What Should Your Website Privacy Policy Say?

What Should Your Website Privacy Policy Say

Think of your privacy policy as a disclosure statement for your website visitors. In order not to be misleading or deceptive, you need to disclose each specific practice or policy regarding the collection, use and dissemination or disclosure of all personal information. So, you need to know how and what information your website will collect.

In the most basic sense, you need to understand exactly how your business collects data, how it uses that information and how it shares or distributes it so your privacy policy can be accurate and not misleading. If you don't understand how your business discloses or uses information, you obviously won't inform your website visitors. This, in turn, could be considered deceptive. Unfortunately, most websites copy privacy policies they find on other sites. Copying another privacy policy may describe the practices of some other website, but may not describe your policies. This may be deceptive in of itself since it misleads your visitors.

Website operators should always post a privacy and/or communications policy on their website if the website gathers any type of personal contact or identifying information from website visitors and/or customers. This applies to websites that collect only email addresses. Personal information generally includes contact information such as a visitor's physical address, phone number or email address and identifying information such as first and last names, social security number, etc. If your website conducts sales of goods, you will almost undoubtedly be collecting this type of information.

Additionally, registration with your website and/or the information your website collects to process a transaction or interact with some feature will result in collecting personal information. Collecting passive use information about how website visitors use and interact with a website should also be disclosed, especially if this information is then bundled with personally identifying information.

Simply because you do not plan on disseminating this information to third parties does NOT mean you should ignore having a privacy policy on your website.

Many websites use California's Online Privacy Protection Act (“OPPA”) requirements as guidelines in drafting their privacy policies. You should use these basic requirements as the framework for your website's privacy policy since they are well defined. Disclosing exactly how and when you collect personal information and when you distribute or disclose it will determine how to fill in the remainder of the policy avoid liability under the FTC Act and any other applicable state law.

When drafting your privacy policy, you should always disclose the following:

    • When your website collects information. Your website may collect information upon registration with your website, or when any of your visitors order a product. But, how else will it collect information? Other collection of data may occur through collection of website traffic and aggregate usage data. For instance, the date and time a user visits your site, the (IP) address from which your website was accessed, the webpages visited, duration on each page, the type of browser and operating system used to access your site, etc. Information may also be collected through correspondences such as through emails, faxes or phone calls with your business. Collection of information also occurs through credit card processing or other third party applications accessed through your website;
    • The information your website actually collects. What personal information will your website collect? You should use OPPA as your guide in defining and determining this information;
    • How your business will use the personal information. You need to disclose exactly how your business intends to use any data or information it collects. Don't leave anything out. If you don't distribute any information, but will store it in some customer contact database, disclose this. Similarly, facilitation of product purchases or collection for future promotions should be disclosed in your policy;
    • The information that is disclosed or provided to third parties. You must determine all the possible ways you will disclose your visitors personal information you collect. These will include information provided during the shipping process, to credit card merchants and banks, your host or ISP through operation of the website, etc. You should disclose all of this even if you don't intend on distributing information to third parties;
  • Will you use cookies or any type of tracking device? This should be clearly disclosed to website visitors and agreed to beforehand. Also, if you use “third-party cookies” (i.e. using a third party such as Google Analytics that passes cookies directly to your website visitors' browsers) this should now also be disclosed.

FTC Rulings Establish Guidelines

You should use the lessons learned from previous FTC enforcement actions to complete the rest of your privacy policy. Here is a quick summary of those lessons:

-Always Follow Your Privacy Policy. If you make statements that you won't distribute your visitors personal information or that “all information you provide will remain anonymous” you better follow those statements. If you don't do what you say, your business will be in violation of the FTC Act. Pretty simple concept-if you lie, you are in violation of the FTC Act and potentially OPPA and maybe other state laws;

-Disclose Exactly How Your Website Treats Personal Information. I touched upon this earlier. You must disclose all the ways you intend or will disclose personal information you collect. This is really a key lesson to be taken away from the FTC's existing enforcement actions. If your object is only to provide information to one party, but you disclose it to third party marketers also, you must absolutely disclose this. If you collect information by accessing the personal information of third party sites through some service arrangement or software application you provide, this is also deceptive;

-Have Security Measures in Place. In a nutshell, you need to protect your customers and visitors personal information. The FTC has also stated that misleading express or implied statements about website security is prohibited. According to the FTC in one of their administrative decisions, your website must implement and document procedures that are reasonable and appropriate to: (1) prevent possible unauthorized access to your system (2) detect possible unauthorized access to the system; (3) monitor the system for potential vulnerabilities; and (4) record and retain system information sufficient to perform security audits and investigations.

In subsequent cases, the FTC added to its definition of what constitutes “reasonable and appropriate security” measures. The FTC added requirements that (i) companies should not store sensitive information for unnecessarily long periods of time or in a vulnerable (i.e., non-encrypted) format, (ii) must use strong passwords to prevent a hacker from gaining control over computers and access to personal information stored on a network, (iii) must use readily available security measures to limit access between computers on its network and with the internet; and (iv) must employ sufficient measures to detect unauthorized access to personal information or to conduct security investigations.”

-Proper Training and Oversight is Required. Inadequate training and oversight of the personnel who will implement your privacy policy is a reasonable step your business must take, according to the FTC.

-Don't Change Your Policy After the Fact. You cannot retroactively change your privacy policies to the detriment of consumers. If you began to disclose or sell personal information provided by your visitors without seeking or receiving their consent, your business will be violating the law. Your business must take additional steps to alert customers that it has changed its policy to permit third-party sharing of personal information without explicit consent. The FTC has complained that the retroactive application of privacy policy changes “caused or is likely to cause substantial injury to consumers.” The FTC says you should provide additional notice when your privacy policy has materially changed and what aspects of the policy have changed. Any time you do, you must obtain the consent of your customers who have previously provided personal information.

-Notify Visitors about Privacy Policy Changes. As stated, each time you change your privacy policy, the best practices include notifying visitors of the changes and requiring them to accept the changes after clicking through the amended policy. Any personal information you obtain from previous website visitors should not be used in a manner different than the original privacy policy unless you obtain their consent somehow.

If the FTC ever does file a complaint against your business, it could lead to very stiff civil penalties and consumer redress damages. Better to play it safe then risk shelling out thousands of dollars to the FTC. In conclusion, the best route to take is to draft a privacy/communications policy based upon OPPA and the guidelines set forth by the FTC.

Posting Your Privacy Policy

The basic principles set forth by state and federal laws provide that you should post your privacy policy in a conspicuous manner. A privacy policy is really just a disclosure to prevent your information collection practices from being deceptive.

You should follow the guidelines below on how and where to place your privacy policies, which are meant to comply with FTC laws and the requirements set forth under OPPA.

    • Post the privacy policy directly on the homepage of your website or first significant page after entering your website; or
    • Place a link that contains the word(s) “privacy” or “privacy policy” on the homepage of your website, or on the first significant page after entering the site. The link should lead to a separate page containing the privacy policy. The text link should be written in capital letters equal to or greater in size than the surrounding text or in contrasting type, font, or color to the surrounding text, or set off from the surrounding text somehow with symbols or other marks that call attention to the language” (i.e. “PRIVACY POLICY); and
  • Any privacy policy page links should not be hidden or innocuous where your visitors have to scroll down to the bottom of the page to find it. In other words, the link should be placed on the immediately visible portion of the page.

Federal laws

There is no specific federal law regulating or requiring a website to have or post privacy policies. However, Section 5 of the Federal Trade Commission (“FTC”) Act prohibits unfair or deceptive marketing practices. While the FTC does not regulate privacy issues, any deceptive act or practice in commerce will lead to liability under the FTC Act. If your business gathers and unlawfully disseminates or discloses information from your visitors, this will generally be categorized as a deceptive or fraudulent business practice under the FTC Act.

The bottom line is that use and/or dissemination of information collected from website visitors is deceptive when the visitor is not properly made aware of the potential for this use and sharing before he or she provides any information to the website. The FTC basically requires that website operators/owners clearly inform visitors about all the ways the website collects any of their personal information (“personally identifiable information”) and then how this information will or may potentially be used or shared with third-parties. There is no specific obligation imposed upon website operators to actually post a privacy policy on their website under the FTC Act. However, if you don't post a privacy policy on your website informing your visitors about all the ways your website collects and then discloses their personally identifying information, this is a deceptive practice.

