The rapid pace of e-commerce development has generally left the legal system struggling to keep up and gasping for breath. In much the same way as companies doing e-commerce must invent new business procedures and rules, the legal system is trying to adapt existing laws to fit new settings where it is simply unclear how these laws will apply.
The e-commerce legal tool of choice is the contract. If parties can agree how matters will be handled and capture that agreement in a written contract, they can, in a meaningful way, establish the rules that will govern their arrangements. In other words, these contracts can provide some degree of certainty even in the rapidly changing arena of e-commerce law. We can also expect that as legislatures and judges try to catch the law up to developments in e-commerce, they will look at successful methods and practices as models.
Today, there is a premium placed on negotiating contracts that adequately cover the likely scenarios that will arise out of an e-commerce relationship, to the extent that those scenarios can even be predicted. For example, "application service providers," were largely unknown even a year ago and novel e-commerce arrangements and relationships are announced on a regular basis.
Think of a "co-branding" venture where one party handles backend supply and fulfillment, the other party operates the front-end web site, and both parties outsource hosting and other services to third parties. Spice up that arrangement with corporate structures that include separate e-commerce entities, subsidiaries or joint venture relationships, and the notion of a "short," "simple," or even "standard" contract really does not make much sense. In fact, unlike traditional legal documents such as residential real estate contracts, it is difficult to point to a "standard" contract for e-commerce arrangements. You might even have several different types of contracts with different parties in any given e-commerce venture.
Given the importance of contracts in the e-commerce arena, you will want to know what to look for and what to think about when launching your e-commerce venture. While this article obviously will not discuss every issue, I have highlighted ten key legal concerns that you should consider in your e-commerce ventures and contracts.
Nail Down Your Domain Name
Do you have a "dot-com" name upon which you can build a brand presence? In e-commerce, brand often means everything. The domain name system was not designed to handle either today's volume of name requests or the issues raised by domain name selection. In simplest terms, domain names are registered on a first-come, first-serve basis. Problems are largely resolved through a dispute resolution system that lacks history and, at times, consistency.
You might find that your company's name, or something confusingly similar, has been registered by someone who now wants to sell the name back to you at a high price. This practice is now known as cybersquatting. There are now laws against this practice and actions that can be taken to get "your" domain name in that scenario. In another example, the domain name you want for your e-commerce business may be taken, leaving you with the choice of either changing the name you will use or purchasing the domain name you want from its owner at whatever price the market will bear.
There is a substantial interplay between trademark law and the use of domain names. You will want to obtain the domain names that you want and secure them through a combination of practical and legal methods, including the use of trademarks. Some of those methods of protection should be addressed by contractual provisions that govern the use of the name and any related trademarks. Something to watch out for: If your web host or developer registers your domain name for you, make sure that you, rather than the host or developer, is listed as the owner on the registration. Also, clarify who will have responsibility for renewing domain name registrations so you do not lose a domain name.
Demand Definitive Developer Contracts
Not even lawyers like long contracts, but, given the complexity of issues that can be raised in a web development arrangement, you will want to think carefully when balancing the desire for brevity with the need for adequate protection. Most companies seem to be having third party developers, rather than employees, develop e-commerce sites. There are many benefits of this approach, including reducing the time-to-market of your e-commerce site. The downside is you are transferring a lot of responsibility for your e-commerce strategy to an outside party.
You want your development contract to cover comprehensively the issues that matter to you. You will want to establish hard deadlines for a "go live" date, meaningful hold backs in payments, penalties for delays, and adequate test procedures for your e-commerce project. Ideally, you will want to condition your acceptance of the site on the completion of these testing procedures and have the right to cancel a contract for a full refund if the site does not meet your specifications. Not every developer, however, will agree to acceptance testing or refunds. In that case, you will want to obtain warranties that the site will perform in accordance with the specifications. The more detailed you can be in the written specifications of the site that are incorporated into the contract, the better off you will be.
A good contract will cover many of the other issues mentioned in this article but also should include warranties that your use of the site will not infringe on anyone else's intellectual property, and be fair and even handed about liability limitations and other issues. Because a developer of an e-commerce site will have access to vital information about your business, well-drafted confidentiality provisions are essential in any development contract. A key point to remember: the more of your core business processes that you put on your e-commerce site, the more complicated your development contract is likely to become as you think through and address the business aspects of the arrangement.
Know Who Owns the Intellectual Property
You own your site, right? The intellectual property ownership provisions in many e-commerce development contracts may surprise you. You may also find that your contracts, or lack thereof, with employees and independent contractors have not given you clear ownership of key components of the patents, copyrights and other intellectual property you thought you owned. The process of negotiating an e-commerce contract can be an eye-opener in this regard.
The issues of ownership will be different whether you have employees developing your site, independent contractors, a third party e-commerce developer, or if you outsource the entire e-commerce operation. Careful attention must be paid to employment contracts, contractor agreements, assignments of rights, and other documentation so that you can establish clearly the ownership of intellectual property rights. This process can be cumbersome, but it is necessary.
In certain circumstances, you may not be able to obtain ownership of, for example, certain components of a site that are produced by a third party developer because the developer will insist on retaining the ownership of those rights. In that case, you want to be sure that your contract specifies that you have a license to use these components in your e-commerce site and in other ways that you think will be necessary in the future. Making sure that ownership is clarified and that all necessary rights, licenses and permissions are granted is a major part of negotiating an e-commerce contract.
