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Top Ten Legal Oversights That Can Shut Down Your Website (Part II)

In my last post, I examined legal oversights 10 through 6 that can shut down your website. Now here are the top five.

5. Breaking the Law

Liability: It is often difficult to navigate, with any precision, the hundreds of laws and regulations that cover different types of websites and industries. Failure to comply with federal legislation, such as COPPA, Graham-Leach-Bliley, HIPAA, or international conventions such as the EU Directive, could lead to drastic penalties. While fines and injunctions can be costly they are often overshadowed by the costs associated with litigating and defending liabilities associated with breaking the law.

Solution: Any company that relies on its online presence for business should have an internal regulatory compliance committee. The committee is responsible for following statutory regulations governing the company and its website. Outline policies to comport with regulations far in advance of their implementation deadline dates. Since ambiguities inherent in legislation often make strict compliance difficult, enlist the assistance of outside legal counsel to coordinate compliance efforts. The key is to anticipate regulatory issues before they become a problem.

4. Bad Contracts

Liability: Many companies attempt to cobble together contracts from bits and pieces they find online, or forego written contracts entirely. Most of the time, a problem never arises. In the instances where a problem does arise, however, the lack of an appropriate contract can bring a company’s operations to a grinding halt. Inartfully drafted contracts can actually be worse that having no contract at all. Bad contracts can shift liability onto your company, accidentally transfer intellectual property to a third party or lead to irreparable privacy or security breaches. Bad contracts can gut your company of its intellectual property and leave it racked with lawsuits. Even if an appropriate contract is in place, failure to inform key personnel of important contractual provisions may lead to inadvertent breaches which may also lead to large liabilities for your company.

Solution: Coordinate with outside legal counsel to develop comprehensive contractual strategies to prevent any intellectual property from slipping through the cracks. Rigorous review of third party contracts is also essential to ensure the availability of an exit strategy and to prevent overreaching contract provisions from crippling the company. Having contracts tailored correctly the first time can actually be easier, cheaper, and faster in the long run than trying to put something together yourself. The key benefit, however, is both a reduction in the likelihood of a lawsuit and the amount of your company’s potential liability should a lawsuit arise.

3. Intellectual Property Infringement

Liability: Liability for intellectual property infringement can range from an injunction to a multi-million dollar judgment. If your company’s website includes information which infringes any patent, copyright, trademark, trade secret or trade dress it is only a matter of time before a problem arises. While you may be lucky enough to receive a cease and desist letter before your website gets shut down, that is not always the case.  If your company relies on its website for sales and communication, the ramifications of an unanticipated shut down can be catastrophic. If you become aware of an accusation of infringement and fail to take immediate remedial steps, the court may award punitive damages and order your company to pay the intellectual property owner’s attorney fees as well as your own.

Solution: Everyone associated with adding content to your company’s website must be acutely aware of the proper use of trademarks, copyrighted material and patentable processes online. Assist your employees and website developer by adopting a detailed policy relating to the use and/or dissemination of intellectual property. Be sure you own, or properly license, all intellectual property used on your corporate website. Do not assume you are free to use anything in the “public domain” without detailed documentation of its provenance. If you receive an allegation of infringement any time you waste addressing the issue cause the liability to skyrocket. Informing your employees of appropriate remedial procedures well in advance of a problem, can be the difference between simply removing the infringing material from the website and having the company’s online operations brought to a grinding halt.

2. Ignoring Your Lawyer

Liability: Every company is different. No book or template can take the place of an attorney. If you fail to keep your attorney in the loop, fail to heed proactive legal advice, use contracts improperly, allow intangibles to go unprotected or fail to implement online legal procedures outlined by your lawyer, your company is simply digging a hole from which it may be too deep to extricate itself.  Although problems are inevitable, ignoring the advice of your lawyer often leaves your company without any way to remedy the situation.

Solution: Develop a relationship with a knowledgeable cyber lawyer. If you have a question, or anticipate a change that may change your online legal exposure, give your lawyer a call and do what he or she recommends. Good lawyers can guide you through much of the maze of online legal regulation, but they cannot help you if you do not keep them in the loop or ignore their advice.

1. No Formal Policies

Liability: Your company may float along for a while without any specific written policies regarding website usage or intellectual property protection. You may prefer to keep your head in the sand until a problem arises. Unfortunately, by the time a problem arises, it may be too late to take action. The absence of appropriate policies can lead to irreparable loss of intellectual property or even a lawsuit. If your company does become involved in a lawsuit, your “deer in the headlights” look from the witness stand garners little sympathy from jurors questioning why your company did not have proper policies in place.

Solution: Have detailed written policies and procedures in place before a problem arises. Although appropriate policies will vary from company to company, the foregoing nine issues are a good place to start when considering a general policy outline. Once you have a general outline, begin to incorporate industry and business specific provisions, detailing proper documentation and administrative procedures. Treat the resulting policy as a living document. Enlist the aid of a qualified information technology attorney to periodically review and update the policy to address changes in your corporate information technology structure, your intellectual property portfolio and existing laws.


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