If you post a privacy policy on your website and you or your business does not follow the stated policy, this will also be considered as a deceptive practice. For example, if you state on your website that the operators/owners do not sell or provide any collected email addresses to third-party marketers, but then you do anyways, this is obviously a deceptive practice. In other words, the website privacy policy cannot mislead your website visitors. According to the FTC, a violation of a former written agreement such as a privacy policy is clearly a deceptive act or practice.

Other then the FTC Act, some federal laws govern privacy policies in specific circumstances. This includes the Children's Online Privacy Protection Act (COPPA), the Gramm-Leach-Bliley Act, which governs “Financial Institutions” and the Health Insurance Portability and Accountability Act (HIPAA).

State Website Privacy & Security Laws

A handful of states have separate online privacy protection statutes or have some express law dealing with gathering information from a website. A few states have laws placing security requirements on websites that collect personal information.

The following states have implemented more specific laws governing website privacy policies and security requirements:

California has adopted the California Online Privacy Protection Act of 2003 (California Business and Professions Code Sections 22575-22579). The law requires “any commercial web sites or online services that collect personal information on California residents through a web site to conspicuously post a privacy policy on the site”. It also requires the policy to identify the category of personal information that the website collects and the third parties whom the information may be shared with by the website. This statute applies to any website that collects personal information from a California resident.

Connecticut requires any person who collects Social Security numbers in the course of conducting business to create a privacy policy. The policy must be “publicly displayed” by posting it on a web page and the policy must: (1) protect the confidentiality of Social Security numbers; (2) prohibit unlawful disclosure of Social Security numbers; and (3) limit access to Social Security numbers. Connecticut laws now also require that businesses must “safeguard the data, computer files and documents containing the [personal] information from misuse by third parties” and “destroy, erase or make unreadable such data, computer files and documents prior to disposal.” Conn. Pub. Act 08-16, § 1.

Nebraska prohibits knowingly making a false or misleading statement in a privacy policy, published on the Internet or otherwise distributed or published, regarding the use of personal information submitted by members of the public.

-Pennsylvania includes false and misleading statements in privacy policies published on websites or otherwise distributed in its deceptive and fraudulent business practices statute.

-Nevada requires that “[a] business in this State shall not transfer any personal information of a customer through an electronic transmission other than a facsimile to a person outside of the secure system of the business unless the business uses encryption to ensure the security of electronic transmission.” This includes all e-mail, and websites, and other forms of Internet-based communications containing personal information. It is also important to note that the Nevada Law applies only to businesses “in this State.” However, for many businesses which are not located in Nevada, but that do business with customers in the state, they could be “doing business” in Nevada If you plan on doing a significant amount of business in Nevada, it is safe to assume that the law will apply.

-Massachusetts, like the Nevada laws, requires businesses to encrypt all personal information that is transmitted across public networks or by wireless transmission. It applies to all persons that own, license, store or maintain personal information about a resident of Massachusetts. This law also requires businesses to encrypt all personal information that is stored on laptops and other portable devices. Similar to the Nevada law, “personal information” is defined as a combination of a person's name plus one of the following sensitive data elements related to that person: Social Security number, driver's license or state-issued identification card number, or financial, credit or debit card account numbers.

This article was written by Philip A. Nicolosi, J.D. Mr. Nicolosi provides legal services through his law firm, Phil Nicolosi Law, P.C., focusing on startup and small business law, Internet & technology law and commercial transactions.

Mr. Nicolosi serves as a trusted advisor to numerous startups and small to medium sized businesses. This includes representation for a wide range of business law matters including business organization, corporate/LLC governance, regulatory law, contracts and transactions and most other matters outside of litigation. Mr. Nicolosi provides guidance with e-commerce, Internet marketing and technology-related legal matters. He also assists startup technology companies with seed financing, venture capital and exit transactions.

Mr. Nicolosi is also the founder of InternetLegalArmor (www.internetlegalarmor.com), an automated custom website legal document solution.

Visit Phil Nicolosi Law now, or contact Mr. Nicolosi directly by sending an email to info@philnicolosilaw.com

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Intellectual Property – Why “Borrowing” Web Content is a Really Bad Idea

Intellectual PropertyWe've all been there before.

There's some graphics or content (or even website legal documents) on the web that you like… there's no copyright notice associated with it.

You'd like to take it and incorporate it into your site, right?

It's so tempting, but DON'T do it!

Copyright Infringement Issues

Under the US Copyright Act, there is a principle some refer to as the “rule of automatic copyright”. This rule provides that once an author or artist:

* creates a work of authorship (text, graphics, content),

* that is fixed in a tangible medium of expression (can be perceived by a person even if a machine or device is required to do so),

* copyright automatically vests in the author or artist (regardless of whether the work has a copyright notice or whether it is registered with the Copyright Office).

So, you need to secure the appropriate permissions before using the graphics or content. Failure to do so, can cost you dearly.

An illustrative case is the case of Photo Resource Hawaii, Inc. v. American Hawaii Travel, Inc., No. 07-00134 DAE-LAK (Dist. Hawaii Dec. 12, 2007). In this case, the defendant never had rights to the content, and he was ordered to pay $48,000 in statutory damages, $5,145.55 in attorney's fees, and $386 in court costs.

The same result is true if you had permission to use the material, but the permission expires or terminates. Even if use was originally with permission, use after expiration or termination will get you sued. In the case of Chase Jarvis v. K2 Inc., No. CO3-1265Z (W. Dist. Washington Dec. 12, 2003), the defendant was nailed for infringement because his content license had expired.

Ditto For “Borrowing” Someone Else's Website Documents

You realize that it's past time for you to add the website disclaimers and documents to make your site legally compliant.

So, what to do? You consider “borrowing” legal agreements from another website. After all, it's there for the taking. Right?

Wrong! For starters, it may be copyright infringement to copy the other guy's documents without permission. That's reason enough not to do it.

The other reason is that just as with most things… one size does not fit all. You should realize that each ecommerce business is unique. The other guy's policies regarding the collection, use, sharing, storing, and security of customer data most certainly will not match yours.

Additionally… the other guy's assumptions may be different.

For example, the other guy's site may not incorporate blogs, forums, or chat rooms. If your site does incorporate a blog, then his documents will not have the DMCA notice (and you will not qualify for the “safe harbor” from copyright liability; you'll be liable without even knowing it). Even if his site incorporates a blog, do you want to bet that it has the DMCA notice in proper form?

Another example… I recommend that you assume that you will need broad rights to collect and use passive information from site visitors, so I recommend that you reserve broad rights to collect passive information from them – even if you do not actually utilize all the methods you reserve rights for at the outset, you probably will later – if the other guy's privacy statement does not make the same assumption, and only reserves rights for a relatively narrow range of collection methods, you may be in breach of your Privacy Policy and not even know it.

Finally, your website disclaimers and documents and the other elements of website compliance must work together as a system, so documents are not interchangeable. For example:

* your Terms of Use and Customer Agreement relate to your DMCA Registration Form and to your disclaimers,

* disclaimers that are merely notices in your Terms of Use carry over to your customer agreement where they become a part of a binding contract,

* notices in your Terms of Use regarding the location of your site's servers become critical in terms of your Privacy Policy, especially for personal information transferred from users located in the European Union,

* and so on.


In summary, do it right. Don't cut corners with something so important as your website content and website documents. Use your own content, documents, policies, and rules for your website.

Only then will you have the confidence and peace of mind that you will not be faced with a demand letter, or worse — a lawsuit — from the content owner.

Chip Cooper is a leading intellectual property, software, and Internet attorney who advises software and ecommerce businesses nationwide. Chip's 25+ years of experience include 20 years as Adjunct Professor of Computer Law at Wake Forest University School of Law. Visit Chip's digicontracts.com site, sign up for his FREE newsletter, Website Law Alert, and Special Report; also learn about his “Do-It-Myself” and “Do-It-For-Me” service options.

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Website External Links and Framing Legal Guide!

legal guide

If you operate a website, are you aware of the ways in which website operators can become liable for use of external links? Traditionally, website operators have not been held liable for merely placing an external text link on their website. But, doing more than simply placing a text link on your site and your website content may in many instances result in liability. The following legal guide will introduce you to basic liability resulting from misuse of external links and for framing.

