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Navigating the legal black holes of cyberspace can be harrowing. The growth of the Internet has brought an explosion of new problems for companies doing business online � such as regulatory, copyright, and privacy matters � that often require in-house lawyers’ immediate attention. To help make your way through the rapidly changing field of e-commerce, here’s our top ten list of the biggest potential cyber-pitfalls. 1. Personal Jurisdiction, Choice of Law, and Venue. Counsel must try to control where their business can be sued and what law will apply. Courts use a variety of factors to determine if jurisdiction can be obtained in an e-commerce-related matter. If a company’s Web site is actively doing business in the jurisdiction (i.e., buying and selling), then personal jurisdiction is generally found. If the Web site is only an information exchange and place to register customer information, then jurisdiction depends on the level of interactivity and commercial nature of the exchange of information. Finally, if the Web site only provides information, courts will generally not find jurisdiction. Courts will also tend to find jurisdiction by reviewing the commercial purpose of the Web site and the site owner’s proximity to the court’s forum. Problems arise when the defendant is anonymous and cannot be determined. The Choice of Law test that a court will use in an e-commerce-related suit is generally determined by the principles of the state, unless the Web site’s terms and conditions specify what law will apply � which the contract can and should state. Web site terms and conditions should also specify the company’s home state as the agreed-upon venue for any dispute. 2. Contract Formation and Terms and Conditions. How a business enters into an enforceable contract, and the terms and conditions of the contract are key issues for all e-commerce businesses. Web site contract issues generally center on the registration and creation of domain names, the terms and conditions of the use of the site, notices and disclaimers displayed on the site, and click-through and/or sign-on agreements that the customer will use when he signs on. In addition, the formation of contracts by electronic means is a growing area of concern for e-commerce law. New federal and state statutes regulate electronic signatures. Counsel should be familiar with all aspects of these statutes and how they apply to their business on the Internet. 3. Copyrights. Companies must protect their copyrights on the Internet and avoid infringing the copyrights of others when conducting e-commerce. The rights of online users to view or copy another’s work is another very serious area of concern for Web site owners. Counsel should always obtain an express or at least implied license when their companies are copying another’s work online. Copyright disputes pertaining to the Internet are also continuing to expand as a result of the many cases in the music and software industries regarding Napster, Grokster, and other file-sharing Web sites. 4. Trademarks and Domain Names. Businesses must protect their own trademarks and domain names on the Internet and avoid infringing the marks and names of other businesses. Counsel should be well aware that any marks that their companies want to use on their Web site should be registered with the U.S. Patent and Trademark Office � and/or the trademark office of other nations where they do business to ensure that their companies’ rights are protected. Disputes arising in this area involve garden-variety trademark infringement but can also include banner ads, metatags, framing, and linking. Domain name disputes have generated a significant amount of litigation in e-commerce law. Most domain name disagreements arise when a trademark owner files for an ICANN (Internet Corporation for Assigned Names and Numbers) arbitration as a result of a Web site infringing upon a business’s trademark. Cybersquatting is now also actionable under the Federal Anti-Cybersquatting Consumer Protection Act. 5. Privacy. Counsel must ensure that their companies fully comply with all local, national, and international privacy laws. Businesses must establish effective privacy protection for their clients, employees, and customers on their Web site. Many federal privacy statutes have been enacted that are relevant to e-commerce law. These statutes, which include the Privacy Protection Act and the Electronic Community Privacy Act, seek to establish privacy rights for users of the Internet. Over 90 percent of all Web sites collect some information about their visitors, so privacy laws must be clearly understood by all Web site owners. Businesses should also list their own privacy policy on their Web site. 6. Government Regulation. E-commerce is subject to myriad local, state, federal, and international regulations. Basically, all commerce regulatory statutes in the United States and around the world can be potential hindrances to your clients’ e-commerce business. In theory, if not in practice, if your company has a Web site, it may be doing business in over 200 nations and may be subject to the vicissitudes and vagaries of thousands of national, local, state, and provincial laws. 7. Torts and Insurance. Counsel must work to limit the potential exposure of businesses to civil liability from tort damages and/or the defense costs for e-commerce Web sites. In addition, how a company insures itself against any potential lawsuits must be addressed. Torts such as defamation, invasion of privacy, copyright and trademark infringement, cybersquatting, and negligence are all potential problems. If your business passes on a virus to millions of other computers, it could be potentially liable for millions of dollars in damages. Insurance for this type of problem is essential. 8. Taxation. Current local, state, and federal issues of taxation of Internet transactions must be understood by all e-commerce attorneys. Most Internet sales are not subject to tax, under the Internet Tax Freedom Act, but these issues are being reassessed by Congress and many states. 9. Crimes. Recent legislation governing Internet-related crimes includes the Consumer Fraud and Abuse Act and the Electronic Communications Privacy Act. Federal wiretap, electronic communications, and antipornography statutes along with the Computer Fraud and Abuse Act also apply to the Internet. 10. Business Method Patents. These are a relatively new form of patent. Many business method patents also apply to Internet technology and are being used to expand and restrict business activity on the Internet.
M. Kelly Tillery’s practice at Philadelphia’s Leonard, Tillery & Sciolla focuses on civil and intellectual property litigation. He is also an adjunct professor in the legal studies department of the Drexel University Lebow Graduate School of Business. Associate David J. Shannon concentrates his practice on business law and civil litigation.

A version of this article first appeared in Corporate Counsel‘s sibling publication The Legal Intelligencer.

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