From the December 1997 issue of Startups

Last month, we discussed online etiquette: how to conduct business online without overstepping the boundaries of propriety and good manners. Companies doing business on the Internet must not only abide by online etiquette, but also by federal regulations and the laws of the states in which they operate. Businesses should also ensure that their Web sites meet legal standards, that they observe international and intellectual property laws and that they respect the privacy of their customers. This month, we explore Internet law--uncharted territory for most small businesses.


Sandra E. Eddy is the author of HTML in Plain English (MIS:Press, $16.95, 800-288-2131), Mastering Lotus SmartSuite 97 for Windows 95 (Sybex, $39.99, 510-523-8233) and The GIF Animator's Guide (MIS:Press, $39.95, 800-288-2131).

Establishing an Online PresenceWithin the Law

A typical business establishing a Web site to publicize itself or to provide service or product information may not need to consider many legal ramifications. Visitors to the site look at the pages and may have the option of sending electronic messages, but the company doesn't actively communicate with its visitors. Some businesses, however--especially those selling goods and services online and those that are regulated by state, federal or international laws--should have an attorney view their plans. Depending on the type of business, companies might have to examine copyright law (both in protecting their own Web pages and using others' intellectual property appropriately), state and federal consumer-protection laws, interstate and international commerce laws and treaties, state and federal tax laws and laws regarding international duties. When preparing to sell goods across state lines, a company should be able to compute the correct sales tax for customers living in every state and be aware of laws restricting or forbidding the sales of certain items, such as liquor, cigarettes and fireworks. Companies doing business across country borders also must be aware of laws controlling contracts, product liability, privacy and security.

Jonathan Rosenoer owns and operates CyberLaw and CyberLex (http://www.cyberlaw.com ), pro bono educational services on law for computer users. His book, CyberLaw: The Law of the Internet (Springer-Verlage, $34.95, 800-SPRINGER), provides in-depth articles about Internet legal issues and tracks major developments in computer law. "If a business is subject to special regulation, it should determine whether there are any domestic or foreign state advertising issues," Rosenoer says. "A company offering goods and services might want to check to see if it needs to address any consumer-protection laws." For example, federal law restricts the distribution of certain types of computer software outside the United States, for security reasons. To get ready to export software that could have military applications, you might have to go through a number of steps to meet the regulations of the Bureau of Export Administration in the U.S. Department of Commerce.

You should also make sure your Internet service provider (ISP) is a good business partner. Before committing to a particular ISP, get recommendations from other business owners in your area and research candidates through the local Better Business Bureau. Finally, interview the ISP as you would any other vendor. Ask ISPs the following questions: How do you ensure the security of e-mail messages and credit-card payment information? Do you have liability insurance to cover security breaches? Have you conducted criminal background checks of those with access to customer data?

Intellectual Property Rights

The U.S. Copyright Act of 1976 regulates the protection of intellectual property in this country; its primary international counterpart is the Berne Convention for the Protection of Literary and Artistic Works. When establishing a Web site, consider the following copyright information, applicable around the world:

  • The creator of a work automatically has a copyright at the time he or she creates it. Works created after March 1, 1989, are not required to include a copyright notice.
  • To place a work in the public domain (that is, allow it to be freely published by others), the creator must explicitly state that the work is in the public domain.
  • If you link to a copyrighted work, you are not considered to be copying it, under the current interpretation of the law.
  • You can copy small parts of protected works under what is known as fair use. For example, if you are a literary critic, you can cite parts of a work that you are reviewing. Fair use is not always easy to determine, however, so if you want to cite a few words from a protected work, be sure to credit its creator.

Protect Your Domain Name

Trademarks make a particular company's goods and services easy to identify. On the Internet, the most significant identification for your company is its domain name. But no trademark laws yet apply to domain names. To protect your domain name, consider trademarking it and making sure you keep your registration up to date to avoid losing the name to another company.

