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Use of the Internet by clients has become commonplace. From full e-business, such as on-line banking, to advertising real property listings by real estate sales professionals, the Internet
is a useful medium for many purposes. However, many clients do not generally understand the rules of the Internet. The world of electronic delivery systems has made copying and
distribution of significant and protected works of others, and the infringement of important intellectual property rights, easy, quick, and inexpensive. It is critical that clients
understand some of the fundamentals of doing business on the Internet to avoid potential litigation and damages which could be devastating. The following are some of the potential traps
that clients need to avoid:
Do not adopt a name, logo, or domain name without clearing it for potential trademark infringement.
A domain name adopted by a website
owner may, in addition to functioning as a domain name, also function as a trademark and infringe on the trademark rights of another. A trademark is any word, name, symbol, or device, or
any combination thereof used in commerce to identify the source or origin of goods and services. See, 15 USC Section 1127. A domain name is an address used to identify and direct others
to a specific location or webpage on the Internet. A domain name is obtained by registration through one of several registrars, including the registrars approved by the Internet
Corporation for Assigned Names and Numbers (ICANN). So long as the domain name selected is not exactly identical to another registered domain name, the registrar will grant registration
of that domain name to the applicant. However, a domain name may also function as a trademark. For example, amazon.com¨ is a domain name registered to Amazon.com, Inc., but it is also a
federally registered trademark for a computerized on-line ordering service featuring the wholesale and retail distribution of books, electronics, apparel and accessories, and other
products, as well as other goods and services. Another example is Zionsbank.com®. Zionsbank.com® is a domain name which directs the user to a home page which provides for
banking services. However, Zionsbank.com® is also a federally registered trademark and is used to identify the source of financial services, namely banking, on the Internet.
Similar to registering a trade name with the secretary of state, registering a domain name with a registrar is not sufficient to protect the user of the domain name from liability for
trademark infringement. Domain name registrars do not provide any information to an applicant whether the use of a domain name will cause infringement of another's trademark. Clearing a
domain name for potential trademark infringement can be done only by conducting a trademark search. Trademark rights accrue at common law. One may acquire common law trademark rights by
using a word, name, logo, symbol, or device to identify the source of goods and services. No state or federal registration is necessary. Registration can enhance rights, but it is not the
basis for the fundamental rights of trademark protection. Inasmuch as trademark rights accrue at common law, the use of a domain name to identify the source of goods and services, such as
amazon.com¨, may infringe on the common law or registered trademark rights of another. The test for whether a domain name, which is also used as a trademark, infringes on the trademark of
another is whether consumers are likely to be confused by the use of both trademarks in the marketplace. This is a fact intensive test which cannot be adequately addressed in this
article. Courts consider several factors when determining whether there is a likelihood of confusion, including a comparison of the two marks and their sight, sound, and meaning, the
channels of distribution of the goods and services, the sophistication of consumers, and several other factors. Although it is not the purpose of this article to articulate the likelihood
of confusion test, it is sufficient to state that any time a domain name is registered, there is a risk that it will infringe on the trademark rights of another. As a result, the domain
name should be cleared by doing a comprehensive search to minimize, and hopefully avoid, any potential trademark infringement claims.
Do not engage a developer for your website without having a written contract which addresses key issues.
Too frequently, the owners of websites used for advertising or
conducting e-business engage the services of an independent third person to develop the website without having a written contract in place. A website is composed of several elements,
which include computer software code which runs the website, the domain name, photographs and other graphics, text, databases, other computer software programs, such as a program to take
and process orders for an e-business, and other components. All of these elements may be protected by intellectual property laws, including trademark, copyright, patent, and trade
secrets. Unfortunately, the ownership and other protections of this valuable intellectual property are often overlooked, and the party engaging the developer fails to adequately address
the intellectual property issues.
Although some computer software may be subject to protection under applicable patent laws, generally computer software, graphics, and text will be
the subject of protection under copyright law. A common misconception is that the owner of a website may engage the services of an independent third person to create intellectual property
for the owner, and by designating the work a "work made for hire," the owner then owns all of the intellectual property. Under the Copyright Act, however, a "work made for
hire" applies in limited circumstances. Under the Act, a "work made for hire" is either a "work prepared by an employee within the scope of his or her
employment," or "a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written
instrument signed by them that the work shall be considered a work made for hire." 17 USC Section 101. As a result, if the development is not made by an employee within the scope of
his or her employment, particularly in the context of website development, it is not likely to be a "work made for hire."
