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Doing Business over the Internet

Contracts over the Internet

Contrary to what one might think, "writings" and "signatures" are not a significant problem.

Domain Names

With the increasing popularity of the Internet, a company may find that someone else has registered its name or trademark as the name of an Internet site (a domain name).

The best prevention is to register i) a federal trademark on the principal register or ii) the corresponding domain name as soon as possible. (Registering the trademark federally requires that the applicant already be using the mark across state lines.)

Domain names may be registered through Network Solutions, Inc. (InterNIC) via the following:

InterNIC will "freeze" use of a domain name if a complainant has obtained registration (not merely an application) of the name on the federal principal trademark register or on a foreign trademark register prior to the other party obtaining the domain name.

In other situations litigation is the only recourse.

Liability for Web Pages and Internet Providers

Two relatively recent cases imply that sites on the Internet–both service provider sites and Web sites–may have liability for infringing materials and defamatory remarks posted by visitors to those sites.

In Religious Technology Center v. Netcom On-Line Communication Services, Inc. (907 F. Supp. 1361, N. Dist. Cal. 1995) the Court held that Netcom might be liable for contributory copyright infringement because of an infringing posting made by a BBS user to a newsgroup through Netcom. The post was on Netcom's computer for only 11 days, but Netcom had taken no action during that period after the plaintiff told Netcom that the post was infringing.

In Stratton Oakmont, Inc. v. Prodigy Services Co.(1995 N.Y. Misc. LEXIS 229) the Court held that Prodigy was liable as a "publisher" for a defamatory statement posted by a user because Prodigy exercised editorial control over its bulletin boards by editing posts for "offensiveness and bad taste." However, the Court also found that bulletin-board operators who did not edit their boards would not be liable for defamatory postings made by their users.

Content Ownership

The "fair use" exception to copyright infringement generally does not apply in commercial situations.

(Essentially, the "fair use" exception allows the free use of a portion of another work for purposes of commentary etc.)

Also, the fact that a work is available online and shows no copyright notice does not necessarily mean it is in the public domain.

Permission to use material may have to be obtained from multiple rights holders. With a film clip, for example, performers, writers and musicians may hold rights in addition to the film company.

"Moral rights" of authors/artists (to prevent changes in their works) may also pose problems, particularly internationally. Assignments of rights should include a specific transfer of moral rights.

In general, a "work for hire" agreement should not be relied on to transfer ownership rights; assignment agreements should be used instead or in addition.

Internet and E-mail Use Policies.

An employer may be held liable for an employee's Internet transmissions containing defamatory or harassing statements, infringing material or sexually explicit matter.

In addition, an employer who reviews employee electronic transmissions may run the risk of violating an employee's reasonable expectations of privacy. (See generally, O'Connor v. Ortega, 480 U.S. 709, 718-20.)

An e-mail policy that reminds employees that the e-mail system belongs to the employer and that the employer has a right to examine all e-mail goes a long way to eliminating any expectation of privacy.

Among other items, the policy should specifically prohibit use of the e-mail system to transmit any defamatory, threatening or obscene material. Ideally, of course, the employer should have the employees sign a form acknowledging the employer's right to access all e-mail messages, though that may not be workable in all situations. Some employers even post brief notices that appear when the employee accesses the system.

Use of Personal Information

In general, the Electronic Communications Privacy Act ("ECPA") prohibits anyone other than the sender and the intended recipient of an electronic message–including Internet service providers–from intercepting, accessing or disclosing the contents of the communication. (18 U.S.C. 2511 and 2701.)

The two main exceptions to this are when:

Taking information from customers–even from their Web searches–may be a problem unless the user consents in advance. Ways to accomplish this include i) providing a notice that appears on the screen each time a user activates the service that informs the user how the information will be used or ii) including a consent clause in any agreement that the user is required to enter into before using the service.