Types of Links & Framing

Before I discuss external links and framing liability, you should understand the basic types of website links if you don't already. There are two basic types of external links. Text links (embedded links in text) are called hypertext reference (“HyperREFerence”) links. These links can lead to a different point on the same page, or to a different page in the same site. Of course, hypertext links can link to third party webpages also. A graphic may serve as a hypertext link, but usually these links commonly appear as underlined, capitalized or otherwise prominent text.

The second type of link is an Image (“IMaGe”) link. An IMG link directs the web browser to retrieve an image from a separate image file. This type of link can reference a file from within a website, or from a third party web site. For example, using an IMG link, a web page could direct the visiting browser to retrieve a protected image, video or other content contained on another website and show it on the original website. This presents a seamless integration of web content even though they are not from different websites.

This process, linking and incorporating the content (text, video, audio file, etc.) of another website is also known as “in-line liking.” For instance, a video link embedded on your website is simply an in-line link. An in-line link displays, or “frames” the third party file on the original web page. When the user visits the original page, the HTML code on the original page direct the user's browser to the file located on the third party webpage.

“Framing” is a practice where one website uses frames to incorporate the content of another websites into a browser window along with the content from the original website. The website doing the framing may post navigation tools, text, trademarks and/or advertising along with the framed webpages. The more the framed website is integrated into the original website users may become confused over affiliation, endorsement or sponsorship. Unauthorized framing has been challenged under a variety of legal theories, including copyright and trademark infringement, unfair or deceptive trade practices, passing off, false light and false advertising among others.

Meta tags and keywords are considered “de facto” links as well. (Use of meta tags and keywords can lead to claims of trademark infringement).

Possible Liability For Using External Links

A. Copyright Infringement

Most external links are lawful. Generally, permission is not needed for a regular hypertext link to the home page of another website. There is substantial case authority that provides that traditional hyperlinking is not direct copyright infringement because there is no copying or display involved.

For example, in a key decision that has helped shape the law, the court in Ticketmaster Corp. v. Tickets.com, Inc. (2003) stated:

“… hyperlinking does not itself involve a violation of the Copyright Act (whatever it may do for other claims) since no copyright is involved. The customer is automatically transferred to the particular, genuine Web page of the original author. There is no deception in what is happening. This is analogous to using a library's card index to get reference to particular items, albeit faster and more efficiently.”

However, using external links on your website may create legal liability in some cases. External links can be unlawful when they i) cause consumer confusion; ii) encourage or facilitate illegal copyright infringement by others; or iii) violate other laws. In particular, copyright infringement (direct, contributory and vicarious infringement), trademark infringement and dilution, passing off and misappropriation are the main areas of liability. Defamation may also come into play.

1. Contributory Copyright Infringement

Contributory copyright infringement can occur by providing links to websites that display infringing material and actively encourage or facilitate the use of those links in various ways.

Instructions on following links and encouraging visitors to use them or including software that facilitates downloading infringing copies of content (such as peer-to-peer software) or including software that assists the downloading of material from remote sources, are all considered material contribution to copyright infringement.

In the cases that have decided this issue, the common elements have been that a middle party makes available a list of links to third parties who willingly make copyrighted works available for viewing or downloading. Websites don't directly host or re-transmit the protected content, but they do provide links to materials made available by others.

Contributory infringement occurs when an individual or business knowingly induces, causes, or materially contributes to the infringing conduct of others. The essential elements of this claim are knowledge of and participation in the infringement. In establishing a claim of contributory infringement, a copyright owner must establish the website had requisite knowledge and participation. The knowledge aspect can be established if the website has been put on notice, such as by receiving a cease and desist letter from the copyright holder, or even by allegations made in a pending lawsuit against the website. The participation aspect can be established by placing a link which facilitates the user going to another website containing the infringing items.

-EXAMPLE: Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc. (1999): A website (Intellectual Reserve) posted copies of a church's copyrighted handbook and provided links to other sites that contained infringing copies of the handbook. In this example, the defendant knew and encouraged the use of the links to obtain the unauthorized copies. This was held by the court to constitute contributory copyright infringement. The court issued a preliminary injunction directing the defendants to remove statements identifying the domain names of websites containing the handbook. This was held by the court to constitute contributory copyright infringement. The court reached this result despite the fact that the defendants' website did not contain any direct links to the infringing websites.

Intent and context matter.

Case law has shown that defendants have been found liable because they did more than just post links. The intentional encouragement of copying or downloading of protected materials is a liability trigger. Context can make it clear that a link is posted merely for its informational (indexing, referencing) content. Without active encouragement of use of illegal content, then “aggravating” factors are missing and courts have not imposed liability. In cases involving informational (“pure speech”) links, the elements of material furtherance of infringement (contributory infringement) and financial gain from infringement (vicarious liability) likely don't exist.

But, contributory infringement is subject to reasonable limits.

-EXAMPLE: Bernstein v. J.C. Penney, Inc.: A photographer sued the retailer J. C. Penny for a link on its site to a movie database. This link in turn linked to a site in Sweden that allegedly infringed the photographer's copyright in a couple of photographs.The court denied the plaintiff's motion for a preliminary injunction, and the plaintiff dismissed his case. Although a final resolution was not reached, this case suggests that claims of contributory infringement cannot be remote. There must be some reasonable limits in terms of third party linking to infringing materials.

2. Deep Links

Deep links direct the user to an image or webpage other than the homepage of a third party website. Many websites post introductory materials including third-party paid banner advertisements and special promotions or teasers relating to their own site on the home page. Businesses expect that most website visitors will find those advertisements before going further into the website's other pages. Deep linking and bypassing the home page of some other website has caused lost revenues. Of course, this has led to lawsuits. But, deep linking to interior pages of a website by itself is not copyright infringement when the copyrighted materials are not shown or displayed on the original website.

Deep linking by itself without confusion of source is not unfair competition. (Ticketmaster Corp. v. Tickets.com, Inc.). If deep linking is somehow done in a way that would confuse viewers as to affiliation, sponsorship or endorsement by the other website (i.e. trademark infringement), this could trigger a claim. For example, a deep link that says “Click Here For More Information,” which then leads viewers to a page on a competitor's website containing information about a similar product.

3. In-line Links & Framing

Can I embed links to videos and use “In-line” Image links?

Case law has held that In-line linking and framing by itself is not direct copyright infringement. The content is not a display or distribution in violation of copyright law.

In-line linking and framing may cause some users to believe they are viewing a single webpage (seamless content). But, the Copyright laws do not protect a copyright holder against acts that cause consumer confusion. Without causing consumer confusion, in-line linking and framing is within the law (although it's considered bad web etiquette).

In order to prove direct copyright infringement, a plaintiff must first prove that the defendant copied the protected work. A plaintiff must first establish: (1) ownership of the allegedly infringed material and (2) violation by the alleged infringer of at least one of the exclusive rights granted to copyright holders. Many of the claims for direct copyright infringement for “unauthorized” use of in-line linking and framing have gone nowhere. This is because there was no actual copying and display of the infringing content.

-EXAMPLE: Perfect 10, Inc. v. Amazon.com, Inc., et al.(2007): In what was the first court to provide an actual decision regarding the use of framing, the Ninth Circuit Appellate Court held that framing infringing images found on third party websites via in-line linking is not direct copyright infringement. Google presents a framed page in its search results where the bottom half comes directly from the third party web site where the image is actually found. The court used the “server” test and decided that a website that “frames” content by providing an in-line link to the copyright holder's site is not a public display or public distribution. The framed content is not being stored on the framer's server. The court also found that Google did not commit direct copyright infringement by providing “in-line links” to third party websites that contained infringing images. The Court stated that providing a link to a third party website that displays infringing images, by itself, does not make the original website liable for copyright infringement.

The Court also laid out a new test for secondary liability on the Internet. A computer system operator must have “actual knowledge that specific infringing material is available using its system” and “continue to provide access to infringing works.” This is true despite the fact the provider could take simple measures to prevent further damage to the copyright holder. The court struck down the vicarious liability infringement claim due to Google's use of in-line links because Google had no ability to control the third party websites or compel them to remove infringing images found on those sites.

Framing and Inline linking of third-party content into another web page can potentially raise the following issues: trademark infringement, passing off, defamation and possibly copyright infringement for creating a derivative work.

