White SW Computer Law
Intellectual Property, Information Technology & Telecommunications Lawyers
Melbourne Office - PO Box 452, COLLINS STREET WEST Victoria 8007 Australia
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TAKING CARE OF BUSINESS ON THE INTERNET

The Internet is seen by many as the brave new frontier for global commerce. The legal aspects of operating an Internet based business are still being established and need to be carefully considered. The following “snippets” give you some examples of recent incidents and developments in Information Technology law, which you should consider when setting up and operating your web site. Where possible, URLs have been included to provide you with a source of further information.

Starting in your own backyard...

Did you know that if you engage a developer to create an Internet site the copyright in the site will most likely be owned by the developer and not you unless an assignment of copyright has been signed? This means that you would not be able to copy or use the material produced for the web site unless the developer agrees to such reproduction or use. The developer also has to take precautions if a customer has requested that certain material be incorporated into the site. The developer should seek an indemnity from the customer that that material does not infringe the copyright of any other party. If no indemnity is provided and the developer uses a copyright work, they may be sued for copyright infringement. In addition, remember that if your site distributes, unauthorised copyright material, misleading or deceptive material or is defamatory you may be sued.

Now that you have your web site designed, choose your domain name carefully...

There have seen many recent cases, mainly in the US, of individuals registering domain names that suggest an affiliation with a well known corporation which they hope to sell to the corporation in question. As found in Panavision International v Toeppen (http://laws.lp.findlaw.com/9th/9755467.html) this practice can violate the US Federal Trademark Dilution Act. Mr Toeppen was ordered to stop using the trademarks “Panavision” and “Panaflex” as domain names and to transfer the registrations of the domain names “panavision.com” and “panaflex.com” to Panavision International. Interestingly, Toeppen who is a resident of Illinois was sued in a California Court as his infringement was directed at a Californian business. Have you considered the expense you may incur if you were sued by an international firm for a similar infringement?

In The Shetland Times Ltd v Wills and Zetnews Ltd, Shetland Times (ST) published a newspaper - The Shetland Times and the defendants published another newspaper - The Shetland News (SN). ST have recently established a web site on which they feature various articles from their paper. SN also operates a web site which had links to headlines on ST's site. By using these links, readers bypassed the need to visit ST's home page and did not see the advertisements placed there. ST claimed infringement of copyright as SN reproduced the headlines from ST when providing the links and the text of the articles when it was displayed on the users screen. An interim injunction preventing SN from using such links was granted by the Scottish Court on the basis that incorporation of links to headlines provided at another site constituted an infringement of the copyright which subsisted in the headlines and their articles as cable programs and the headlines alone as literary works. The matter of whether a copyright infringement has occurred is expected to be finally determined by the Court later this year. If providing links to other sites, it may be prudent to obtain written authorisation before doing so.

The dangers of using content from another party's web site without their permission are also under examination in the US case of Ticketmaster Corporation v Microsoft Corporation ( http://www.callaw.com/ticket.html). Microsoft linked one of its web sites ( http://seattle.sidewalk.com) to the Ticketmaster web site ( http://www.ticketmaster.com). Ticketmaster claimed that this linking enhanced the value of Microsoft's web site while diminishing the value of Ticket master's web site by, amongst other things: depriving Ticketmaster of advertising opportunities; publishing erroneous information; and diluting the value of Ticketmaster's relationship with MasterCard, a major advertiser. Ticketmaster is pressed claims for, amongst others, trade mark infringement and misleading and deceptive conduct. Even if your intentions are to bring more business to the linked site, you should obtain permission before establishing a link to the site to avoid possible legal ramifications.

Instead of sending your visitors away to linked sites, another alternative is to bring the other material to your site using frames...

In February 1997, a Complaint ( http://www.ljx.com/internet/complain.html) was lodged by The Washington Post, Time Inc, Cable News Network, Times Mirror , Dow Jones and Reuters New Media against Totalnews in the New York District Court. The plaintiffs claimed that Totalnews had, by “framing” and “linking” to their content on the Totalnews site, amongst other things, misappropriated valuable commercial property, engaged in false representation and advertising, committed Federal Trademark dilution, infringed their registered trade and service marks and copyright (including domain names). As income derived from advertising on the Internet continues to grow, so to do the risks and potential damages, which may be awarded against an infringing party. As with all other forms of copyright works, permission should be obtained from the author prior to using the work in any way to avoid risky and expensive litigation.

Now that your site is up and running orders for your goods and services are starting to arrive, beware of foreign laws that you may not have considered!

The French-Defence Association sued Georgia Tech Lorraine, which is the European platform of the American Georgia Institution of Technology, because its home page is only presented in English. A 1994 law requires that public communications such as advertising and restaurant menus must be in French and if they are also translated, it must be into more than one language. It is also required that goods and services be offered in French in addition to any other language used.

Are the goods and services you are offering legal in other countries? In December 1996, the Minnesota District Court ruled that the State of Minnesota had jurisdiction over Granite Gate Resorts Inc and its President, who are based in Nevada. Granite Gate provided a commercial sports betting service which is illegal in Minnesota but represented that such a betting service was legal. The agreement between Granite Gate and its customers provided that all claims against Granite Gate must be commenced in Belize, whereas claims against customers could be brought in the customer's home state. The Court used a five-factor test (This test differs in Australia and other US States) to determine whether Minnesota Courts had jurisdiction and considered:

  • the quantity of contacts
  • the nature and quality of the contacts
  • the connection with the cause of action with the contacts
  • interest of the State in having the matter before the Courts of Minnesota
  • convenience of the parties

Records produced by Granite showed that Minnesota residents had both Internet and telephone contacts with Granite and as the defendants had an advertisement on the World Wide Web, accessible by Minnesota residents, it was ruled that the State of Minnesota had jurisdiction to take consumer protection action against the defendants.

In 1981 in the US, Playboy Enterprises Inc obtained an injunction against Chuckleberry Publishing Inc and Tattilo Edtrice SpA to prevent them from selling their magazine Playmen in the US. The injunction prevented Tattilo from using the trade marks “Playboy” or “Playmen” or any other confusingly similar word in conjunction with the sale or distribution of English language publications and related products in the US. Fifteen years later In Playboy Enterprises Inc v Chuckleberry Publishing Inc & others , the Court found that by offering access to American customers via the Internet, Tattilo was in contempt of Court by breaching the injunction. Tattilo was ordered to :

  • shut down its Internet site in Italy or refrain from taking new subscriptions from US residents
  • invalidate user names and passwords previously purchased by US residents and refund the remainder of their subscriptions
  • pay to Playboy, all gross profits earned from its Internet services provided to US residents
  • revise its Internet site to indicate that no subscriptions are available to US residents
  • pay Playboy's legal costs
  • pay US$1,000 per day until it complies with this order. This order is particularly important as the judgment for damages could most likely be transferred to Italy for enforcement under international convention obligations whereas the injunction may not.

These are just a few of the issues, which need to be considered! Anyone who operates a web site should keep watching for new legal developments, which are sure to come.

STEVE WHITE
WHITE SW COMPUTER LAW
FEBRUARY 1998

www.computerlaw.com.au © White SW Computer Law 1998 This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.


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