Under copyright law, except in the case of a work made for hire, the author, developer, or creator is the owner of the work. See, 17 USC Section 201. The owner of the copyright has several exclusive rights, the violation of which by another may lead to a claim for infringement. These exclusive rights include the right to reproduce the copyrighted work in copies, modify or create derivate works of the original work, distribute copies of the work to the public, and publicly display the work. Each of these rights could have a significant impact on the owner of a website. For example, if the developer has the exclusive right to modify the work and the work at issue is the computer software which runs the website, conceivably the website owner, as opposed to copyright owner, cannot update and make any changes to the website without obtaining the consent of or a license from the developer. Because the developer owns the copyright, it is not sufficient for the website owner to obtain a verbal promise from the developer that the website and the other intellectual property will be owned by the owner upon completion of the development. Such a promise may create an implied license in the website owner, but the material terms of the implied license will be unknown until a court decides the terms of the license. Unless the website owner has knowingly and after full and fair negotiations made the determination that he or she will accept a license, which should be in writing, the owner of the website should obtain a written assignment of the developer's rights to all intellectual property associated with the website. "A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 USC Section 204. Without a full assignment of the developer's rights, not merely a license, the website owner will have limited control and rights regarding the website.
Another frequent problem that arises with developers is the registration of a domain name. Developers, as part of the package of services, will offer to obtain a domain name for
the website owner. The agreement with the developer should include a clear understanding that the domain name will be registered in the name of the owner, not the developer. Further, the
owner should confirm that the domain name is registered in his or her name and that the technical and administrative contacts are both under the direct control of the owner. Confirmation
of proper registration can be done by visiting www.whois.com, www.networksolutions.com/cgi-bin/whois/whois , or another similar site. Domain name rights have been held to be
contract rights, not property rights. Unless the domain name is infringing on the trademark rights of another, short of litigation to enforce a contract, there is currently no mechanism
to force the transfer of a domain name to the intended registrant.
It is important for each business owner engaging the services of an independent contractor for Internet
development to have a written agreement which, at a minimum and in addition to addressing the timing, scope, and compensation of the project, should include an assignment of the
intellectual property rights and a clear statement of the parties' intent and the obligations of the developer with respect to any domain names.
Do not copy photographs, text,
compiled data, and other information in an electronic format without a license or permission.
The electronic world has made the copying and distribution of the works of others
easy and inexpensive. For example, in the music industry, Napster made electronic music files available on-line without paying a royalty or otherwise having a license to make such files
available to others. Napster took the position that the Internet, as a new medium, should allow for the free distribution of otherwise protected works. Ultimately Napster was enjoined and
has terminated its services.
Because of the ease of copying and distribution, there is a temptation to not take appropriate steps to understand what action, if any, should be taken
before using the works of others. As indicated above, the owner of a copyrighted work has several exclusive rights. In general, if the owner of a copyrighted work is able to establish
ownership of the work and that copying has occurred, there is infringement.
Photographs, text, data compilations, and other electronic information are capable of protection under
United States copyright law. Given that most people will probably not sit on a witness stand and testify that they have copied the works of another, courts may find copying if the alleged
infringer has access to the work, and if there is substantial similarity to the original work. There are other factors to be considered, such as the filtration of unprotected elements,
but for purposes of this article, there may be infringement if there is access and substantial similarity. Before copying a photograph, text, complied data, or other protected elements,
the owner of the website should obtain a written license or permission to use the work, and the license or permission should identify the scope of the permitted use, including the term of
the use.
Do not link to another website or frame another website without permission from the other website and having terms of use posted on your own website.
The
law with respect to framing and linking on the Internet is not yet settled. Framing is including within a frame on one website the website of another. Linking is including on one website
a hypertext link to the website of another. There are cases which have addressed the issues relating to framing and linking, but no clear position has emerged. There are two fundamental
intellectual property areas of law at issue. First, the framing of or linking to another's website may constitute copying and the public display of the copyrighted work of another. As
described above, two of the exclusive rights of a copyright owner are the right to copy and to publicly display the work. The second intellectual property issue is trademark infringement
and unfair competition. Under the federal law of unfair competition, no person may, on or in connection with any goods or services, use any trademark which is likely to cause confusion as
to the affiliation, connection, or association of such person with another person. See, 15 USC Section 1125(a). Framing or linking may suggest an association, sponsorship, or endorsement which is not approved or intended. Another potential problem that may arise from framing and linking is breach of contract. Website owners may have contracts with advertisers which limit advertising on a website to advertising from one specific source. If a website is framed by another, and the framing website has its own advertising, the advertising for both websites will be on the same screen display at the same time. This side-by-side advertising could trigger a breach of contract for at least one of the advertising websites. A final issue is "deep" linking. Deep linking is linking to a page behind the first or home page of a website. For example, www.utah.gov is the home page for the Utah state government. On the home page, there are several ways to access additional pages with additional information and purposes, such as the page located at www.utah.gov/serv/bes which allows searching the Division of Corporations and Commercial Code's database. Creating a link to the database, without going through www.utah.gov constitutes "deep" linking. In at least one case, Microsoft used a deep link to bypass the home page of www.ticketmaster.com. Ticketmaster.com¨ generated substantial advertising revenue from its home page, as well as other economic benefits. By "deep" linking past the ticketmaster.com¨ home page, ticketmaster.com® suffered an economic loss. The case was settled, and Microsoft agreed to link only to the home page.