Framing and in-line links pose the same trademark and derivative work concerns. Framing might be viewed as more problematic when it comes to trademark infringement. A viewer could easily conclude that all the material on the framing website belongs to that site. But, you cannot in-line link or frame third party web-content and always escape liability. Even though you are not directly copying the content, your framed page along with the content from an external framed page could be viewed as an unauthorized modification of the content. In terms of potentially creating a derivative work, this really is a grey area and depends on the context and nature of the framing. So far, the issue hasn't been directly decided, but many intellectual property attorneys feel this practice could result in a derivative work.

-EXAMPLE: In Futuredontics Inc. v. Applied Anagramic Inc. (1997): Applied Anagramic (Defendant) operated a web site and divided its pages into frames. Defendant's website contained an unauthorized link to the Futuredontics website that caused copyrighted materials on plaintiff's site to appear within one of the frames of Defendant's website. The problem was that the rest of the page was filled with content supplied by Defendant, including its logo and information about its business operations. The court found that Futuredontics had failed to show that it was or would be injured by defendant's conduct. Absent the requisite showing of injury, plaintiff was not entitled to injunctive relief. However, the court left the door open for the creation of a derivative work. The district court would not dismiss the claim holding that the defendants conduct may create an unauthorized derivative work.

B. Trademark Infringement & Dilution

Any link (in-lining or framing) that falsely leads the viewer to conclude that the web page (owner) is affiliated, endorsed or sponsored by the trademark owner could lead to a claim of trademark infringement.

Trademark infringement basically occurs when someone uses a mark of another in such a way that creates a likelihood of confusion. Using an image link or framing that places another party's trademark or logo on your web page may cause confusion.For example, the use of a company logo to link to the company's website could be trademark infringement. If the consumer is likely to believe that the third party business or website is associated with your website, it is infringement. As a general rule, a link that simply uses a text reference rather than a logo or trademark does not make any implication about affiliation.

The use of logos and trademarks as direct links presents an obvious problem. Using a trademark or logo can expose you to liability if a court finds that the reasonable consumer would likely be confused, given the facts. In addition, The Federal Trademark Dilution Revision Act (FTDRA) of 2006 provides owners of famous marks with protection against dilution by blurring and dilution due to tarnishment. Under the revised FTDA, the plaintiff only needs to show the defendant's mark is likely to cause dilution. Improperly framing content of another website may result in consumer confusion (direct infringement) and/or claims of dilution.

-EXAMPLE: Washington Post Co. et al vs. Total News, Inc. (1997): The website Total News was sued by the Washington Post and CNN. The plaintiffs claimed trademark dilution for the framing of the news pages of plaintiffs' sites in a frameset that contained TotalNews advertising. Plaintiffs believed viewers of Total News would be confused since the viewer would see the plaintiff's news pages within a Total News frame, but without plaintiff's banner advertisements. This case was settled without a decision, but Total News agreed to stop framing and to use text-only links.

-EXAMPLE: Hard Rock Cafe, Int'l, Inc. v. Morton (1999): Defendant installed a link on their website which contained the words “record store.” Clicking on this link took the user to the “Tunes” web page which appeared in frames on the defendant's website. Frames appeared above and to the left of the webpage content containing the Hard Rock Hotel logo. The court found that a likelihood of confusion arose from framing the website because the distinction between the two sources of material appearing on the screen was not clear. “Through framing, the Hard Rock Hotel Mark and the [infringing site] were combined together into a single visual presentation.” However, the court did state that framing is a flexible device that in some instances might provide a clear distinction between different sources of the content.

A direct link contained on an offensive or disparaging website (i.e. a pornographic site) could potentially trigger a claim for trademark tarnishment?

Rule: If no “reasonably prudent Internet user” would associate a trademark with the linked site, then this claim would likely fail.

-EXAMPLE: Ford Motor Company v. 2600 Enterprises (2001): Defendant's website contained a text link to Ford's homepage from the website fuckgeneralmotors.com. Ford sued for trademark dilution, trademark infringement, and unfair competition. The district court stated that linking by using a trademarked domain name in a programming code is not a violation of the Ford trademark nor is it dilution of the mark.

-EXAMPLE: Voice-Tel Enters., Inc. v. Joba Inc. (2003): A claim for tarnishment cannot arise from the use of a trade mark on a website containing a link to a potentially offensive site.

C. Passing Off

Using external links improperly may be “passing off” if a website uses links to suggest that its products are those of a more highly regarded competitor.

There are additional common law claims under state unfair competition laws, namely passing off, contributory passing off, reverse passing off, and misappropriation. Passing off occurs when someone or some business tries to pass off its product or services as a third party product or services (or as having some association or connection with a third party when this is untrue). So, for example, framing webpages of a competitor's website in a way that suggests your products are affiliated or made by the competitor.

1. Contributory passing off occurs when the defendant assists or induces another (typically a retailer) to pass of its product as the plaintiff's product.

2. Reverse passing off occurs when someone tries to pass off someone else's product as their own. If you pass off images or logos via in-line links or by framing within your website in a way that suggests affiliation, this could amount to reverse passing-off. This is basically where the work of someone else is passed off as your own. For instance, you could tell your viewers to click here to see some product examples of what you sell, but which are taken from a competitor's webpage, and then claim they are your products. This type of reverse passing off by using a link to pass-off another's work violates state unfair competition and/or unfair business practices laws.

D. Misappropriation

is unauthorized use of another party's property of funds for personal gain. This is yet another potential concern if your using an external link(s) in a manner that allows you to gain something of value.

E. Negligence

Linking to a source which turns out to contain misleading or which contains harmful information may cause liability for negligence. Even simple informational links posted with no particular commercial purpose could create risks under the theory of “negligent publication.” Carefully drafted disclaimers in an External Links Policy, as discussed below, can help advise your website viewers that you are not responsible for third party website content.

F. Defamation

A link to another's webpage or image could be defamatory. For example, “This mortgage broker ripped me off and lied to me.” The statement itself does not identify the party. The link (assuming it actually linked to someone's website or webpage) provides the context that turns the statement into defamation, however.

TIP #1: Use External Links Policy/Disclaimers!

Using a properly drafter External Links Policy, which is really just a set of disclaimers, can serve as a defense to liability for external links. The disclaimers can help protect your business against a claim that could be made by any users of your site. Posting disclaimers is not an absolute shield from liability. But, it does put users on notice that the business does not control or have any affiliation with the content of third party websites. It can also set forth a policy for placing links on your website. Properly drafted external links disclaimers can prevent claims by your website users.

Some websites post no specific disclaimers, but instead display a notice stating something like “by clicking on this link, you will be leaving this web site and will be directed to a third party site, which we have no control over the content.” This operates as a disclaimer. You could also choose to use a link prominently located on your website leading to a separate page with the policy. Using a link labeled External Links Policy” is customarily how this should be handled. But, any link should be prominently located on your website and not hidden.

The best practice is to stick any external links disclaimers on a separate disclaimers page and in the website terms of use. You can then make your website visitors register and click to agree to the website terms before accessing any meaningful portion of your website.

TIP #2: Post a Hyperlink Policy On Your Site!

Your website should contain internal policies concerning who may link to your website and the manner in which it must be done (i.e. a “Hyperlink Policy”). You should also use a link exchange or hyperlink agreement whenever another website wants to do a link exchange with your site. This type of agreement should be used regardless of whether your business is being compensated for placing the link. The most important item to address in such an agreement is indemnification. I talk more about Indemnification later, but it basically is a way to get compensated by the owner of another website for liability your business incurs.

If there is infringing material on the site, the linked-owner is required to indemnify (reimburse all financial damages and costs incurred due to the link on your site) and defend your business against any claims. Indemnification should cover any claims of libel, violation of right of privacy, plagiarism, copyright or trademark infringement and any other claims or suits based on the content contained on the third party website.

Any website requesting a link should also provide a warranty and representation that the website operator(s) has the right to display all materials contained on the website. None of the content on the third party site should infringe on the rights of others including but not limited to rights in trademarks, copyrights, and patents. Further, the operators should warrant and represent that the third party website does not contain any obscene, vulgar, defamatory or any other illegal material.

