Is Your Web Site Legal? You Sure?

Tech Law

August / September 2005 By: Mark Grossman Volume 3 Number 4

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An improperly created web site can breed lawsuits. It's not the place to test the limits of the law. Once you put information out on the internet, it's there for anybody to see. It's the ultimate in unrestricted access. You might create a site for potential customers, but your competitors and enemies get to see it too. A cautious and conservative approach is the way to go. How cautious you need to be will vary depending on several things. The preventive medicine is a legal audit of your web site.

As with almost everything with the net, the precise legal standards for web sites aren't easy to define as the law is in its infancy. The global availability of the net and all the differing legal systems throughout the world has exacerbated the problem of establishing the applicable legal standard.

To some extent, you need to be concerned about the laws of every jurisdiction in this country and throughout the world. Complete compliance with every variation of the law throughout the world is an obviously impossible goal. How you cope with this fact depends on what you do and where you do it.

If You Don't Do Overseas Business

If you're an American company in a generally unregulated industry and assuming that you don't have any overseas operations, your legal compliance strategy can probably safely center on the United States. In this scenario, your cyber lawyer can guide you on what's considered "mainstream" compliance here.

While it's true that "mainstream" compliance doesn't guarantee complete legal compliance, I think that it's the only reasonable approach. You cripple yourself if you demand a guarantee of complete legal compliance. If you do, only your lawyer will make money. There are just too many laws in too many states. Enjoy the benefits of your generally unregulated status. Accept some risk, make your money and deal with problems when and if they occur.

If we change just one variable, the advice changes. If you're in a generally regulated industry, you must be more cautious. The starting point in your legal audit is to decide what states may have jurisdiction over your actions. The analysis will vary depending upon your industry whether its securities, insurance, banking or whatever.

Your web site audit will then need to focus on those states and federal law. Since you're in a regulated industry, you're already used to the need for often fastidious compliance with the laws and regulations of multiple states. In this context, your web site is no different from anything else you do. You can't just slap up a web site while blithely commenting that nobody regulates cyberspace. Wrong! In some ways, everybody regulates cyberspace.

While it may be true that state legislatures haven't yet passed many laws regulating activity of the internet, that doesn't mean that you can assume that you can do things on the net that you couldn't do in other contexts. If you're lucky, you can push the envelope in cyberspace, but only after a thorough audit of your site.

If You Do Business Overseas

If you do business overseas, you'll have to be sensitive to the legal requirements of those countries that could have jurisdiction over your company. Although a computer in the United States may physically host your web site, this may not stop you from being hauled into a foreign court. Worse, it's conceivable that they could hold your web site up against their legal standards.

Whether you think that's right is not the issue. I'm just telling you that it can happen and that you need to be sensitive to foreign legal compliance with your American-based web site.

The Audit

Your web site audit needs to consider many things. Some of it is just common sense, but some is uniquely internet law. Some is a mixture of the two. Here's a sample of what I consider in a web site audit.

Information Accuracy. This point is so obvious that I wouldn't say it except that I've heard reasonably astute people say things like, "It doesn't count if it's online." That statement couldn't be more wrong.

Defamation and unfair and deceptive trade practices (things like false advertising) are examples of some things that you can have on your web site that can get you hauled into a courtroom. It's essential that you carefully review information before it's posted to the web.

Copyright and Trademark. Copy-right and trademark law fully apply to the web. If you post somebody else's logo on your site, make sure that you have written consent. If material is copyrighted, get the author's permission.

If you want to frame another web site within yours, get their permission in writing. This is an area that's seen some well-publicized litigation recently.
Although the law isn't well-established on framing, the cautious and conservative approach is to get consent.

For those of you who have no idea what "framing" is, it's a way web page designers create multiple windows, or frames, on your computer screen. Each frame operates independently, so information downloaded into one frame fills only that frame, and doesn't change the contents of the other frames.

Those who think that you must get consent to frame argue that enclosing somebody else's site within your frame is like making a copy of their site without their consent. Others think that framing is no more an illegal copy than just calling up the site on a computer. They argue that the material was put on the web to be displayed on computers and that framing doesn't change anything.

It makes for an interesting discussion, but while the law is unclear, the advice is get permission before you frame.

Create a Web Wrap Agreement

While internet law remains often nebulous, one way to reduce your legal exposure is to have your web visitors enter into a contract with you. No, they don't sign anything. What you do is post what's sometimes called a "web wrap agreement" on your site.

Such agreements are a natural evolution of "shrinkwrap agreements" that you see every time you buy new software. "By installing this software, you agree to be bound by the terms of this agreement" is typical shrinkwrap agreement language.
"By using this web site, you agree to be bound by the terms of this agreement" is web wrap agreement language.

A well-drawn web wrap agreement can help you to reduce significantly your legal risks. The most basic thing that I put in every web wrap that I do is a limitation of liability clause. So even if you get sued and lose, at least the maximum damage award against you is nominal. I'll typically limit damages to something like $50 to $100.

To further insulate you from the claims of users, I always have them agree that use of the site is at their own risk and that you disclaim all warranties. Also, the flip side is that I include a clause making them liable to you if they upload things to the site like copyrighted or trademarked material that they don't have a right to use. This gives you some protection if a third party sues you for something posted to your site by a user.

My favorite way to discourage my clients from getting sued over nonsense is by including a clause requiring that any lawsuit be filed in my client's home state, not the user's. Using the courts looks a whole lot less attractive as the mileage increases.

Be Proactive

Having your Web site audited is a good example of effective proactive law. Once you get sued, you can't require the other side to come to your home state if you didn't have the agreement already on the site.

Don't be like the people that put in the burglar alarm after the burglary. A little preventive law is much cheaper and less stressful than crisis law. Have your site audited now, not after it causes you a problem.

Mark Grossman is a partner at Dewitt Grossman P.L., a Miami law firm. © 2005 DeWitt Grossman, P.L.

Disclaimer: The advice given in here should not be considered legal advice. This article only provides general educational information. Your individual situation may not fit the generalizations discussed. Only your attorney can evaluate your individual situation and give you advice.