Similar to the use of any other intellectual property, the safe approach is to obtain written permission to do the framing or linking. Many websites include a link to a page which
sets forth the terms for framing and linking and allows such activity and use so long as there is compliance with the terms. For example, on the site www.fanniemae.com, there is a link
titled "legal". By clicking on the "legal" link, the user is taken to a page which includes a link titled "Linking Agreement". The page linked to the
"Linking Agreement" link sets forth the specific terms of any linking to the www.fanniemae.com site. Interestingly, the page includes a statement that "Fannie Mae welcomes
links to its Internet sites."
Although the enforceability of statements of terms of use included on a website is highly suspect inasmuch as there is usually no affirmation of
such terms, the current practice on the Internet is to include terms of use and disclaimers. Specifically with respect to framing and linking, the terms of use should include statements
to the effect that links are provided only as a convenience and no affiliation with the linked entity should be inferred. Further, the user should be notified that the website owner does
not monitor the linked sites and the use of the links is strictly at the user's own risk. It is possible that a one-time legitimate link may become a site inappropriate for review or use.
There may be viruses or other illicit code downloaded to the user's computer when accessing the website, and the site may contain information which is inaccurate, misleading, or which
could constitute a crime or civil violation.
The flip side of this issue is the protection of one's own website and avoiding embarrassing or legally problematic linking or framing.
It would be appropriate to include a linking policy in a statement of terms of use.
Do not use metatags which are trademarks of others, especially your competitors.
This is another trademark issue. Metatags are code which is embedded in a website which gives instructions for the operation or display of the website. A visit to this author's firm's
website, www.cnmlaw.com, will disclose a metatag. Metatags may be displayed in Internet Explorer by clicking on "view" on the toolbar, and then on "source" from the
dropdown menu. A separate window will appear which will display any metatags. In the case of www.cnmlaw.com, there is a metatag "<meta http-equiv= "Content-Type"
content="text/html; charset=iso-8859-1">." In some cases, Internet search engines use metatags to help locate sites which the user of the search engine is seeking to
locate. In one case, Equitrak included a metatag of the word Copitrak® with the hope that users of Internet search engines would be directed to its site, and not its competitor
Promatek, which owned the trademark Copitrak®. Courts have found that when the metatag is the trademark of another, this constitutes initial interest confusion, a form of trademark
infringement. Although the trademark is never displayed to the public, unless one follows the steps above, because the trademark is used to at least initially divert the attention of the
Internet user to the website of another, there is confusion as the source of goods and services. Developers may or may not disclose to a website owner that metatags have been used in the
website. The owner should include in the development agreement a representation and warranty that no metatags are included which may be another's trademark, and the owner should
personally review the metatags to confirm the accuracy of such representation.
Do not send spam e-mail without complying with state statutes.
Spam is unsolicited
e-mail and has become an enormous problem in the business world in particular. The estimated loss of productivity is significant and, at a minimum, for most people spam is very annoying.
At least half of the states have addressed spam in some fashion, and Utah has adopted its own unsolicited commercial and sexually explicit e-mail statute. See, The Unsolicited Email Act and Anti-Spam Litigation, Gregory M. Saylin and Spencer J. Cox, Utah Bar Journal, January/February, 2003. Before engaging in the practice of sending any unsolicited e-mail, the statute of each state which will be involved in the process should be reviewed. This includes the state of the sender, the recipient, and any intermediary, such as an Internet service provider.
Avoid unintentional disclosure of customer information, including information communicated by fax and e-mail.