Summary: External Links & Framing Guidelines

    • Avoid using links that suggest affiliation or sponsorship with some third party. Any link that falsely leads the viewer to conclude that the web page author is affiliated, approved, or sponsored by another website could lead to a claim of trademark infringement. This means avoid using links which are trademarks or logos. As a general rule, a text link that simply references a third party name (or product) rather than a logo does not suggest affiliation, endorsement or sponsorship;
    • Avoid using deep links that cause confusion as to source or affiliation with a third party website;
    • Avoid framing when doing so will cause consumer confusion. Including protected content or a third party trademark in the frame may cause confusion. If the frames are used to either make your website content look like it belongs to the linked site, or to make the linked site content look like it belongs to you, this could trigger a claim. You should clearly indicate third party ownership of any content you display from a framed third party website;
    • Framing content from other webpages in such a way that omits their banner advertisements and other ads;
    • Avoid using links (in-lining or framing) that pass off the goods or services of another company or website as your own;
    • Avoid using links that pass off your goods or services off as that of one of your competitor's;
    • Avoid websites that are “linking” sites. These websites provide access or unauthorized links to other websites where pirated sporting and pay-per-view events are hosted, where movies (or trailers) can be downloaded, or that contain illegal content such as pornography;
    • Avoid Defamatory links (i.e. “This guy ripped me off” where the link leads to a website operated by or involving the person referred to as “guy”);
    • Check the websites your links lead to regularly. Website owners change and website content may change over time;
    • Use an External Links Policy on your website and use a Hyperlink Agreement for link requests;
  • Obtain Permission to link to another website.The simplest and most direct way to prevent claims for infringement is to obtain permission. Some websites solicit or encourage links, and even make symbols and other graphics available that you can download and use as the linking symbol. Some web sites perform some type of limited screening and approval process before granting permission. Otherwise, you can contact the website administrator directly via email and request linking to the website or a link exchange ideally.

This article was written by Philip A. Nicolosi, J.D. Mr. Nicolosi provides legal services through his law firm, Phil Nicolosi Law, P.C., focusing on startup and small business law, Internet & technology law and commercial transactions.

Mr. Nicolosi serves as a trusted advisor to numerous startups and small to medium sized businesses. This includes representation for a wide range of business law matters including business organization, corporate/LLC governance, regulatory law, contracts and transactions and most other matters outside of litigation. Mr. Nicolosi provides guidance with e-commerce, Internet marketing and technology-related legal matters. He also assists startup technology companies with seed financing, venture capital and exit transactions.

Mr. Nicolosi is also the founder of InternetLegalArmor (www.internetlegalarmor.com), an automated custom website legal document solution.

Visit Phil Nicolosi Law now, or contact Mr. Nicolosi directly by sending an email to info@philnicolosilaw.com

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Website Advertising – 2 Legal Traps to Avoid When Writing Your Own Copy

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If you're like most small ecommerce businesses, you're likely to write your own marketing copy. Be aware that this is a highly regulated area that could result in substantial liability. I've boiled most of the regulations into 2 basic traps you must avoid.

What is Marketing Copy?

Wikipedia defines “copy” as written material, in contrast to photographs or other elements of layout, in a large number of contexts, including magazines, advertising, and book publishing. In advertising, web marketing and similar fields, copy refers to the output of copyrighters, who are employed to write material which encourages consumers to buy goods or services.

Web copy has one major advantage over offline copy – it is interactive. Hyperlinks provide you with powerful tools to lead a potential customer through a pathway designed by you which ultimately leads to a conversion to your call to action.

Trap No. 1: Failure To Substantiate Claims Before Publication

When you write your own marketing copy, you necessarily make certain “claims” – statements upon which a consumer may reasonably rely in making a purchase decision. In so doing, you're facing another legal pitfall.

Legally, claims are extremely important. The Federal Trade Commission (FTC) Act, 15 USC Sec. 41-58 and accompanying regulations prohibit “unfair or deceptive acts or practices”. Unfair or deceptive acts or practices include claims that are not substantiated before the claim is publicly disseminated.

So review your ads carefully, and be sure that you can substantiate and back up your ad claims.

Here are some examples of claims and the related challenges regarding substantiation and back-up:

* If you claim “best value”, understand that it's a promise that is very broad in scope – essentially, you're promising that your offer is worth more than the asking price – if you're going to make this claim, you'd better provide the proof on your site.

* If you claim “we're no. 1”, you need to be very specific regarding how you determine no. 1 – no. 1 at what? – in gross sales, in sales growth for a specific period, in the number of widgets sold?

* If you claim the “latest and greatest”, “next generation” or words to that effect, you should substantiate how the claim is true – explain specifically how you justify the claim in relation to other competitive products on the market.

* If you claim “user friendly” or “easy-to-use”, you need to be specific regarding substantiation of specifically how much time a certain task routinely takes, exactly which steps are automated.

* If you offer a “risk-free guarantee”, understand that even a free evaluation is not completely risk-free because the evaluation takes time for the customer to evaluate – time is money, so-to-speak, so a better approach is to promise an unconditional refund, no questions asked.

Trap No. 2: Avoid Untrue And Deceptive Claims

In addition to substantiating claims before making them, be careful not to make untrue or deceptive claims. Certain types of claims should be avoided altogether, including:

* never claim that you have a cure for anything – not even large drug companies with products that have been the subject of years of testing will make such a claim, so you shouldn't either;

* never specify a level of revenue or profits that a user will achieve, even if you or another purchaser has achieved a specific level of revenue or profits – remember the old cliche, “your mileage may vary”;

* never promise specific results – again “your mileage may vary”.

The FTC has special rules governing any use of the term “FREE” (or similar words to that effect), which the FTC believes is frequently used in an untrue or deceptive way.

Similar words to “free” include:

* Buy 1-Get 1 Free; * 2 for 1 Sale; and * 50% off with the purchase of 2.

According to the FTC: “[t]he public understands that, except in the case of introductory offers in connection with the sale of a product or service, an offer of ‘Free' merchandise or service is based upon a regular price for the merchandise or service which must be purchased by consumers in order to avail themselves of that which is represented to be ‘Free'. In other words, when the purchaser is told that an article is ‘Free' to him if another article is purchased, the word ‘Free' indicates that he is paying nothing for that article and no more than the regular price for the other. Thus, a purchaser has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise or service by marking up the price of the article which must be purchased, by the substitution of inferior merchandise or service, or otherwise.”


In summary, be aware that what you say in your marketing copy is heavily regulated. You need to be careful not only to substantiate ad claims before you post them to your site, but also use certain key terms with great care so as not to mislead or deceive consumers.

Chip Cooper is a leading intellectual property, software, and Internet attorney who advises software and ecommerce businesses nationwide. Chip's 25+ years of experience include 20 years as Adjunct Professor of Computer Law at Wake Forest University School of Law. Visit Chip's digicontracts.com site and download his FREE newsletter, Website Law Alert, and also learn about his “Do-It-Myself” and “Do-It-For-Me” service options.

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Do Trademarks Always Trump Domain Names? Not Always


Online start-ups are faced with the daunting task of selecting a domain name that will withstand legal challenges.

There's a general belief among online start-ups that a trademark owner will always trump a domain name registrant with the same or confusingly similar domain name. That's not always the result… as two recent 2010 UDRP decisions point out.


What is the UDRP, and why is it important?

The UDRP acronym stands for the Uniform Domain Name Dispute Resolution Policy. The UDRP is a set of procedures and rules that are supposed to help determine who should prevail in a dispute over domain name ownership.

The UDRP is important because it provides a faster and cheaper way to resolve a domain name dispute than a full-blown lawsuit in a court of law. Instead of litigation, it's an administrative proceeding where the contestants present written arguments to a panelist-arbitrator who issues a binding decision. In-person hearings (including hearings by teleconference, videoconference, and web conference) are permitted only in exceptional cases, and are therefore rare.

The UDRP has not been without its critics. Most of the criticism centers on the fact that the UDRP was established to benefit trademark owners in taking non-trademark owners to task in domain name disputes. And UDRP critics often point out the fact the UDRP decisions seem to come out overwhelmingly in favor of trademark owners.

There are three requirements for a trademark owner-complainant to prevail over a domain name-respondent in a UDRP proceeding:

1 – the domain name registered by the respondent is identical or confusingly similar to a trademark or service mark in which the complainant has rights;

2 – the respondent has no rights or legitimate interests in respect of the domain name; and

3 – the domain name has been registered and is being used in bad faith by the respondent.

The Arizona State Trailer Sales Case

This case involved requirement no. 1 above.

