Moving Content Online :: Laurence Kaye

MOVING CONTENT ONLINE A Legal and Regulatory Health Check

All publishers face a legal and regulatory minefield as they move their content online. Laurence Kaye, Laurence Kaye Solicitors, has developed a clear, practical framework for safely navigating the minefield and, in this article, uses it to provide an invaluable checklist of key issues which online publishers need to address. Within a short space of time, the perception of the internet and the web as a legal and regulatory ‘no man’s land’ has gone. The current view is that ‘online equals offline’. In other words, the same rules and regulations that apply to business carried on in the offline world apply to business done online. The ‘real’ legal challenge is the exposure to a multitude of often-conflicting national laws because of the global nature of the medium. EPIC – a systematic approach EPIC is a structure to enable a publisher to identify the legal issues for an online content business in a logical and consistent way and then to integrate them effectively into the project management process. EPIC divides these issues into four components: 

Establishing the business;

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Protecting (and contracting with) customers;

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Infrastructure; and

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Content.

Establishing the business For new businesses, all the incorporation formalities will need to be addressed, together with the required shareholder and operating agreements. In working out the required corporate structure, the impact of direct and indirect tax needs to be considered to achieve the maximum tax efficiency. Early consideration should also be given to share incentive arrangements. In considering where to establish a ‘cross-border’ online content business, the choice of country of establishment is an important one from both a tax and regulatory viewpoint. Once the E-Commerce Directive is in force, it will apply a ‘country of origin’ principle to certain key legal requirements for online businesses. For most online content businesses, it is unlikely that any specific licences or consents are needed. However, if the business is to be a joint venture between several players who have significant existing market shares, or if the business results from a merger, then the potential impact of competition law needs to be considered. Protecting (and contracting with) the customer Broadly speaking, the issues to deal with under this component are: 

The information that must be provided to customers on the site;

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Compliance with data privacy laws and regulations; and

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The mandatory content that must be included in contracts made online and the procedure for making a valid contract online.

The first issue to resolve is whether the online content business is B2B and/or B2C. The significance of the distinction is that if the business is B2C, then consumer protection legislation will apply to a site. For businesses established within the European Union, a ‘consumer’ is an individual who ‘…is acting for purposes which are

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outside his or her trade, business or profession.’ (source: draft E-Commerce Directive). Given the home/business mix of most online content use, the safest thing is to assume that the site’s customers will include ‘consumers’.

Information There is existing and future legislation that specifies certain information that must be included on your site for customers’ benefit. Although the E-Commerce Directive is not yet in force, it is sensible to take account of its requirements now. The information it requires includes: 

the name, geographic address and e-mail address of the service provider;

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its official registration number;

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its VAT number (if any);

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if applicable, clear price indications, including whether they are inclusive of VAT and delivery.

Data privacy Every site established in the EU that gathers information about living individuals, or information from which living individuals can be obtained, must comply with applicable data privacy laws. The cornerstone of the legislation (in the UK - the Data Protection Act 1998 and Regulations made under it) is the requirement to comply with the

Data Protection Principles. In practice, this means: 

Obtaining the data subject’s consent through an online Privacy Policy Statement;

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Designing the site so that there are clear links through to the Statement from any page where an individual inputs personal data;

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Obtaining appropriate contractual warranties from third parties where personal data is supplied to you under contract by third parties;

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Putting in place the appropriate technical and operational procedures to ensure compliance with the Data Protection Principles covering areas such as the security of data, the removal from your database of ‘old data’ and so forth.

In addition, special consideration is needed where any personal data is transmitted outside the EU. This is because the EU Data Protection Directive bans the export of personal data outside the EU unless the importing country has adequate levels of protection in place. In the case of the United States, after extensive negotiations certain ‘Safe Harbor Principles’ are in place. Once all EU member states have ratified this, it means that EU-based companies will be able to export personal data to US companies that have agreed to abide by those principles.

Online contracts It is generally agreed that contracts, including terms and conditions, can be validly created online by the customer clicking acceptance. There are certain types of contract that can only be created in writing (e.g. for the sale of land) but that is likely to change over time to facilitate online contracting. At this stage, the key points to remember are these:

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In the case of online consumer contracts, the E-Commerce Directive will require that the customer’s order for goods or services (including the provision of online content) must be promptly acknowledged by the supplier by electronic means;

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In the UK, The Consumer Protection (Distance Selling) Regulations 2000 would apply to an online content business that offered paid-for subscriptions. These Regulations require certain information to be provided to consumers. In addition, the contract must include a right of cancellation of the subscription service except where the customer has agreed to start receiving the service before the cancellation period would expire.

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The online contract will need to contain all the other terms and conditions relevant to the contract.

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The site must be designed so that all the terms and conditions are drawn to the customer’s attention, and accepted by the customer, before the contract is concluded.

