Copyright considerations when setting up an online presence - August 09

A version of this article appeared in Copyright World July/August 09

Having an online presence is now essential to most if not all business in the UK. The BBC reported that in the last quarter of 2007, online sales rose 50% from £9.61 billion to £15.2 from a year earlier  and the Office for National Statistics reported that Internet Retail Sales for the month of January 2009 rose by 17.1% compared to a year earlier . It is therefore clear that trade over the internet is and will continue to grow.

Apart from the technical and commercial considerations when setting up an online presence, intellectual property and in particular, copyright considerations play a vital role in the success of a businesses’ online presence. This article examines the key copyright considerations which businesses and their advisors would need to address when setting up an online presence. In addition, it would also highlight other fundamental legal considerations which need to be addressed.

PROCURING A DOMAIN NAME
Selecting the right domain name is an important decision for a business in order to create and enhance a business’ brand and image. A business will have to consider the type (i.e. top level domain name (e.g. .com, .org or .biz) or a country level domain name (e.g. .co.uk or .ac.uk)) which it wishes to acquire. This would be dependant on various factors including whether it is a global business or trading within a territory (e.g. it may be an exclusive distributor in a specific country and thus a country level domain name may be more appropriate). It some cases, it may be also appropriate for a business to acquire a number of similar domain names to stop third parties from cyber squatting or leeching off its good will. For example, it may use www.rickerbys.com as its primary domain name but may also acquire www.rickerby.com, www.rickerbys.org and www.rickerbys.co.uk.

Upon short listing the domain names which it wishes to acquire, ‘whois’ searches would need to be carried out to check the availability of the short listed domain names. A ‘whois’ search can be carried out on sites such as http://www.whois.net or http://www.networksolutions.com/whois/index.jsp.

To minimise the risk of the short listed domain names infringing third party’s registered trade marks or passing off, a business is well advised to carry out its due diligence on the short listed domain names. Such due diligence can be carried out by instructing a trade mark agent to carry out various searches. The business may also carry out preliminary searches by searching the Yellow Pages, and the UK’s Intellectual Property Office and also a general search engine search for conflicting trade marks or brands owned by third parties.

Where its desired domain names are unavailable, the business could purchase such domain names from the owner although where such domain names are owned by cyber squatters, the business may be able to compel the cyber squatter to assign such domain names by commencing legal proceedings for registered trade mark infringement or passing; or under the Internet Corporation for Assigned Names and Numbers’ Uniform Domain-Name Dispute-Resolution Policy (often referred to as the "UDRP"). In a nutshell, where a business can show that:

1. That the domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and
2. The respondent has no rights or legitimate interests in respect of the domain name; and
3. The domain name has been registered and is being used in bad faith by the respondent
the business would be entitled to compel the other party to relinquish the domain name in question the business. For more information, please see: www.internic.net/faqs/udrp.html.

WEBSITE DEVELOPMENT
At the development stage of its website, a business would in most cases enter into three contracts namely (i) a website development contract; (ii) website design/content contract; and (iii) hosting contract in respect of the website. This article will now consider the copyright issues in relation to each of these contracts in turn.

Website Development Contract
When negotiating a website development contract, a business will need to address the issue of ownership or licensing in relation to the software deployed by its website developer (‘WD’) to run the website. If the software deployed is specifically developed for the business, it may well be that the business may want to own the copyright in the software. If so, it would need to ensure that its WD assigns the copyright to the business and the relevant warranty and indemnity clauses are incorporated into the contract.

More commonly, in ‘off the shelf’ website development project, the copyright in the software would be licensed to the business on a non-exclusive basis although where customisation is carried on the software, it is not uncommon to require the customised portion of the software to be owned by the business or be licensed to the business on an exclusive basis. Again, appropriate warranties and indemnities should be obtained from the WD.

Where the business is licensed to use the software and has no access to the source codes of the software, it should consider whether it requires such access to ensure continuity of cover in the event the supplier becomes insolvent or is unable to meet its support and maintenance obligations. If so, a source code escrow agreement should be put in place.

Where the WD is incorporating designs, photos and content of the business into the website, it is important to ensure that the contract does not contain a clause which assigns such intellectual property to the WD. The WD may also require the business to warrant and indemnify the WD for any intellectual property infringement in relation to the designs, photos and content provided by the business to be incorporated into the website. In this regard, if the business is unable to have these provisions removed from the contract, it would need to ensure that it has secured all the relevant rights to use such material; and exclude and limit its liability within the contract to a level which it is comfortable with.

Website Design and Content
The business may have also commissioned other consultancies, designers, photographers or media studios (‘Content Provider’) to produce materials for the website which is being developed e.g. web layout, photos and video clips. In this regard, the business will need to ensure that the copyright in such materials have been duly assigned to the business; and that the Content Provider provides the business with appropriate warranties and indemnities to minimise the business’ risk exposure in relation to such materials infringing third party intellectual property.