Privacy is a hot topic. Although privacy always has or
at least should have been an issue, the advent of electronic delivery systems has made the issue more relevant than ever before. The Gramm-Leach-Bliley Act addresses the privacy of
certain non-public consumer information by financial institutions and their service providers, and imposes privacy obligations on such institutions. The scope of businesses included in
the definition of financial institutions is very broad. In addition, the Health Insurance Portability and Accountability Act of 1996 addresses the privacy of identifiable health
information. In addition, there are other potential concerns relating to the disclosure of information that is sensitive or confidential. With the heightened standards for financial
institutions and health care providers, it is conceivable that there could be a claim for negligence against one who collects sensitive and confidential information and discloses that
information without the consent of the affected person. A negligence claim could arise from the failure of a website owner to adequately secure the server on which data is located, both
from physical intrusion as well as electronic disclosure or access. Although according to Formal Opinion 99-143 of the American Bar Association Standing committee on Ethics and
Professional Responsibility "[a] lawyer may transmit information relating to the representation of a client by unencrypted e-mail sent over the Internet without violating the Model
Rules of Professional Conduct (1998) because the mode of transmission affords a reasonable expectation of privacy from a technological and legal standpoint," the ethics opinion also
provides that "[a] lawyer should consult with the client and follow her instructions . . . as to the mode of transmitting highly sensitive information relating to the client's
representation."
Read your contracts and comply with them.
Owners and users of websites should read and understand the contracts that govern their relationship
to intellectual property and the rights of others doing business on the Internet. The owner should begin with the development agreement. The development agreement should be drafted to
address ownership, scope of the work, timing of delivery of the work to be tested and the final product, identification of the deliverables, representations and warranties as to the
originality of the work and non-infringement, the use of third party software, indemnification for infringement claims, and an assignment of all intellectual property. Again, there may be
a reason to allow the developer to maintain the ownership or license to some of the files involved in the website, but the issue should be negotiated and appropriately addressed in the
development agreement. The owner should be aware of any other license agreements governing the use of intellectual property, such as software license agreements.
A local business doing business on the Internet may not be able to limit jurisdiction to local courts.
The Internet is a world-wide enterprise. Doing business in one state or
location may, under some circumstances relating to the Internet, be deemed to be doing business for purposes of long-arm jurisdiction in other state or jurisdiction. In System Designs,
Inc. v. New Customware Company, Inc., Case No. 2:01-CV-00770PGC (March 5, 2003), Judge Cassell reviewed the standard for specific long-arm jurisdiction. Under the minimum contacts prong of the test, the court distinguished three ways website owners do business on the Internet. Under the first type of website, the defendant clearly does business over the Internet, including entering into contracts and the repeated transfer of files over the Internet. The second type of website is a passive website. Information is made available, but there are no contracts or other similar characteristics of the first category. Third are interactive sites. A user of an interactive site may exchange information with the host computer, but it does not reach the level of the first category. The website in System Designs was owned by a virtual company with no offices, employees, or other physical assets in the state of Utah. The court found that the website was an interactive site. In order to find long-arm jurisdiction, however, according to the opinion, the court had to address the quality of the contacts and the actions of the defendant. The court refused to dismiss the case on the basis of lack of jurisdiction because the defendant actively sought to do business on the Internet with Utah companies. Utah companies doing business on the Internet need to be aware that they may be forced to defend themselves in jurisdictions not anticipated.
Protect and enforce intellectual property and other rights.
Finally, a good defense is a well executed offense. Websites naturally include multiple intellectual
property and other rights. Not only should website owners seek to avoid infringing on the rights of others, they should protect their own intellectual property and other rights. For
example, copyright protection is generally available to any original work of authorship fixed in a tangible medium of expression. See, 17 USC Section 102. Obviously there are limitations, but in general, owners should consider copyright registration. Copyright applications with detailed instructions are available at http://www.loc.gov/copyright. In addition to the substantial remedies available, a certificate of registration constitutes prima facie evidence of the validity of the copyright and of the facts stated in the certificate of registration. See, 17 USC Section 410. Obtaining federal trademark registration may cost several hundred to a few thousand dollars, but the benefits are significant. Like a copyright certificate of registration, a federal trademark certificate of registration is "prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate, subject to any conditions or limitations stated in the certificate." 15 USC Section 1057. In addition to the recovery of damages and access to federal court, the owner of a federal trademark registration may enjoin the use of an infringing mark. Having a federally registered trademark can provide the leverage necessary to stop an infringer without having to file a lawsuit. Patent protection may be available for certain programs or business methods, and there may be trade secrets associated with the website and the business on the website which should be protected.
Doing business on the Internet has multiple traps and risks, but with careful evaluation and analysis of each of the elements of the website and a review of the relative rights of
the elements, owners may avoid the nightmare of litigation and the devastation of an adverse damages award. Evaluating a website is similar to reviewing a title report on a parcel of real
property. Each lien and other encumbrance must be reviewed and evaluated and an understanding of what action needs to be taken for each such interest must be determined. Owners of
websites can be much more confident doing business on the Internet if each will take appropriate steps to avoid infringement and the other problems addressed in this article, and the time
to protect the owner's interest in his or her own property.
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