The Law Of The Web

Can you really bulletproof your website? Maybe not. But you can adopt a well-informed, cost-effective approach to reducing risk and potential liability by taking certain steps when getting a website off the ground. The earlier you start, the better.

Let's say that, like most business people today, you're serious about capturing market share, developing brand awareness and growing your business, so you have decided to launch your own website. You have a winning product or service, a catchy name and cool logo. You've got a handle on what it is you want to do with the site and what the business case is for it. You might even have decided who is going to get it up and running–an in-house team or an outside web development company. Everything looks like it's ready to go, but you also have enough savvy to know there are advertising, copyright and trademark issues, as well as contracting and consumer-protection issues, that you need to be aware of before you go too far down this uncharted path into the metaphysical world of e-commerce. Where to begin?

1. Have a Plan
The legal considerations start with the web development plan. Let's say you've decided to outsource or otherwise contract with a development firm to do the work; there are a number of things you will need to address in your agreement with the firm. Beyond outlining the stages of the project and your expectations of the work to be performed, the contract should clearly define the ownership of work product and content; infringement, liability and indemnification terms; the launch schedule and project management details; pricing and payment terms; maintenance and support; confidentiality and privacy; and acceptance testing.

2. Know the law
Whether the purpose of your website is merely as an advertising channel for products or services, or whether you wish to transact business with customers through your website, you need to be aware of certain realities and risks governing advertising on the Internet.

Internet advertising is governed largely by the same basic laws, regulations and policies as more traditional forms of advertising. To assist merchants and service providers in understanding and complying with the regulatory framework, the Competition Bureau published a draft paper in May 2001 that summarizes many of the issues, including a good discussion on the use of disclaimers and jurisdictional issues. The paper is titled Staying “On-Side” When Advertising On-Line. An updated version is available from the Competition Bureau website (

3. Minimize the Risk
Some practices are best followed to avoid liability issues. For instance, do not use any other person's or company's logo, design, trade name or content as a link or in any advertisement or underlying software, without express written consent. Be vigilant to spot any illegal, prohibited or offensive content, products or services, misappropriated logos or trademarks, or any false or misleading advertising that is visible to the retail public on your website. And avoid framing other websites or making any implied affiliations, without the express consent of those parties.

The best forms of risk mitigation are well-drafted user agreements (known as a Terms of Use or Terms of Sale Agreement) and effective legal notices containing disclaimers, a privacy policy, limitations on liability and prohibitions on merchants linking to other third-party websites. You need to ensure all legal notices are readable and easily accessed, and highlight the important terms. At a minimum, your home page should have a hyperlink to legal terms at the top of the screen, and a statement next or near to the hyperlink stating that use of the site is subject to terms to which the user agrees by accessing any content or other links. (This can be worded in a non-intimidating way, like “The Legal Stuff” or “What Our Lawyers Want You to Know.” But, “non-intimidating” does not mean obscure.) Online customers should be required to scroll through the legal terms and accept them; incorporating an “I Accept” button is highly effective.

Website notices are designed to shelter you against many different kinds of claims, including those based on:

– false, misleading or offensive advertising by your customers;

– outdated links or content, or content that is inaccurate or incomplete;

– server outages, downtimes, or transactional loss of data;

– implied representations, warranties or affiliations with your merchant customers;

– intellectual property infringement (e.g., copyright and trademark) or wrongful passing by your suppliers;

– jurisdictional claims (by stipulating in the legal notice which laws and which courts will govern any legal or contractual claim or dispute involving your website or business transacted on your website, e.g., the laws of Ontario).

Legal notices are an inexpensive form of “bulletproofing” designed to reduce risk. Nothing will ever entirely eliminate your risk, but nothing will offer you this level of protection for so little cost, either.

4. Copyrights and Trademarks
Intellectual property plays a critical role in governing and regulating the rights and obligations of users and contributors. Websites, for the most part, consist of multiple-sourced, overlapping content such as text, graphics, audio, video and hypertext links, each of which is protected by copyright. In other words, at least in theory, somebody, somewhere, owns the copyright in each of these original content sources, and somebody owns the copyright in the website itself. You need to be aware of these rights and their boundaries, lest you find yourself unwittingly infringing copyright.

Copying, downloading or otherwise reproducing content from another site without the express consent of the owner is–or at least can be–copyright infringement. Whether it be a graphic, a piece of artwork, a logo or text, courts apply various tests to determine at what point such copying becomes copyright infringement. It is vital you protect yourself in the development agreement against unauthorized copying of third-party content on your site by your website developer.

You also need to be aware of content ownership issues between you, your in-house employees and outside consultants contracted to design your website or features of it. As a general rule, copyright vests in the author (creator) of the original work. One exception is where the author is an employee and the work is created in the course of employment. In that case, the employer is the first owner of copyright. If, on the other hand, content is created by an outside consultant or designer, the consultant or designer owns the copyright unless he or she has signed an agreement assigning copyright (and waiving moral rights) to you. It is not enough that you paid the consultant or designer to create those features; you need an explicit assignment of copyright to own the content.

Trademarks are similarly vital forms of intellectual property that play a critical role in the world of e-commerce. A trademark can be a word or phrase, design, logo, or any combination of these, that allows one person to distinguish his or her wares and services from those of another. Trademarks are vital to branding and goodwill, and can play an important role in securing or protecting domain names. Trademarks can be registered or unregistered. As with copyright, a trademark can be infringed. But as with copyright, steps can be taken to protect your rights, to reduce risk and to leverage the mark as part of an overall branding strategy.

Beyond branding, trademark issues that arise in connection with e-commerce include website content; unauthorized linking and framing; parody or copycat websites, and context-sensitive advertising. With regard to content, for example, trademark infringement can occur if you place a competitor's trademark on your website without authorization, if you use another's trademark in your advertising, if you adopt or use another's trademark as your own, or even if you use a confusingly similar trademark in advertising your wares or services. This operates in reverse: your trademarks (and copyright) enjoy the same protection.

The subject of copyright and trademarks is too large to do more than scratch the surface here. If you have any questions or doubts, seek the advice of a lawyer experienced in intellectual property law.

5. Consumer protection
Several provinces, including Ontario, have adopted new consumer protection legislation that will directly affect Internet-based transactions between suppliers and consumers. Ontario's legislation came into force on July 30, 2005. Very briefly, the legislation is applicable to a number of categories of consumer agreements, including over-$50 contracts transacted on the Internet. It provides for detailed disclosure requirements about the supplier, the goods and services, prices, delivery and performance requirements, as well as the rights and obligations of both the consumer and supplier, date of the transaction and name of the consumer. It requires suppliers to provide consumers a clear, last-chance opportunity to accept or decline the agreement, or to make corrections, before completing the transaction. Non-compliance will give rise to significant consequences, not the least of which are important cancellation rights.

Under the new legislation, suppliers must deliver a copy of the agreement to the consumer–by e-mail, fax, snail mail or in any other manner that allows the supplier to prove that the consumer has received it–within 15 days after the consumer has entered into the agreement.

The purpose of this article is to raise awareness of the many legal and business issues that should inform prudent companies that are expanding traditional sales channels to include the web. But we have only scratched the surface. Other issues that should be addressed include the general requirements of e-commerce contracting, privacy and confidentiality, linking and framing, domain names, international transactions, and intellectual property protection and infringement, to name a few. Remember: awareness is half the battle. Adopting and implementing business controls to monitor the content on your website, including that content's origin and pedigree, is the other half.