Business Law: 3 Online Business Mistakes to Avoid
Despite the popular myth, cyberspace isn't the Wild West. Know the rules and protect yourself.
 

By Nina L. Kaufman, Esq

You have a brilliant idea at 3 a.m on a Saturday. You turn on the computer, access the internet and register your domain name. Over the next 24 hours, you set up a PayPal account, get a template website, slap up some copy and, voila! You're in business. Online. You haven't had to ask for permission. No pesky regulations or bureaucrats breathing down your neck. The sense of freedom is dizzying: The whole world is open and no rules apply. Right?

Wrong. "Forget that Wild West metaphor. It's a myth," writes Mark Grossman of The Grossman Law Group. "Cyberspace doesn't exist outside of the legal system," he cautions in his article, "Employees and Technology." "The very same laws apply to your internet connection as to you sitting at your office in front of your keyboard."

"Drat," you think, as you begrudgingly search for your attorney's phone number on Monday morning. Before you make that phone call, think about what you will discuss with her.

I spoke with Natalie Sulimani, an intellectual property specialist, principal of The Sulimani Law Firm and self-described "privacy nut" to get her take on what she describes as the top three items that should be discussed:

1. Having a web development agreement that doesn't bite you. Plenty of entrepreneurs hire a web developer to build on their brilliant idea. That's why Sulimani puts this issue at the top of the list. She likens opening an online business without having your attorney review the web development agreement to opening a corner shop without reviewing the lease.

"People don't understand that if the developer buys the domain name or opens the hosting account, he owns it. And you've just let your business become his hostage if there's a dispute," Sulimani says. "You need to control those issues--otherwise, [the web developer] could shutter your business in a nanosecond."

2. Not identifying your intellectual property. Just as you thought (before reading this article) that cyberspace was the wild, new frontier, there are plenty of others operating under that same misunderstanding. What's your intellectual property--specifically, your copyrights and trademarks--and can you protect them?

First, are you using other companies' trademarks? Imagine going on a major promo blitz and getting a nasty lawyer's letter from Walla Walla, Wash., saying "Cease and desist--we were here first." You could end up having to redo all your marketing efforts, doubling your marketing costs. Ouch!

Second, have you protected what you have? For a mere $45, you can properly copyright your website by submitting it to the U.S. Copyright Office. That's a necessary prerequisite to filing a copyright lawsuit. But when you do that, you could be entitled to statutory damages of anywhere from $1,000 to $10,000 from anyone who ignores your cease-and-desist letter. "It can be a good return on investment," Sulimani says.

3. Having a "patchwork quilt" for a privacy policy. Entrepreneurs have been known to scrounge the internet cutting and pasting from an assortment of website terms. Not a good idea. "Website terms should be tailored to your business," Sulimani cautions. "Copying them from another site can be as dangerous as blindly using another company's contracts." She laughed as she recalled the website that had obviously failed to find and replace "Yahoo" in its terms and conditions. "What are they doing with Yahoo's policies?" she queries. "Do they have any idea what's in them . . . or what it would take to properly enforce them?"

Sulimani offers these three suggestions when it comes to creating the terms and conditions for your website:

• Consider the highest possible standard when drafting privacy policies to properly safeguard customer information. Privacy policy standards differ from state to state. Sometimes the state with the most restrictive policies wins in a court dispute (and it may not be your state)

• Have a vision for your website. You won't want to revisit your terms and conditions and privacy policies each time you expand your online business. If you do, you'll be paying the legal fees time and time again.

• Disclose the terms of any third-party vendors. Whether it's newsletters, surveys or shopping carts, your vendors' policies may differ from yours. By disclosing them, you give your customers the tools they need to give their informed consent when purchasing from you.

Finally, look for an attorney who knows this subject. Read what he or she has to say. Do the research to know which buzzwords you need to hear. If your business is real estate, are you hearing "FHA guidelines"? If it's a social networking site, do your terms mention "Safe Harbor Act"? Cyberspace laws are in rapid flux. Make sure you don't get trapped.

© 2004-2010 The Legal Edge LLC. Nina L. Kaufman, Esq. is an award-winning business attorney, author, and speaker. Under her Ask The Business Lawyer umbrella, Nina offers easy-to-understand business law resources that protect small businesses and save them money. To learn more, and receive our FREE "LexAppeal" ezine, visit http://www.GreatBusinessLawTips.com  or contact Contact Us. This article is for your general information only. Be sure to consult with an attorney regarding your particular situation to make sure you get the specific advice you need.

Nina Kaufman, Esq. Award Winning Business Lawyer, Author & Speaker