The complainant, Arizona State Trailer Sales, argued that the respondent's littledealerrv.com domain name was confusingly similar to the complainant's registered mark, LITTLE DEALER LITTLE PRICES and the complainant's common law marks, LITTLE DEALER LITTLE PRICES RV and LITTLE DEALER.

The respondent argued that it should prevail because its registration of its littledealerrv.com domain name occurred prior to the complainant's registration of its trademark.

The respondent won. The UDRP panelist noted that a complainant has to show that the respondent's domain name is identical or confusingly similar to complainant's mark. “This provision necessarily implies that Complainant's rights must predate the registration of Registrant's domain name”, the panelist concluded.

The take-away – the respondent won because it registered its domain name before the complainant registered its trademark.

The University of Texas Case

The University of Texas at Austin (UT) case involved requirement no. 3 above.

UT showed that it owned the texassports.com domain name, as well as the following registered trademarks: TEXAS, UNIVERSITY OF TEXAS, TEXAS LONGHORNS, and LONGHORNS. UT also showed that its TEXAS mark is registered for “Entertainment services, namely, providing college athletic and sporting events.”

UT argued among other things that the use of respondent's texassports.org domain was in bad faith because it was used as a “parking” website for information related to University of Texas sports and sporting events.

The respondent won. The panel found that UT did not prove “bad faith”. The panel reasoned that because the term “Texas Sports” is geographically descriptive, the respondent was free to register its domain name using the term on a “first-come, first-served basis”.

The panel also found that UT did not have a registration for the term “Texas Sports”, and therefore there was no likelihood of consumer confusion.


Selecting a domain name that will withstand legal challenges is a strategic undertaking for any online start-up.

The important lesson is that although the UDRP may help in deciding in favor of a respondent in a domain name dispute with a trademark owner, the recommended approach is to avoid the dispute altogether by undertaking a thorough search of pre-existing trademarks before selecting a domain name.

Copyright 2010 Chip Cooper

Leading Internet, IP and software lawyer Chip Cooper has automated the process of drafting Website Legal Forms for website legal compliance. Use his free online tool — Website Documents Determinator — to determine which documents your website really needs for website legal compliance. Discover how quick, easy, and cost-effective it is to draft your website legal forms at DigiContracts.com.

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Website Legal Compliance Alert – Why It’s Risky To Copy Stuff Off The Web


It's tempting and so easy to use your right click to download stuff off the Web – to copy or save images, text, even videos. And this content is often great material for your website copy, squeeze page, sales page or banner ad.

Fair warning – in most cases this content will be protected by copyright even if there is no copyright notice, and you will need a license or a valid claim of fair use to use it, or face a possible copyright infringement claim that could result in liability of up to $150,000 in damages.

The Rule of Automatic Copyright

The key to understanding why most content on the Web is copyright protected, even if it doesn't have a copyright notice, is sometimes referred to as “The Rule of Automatic Copyright”.

How copyrights are created is really simple, and that's why it's so often misunderstood. The Copyright Act says that a work is created when it is “fixed in a tangible medium of expression”. This means that a copyrightable work of authorship is created when pen hits paper, or keystrokes are recorded into the RAM of a computer, or video is recorded.

So, the fundamental rule is that copyrights are created automatically when an original work of authorship is fixed; no registration, copyright notice, or other act is required. And the copyrights vest in the author of the work. The copyright owner then controls to what extent another person can exercise the exclusive rights of a copyright owner – the rights to copy, modify (create derivative works), distribute, display, and perform the work.

And very important, if you exercise of any of these exclusive right without permission (a license) or a valid claim of fair use, you're a copyright infringer subjecting you to claims for damages, in addition to other remedies.

What Is Fair Use?

Fair use is a basic principle of copyright law that says that the general public may use certain portions of a copyrighted work without a license from the copyright owner, provided the use is for purposes such as commentary, criticism, search engines, news reporting, research, teaching, library archiving or scholarship.

The catch is that if the copyright owner disagrees with the validity of your fair use claim, you may have a copyright infringement lawsuit on your hands.

To determine whether you have valid claim of fair use, four factors must be considered:

* the purpose and character of the use, including whether the use is a commercial use or for non-profit educational purposes, including the “transformative” nature of the use;

* the nature of copyrighted work;

* the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

* the effect of the use upon the potential market for or value of the copyrighted work.

The process of weighing and applying the four factors is fact intensive, and there is no bright line test. For example, with the first factor, a key question that weighs in favor of fair use is whether you have transformed the portion of the original work by adding new expression or meaning, such as with a parody, or by adding independently created images to quotes taken from a copyrighted article or speech.

Probably the most significant of the four factors in the context of use in connection with promotional material for your website copy, squeeze page, sales page or banner ad is the fourth factor – the effect on the potential market for the copyrighted work.

One final tip – don't fall into the trap of believing that if you acknowledge the copyright owner of the source material, your use is a fair use. On the one hand, acknowledgement may be a point to consider in weighing the four factors, but in and of itself it won't protect against an infringement claim. And what's even worse, it may even create additional legal claims involving infringement of privacy rights.


Bottom line, it's very risky to freely use your right click to download stuff off the Web. Copyrights to Images, text, and videos are almost always vested in someone. And the fair use defense to copyright infringement is very limited in scope, and generally poorly adapted for use with your website copy, squeeze page, sales page or banner ad.

It's always best to get a license. That's the only way to be sure that you'll not be facing a copyright infringement claim and a possible claim of up to $150,000 per work.

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.

Is your website legal? Do you comply with new FTC regs? Do you have a real solution for website legal compliance you can really have confidence in? Unleash incredibly simple and easy intelligent online virtual legal assistant for 29 minutes and protect your business, products, and profits. Website legal compliance made simple by leading Internet attorney Chip Cooper.

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Social Media Sweepstakes and Contests: Legal Perspectives


With the explosion in social media activity by users of the internet, its value as a marketing tool has also been recognized. At this point, any business which doesn't have a presence in social media is at risk of being left behind. One strategy that lends itself nicely to the interactive nature of social media is the running of contests and sweepstakes promotions. But they should never be entered into without ensuring that all your legal bases are covered.

Contests, such as those which ask participants to upload photographs, from which the winner will be selected by votes from the community, are fairly common. This sort of thing is legally classified as a contest, as distinguished from a sweepstakes, which requires no other action from entrants than completion of a form. The official rules for each type are, therefore, somewhat different in the regulations guiding them and the language used.

A contest and sweepstakes lawyer is a resource that you need whenever you are planning to run a promotion of this kind, whether it's through social media, on your own website, or through partnerships with bloggers. The complexity of drafting official rules which are fully compliant with current regulations, federal and state, is too much for you to realistically consider doing it yourself.

The liability you could face for rules that aren't compliant is significant. Don't be fooled into thinking that no one will notice. It's just not worth the risk. Having a lawyer who is experienced with online games of chance and contests, you won't have to worry.

Many people access the internet using mobile computing. In fact, within three years, it's projected that more people will do so than using a laptop or desktop computer. This may create new legal issues which need to be addressed; for example, if a person is a resident of one state, but enters a sweepstakes via mobile in a different state with different relevant laws.

As a marketing strategy, contests and sweepstakes became commonly used in the middle of the Twentieth century. Back then, direct mail and radio advertising were used. As legal questions arose, they were addressed and formalized. The process is ongoing. For this reason, you should never consider templating the language of your rules on someone else's – at least not without a full review by a contest lawyer.

There are both federal and state laws which govern the allowable features, qualifications for entry, and disbursement of prizes for both sweepstakes and contests. Each country has its own laws, as well, which complicates things for international competitions. Social media sites have their own terms of service, which include language relating to the running of promotions. All of these different requirements must be understood and incorporated into your official rules.

Engaging a sweepstakes and contest lawyer gives you the peace of mind that all your promotional games are fully legal. They'll also work with you in the event that issues should arise with competitors. This is an area of your business in which you just can't take chances with liability.

Lior Leser, Esq. can help you build and run legally compliant online sweepstakes. Regardless of how you deploy the online promotion, an Internet Sweepstakes Lawyer can help you navigate through the state and federal legal requirements of establishing, registering, bonding, running and fulfilling internet and mobile Sweepstakes. http://web20lawyer.com/Promotions_Lawyer.htm

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How to Write Website Terms of Service (AKA Terms of Use or Terms and Conditions)

terms of service

Terms: The Background

Why do we care about a web site's Terms and Conditions? Everyone knows that a site needs to have legal Terms. Few people think about the obvious question: Why?

