While it may be debated whether or not there is a specific body of legal knowledge or guidance in the form of "cyber law," it does seem that for the most part efforts are being made to fit existing statutes to the issues involved in conducting Internet-related businesses.

Regardless, from a practical point of view, there are important legal issues with respect to e-commerce that you need to take into consideration. Use of the Internet to promote or transact your business does not exempt you from existing laws and legal issues that any small business faces wherever that business is located. These issues become more complex, however, if you do not have a passive site (promotional website only) and instead seek to actively transact business online. In either case you may have exposure to business liabilities—from your customers or government oversight agencies (legal judgements) or from within your own organization (potential loss of proprietary information/customer lists)—and it pays to practice prevention. Legal issues may include (but certainly are not limited to):

domain name registration

intellectual property

electronic contracts and signatures

Internet sales tax matters

Promotional websites

If you have a promotional website, you will want to be assured that your proprietary information depicted on the website has intellectual property protection. In most cases, this will involve copyrights and trademarks (and potentially trade secrets and/or patents in rare instances). You should obviously consider whether or not your state requires that you have a special business license to conduct your business. For example, having "auctions" requires a business license whether this is an online auction, or a conventional one. Although some legal issues will be effectively dealt with by means of your site privacy agreement, and by secure servers, you may be well-advised to consider having your employees sign non-compete and confidentiality agreements to safeguard proprietary business information and use of customer lists.

If you have an active website through which you conduct online business, the issues become more complex. For example, in the case of an online auction, your extent of liability may be determined by such factors as whether or not you simply post information for other companies (as in bulletin board or newspaper-type services) or collect fees (selling by proxy), and in what state the servers are located (jurisdiction of applicable statutes).

Certain specific areas of business may have unique international, national, and state statutes that apply (for example, Internet gambling, use of information gathered on children, and software sales). Did you know that, if you sell software online, you are subject to specific Internet-related interpretations of existing statutes that govern issues such as "warranties," "substantial performance," "shrinkwrap licensing agreements," "repossession of software," and "transferability" (of financial receivables)? Similarly, in the unlikely event you plan to get involved in providing an Internet gambling business, you would want to be aware that there are five specific federal laws in force, there is also pending congressional legislation, and numerous states have enacted their own protective statutes in this area.

Reasonable caution and good judgment should prevail. It is important to know the legal issues and standards of your industry and to apply them to your e-commerce decisions. Similarly, you will want to have clear agreements with your employees to safeguard your businesses’ proprietary interests and customers. If you are uncertain regarding any of these issues, in most cases it will be a wise decision and a good investment to consult with an attorney early in the process. Find one who has experience and knowledge in this dimension of the law. As one inexpensive way to approach this, you may want to contact a local law school to find who is teaching a course in related areas (it’s likely someone is) and to see if there is a free legal clinic for small businesses where you might be able to have your particular questions or concerns addressed. If free assistance is not available, you may be able to get a good referral to legal talent with experience in your area of inquiry—from a law school or from your SBTDC regional office.

Related links

Please note the following annotated websites which you may find useful. It may be necessary to do some looking around within these sites since none were identified that focus exclusively on e-commerce issues as they relate to small businesses.

A comprehensive legal site that addresses "legal information for internet and technology professionals." This site features links to numerous articles and other sites. There is a discussion group forum.

This more generic self-help site claims "commonsense wisdom" and suggests it is the first place to look for answers to "all your legal questions." Information includes a law dictionary and FAQs. A similar site is found at Freeadvice.com ("legal advice written in plain English"!)

Somewhat more specific to e-commerce legal issues are two additional sites:

Bitlaw.com lists itself as "a comprehensive Internet resource on technology law." It provides links to articles, government sites, and technology law periodicals. It also has FAQs.

"Managing The Digital Enterprise: INTERNET GOVERNANCE" – Perhaps the most practical site found in this area is this university site. The second section focuses on a wide range of issues:

regulation of business transactions and securities trading

consumer protection (including the protection of minors)

fairness in advertising

the protection of intellectual property

various forms of taxation on the sale of goods and services

prohibitions on gambling, the trafficking of alcohol and other controlled substances across borders

regulations on the safety of food and prescription drugs

the protection of free speech and controls on the distribution of indecent materials

There are links to an extensive array of other sites, documents, articles, agencies, and forums.

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