From the September 2000 issue of Entrepreneur

Sure, your Web site is up and running, and you're generating more orders every day. But you could lose all that good fortune-and your Web site, too-if you fail to cover your legal bases. Think about it: Litigation is not only expensive, but it could result in the loss of your logo, brand name or even the site itself.

The good news is, at least there are steps you can take to protect your company from potential legal pitfalls. The bad news is, legal issues are more complicated for e-businesses than for traditional ones. Unlike entrepreneurs who set up brick-and-mortar stores, entrepreneurs who are "setting up an Internet site subject themselves to regulation by all 50 states and, potentially, by foreign nations," says Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, and one of Entrepreneur's monthly columnists. "Some courts have held that the place of sale is in the state where the offer was accepted, which is every state."

Trademarks

As your Web site grows and develops, it's imperative that you protect your intellectual property with trademarks, copyrights and patents under Trademark and Copyright law. You can trademark the name, symbol or slogan that identifies your business as the source of a particular good or service. Trademarks on your Web site might include your company name or logo, names of products or services and the domain name. A trademark gives you the right to exclude competitors from using names, symbols or slogans that customers would confuse with your company.

"The main steps in the trademarking process include registering your mark with the U.S. Patent and Trademark Office (PTO) as well as searching for pre-existing trademarks that might conflict with [yours]," says Mark J. McGuire, president of trademark research and brand protection firm NameProtect.com in Madison, Wisconsin. Although companies develop rights to trademarks simply by using them, you can strengthen those rights by registering them with the PTO. In fact, federal registration may be the single best way to protect your trademarks on the Internet. (This protection is especially important for domain names-the administrative body in charge of registering and administering domain names has a dispute policy that favors the holders of registered trademarks.) The PTO's filing fee for a trademark registration is $245.

You can access trademark forms and application information by logging on to the PTO Web site. The forms may be downloaded, filled out and mailed in. To search for other pre-existing trademarks that might conflict with yours, check out the PTO's trademark database on the Web.

There are also tools on the Internet designed to help you with the process: NameProtect.com, for example, offers a service that lets you know if your name is infringing on a pre-existing trademark by looking for possible conflicts in the U.S. federal database of trademarks, the Canadian database of trademarks, the Internet-domain-name database and InfoUSA's company-name database. You can search unlimited name variations online for free.

NameProtect.com also offers a free service called NameGuard, which gives you periodic Web-based reports that identify threats to your brand and include the tools you need to ensure that it's unique and secure. NameGuard reports are updated every 30 days. The NameGuard service provides brand-related information in three key areas: First, it tracks new domain names being registered worldwide, as well as domains being sold in the secondary markets that have potential to conflict with your company's domain, misdirect its customers or be used by a potential online competitor. Second, NameGuard will track new trademark applications in multiple countries that might conflict with your company's name. Because a trademark holder can exclude others from using a similar name, this is important for new companies without trademark protection as well as companies that have protected their trademark rights and want to snuff out potential infringement. And finally, NameGuard reports on which companies link to subscribers' Web sites and allows subscribers to learn what customers and others are saying about the company online.

Copyrights

It's also important to copyright your Web site-that way, you can prevent unauthorized use of its content. A copyright can attach to creative works of authorship that are fixed in some tangible form. The U.S. Copyright Office permits copyright registration of both graphical and textual elements of a Web site (including graphics and photos, plus product and company descriptions).

If you intend to maintain control over how your work is being used, you'll definitely need to get a copyright. Keep in mind, however, that although copyright protection under U.S. law takes effect the moment a work is produced in tangible form, only those works that are registered with the Copyright Office are entitled to substantial damages in lawsuits.

If you own a Web site, you should register a copyright as soon as possible. Contact the U.S. Copyright Office at (202) 707-5959 or visit its Web site to obtain an application form. There is a $20 application fee.

McQuire says that if any part of your Web site was created by an outside Web developer, copyright ownership of the work "may reside in the outside developer, even if you've paid the developer for that work. If possible, have the developer sign an agreement stating that you retain the copyright to any creative Web site content." Put notices on your Web site alerting people to your copyright and trademark rights.

But keep the following information in mind: Internet merchants need to be sure that they-not the developer they're working with on the Web site-have the exclusive right to use the site and make any changes to it. Secure that relationship by drawing up a legal contract stating that the material on the site is owned "by the entrepreneur, as opposed to the Web company," says Bahls. "Otherwise, you might not be able to change your site without the original designer's permission, and you might even get kicked off the site." Bahls adds that the contract should include a clear "understanding of the fees and the ability to update the site."

Trading Trademarks

Do you already have rights to the images or content on your Web site? If so, you may be able to create additional value-by selling or licensing them. IPnetwork.com, a New York City company, can provide support in this area. It offers information and services designed to guide you through the process of selling or donating your rights. If you want to license your property, IPnetwork.com will help you license it to the right bidder. IPnetwork.com can also help you determine a reasonable price for your properties and assist you in deciding what you really need to get out of a licensing deal.

What's more, the company allows entrepreneurs who want to buy or license any type of IP rights-from biotech patents to comic-book characters, which add artistic value to Web sites-a resource for doing so. You can browse through the properties listed in the auction area or use a comprehensive search engine to quickly home in on specific properties.

"You know you need art to make your site look great, but if you just lift some images from another site, that's infringement," says Christine Hearst Schwarzman, IPNetwork.com's founder and CEO. "This site helps you find out who owns the property so you can pay the small fee to the owner and not infringe upon them."

So take the time to cover your legal bases. Your work will certainly pay off for your Web site today-and ensure your Net venture will be able to rake in the profits tomorrow.