While our statutes, regulations and past cases are full of laws and their applications when it comes to everyday interactions, few laws and cases exists with respect to online interactions. Why? Our cyber universe, as a mature legal arena, has existed for only some ten or fifteen years. When compared to the hundreds of years of “real world” interactions, its easy to see why many legal “holes” exists in our system.

Under US law, these legal “holes” are filled up with with either judge-made interpretations or privately drafted contract law. Given that on any single day, a judge reviewing an online case may have come from family, criminal or juvenile courts, we would rather leave as little for judges to decide on their on as possible. We achieve this through proper negotiation, drafting and implementation of site Terms.

Luckily for us, the US, as opposed to many civil code jurisdictions, respects privately negotiated contracts. Web site Terms are nothing more than privately negotiated contracts. Unless you realize this important point, you will end up leaving too much for judges to decide.

Three Common Mistakes

Failing to realize that web Terms are privately negotiated agreements, most web site operators make three common mistakes.

They Copy Other Sites' Terms: The most common way for site administrators to “draft” site Terms is by copying it from other sites. Worse, they copy it from some site touting its Terms as a standard that once edited can be used by anyone. Why? because, few administrators understand how important these Terms are. Fewer still understand the impact Terms have on each and every future online dispute.

They fail to Negotiate the Terms: The most common mistakes made by site administrators is believing that if they post Terms on the internet, they will bind visitors. That is equivalent to posting mortgage papers on the wall of a bank and believing that everyone who enters will be bound by those documents. Web site Terms must be negotiated to be valid. This is a critical component of online compliance; few, however, understand how online negotiations take place.

They Don't Change with the Times: Internet laws “develop” or “mature” through case law on a daily basis. Since so few cyber laws are codified through statutes, compliance can only be reached through Terms amendments reflecting these latest rulings. Many site Terms, however, were drafted 6 months to 3 years ago. Administrators must start thinking about making key changes to Terms on a regular basis.

The Risk of Non-Compliant Terms

In our representation of online companies, we see four main areas of risks faced by clients. These risks are easily avoidable; however, due to a lack of understanding risks often mature into costly if not destructive forces for a young company.

Many online companies unknowingly make promises to online users that they never intend. I've seen clients with subscription based pricing models having copied Terms relevant only to one time charge sites. As a result, they were liable for wrongful charges. Some clients with upstart e-tail sites, ended up making consumer support promises which only the like of Amazon or Buy.com could make.

Important contract provisions get struck down. When online companies fail to understand that Terms must be “negotiated” with users, they end up surprised when judges strike down provisions that are employed by countless other sites. The typical response is, “How could a judge do this? It is Standard industry practice.”

The Company assumes unnecessary levels of liability. When Terms are not properly drafted and negotiated, incorrect provisions can result in substantial corporate liability. There are countless class-action websites run by attorneys soliciting clients for class action law suits against online companies. Having the wrong Terms can be devastating.

Administrators facing personal liability. Hard to believe, but when Terms are drafted improperly the owners and operators of sites can face liability personally, not just as a corporation.

Step 1: Define Your Goals

It may sound strange, but before you can start drafting any Terms you need to figure out what your goals are. The Terms must reflect your goals. More importantly, they need to avoid saddling you with unnecessary obligations.

If you are building an affiliate marketing campaign and deploying squeeze pages, what are your goals? You want to build a mailing list, that's obvious. But what are the Terms of the transaction? You may want to give them a free gift or service in exchange for information. Alternatively, you may want them to read product descriptions. Either way, what do you want you customers to do?

If you are building a forum or soliciting product reviews, what do you want users to do? You want them to post comments but you want them to behave in accordance with the law. What does that mean? How can their behavior make you liable to third parties?

If you are building an e-tail site, what do you want to accomplish? You obviously want to make sales, but you also don't want to be liable for faulty products, lost shipments or false advertising.

What if you are designing software that runs on the internet? You want to make sure it is deployed in accordance with legal allowances. You also want to make sure that its not distributed without your consent. What about a dating site? Here you want to make sure that members are truthful and that people interact safely.

Every online product or service is unique. Start by defining your goals. There can never be too many. The mistake is to just ignore this stage.

Step 2: Where is Your Liability?

Once you figure out what your goals are, you need to think about where potential liability can come from.

If you're developing an affiliate marketing campaign, you face liability from potential false advertising and product liability.

If you you built a widget that runs off of tweeter, you face potential trademark and copyright violations in redisplaying tweets.

If you run a forum, you face publisher liability for comments made by users.

If you developed software that automates posting to Craigslist, you face liability for enabling your users' unintentional violation of that site's terms of service.

If you develop a squeeze page you may face privacy concerns due to follow up advertising.

If you develop a digital entertainment download site, you may face liability due to copyright infringement for ringtones and games.

If you build a social network site, you face liability for intellectual property infringements for users' posting.

There is unlimited forms of liability faced by online companies. The trick is to give some thought to all potential issues that can arise in the future, however remote. Always ask, what can someone end up being unhappy about? Even a $2.99 download product can result in millions of dollars in liability.

Step 3: Define Your Customer's View

It's one thing to figure out what you want. It's quite another thing to figure out what your customer wants to achieve. Don't forget what we said earlier on: A web site's Terms is a negotiated agreement. It can never be one sided or it risks being thrown out by a judge. So what do your customer want?

A customer who clicked on an advertisement to an affiliate marketing site, wants truth in advertising regarding the product.

A visitor to a squeeze page wants an exchange of his information for value. The e-product must be delivered as promised.

A subscriber to a newsletter wants his information kept confidential from 3rd party marketers.

A member to a dating site wants his personal information kept confidential from other members unless he wishes them revealed.

A customer of a digital entertainment site wants his digital game to operate properly.

A customer downloading a ringtone wants to make sure that he is paying for one download and not paying for a subscription.

A buyer from an e-tail site wants to know who to return the product to in the event of a complaint.

A client posting a review wants to make sure you keep his identity confidential.

If you haven't given thought to what your customers want, a judge will. The negotiation starts by you thinking about your customers needs.

Step 4: Enable through Negotiation

So how do we put everything together? How do we enable our goals, while minimizing potential liability and allowing for customer wishes? We negotiate with the customer. I know this sounds strange. How can you ever negotiate with a visitor to a splash page?

Terms of service are worth little if a court is likely to later dismiss many of the key provisions. Courts over the past few years have struck down many important sections of leading sites' Terms as being too one sided. How do you avoid it?

Focus on the best form of “consent”. Most web sites at best offer a link at the bottom of a page to the site's Terms. Others go a little further by requiring the users to check a box as having “agreed” to the site's Terms. However, if you have a provision that you “must” make sure that a court will uphold you can do better. There are countless options available to make sure that a client reads and consents to important terms (e.g. displaying summarized terms of service).

For some key issues, like dispute resolution, afford the user options. Most attorneys, inexperienced in online law, draft straight forward terms. As they try to bind users, they fail to understand that unless they build options into the Terms (like how to best resolve disputes) judges are likely to strike the provisions down.

Don't fail this step. Negotiate fair Terms with your customers by giving them ample chance to consent to important provisions and providing them with options on how to best implement the Terms.

Step 5: How to Make Changes?

You can be assured of one thing. You'll have to make ongoing changes to your Terms. Not only are your business practices likely to change over time, online laws change on a regular basis. As online legal cases make it through the court system, we must incorporate into existing Terms any new legal interpretations and findings. Failing to do so, assures us of stale and irrelevant Terms. Basically, absent amendments to our Terms, the goals we set up earlier while minimizing liability will be ineffective.

But how do we make changes? If we look at the typical terms of service agreement, we are likely to see a statement such as this: “XYZ reserves the right to amend these terms of service at any time, with or without notice to the users. It is the user's obligation to check this page from time to time to see if any changes to the terms were made.”

Does this provision seem strange? How often have you heard of a contract that can be amended unilaterally by one side without notice or the option to back out? Not often! That's because, in our normal daily lives we would never agree to such a contract. So why should such a contract apply online?

Courts have, in online cases, consistently rejected contract provisions which were deemed too onerous when one side did not have the opportunity to choose among alternatives, negotiate or withdraw. From cases concerning arbitration clauses to subscription pricing, courts have rejected provisions that are too one sided.

