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Safety Net

When setting up your Web site, beware the legal pitfalls.

Yours is a fast-moving company, savvy and up-to-date. So of course you want to establish a World Wide Web site or other presence on the Internet. But while Internet advertising and commerce opens a whole new world of possibilities, it also opens a whole new world of legal problems.

The rights to that popular song you incorporate into your Web site may belong to someone else. The freelance programmer who designs your Web site may later claim ownership of it. The theme-oriented bulletin board you establish for customers may host discussions and graphics that are inflammatory or even illegal in some countries.

"Companies introduce Internet sites with much fanfare," says Mark Kaminky, vice president and general counsel for MVP Media Group, an entertainment-oriented publishing firm in Lombard, Illinois. "Yet many times they fail to consider the complicated legal issues that are part and parcel of the communications revolution."

One of the chief dangers, says Kaminky, is rushing to get online without a real purpose. "Everybody wants to get online because everyone else is," he says. "You need to decide what you want to do and develop a plan. Then consider what legal concerns might be involved."

Many of the legal concerns associated with doing business on the Internet fall into the area of law called "intellectual property." Unlike more conventional forms of property, such as land or equipment, intellectual property includes ownership of patents, copyrights, trademarks and trade secrets. Laws protect intellectual property to encourage creativity and prevent people from stealing ideas.

As inventions such as the printing press and the copier have made reproducing and distributing ideas easier, the law has been adapted. But now that the Internet can make ideas instantly available worldwide, companies doing business on the Internet open themselves to a wide range of legal questions for which American law may not yet have answers. Indeed, given the international arena of the Internet, it's not always clear which country's laws apply.

The international arena brings increased potential liability because different countries have different moral expectations and legal standards. That's what CompuServe learned last January, when a prosecutor in Munich asked the online service to stop letting German subscribers see discussion groups and pictures Bavarian state police said violate German pornography laws. Fearing legal action, CompuServe promptly shut down 200 of its newsgroups--eliminating access to subscribers in 140 countries.

There are also questions concerning transactions conducted online. Advertising specialized products and services on the Internet can help you reach narrowly targeted groups of potential customers and simplifies the selling process by letting people place and pay for orders electronically. Don't assume, though, that your standard sales terms and conditions can be transferred wholesale into this new medium. "You've got to customize your legal needs to this new frontier," Kaminky says. "A lot of people just go out [on the Net] with [the legal protection] they have and get burned."

Be especially wary if another business asks to advertise its products on your Web site. "If people see a magazine ad, they don't buy the product through the magazine," says Kaminky. "A Web site is different." If the other business didn't have a right to sell that product, doesn't deliver the merchandise, or the product injures someone, the customer won't necessarily distinguish your business from the seller's. At best, you could lose goodwill; at worst, you could be named in a lawsuit.

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This article was originally published in the February 1997 print edition of Entrepreneur with the headline: Safety Net.

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