Hosting Contract
If the business is not hosting the website itself, it will have to enter into a hosting contract with a hosting provider (‘HP’). In such a case, most (if not all) HPs would require warranties and indemnities from the business in respect of the content which it requires the HP to host. To reduce the business’ risk exposure, it would need to ensure that it has secured all the relevant rights to use such material which it requires the HP to host. It would also need to negotiate appropriate exclusion and limitation of liability provisions to reduce its risk exposure.
Where the website provides a blog or forum section, it should ensure that the user terms and conditions contain appropriate ‘do’s and ‘don’t’s, warranties and indemnity provisions (see below for details).

WEBSITE OPTIMISATION AND SPONSORED LINKS
To raise the profile of a website, it is not uncommon practice to optimise websites through the use of meta-tagging and sponsored links. In some cases businesses have used competitors’ trade marks, brands and content as meta-tags and sponsored links.

Until the recent decisions of L’Oréal v eBay   and Interflora, Inc. Interflora British Unit v Marks and Spencer PLC Flowers Direct Online Limited,  (‘Cases’), the balance of judicial authorities suggest that the practice of using third party trade marks, brands and content as meta tags or sponsored links did not constitute trade mark infringement or passing off. However, the judge in these Cases has referred this issue to the European Courts of Justice for clarification. Meanwhile, it is submitted that businesses should cease from such practice until the legal position has been clarified.

WEBSITE GOING LIVE
Mandatory Disclosure Requirements
When the website becomes accessible to the public over the internet, a business will need to ensure that it has complied with various disclosure requirements under the Distance Selling Regulations 2000, Companies Act 2006 and the Electronic Commerce (EC Directive) Regulations 2002. Some of the information which needs to be disclosed includes the company name, number and trading address (a PO Box is insufficient), price of the products and services, cooling off periods, phone numbers and VAT number (where applicable).

Copyright Notice
To protect its copyright, the business should mark each page with a copyright notice. Such notice is commonly found at the bottom of each page on the website. An example of such copyright notice would be ‘© Rickerbys LLP 2007-2009. All rights reserved’.

Website Terms of Use
The business should also have in place a set of ‘Terms of Use’ for the website (‘TOU’). From a copyright perspective, the TOU will set out the scope of the licence on which copyrighted materials on the website may be used by users of the website. Usually the licence would allow such user to print out copies of the website a non-exclusive basis and for such user’s private non commercial use. Where determined appropriate by the business, the TOU should also expressly state that third parties are not to ‘link’ their website to the business’ website.
In addition, the TOU should include appropriate exclusion and limitation of liability provisions which should encompass the situation of copyright infringement by the business of third party’s copyright. 

In order to ensure that third parties are complying with the TOU, a business should regularly carry out searches on the main search engines e.g. Google, Yahoo, MSN etc. and auction sites e.g. eBay using its brands, trade marks and name of products (where the products are specific to the business) (‘Business’ IPR’) to see if third parties are using the Business’ IPR without its authorisation. If so, cease and desist letters should be sent to such parties demanding that such third parties cease carrying such activities. Where appropriate, it should consult its legal advisors.

Privacy Policy
Where the business collects ‘personal data’, the business would also need to put in place a privacy policy to assist it in complying with its data protection obligations.
Within its ‘contact’ section, where a business includes ‘personal data’ of an employee e.g. name or email address (which identifies the employee), it would be prudent to ensure that the business obtains the consent of the employee before posting such employee’s personal data on the website.

Further guidance of data protection issues can be found at www.ico.gov.uk.

OTHER ISSUES

Blogs and Forums
Where a business provides a blog or forum feature on its website, it will need to ensure the terms of use of such facilities contain a list of ‘do’s and ‘don’t’s including appropriate warranties from such users stating that any materials posted on the blog or forum would not infringe the intellectual property of third parties or contain materials which are defamatory or unlawful (collectively as ‘Prohibited Material’). An indemnity clause should also be incorporated into the terms of use requiring the user to indemnify the business if the materials posted are Prohibited Material.

In addition, the business should also reserve the right to remove any material at its discretion where it has reasonable grounds to believe that such material could potentially be Prohibited Material.

A business should also be aware that under the Consumer Protection from Unfair Trading Regulations 2008, it is unlawful to ‘seed’ blogs or make comments on blogs on how good its products are and pretend that those comments come from a consumer or a third party when in reality it comes from the business.

Subscription Services
Where a business provides an online subscription service e.g. online magazine, education content, music etc. it is vital that the terms and conditions of such subscription contain stringent licensing provisions in respect of use of such material. Commonly, the licence granted to the subscriber would be a non-exclusive licence to access the materials during the subscription term. In addition, the business will also need to consider what the subscriber is and is not authorised to do with the materials which it has accessed or downloaded.

An indemnity provision requiring the subscriber to compensate the business for any loss and/or damage suffered by the business as a result of the subscriber being in breach of the licensing provisions should also be incorporated.

Michael Nga, Commercial Solicitor