Internet Business | The Law Firm of Ekaterina Mouratova, PLLC

Nowadays more and more businesses are established online. The predictions are that in the nearest future even less people will be attached to the physical location of their offices or stores. Internet allows great flexibility, less start-up and operational costs, much wider outreach to markets, consumers and professionals, whose assistance the businesses may need, and availability of many other useful business resources (e.g. the use of forum sites, professional sites, targeted advertising). Accordingly, establishing a business presence online can be a lucrative way to sell, buy, market, advertise and otherwise promote your goods or services.

From legal perspective, the same laws and regulations apply to online and offline businesses. So when starting an online business you have to know what laws and rules regulate your industry in general and what specific legal considerations must be given to your type of venture (e.g. contractual relationships, employment matters, form of business organization, intellectual property issues and many others).

But in addition to the legal matters, which all businesses face, online businesses must comply with special laws and regulations, which govern commercial activities in cyberspace. Also, the owners of online businesses should discuss with a business attorney how such general laws as, for example, intellectual property, contracts law, taxation, and customer protection law are interpreted, applied and operate in cyberspace since the specifics of online presence impose certain questions and practical rules.

Online business activities are regulated simultaneously by federal, state, and local (municipal) laws. The major Federal laws, which guide online businesses, are

The Anticybersquatting Consumer Protection Act of 1999

Selling on the Internet: Prompt Delivery Rules

Children?s Online Privacy Protection Act

The Federal Trade Commission (FTC) is the primary federal agency regulating e-commerce activities, digital rights, use of commercial emails, online advertising and consumer privacy. There is an extensive list of FTC?s e-commerce rules and regulations, and your attorney should familiarize you with the ones applicable to your type of business.

Taxes. Online businesses are required to pay the same federal taxes as regular businesses. There is a question, however, about state and local taxes. Whether online business is responsible for payment of state and local taxes is very fact specific and you should seek a professional consultation with an attorney to avoid any inadvertent violations. The general rule about state and local sales taxes (whether an online company has to collect those taxes from its customers and pay them to state and local revenue agencies) is that if an online business has some physical location at that state, such as a storefront, office or warehouse, it should charge its customers the sales tax rate required by the jurisdiction where that business is located. If your company does not have a presence in a particular state, it is not required to collect sales taxes from the customers. The reason is that online retailers who do not have a physical presence in any state and supply the goods/services by mail to different locations cannot possibly comply with over 7,500 tax jurisdictions that are present today in the U.S., accordingly to force them to collect sales tax would put a strain on interstate commerce.

International business. If you do business internationally, you should also be familiar and comply with international trade and contract law, shipping, tax, and customs regulations and other considerations depending on particular countries where you intend to conduct your business activities.

Intellectual property. Intellectual property issues have become a growing concern with the development of online businesses. As Internet gives more opportunities and easier access to the companies? information, it is possible to inadvertently infringe somebody?s intellectual property (IP) rights or become a victim of bad business practices yourself. It may be difficult to maintain a line between a healthy competition and adoption of the successful business practices and copying protected information. Online business owners are mainly concerned about protecting their domain names, trademarks, copyrighted items, including text, music, movies and art, computer software, patents, and licenses, all of which fall under U.S. Intellectual Property law and enjoy the same protection as offline matters. But with the rapid development of Internet and unique possibilities it gives to the users, there are certain specifics regarding the exploitation and infringement of IP rights.

The 1998 U.S. Digital Millennium Copyright Act (?DMCA?) was adopted to reflect those differences and clarify IP law in relation to online practices. It protects digital works, including text, movies, music and art, other forms of electronic information and data published online and contains many provisions explaining how an IP proprietor can protect his rights and avoid the infringement of the IP rights of others.

A common problem is when somebody obtains through Internet and starts using other?s copyrighted material without permission hoping that his/her acts will be undetected in a wide online net. Pursuant to the DMCA the IP owner is entitled to the same various damages as it would be in a real world and has a right to prevent others from using its materials without obtaining necessary licenses and paying royalties to the owner. Copyright infringement can have severe consequences, including criminal penalties and potentially substantial civil damages for each infringement, plus bearing the legal fees of the copyright owner, if he prevails in court.

DMCA also explains what measures a website owner may take to prevent infringement of others? IP rights. Also, if it uses somebody?s materials to promote the public interest, such as education, scholarship, criticism, parody, etc., uses a relatively small amount of the total copyrighted work and not for profit, its actions might fall within the ?fair use doctrine? and it may avoid infringement charges. But in this case, the good practice is to give credit to the original author or the source from which the material at issue was obtained to avoid confusion regarding its legal ownership.

Terms of Use of the Website. Under certain circumstances the information posted on you website may result in a binding contract (e.g. if the views of your website reasonably rely on it and act or refrain from acting based on the information they learnt from your site). Also, the puffery or advertisement may become an enforceable contract. That is why it is very important to post Terms of Use on your website, which are fully compatible with your business, reflect your intentions and goals, limit your liability, express other information, which may be necessary for your visitors to know and otherwise comply with the applicable U.S. law and regulations. Terms of Use of the website is considered to be a contract between you and your site?s visitors even if it is not named this way and prevent somebody from claiming misunderstanding, inducement or some other misleading by your site. Such Terms of Use usually contain lots of disclaimers and other legalese. You should request a business attorney to draft it and review your website to make sure it fully complies with the law.

All activities that are illegal in real life are also illegal on the Internet. Cyber law also defines what actions are illegal to do online. The example is child pornography, cyber stalking, online fraud, cyber scams, hacking, cyber harassment and virus attacks. The objective of the Cyber law is to protect Internet users and make Internet a safe place for business and personal interactions. Cyber law is enforced by courts and police officers across the country. If a person violates cyber law they can be subjected to civil and criminal liabilities, ranging from fine and penalties to a jail term. Cyber law is also monitored and enforced by the United States Federal Bureau of Investigation.

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Source: http://blog.mouratovalawfirm.com/?p=169

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