Ecommerce Legal Issues

In the past several years, more and more business has moved online. Companies are opening a new channel of business by selling their goods and services online to a wider market. Consumers are also looking toward the internet, and the percentages of online sales are growing each year. Consumers are buying everything from car insurance to clothes online, as well as booking travel, buying or searching for cars, and purchasing their music online through various services. A recent Internet Retailer report showed that internet businesses are growing in large numbers year over year, even while the economy is a downturn. Because of all of these facts, more companies are moving toward becoming multi-channel and are facing the challenges of legal issues that arise while doing business on the web.

Common Issues Facing Internet Retailers

Pay per click (PPC) advertising is common for companies to use. These companies purchase terms, keywords and brand names from online media agencies that place ads on search engines, social media websites, and other affiliates. The ads show when a search is made that is topical or includes the keywords purchased. With PPC a company pays for each time an individual clicks on their ads. This cost can be as low as $.01 per click. One problem with PPC is pay per click fraud. Pay per click fraud is where company’s ads are clicked on with the intent to increase their number of clicks. This clicking can be done by a person, script, or computer programs. Four reasons why someone would commit pay per click fraud are: to complete competitors advertising budget, to be malicious for personal or political vendettas, to “help” a friend by showing a lot of activity on their website, and to frame a competing publisher. PPC fraud is a growing problem with online advertising, and companies need to have full time attention to their click advertising and the budget they are spending, in order to keep from being a victim. Many search engines are currently working to fight against click fraud. Google, the world’s largest search engine, has been sued many times for not preventing such action.

In 2003 the CAN-SPAM Act was passed. CAN-SPAM stands for Controlling the Assault of Non-Solicited Pornography and Marketing. This act determines the requirements for anyone who sends email advertisements. All emails must meet four criteria вЂ" you have to provide the email recipient a method to opt-out of future emails, the subject line cannot be deceptive, the “from” and “to” routing information must be accurate and identify the person who initiated the email, and it must contain a clear message that the email is an advertisement. Any violations of the CAN-SPAM Act can be subject to fines and are enforced by the Federal Trade Commission (FTC).

One provision of the CAN-SPAM Act was to FTC to create a do not email list similar to the do not call lists. However, after review the FTC rejected this option as they believed the lack of authentication of the email addresses could undermine the list and raise security concerns (www.ftc.gov).

Most companies consider their domain name to be a valuable asset. Today the first contact many consumers have with a company is through their website. A domain name allows customers to quickly and easily connect to a particular business via the internet. With a company’s domain name being so valuable, companies must be aware of the potential for domain name fraud or infringement. If there is a dispute over a domain name the Uniform Domain Name Resolution Policy mandates domain name disputes for registered domain names are resolved with mandatory arbitration. There are companies who establish their domain name based on common misspellings of their competitor, a practice called cyber squatting. In order to police domain name infringement the government created the Anti-Cybersquatting Consumes Protection Act (ACPA) in 2003. This Act does not prelude court procedures or arbitration, but it is an authority established to give domain name owner’s legal remedies against others who obtain domain names in “bad Faith”. 1

Pending Legislation and Documented Court Cases

When a business chooses to go multi-channel, there are court decisions resulting from law suits, pending legislation by Federal and State Governments, and requirements by the Federal Trade Commission that effect on e-commerce companies. Each of these must constantly be monitored to ensure your business stays in compliance. Large corporations have Legal departments and individuals dedicated to keeping abreast of these things, while smaller corporations will generally hire a law firm that specializes in e-commerce to do it for them.

In the case of Blue Nile vs. Ice.com, the plaintiff alleged the defendant copied elements of the Plaintiff’s website and was therefore in violation of the Copyright Act. Both were online jewelry sellers and competitors. The lawsuit claimed Ice.com copied the “overall look and feel2” of Blue Nile’s Diamond Search web pages. The takeaway lesson from this example is that when competing in a multi-channel market, one has to be cautious in not crossing the line of mimicking the competition to the point where they almost are indistinguishable.

The Fair Use Doctrine was at the center of Playboy Enterprises, Inc. vs. Huckleberry Publishing Inc. Fair Use is a doctrine in U.S. Copyright Law that allows limited use of copyrighted material without having to get permission from the property owner. The defendant, who had appeared in Playboy magazine as Playmate of the Year, claimed she was entitled to use that term to accurately describe the title bestowed upon her by Playboy magazine. The defendant used on her website Meta tags, which are commonly used by search engines such as Google to index a site. Playboy disagreed with her usage. The court in this situation ruled in favor of the defendant3 agreeing she had the rights to use the title and terminology on her website.

Viacom vs. YouTube is currently in the news. Viacom’s complaint is there are nearly 160,000 unauthorized clips of Viacom’s entertainment programming available on You Tube and that the clips have been viewed more than 1.5 billion times. Viacom says “YouTube’s brazen disregard for the intellectual property laws fundamentally threatens not just plaintiffs but the economic underpinnings of one of the most important sectors of the United States economy4”. Strong