A Crash Course in ECommerce Legal Issues
Here at eCommerce we had the opportunity to talk with Jim Chester, Senior Partner with Klemchuk Kubasta LLP, specializing in patent and trademark law. Jim heads the new eCommerce group, which focuses on legal issues for online businesses. I asked Jim to give me a perspective on what companies should be aware of (possible pitfalls, legal issues, etc.) of starting their own eCommerce company.
1. What is the first thing an executive needs to do when launching a new eCommerce site (from a legal perspective)?
Jim: Overall, an appreciation of the wide range of legal issues (including regulatory, contract, intellectual property, etc.) is important for understanding the types of matters that will need to be addressed. Getting the domain registered and associated trademark registration applications on file is important early on. Also, they must ensure that they have written agreements with all folks developing and creating content for the site to ensure that the company will own all the IP (intellectual property) that is created.
2. What are some common legal mistakes eCommerce sites have made / make?
Another common mistake involves hiring contractors to design logos, websites, web content, etc. Under copyright law, these contractors will own the rights to these items unless/until they transfer those rights to the company - and not simply when the company pays for their services.
3. What are some little known pitfalls that eCommerce sites can fall into, if you aren’t watching out?
4. What can you do to protect your eCommerce site (your employees, products, etc.)?
Jim: There are a number of strategies we can employ to protect an eCommerce company. Spending a little more on legal on the front end will generally save many times that later on. eCommerce companies need to invest in solid Policies and Terms, and ensure ownership of all intellectual property associated with the site. In addition, registering marks with the USPTO is one of the most "bang for the buck" things any company can do. Also, keep in mind that laws and "best practices" change - and Terms and Policies should change with them.
5. There are a lot of different opinions on how eCommerce sites should deal with sales tax. I know many owners that simply absorb it entirely. What is your advice on that?
Jim: I wouldn't recommend "eating" that tax. It's possible that the "tax included" price could skew the amount of taxes owed - and primary liability for collecting and paying these taxes rests with the merchants. Where appropriate, they company should itemize the tax, collect the tax from the buyer, and then pay it to the appropriate authority.
6. In terms of copyright and intelligence law I've heard many site owners concerned when another site pops up looking suspiciously like theirs (not a literal copy or spoof, but just obviously patterned after it). What are their options when this happens?
Jim: One thing we've done, where appropriate, is apply to register the copyright in the site with the US Copyright Office to protect the overall layout and design. Other options are also available, but would depend on the specific elements of the site that were in need of protection. If a company suspects that someone is copying their site or trademarks, etc., it is important for the company to contact IP (intellectual property) counsel as soon as possible so they can investigate the situation and recommend a strategy for responding. In many situations, the first step to confront an alleged infringer would be to send a "cease and desist" letter instructing them to stop the offending activity. If that fails to resolve the matter, litigation may be necessary to protect a company's IP (intellectual property) rights. Generally speaking, the more of a company's IP (intellectual property) that is federally registered, the stronger their legal position.
7. Are you available to take on new clients should readers need his services?
Jim: Certainly. I enjoy meeting new clients/prospect, especially in the eCommerce space, and hope to build a long-lasting relationship with them.
To clarify - I'm the "business" guy at the IP firm. Unlike most of my colleagues at the firm, my background is economics and business - not engineering. I focus on helping our creative, innovative clients make money off their ideas and inventions through helping them with commercial IP protection (ie., trademarks, trade secrets and copyrights), as well as domestic and international transactions and agreements.
About the Author
J.F. (JIM) CHESTER, JD/LL.M | SENIOR PARTNER
Jim Chester is a Senior Partner with Klemchuk Kubasta LLP, a leading patent, trademark and IP law firm based in Dallas. Jim specializes in advising entrepreneurs, start-ups and privately-held companies in a variety of industries regarding trademark, copyright, and trade secret protection, licensing & enforcement in the U.S. and abroad. He regularly represents clients before the U.S. Patent and Trademark Office (USPTO) and the U.S. Library of Congress (Copyright Office).
In addition, Jim assists companies in international business transactions and joint ventures. To date, he has advised clients on business deals involving almost 100 countries. He coordinated with foreign counsel on legal projects around the world on behalf of U.S. clients, and serves as legal advisor to foreign companies doing business with or in the U.S.
To be an effective international business attorney, he has also gained significant experience and expertise handling domestic business matters, including entity formations, transactions, acquisitions, and other legal issues commonly faced by his clients.
His international practice involves advising clients regarding international trade regulations, including compliance and enforcement issues involving Customs/import and export laws, ITAR, and the FCPA. He has represented numerous clients before U.S. Customs & Border Protection, U.S. Department of Commerce, U.S. Department of Defense Trade Controls, the Office of Foreign Asset Controls, the U.S. International Trade Administration, and other state, federal and foreign governing bodies and agencies.
In addition to being admitted to practice law in Texas and Washington, DC., he is a licensed U.S. Customs Broker.
In addition to working at the firm, he is an adjunct professor of law at Baylor University Law School, teaching courses on International Trade Law and International Business Transactions. He previously served as an adjunct professor of Business Law at the University of Dallas. Read Jim's Full Profile Here.