Guarding Customer Privacy

Over the years, the U.S. Supreme Court and individual states have established a citizen's right to privacy. But how those rights will translate on the Internet has yet to be established. "The Global Information Infrastructure's great promise--that it facilitates the collection, reuse and instantaneous transmission of information--can, if not managed carefully, diminish personal privacy," according to A Framework for Global Electronic Commerce (http://www.iitf.nist.gov/eleccomm/ecomm.htm ), a paper issued and posted on the Web by President Bill Clinton and Vice President Al Gore. "Privacy concerns are being raised in many countries around the world. For example, the European Union (EU) has adopted a directive that prohibits the transfer of personal data to countries that, in its view, do not extend adequate privacy protection to EU citizens."

Timothy J. Walton, an attorney in Novato, California, runs a Web site called Internet Attorney (http://www.sflegal.net/attorney/ ), which includes articles about the law and Internet privacy, Web-site design, computer security and other related topics. "If someone publicizes personal facts for financial gain or without permission--or makes someone look bad, he or she can run into problems," Walton says. "For the most part, if a site asks for information and the person visiting the site freely gives it, there is nothing illegal about selling that name and address to anybody who will pay for it. However, unsolicited e-mail has resulted in court orders to stop, increased legislative activity and, in one case, the disbarment of an attorney."

Doing Business Across State and Country Borders

Large and small companies can reach a wide audience on the Internet; state and country borders are invisible to most customers. "The borderless state of the Internet presents both opportunities and problems for American businesses," Walton says. "Many pending court cases and laws involve businesses in one state selling to residents of other states. For example, California recently passed legislation that attempts to regulate out-of-state online businesses that are selling to California residents.

"The California law also states that an online business must specify a real-world address on the opening page, the page with the sales pitch or the page that requests credit-card information," Walton says. It's so easy to create and post a professional-looking Web page that even fictitious companies can look like real businesses to consumers. So the best proof of a company's existence is a street address that a customer can verify through a personal visit or a letter.

The Bottom Line

"The best advice for a company that wants to establish an Internet presence is to conduct business with integrity," Walton says. "It is deceptively easy for businesses to fall into the trap of treating online consumers as nameless, faceless entities. Offer online customers the same respect you give your other customers. Someday, a customer who has had a good experience with your company will decide to tell a few thousand friends about it."

Law and Ordering

Timothy J. Walton, an attorney in Novato, California, recommends these Internet law resources:

  • FindLaw Internet Legal Resources (http://www.findlaw.com/ ) is a legal search engine and directory. To find information about a particular legal topic, either type a term in a text box or click on a category, such as Legal Subject Index, State Law Resources or Foreign & International Resources.
  • Lawguru.com (http://www.lawguru.com/ ) is the home page of The Law Offices of Eslamboly & Barlavi, a law firm with offices in Los Angeles and Fresno, California. Here, you can perform legal research using hundreds of legal search engines and link to other law-related sites.
  • The Business Law Site (members.aol.com/~bmethven/) sponsored by Berkeley, California, law firm Methven & Associates, allows you to research federal, state and international statutes; link to other legal resources; obtain information about the Internet, trademarks and copyrights; review business law; and find other business information.
  • The Law-Related Internet Project Saarbrücken (http://www.jura.uni-sb.de/english/ ), sponsored by the Computers and Law department at the University of Saarland in Saarbrücken, Germany, is an international law center. From this site, you can link to English- and German-language legal sites in Germany and other parts of Europe.

Worth Reading

Online Law: The Software Publishers Association's Legal Guide to Doing Business on the Internet, by Thomas J. Smedinghoff, Andrew R. Basile Jr. and Geoffrey Gilbert (Addison Wesley Longman, $36.95, 800-822-6339), is a layman's guide to Internet law.

Doing Big Business on the Internet, by Brian Hurley and Peter Birkwood (Self Counsel Press, $14.95, 800-387-3362), includes a variety of information, from legal and security basics to choosing an Internet service provider.

Contact Sources

Jonathan Rosenoer, http://www.cyberlaw.com

Timothy J. Walton, c/o Brayton Harley Curtis, 222 Rush Landing Rd., Novato, CA 94945, (415) 898-1555, ext. 275, http://www.sflegal.net/attorney