SOURCE:
http://www.technologyevaluation.com/research/articles/ten-key-legal-concerns-in-e-commerce-ventures-and-contracts-16262/
The e-commerce legal tool of choice is the contract. If parties can agree how matters will be handled and capture that agreement in a written contract, they can, in a meaningful way, establish the rules that will govern their arrangements. In other words, these contracts can provide some degree of certainty even in the rapidly changing arena of e-commerce law. We can also expect that as legislatures and judges try to catch the law up to developments in e-commerce, they will look at successful methods and practices as models.
Today, there is a premium placed on negotiating contracts that adequately cover the likely scenarios that will arise out of an e-commerce relationship, to the extent that those scenarios can even be predicted. For example, "application service providers," were largely unknown even a year ago and novel e-commerce arrangements and relationships are announced on a regular basis.
Think of a "co-branding" venture where one party handles backend supply and fulfillment, the other party operates the front-end web site, and both parties outsource hosting and other services to third parties. Spice up that arrangement with corporate structures that include separate e-commerce entities, subsidiaries or joint venture relationships, and the notion of a "short," "simple," or even "standard" contract really does not make much sense. In fact, unlike traditional legal documents such as residential real estate contracts, it is difficult to point to a "standard" contract for e-commerce arrangements. You might even have several different types of contracts with different parties in any given e-commerce venture.
Given the importance of contracts in the e-commerce arena, you will want to know what to look for and what to think about when launching your e-commerce venture. While this article obviously will not discuss every issue, I have highlighted ten key legal concerns that you should consider in your e-commerce ventures and contracts.
Nail Down Your Domain Name
Do you have a "dot-com" name upon which you can build a brand presence? In e-commerce, brand often means everything. The domain name system was not designed to handle either today's volume of name requests or the issues raised by domain name selection. In simplest terms, domain names are registered on a first-come, first-serve basis. Problems are largely resolved through a dispute resolution system that lacks history and, at times, consistency.
You might find that your company's name, or something confusingly similar, has been registered by someone who now wants to sell the name back to you at a high price. This practice is now known as cybersquatting. There are now laws against this practice and actions that can be taken to get "your" domain name in that scenario. In another example, the domain name you want for your e-commerce business may be taken, leaving you with the choice of either changing the name you will use or purchasing the domain name you want from its owner at whatever price the market will bear.
There is a substantial interplay between trademark law and the use of domain names. You will want to obtain the domain names that you want and secure them through a combination of practical and legal methods, including the use of trademarks. Some of those methods of protection should be addressed by contractual provisions that govern the use of the name and any related trademarks. Something to watch out for: If your web host or developer registers your domain name for you, make sure that you, rather than the host or developer, is listed as the owner on the registration. Also, clarify who will have responsibility for renewing domain name registrations so you do not lose a domain name.
Demand Definitive Developer Contracts
Not even lawyers like long contracts, but, given the complexity of issues that can be raised in a web development arrangement, you will want to think carefully when balancing the desire for brevity with the need for adequate protection. Most companies seem to be having third party developers, rather than employees, develop e-commerce sites. There are many benefits of this approach, including reducing the time-to-market of your e-commerce site. The downside is you are transferring a lot of responsibility for your e-commerce strategy to an outside party.
You want your development contract to cover comprehensively the issues that matter to you. You will want to establish hard deadlines for a "go live" date, meaningful hold backs in payments, penalties for delays, and adequate test procedures for your e-commerce project. Ideally, you will want to condition your acceptance of the site on the completion of these testing procedures and have the right to cancel a contract for a full refund if the site does not meet your specifications. Not every developer, however, will agree to acceptance testing or refunds. In that case, you will want to obtain warranties that the site will perform in accordance with the specifications. The more detailed you can be in the written specifications of the site that are incorporated into the contract, the better off you will be.
A good contract will cover many of the other issues mentioned in this article but also should include warranties that your use of the site will not infringe on anyone else's intellectual property, and be fair and even handed about liability limitations and other issues. Because a developer of an e-commerce site will have access to vital information about your business, well-drafted confidentiality provisions are essential in any development contract. A key point to remember: the more of your core business processes that you put on your e-commerce site, the more complicated your development contract is likely to become as you think through and address the business aspects of the arrangement.
Know Who Owns the Intellectual Property
You own your site, right? The intellectual property ownership provisions in many e-commerce development contracts may surprise you. You may also find that your contracts, or lack thereof, with employees and independent contractors have not given you clear ownership of key components of the patents, copyrights and other intellectual property you thought you owned. The process of negotiating an e-commerce contract can be an eye-opener in this regard.
The issues of ownership will be different whether you have employees developing your site, independent contractors, a third party e-commerce developer, or if you outsource the entire e-commerce operation. Careful attention must be paid to employment contracts, contractor agreements, assignments of rights, and other documentation so that you can establish clearly the ownership of intellectual property rights. This process can be cumbersome, but it is necessary.
In certain circumstances, you may not be able to obtain ownership of, for example, certain components of a site that are produced by a third party developer because the developer will insist on retaining the ownership of those rights. In that case, you want to be sure that your contract specifies that you have a license to use these components in your e-commerce site and in other ways that you think will be necessary in the future. Making sure that ownership is clarified and that all necessary rights, licenses and permissions are granted is a major part of negotiating an e-commerce contract.
SOURCE:
http://www.technologyevaluation.com/research/articles/ten-key-legal-concerns-in-e-commerce-ventures-and-contracts-16262/
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