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Science & Technology

Introduction to Electronic Commerce: A Road Map to the Legal Issues

Thomas J. Smedinghoff

The World Wide Web has attracted the attention of virtually all aspects of commerce and industry. Everyone is rushing to set up a Web site and to do business on the Internet. For purposes of illustration, establishing and operating a Web site provides a good example of the legal issues that arise online. Virtually all forms of online commercial activity can be accomplished via an Internet Web site.

Before You Start. Setting up a Web site requires a domain name, i.e., an Internet address. Many businesses seek to obtain names tied to their business name or key trademarks (such as,,, and because they are easy to guess and easy to remember. But in many cases a business’s name or key trademark is already taken by someone else. This problem has led to much litigation over domain names and trademark rights.

Rights to Use Content. Building a Web site begins with content—content will be displayed on the Web site, and other content may be published or distributed through it. Web site content may include text, data, musical works, sound recordings, photographs, still images, motion pictures, and software. Obtaining this content raises numerous copyright issues, as well as, in certain situations, issues relating to rights of publicity, rights of privacy, defamation, and trademark law. If the content to be published is software, patent and trade secret issues may also be important.

The key issue, in the first instance, is the question of copyright. Virtually all works published online—for example, text, sound, and images—automatically are protected by federal copyright from the moment of their creation. Thus, copyright provides a valuable form of protection for the electronically published content created by the publisher. At the same time, however, it can present a significant and serious obstacle to using content created by others, especially in the absence of permission from the owner of the copyright of the content. Thus, Webmasters will need to address the issue of copyright with respect to all of the content that they incorporate into their Web sites.

Developing Content. For businesses that develop their own Web page content (either through their employees or by retaining an independent contractor), it is important to understand the nature of the copyright rights that are automatically created in this process, and their impact on the proposed use of what is created. This involves consideration of a number of important issues.

First, does the business own the copyright to the content that it created? When Webmasters create their own content, they can use employees or hire outsiders for the creative process. But in either case it is important to take the necessary steps to ensure that they own all of the rights in the work product they create (or at least the rights to use the content as planned). Merely paying someone to create content is often not sufficient to ensure the ownership of the resulting copyright. In many cases, appropriate copyright assignments or work for hire agreements will be required.

To obtain the rights you need in content, you must first understand what potential rights exist. For most types of works the key focus is on who owns the copyright. But trademark rights, privacy rights, and publicity rights may also be important. Software can also involve other intellectual property rights such as trade secret and patent rights.

Second, if the business does own the copyright, has it taken steps to adequately protect its rights and to preserve the value of the new asset that you have created? This includes using a proper copyright notice and registering its copyright claim.

Third, if the business does not own the copyright, has it secured a license from the copyright owner that grants the rights necessary for its contemplated Web site use? It is important to note that the content a business has used in the past may not be authorized for online use. For example, an advertising agency may have created a brochure that the business prints and distributes. However, unless the agency assigned all of its rights in the brochure to the business, you may not be able to publish the brochure online.

Fourth, has the process of developing the content resulted in an infringement of the copyright of anyone else? Even when work is ostensibly original, it is important to ensure that the persons creating it do not either intentionally or inadvertently infringe the copyright of any third party.

Using Content Without Permission. If you use preexisting content created by others, it is important that you understand the restrictions that the Copyright Act imposes on your use of the work, and the extent to which you need to obtain permission from the copyright owner.

In some cases, it may be possible to use preexisting content developed by others without obtaining their permission. Generally, it is permissible to use content without permission of the author if (1) it is in the public domain, (2) the use is considered a "fair use" under the copyright law, (3) the copying is considered de minimis under the copyright law, or (4) what is copied is not itself copyrightable, even though it comes from a copyrightable work. However, copyright is not the only concern. There may be other rights in the work for which permission is required, such as a release of the right of publicity of any persons depicted in the content you propose to use.

Licensing Content. To use most preexisting content on a Web site, it is necessary to obtain a license from the owner of the copyright. The process of obtaining permission in-volves several steps, which can be summarized as follows: (1) identify the content to be used; (2) identify the separate rights for which permission must be obtained; (3) identify and locate the owner of each right for which permission is required; and (4) negotiate and obtain the requisite form of permission. A rights and permissions professional may be the best source of information about these issues.

Trademarks. When trademarks are included in a Web site, two sets of issues arise. If the owner of the Web site is also the owner of the trademarks, it is important to ensure that they are properly used and protected. On the other hand, if a Web site makes reference to the trademarks of others, it is important to ensure that the marks are not used in a manner that is likely to constitute trademark infringement. This could be a problem, for; example, if the Web site uses someone else’s trademark in a manner that implies that the Web site, or the products that it promotes or markets, are created by, associated with, or endorsed by the owner of the trademark.

Thomas J. Smedinghoff is head of the Information Technology Law Department at the Chicago law firm of McBride Baker & Coles.

The paper is an abridged and edited version of one that originally was presented at the 1996 ABA Annual Meeting in Orlando, Florida.

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