While this provision is widely accepted in the industry, I would not advise building an online business based on the broad application of unproven and legally weak provisions. Avoid the risk of a court rejecting your Terms. The solution: NOTICE. Go out of your way to provide your users with notifications of any changes made to your policies. Send out email and txt messages. Post notices of revisions to your site. Have members “re-accept” the new Terms.

You can never do too much when it comes to providing notice of changes.

Step 6: How to Control Liability

So by now, we negotiated compliant Terms for our online business. Is that enough to control our liability. No! To assure that any potential future liability is contained, you must follow these three steps:

Follow the Terms: This may seem so simple, but so few actually follow it. You need to know your Terms and you need to follow the Terms. If you made promises, keep them. If you provided customers with procedures they need to follow, respect them. Don't create a situation where you actually create liability for yourself by having drafted compliant Terms but having failed to follow them. Remember, since there are many “holes” in the online legal system, judges rely on privately negotiated contracts such as Terms. Your failure to follow your own Terms will be read against you. You would have effectively breached your agreement with your clients.

Teach your Clients: So you “negotiated” your Terms through proper usage of the “acceptance” procedure. But do your clients know what to do? Often you liability is tied to your clients' behavior. So go out of your way to teach them proper and lawful behavior. From support forums to seminars, from conference calls to newsletters – Build a culture of education by teaching your clients the lessons that are important to you.

AND… Build Liability Proof Domestic and Offshore Corporate Structures.

Build Liability Proof Corporate Structure

After all is said and done, don't forget that your best ally when it comes to managing potential liability is the corporate structure that you've set up.

Basic corporate structures, if properly set up and managed over the years, will provide you with some liability protection. That might be enough for some simple online businesses such as squeeze page powered affiliate marketing campaigns and e-tailers.

For other online businesses, a more sophisticated form of domestic and offshore corporate structure is needed. Believe it or not, your greatest risk will not come from government. It will come from competitors. Everyday, large tech companies compete with smaller more nimble companies using the court system. And why not? In court, the larger companies have an advantage – money.

Many entrepreneurial companies have gone out of businesses after being dragged into court by larger companies. For many online and software companies, compliant Terms will not suffice. They need to supplement those Terms with a structure that evens out the odds in court.

This is a topic too large for this eGuide. Speak with an attorney about the design of domestic and offshore networks of online compliant corporate businesses.

Where Do We Go Next?

Sit back and start designing your site's Terms. The more questions you have, the better it will end up. And remember what we said in the beginning of this eGuide: A Site's Terms is only one component of its overall online compliance.

Make sure your Terms integrate and support your business' overall online compliance strategy including:

Online Privacy Software Compliance Mobile Compliance Direct Marketing (email and txt) Intellectual Property Compliance (trademark and copyright) Online Advertising Online Promotions (contests and sweepstakes).

Once you design an overall compliance strategy, examine your business' liability exposure and the ability to incorporate an online liability management system based on both domestic and offshore corporate structures.

By: Lior Leser, Esq. – Web 2.0 Lawyer

Lior Leser counsels Internet, mobile and software companies as a head of the LYL Law Group. Mr. Leser earned his J.D. at Stanford Law School (Stanford, CA). He also attended Sophia University (Japan) and the London School of Economics (London, UK) for advanced studies in Finance. He attended Brandeis University (Waltham, MA), where he earned an M.A in International Economics and Finance and a B.A. in Economics.

Article Source: http://EzineArticles.com/6808429

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The Difference Between Copyrighted and Royalty-Free Images

Royalty-Free Images For Commercial Use

The Difference Between Copyrighted and Royalty-Free Images

With many thousands of new websites being created or updated each day there is a growing need for webmasters to obtain good quality royalty free images for commercial use. Images and photos are an absolute must to illustrate certain concepts, ideas or news articles, and their value is immeasurable..

Images, photos or illustrations add interest to a website, they provide a focal point. They visually create an impact that an article with no illustration does not, and can result in a website being much more popular than it might otherwise be. It has long been established that the use of images provides extra interest. Pictures break up blocks of text to make pages more visually appealing and this results in readers staying longer on a page, website or publication.

Once a webmaster or entrepreneur comes to the realisation that images are a necessary requirement, the next stage is finding images that fit the bill for any given project. Unfortunately, this is where many make their first mistake, the mistake being searching the internet for “copyright free images”, when in fact what is really required are “royalty free images.”

When a person takes a photograph they automatically own the copyright on that image and it cannot be legally used without obtaining the release of the copyright, which is usually a very expensive thing to do. Even if that image is openly published on a website or in a magazine the copyright still belongs to the person that created the image unless they release or sign over the copyright to some one else. It is not unknown for some people to “take” images that appear on other websites and use them for their own purposes. But without securing the copyright this is a very risky thing to do and should really not be done unless you can contact the owner of the image and come to some kind of arrangement.

Another way of using photos or images is by obtaining a license to use a photograph and paying a royalty every time it is used. This usually entails paying a fee or percentage on products or services sold by using the image. This can be quite expensive and contracts are usually involved which most smaller business really do not want to get involved with.

There is another option, and that is using royalty free photos. Royalty free photos are where a one off fee is paid and in return users are given a form of license to use the images for no additional recurring payment. There are different forms of royalty free agreements, many will allow only non commercial use and others will allow you to use an image only a specified number of times or on a limited number of products, so it is a good idea to check the details carefully. However, there are some royalty free photo websites that place no restrictions on royalty free images for commercial use. These sites allow more freedom to use their images and photos and should actively be sought out as this type of arrangement provides really good value for money.

Of course it is important to note, that even when using royalty free photos and images, the copyright of the image still retains with the creator; which means that you cannot resell that image. You can only create products or services using the image and sell those. The copyright in all cases remains strictly with the creator unless you negotiate otherwise.

In the event that you find a photograph, picture or image that you wish to have exclusive rights to, it is worth contacting the company or creator to enquire about this so that the image can be exclusively used by you. There will be extra fees involved, but it may be worth it as that image may best visually represent you and your company; it will also prevent others from using the same image and having your brand identity compromised.

Finally, it is important to restate that royalty free images for commercial use are not copyright free. The copyright is retained by the creator of the image. It is amazing to see how many searches are made every month for copyright free images, when in fact, what most really require are royalty free images; the problem is the people searching, just don't know what to look for!

Allison Galpin
Royalty free images for commercial use for webmasters and publishers.
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Trademark Registration: Protecting Your Logo Design

Question: Is a federal trademark registration the right way to protect a logo design?

Answer: It depends…

The answer to this question depends on how you intend to use the mark in commerce. For example, let's say you develop a logo or design that you and your friends really like and people are asking for a t-shirt that displays the logo. So you now plan on going into business selling t-shirts, sweat shirts, etc., with your logo prominently displayed. But before you do, you want to make sure and protect your logo design. Is trademark the best protection?

Remember, a trademark is an identifier. The mark identifies to the consuming public the producer of a particular product, or in the case of a service mark, the source of a particular service. With use in commerce, it becomes a recognizable logo design which identifies your product or services from those products or services of others. That's not what the logo design is doing in our t-shirt example. You are not a t-shirt, sweat shirt manufacturer. You are simply purchasing the clothing from another source in order to display your new design. The logo is simply being displayed on the t-shirt, it is artwork. According to trademark law, subject matter that is merely a decorative feature does not identify and distinguish the business owner's goods and, thus, does not function as a trademark. You are not using the logo design as a trademark, but as an identifier. I would therefore not advise pursuing trademark protection but instead, apply for copyright registration on the design.

If however, you have a product, and you intend to display the very same new logo on the product, and/or display the new logo design on the product's packaging as well as the advertising materials for the product, that's clearly using the logo as a trademark. With continued use in commerce, you are teaching the public that when they see the logo design on a product, or on packaging, or in advertising, that your business is the source of the product. In this case, trademark registration is the right way to protect the design.

Is your name, logo, design actually a trademark, or more ornamentation? The exact same design logo, however, in one example, copyright registration is the answer, and in the second example, trademark registration is the answer. It all depends on how you use the mark in commerce.

About the author:

Gary Price is an attorney registered to practice before the United States Patent and Trademark Office. His legal practice includes all areas of Intellectual Property. Mr. Price also provides federal registration services under the business name Trademark Connect. If your business wants to register its brand, then go to http://www.TrademarkConnect360.com and learn more about our registration services and our registration Guarantee.

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