting informed legal counsel regarding their specific situation.

Top