Web site traffic increases every day. E-commerce sales are through the roof. Products are shipped out regularly across the country to meet increased demand.
Then one day, bad news arrives: A small business in Minnesota has filed a lawsuit against your company because your Web site domain name is too close to its registered trademark.
Even though you decide to fight the claim, you must stop using the name until the case goes before the court, explains Sharon Toerek, an attorney with Macedonio, Toerek & Box PLL. While you wait, customers cannot log on, thousands of dollars worth of advertising is rendered obsolete, and it appears your e-commerce business will never see the light of day again as customers click over to your competitors.
Scenarios like these are all too familiar for scores of business owners who didn’t take precautions during the infancy of the Internet. But Toerek, who deals with issues of intellectual property and trademarks, says that doesn’t have to be the case. There are specific pitfalls business owners need to be aware of before selling products online.
Trademarks
Just because your company’s Web site address has been approved by Network Solutions Inc. — the organization which administers domain names in the United States — that doesn’t mean you’re protected from a trademark infringement lawsuit. If your e-commerce site’s domain name is too close to a company’s registered trademark, you could be in trouble.
“The most common misstep is that someone calls NSI and their domain name is available, so they adopt it without having done additional research and are infringing on someone else’s trademark by putting that domain name into place,” warns Toerek.
In the past, the NSI allowed a Web site to continue to operate until the trademark problem was hammered out in the courts. But a recent 180-degree turnaround in policy now shifts the burden onto the company accused of trademark infringement.
“NSI would basically say, ‘Duke it out in court, we’re not getting involved,’” explains Toerek. “Now the policy is, if someone else has a claim of a registered trademark, as long as they can provide a certificate of registration, NSI will shut down the domain name or suspend use of it by anybody while the parties resolve it.”
So how can you avoid this problem? Toerek suggests a trademark search to ensure there are no similar trademarks that may cause legal hassles.
Out-of-state lawsuits
If you take orders over the Internet and ship products across state lines, courts have ruled a lawsuit can be filed by customers in their home states if they have a problem with your product.
“Mom and pop businesses in Iowa are getting sued in California because they sold a product there a customer decided he or she didn’t like,” says Toerek. “If people have common sense and cool heads, this stuff gets resolved on a business level.”
But with the growing number of smaller companies setting up shop on the Net, and the continued large payouts in civil lawsuits, cooler heads aren’t always going to prevail.
The best way a company can protect itself is to make sure advertising is legal and accurate, and to be willing to work with dissatisfied customers, no matter how far away they are physically, Toerek says. And as the courts hash out the details over the next few years, the risks of selling over the Internet will soon be better defined.
Copyright control
After Web designers have crafted the online vision for a company, it’s vital that business owners make sure they will be allowed to modify it if customers dislike the design. Although many companies assume they own their Web site, the copyright for the graphics or design is not owned by the business unless there is a written agreement between the designer and the business.
“It’s largely done on a handshake basis, so the legal relationship really isn’t defined,” Toerek says.
If a company fails to gain copyright control over its site, the business may not be able to make modifications without permission from the person or company that initially designed it.
“Absent an assignment in writing, that Web site designer is going to own the copyright.”
Insufficient security
The need for a secured page when taking credit card information is common knowledge, but Toerek warns that companies should double-check with the Web site designer about how clients will be protected when sensitive information is sent over the Internet.
“Make sure the Web site designer you choose does the magic they do to make sure your customers are safe when they transmit information over the Web,” says Toerek. “They should understand the technology and how to employ it.” How to reach: Macedonio, Toerek & Box, PLL: (216) 360-9919
Jim Vickers ([email protected]) is associate editor at SBN Cleveland.