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A well-written contract will specify the law that governs the contract and the courts, which will have jurisdiction over any contract disputes. In the case of contracts with consumers, the courts of their home state can still have jurisdiction over disputes, even if the online contract says otherwise. The message is – establish an effective customer complaint’s procedure that avoids going to court!

Infrastructure Typically, the building and ongoing support of all or part of the technical infrastructure will be outsourced. For paid-for content (for those providers lucky enough to establish that business model!), a deal may be done with an applications service provider to manage the sale and ‘delivery’ of content online. In all cases, the key message is – nail the deal! All too often, development is completed before a contract is ever signed and it can end in tears where the e-business falls out with the provider. Whatever else, the deal contract should cover the following issues: 

A clear requirements specification;

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A timetable specifying what elements are to be delivered and by when;

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A mechanism for handling changes as the project proceeds;

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A procedure to be followed to govern acceptance of hardware and software;

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Payment provisions;

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Intellectual property ownership and rights to use the deliverables;

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Termination, its effect and access to source code if the supplier goes out of business;

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Reasonable performance and service level warranties; and

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Governing law and choice of jurisdiction (i.e. the Court that has jurisdiction over any contract dispute).

As well as registering domain names, trade mark searches should be carried out as well to protect against the risk of another trade mark owner alleging that the site operator’s use of a domain name infringes their trade mark. If the site operator has developed a unique application for an online content business, expert advice should be taken on whether it is patentable. Meanwhile, confidentiality of the invention should be protected by non-disclosure agreements.

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Computer programs, as such, are not patentable. However, computer-related inventions can be patented if they involve a new and inventive technical contribution to the state of the art. Technical solutions for use in data processing and for carrying out methods of doing business therefore remain patentable. The European Patent Organisation (EPO) recently announced the resolutions arising from its nine day conference considering revisions to the European Patent Convention 1973. (The full text of the press release is available at http://www.europeanpatent-office.org/news/pressrel/2000_11_29_e.htm). Amongst other things, it said that software patents were an outstanding issue of some significance and would be re-visited at a later date, hinting ‘proposals for further revision might include software patents’. Content ‘Content’ is used here in the broadest sense to include everything on the site from audio-visual and literary material to hyperlinks, advertising and promotional material. The main content-related issues can be broken down into these segments: 

Copyright clearance;

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Content contracts; and

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Content legality.

Copyright clearance and content contracts are familiar territory to publishers. The main concern here is to ensure that copyright in the material is acquired or, alternatively, licensed on terms sufficiently broad to cover the digital media platform(s) on which it is made available. In addition, in some cases the rights should cover offline (e.g. print) use as well. The procedures for checking the legality of content are broadly the same as those applying offline. (Amongst other things, do not forget to check the ‘errors and omission’ policy!). But there are some unique issues, principally in relation to hyperlinking. The law on this subject is not yet clear either in the US or Europe. Accordingly, the views expressed here are subject to change and should be treated with caution. From the cases that have been heard or settled so far, the following trends seem to be emerging: 

On the basis that a hypertext link is an electronic equivalent to an index or library card, a link to another site (whether to the home page or deeper within the site) is unlikely to amount to copyright infringement;

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This probably remains the case even if there is a notice on the linked site that expressly prohibits linking, but prudence suggests seeking permission from the linked site or, at the least, a suitable notice on the linking site about hypertext links (see below).

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Deep linking may run the risk of falling foul of unfair competition laws, particularly where the user may not realise that he or she is leaving one site and going to another. It is therefore sensible to have a ‘pop-up’ window making it clear that by clicking on the link, the user is leaving the host site and accessing another site.

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Under unfair competition and trademark laws, hypertext links that are in the form of the word mark or trademark of another party are risky and should be avoided.

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Framing – displaying another website in a partition of the browser window while remaining on the host site – raises similar issues. However, framing carries a significantly higher risk of copyright infringement

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and trademark and/or unfair competition law infringement. It should therefore be the subject of an appropriate agreement. 

Liability for linking through to libellous material published on another site is beyond the scope of this article. The law is also developing in this area and it is another point to add to your checklist!

A final thought Carrying on any online business means that there is always the risk of falling foul of the law. Achieving 100% compliance is unlikely. But by using a systematic approach like ‘EPIC’, the legal risks of doing business online can be significantly reduced. Laurence Kaye Laurence Kaye Solicitors © Laurence Kaye 2001 T: 01923 352 117 E: [email protected] www.laurencekaye.com http://laurencekaye.typepad.com/ This article is not intended to be exhaustive and it does not constitute or substitute legal advice, which should be sought on a case by case basis. Please feel free to copy or make available this article without modification in print or electronic form for noncommercial purposes. If you do so, please include this disclaimer and copyright wording with attribution. If you want to re-publish or make the whole or part of this article available in a commercial service or publication, please contact the author at [email protected].