Top Legal E-Commerce Concerns (Part I)

npfWhen dealing with contracts in the e-commerce arena, you will want to know what to look for and what to think about when launching your e-commerce business. The process of negotiating an e-commerce contract can be an eye-opener for most people. Highlighted are five key legal concerns that every e-commerce business owner should be aware of.

1. Settle on Your Domain Name

In e-commerce, branding is key and often people revert to sneaky practices. A common trick is for someone to register a name similar to your company’s name, only to sell the name back to you at a steep price. This practice is now known as cybersquatting and is unlawful. It’s important to know that a patent attorney can help you with actions that can be taken to get “your” domain name in that situation.

Another trick to watch out for: If you web host or developer registers your domain name for you, make sure that only you, is listed as the owner on the registration. Also, be clear on who will be responsible for renewing domain name registrations so you do not lose your domain name.

2. Negotiate Definitive Developer Contracts

Most e-commerce owners hire third party developers. Due to this you will want to create a development contract to cover comprehensively the issues that matter to you. Key issues addresses should be “go live” date, penalties for delays and test procedures for your e-commerce project.

A good contract will cover these issues and also should include warranties that your use of the e-commerce site will not infringe on anyone else’s intellectual property.  Additionally, because a developer of an e-commerce site will have access to vital information about your business, a well-drafted confidentiality provisions should be included in any development contract.

3. Take Control of Your Intellectual Property

Be sure you own your site. The intellectual property ownership provisions in many e-commerce development contracts surprise site owners. You may also find that your contracts with employees and contractors have not given you 100% ownership of patents, copyrights and other intellectual property you thought you owned. Therefore, careful attention must be paid to contracts and agreements so that you can establish clearly the ownership of intellectual property rights and avoid possible patent prosecution.

If unable to obtain ownership of, for example, certain components of a site because the developer requires ownership of those rights, make sure that your contract specifies that you have a license to use these components in your e-commerce site and in other ways that you think will be necessary in the future.

4. Don’t Borrow Without Permission

From time to time some site owners will add graphics, content or programs that they have found browsing on the Internet. While the temptation may be strong, you will want to obtain permission before they are used. In the case of a developer it’s best to place the contractual burden upon him/her either to get the appropriate permissions and licenses and to cover you should any infringement claim be brought against you.

You will also want to monitor the revisions to your site and addition of content to make sure you are not infringing on another site.

5. Reach an Agreement with Your Site Developer

The most common problem that can happen with a site owner and developer is the competing interests. The typical situation that happens is that the developer wants to take the work that it has done on a site and reuse it for other customers, while the owner wants to do whatever they want with their site. The owner also does not want to find a competitor has a very similar site, also designed by the same developer. On the other hand, e-commerce site owners need to understand that a developer’s business survival requires that clients not go out and sell a unlimited copies of the e-commerce site they developed, for a price far below what the developer can charge.

These potential problems can be avoided with contracts that contain well-defined permission requirements, non-competition provisions, etc. The important point is to address these issues before starting the project rather than to later, after a problem pops up.

In part II, more legal issues and concerns such as protecting your customers’ privacy and sorting out the tax on your e-commerce site. Other issues will be discussed to help you protect your e-commerce and avoid legal issues with your e-commerce site.