Copyright Owners Have Extra Step before Alleging Infringement
The Digital Millennium Copyright Act (DMCA) is the law that provides copyright owners with remedies if their works/content are being used unlawfully on an Internet site. While there are some administrative requirements to exercising remedies, the main requirement is that the copyright owner believe in good faith that its content is being misappropriated.
In a recent United States district court, an additional requirements has been added before a copyright owner can utilize the DMCA. Basically, the court ruling states that under the DMCA, a copyright owner must first evaluate whether the use of the material is a fair use of the copyright PRIOR to demanding that copyrighted material be removed from an Internet site. The court held that a copyright owner acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine.
Unfortunately, fair use is a fact based inquiry and so it is not always easy to determine whether or not a use is fair use (even for a trained intellectual property lawyer). In this case, the court acknowledged that there is no bright-line rule with respect to what constitutes “fair use” of copyrighted material. Factors to consider in making this determination include (1) how much of the original work was reproduced; (2) whether the new use is commercial in nature; (3) whether the market for the original work was harmed; and (4) whether the new work is a parody.
Copyright infringement on the Internet is a rapidly growing problem because it is so easy to copy and publish material. This case clearly adds another hurdle to enforcement which can be costly if a copyright owner needs to hire a lawyer to assess fair use. However, the court ruling makes sense given that fair use is an established and protected use of copyright material in the US.
Online Fraud Makes Branding More Important for Small Business
Online fraud is growing rampantly without any end in sight. While the Internet has become a lucrative channel for conducting business and selling goods and services, it also created a lucrative avenue for scammers and thieves.
Today, anyone can put up a professional website for very little costs. A domain only costs $8, hosting can be free in some cases, and you can buy pre-made professional web templates that can rival the looks of the most established businesses. Ecommerce functionality is likewise getting cheaper so anyone can set up a cheap way to extract money from unsuspecting web customers.
The technology and laws that have arisen to protect privacy on the Internet can be manipulated to protect revealing the identity of the scam artists. Some of the most famous scams have extracted billions of dollars and the law enforcement agencies cannot trace the criminals.
The legal system has always been one of the slowest institutions in society to act to address new legal problems that arise due to an evolving society. And, the law will never catch up. Arguably, the minds behind criminal schemes are clever and even more innovative than the entrepreneurs with legimitate business models.
Technology will always outpace the law and even when the law does address a new problem, enforcement and real remedies are just not practical to a single person who has been defrauded.
We have gotten to a point where online commerce has become accepted and mainstream, but the concerns of online fraud are only now becoming a matter of significant concern to the average person. Online fraud cases are showing up more and more in the news. The average business and consumer is becoming aware of the problems and the increasing chances that they could become a victim.
No longer will any security or trust certification seals work to alleviate the concerns. The public is becoming more savvy and understands that MOST (not all) of those certification programs are just another way someone is making a quick buck to sell a nice looking seal.
This issue will be elevated in the next few years and as a result- online buyers have started and will start to change their buying habits online based on these concerns. They will want to only do business with companies that they KNOW are legitimate.
Even more, customers will come to realize that just because a website looks professional does not mean it is legimitate. And, just because it posseses certifications or seals, does not mean it is a trustworthy business. Customers will do more diligence seeking independent evidence of credibility.
This trend will make it more challenging for the new and small businesses to be successful and compete with the larger and more established businesses. The best way to address this in your business is to focus on building your branding and establishing a presence in your industry.
Don’t look for shortcuts but think about what any real, legitimate company does over time to build their brand presence. Branding activity can be expensive but with new Internet based tools such as social media to help spread the word, a business can build a brand quickly with the right focus and approach.
Is it Legal to Buy Your Competitors Names as Keywords for PPC/Adwords?
One of the most effective methods of advertising on the Internet is known as Pay Per Click (PPC). Google Adwords is the largest and most used PPC ad network but there are many others (Yahoo Search Marketing and MSN) that are based on the same concept.
PPC networks allow you to bid on specific keywords that when searched in a search engine will trigger advertisements that link to the advertiser’s websites.
One question that has arisen lately is whether it is legally permissible to bid on your competitor’s trademarks and trade names as keywords or whether such use in in violation of the trademark laws?
Interestingly, courts have come down on both sides when it comes to this issue. The matter comes down to whether this practice results in a sufficient “use in commerce” of the trademark to constitute an illegal trademark use.
There is a 2004 federal case (Eastern District, Virginia) that concluded that simply purchasing these keywords as part of a PPC network does not rise to the necessary use in commerce. On the other hand, there is a 2006 case in Minnesota that went the other way because the court found that the advertiser was commercially benefiting.
In the law, the law of your jurisdiction (or the jurisdiction where a case is heard) governs your situation. So for now, the issue is open. What does this mean?
Well, if you are an advertiser there is a reasonable basis for using this practice and if you are a trademark owner and want to stop competitors from using your trademark in PPC programs, there is a reasonable basis for sending cease and desist letters.
Now, if you get a cease and desist letter, you should cease using another’s marks in your PPC or consult an attorney to better understand your risks in your specific jurisdiction if you want to continue the use of another’s marks and names in your PPC campaign.
PS- This post goes to show that there are a lot of legal uncertainties in the business world. If you are not operating your business through an asset protection vehicle such as a limited liablity company (LLC), you should be! If you look at any of the more successful online businesses, you will see they are operated through an LLC or corporation. Learn about LLC Formation so you can protect yourself and your assets.
Social Networking Can Benefit Any Business But Beware of the Traps
Social networking websites have become the latest rage on the Internet. Many traditional websites have been surpassed in traffic by social sites such as Facebook, YouTube and MySpace.
While viable business models behind the social networking sites themselves are still playing out, the benefit of social media to any business is definitely proving itself.
The fundamental premise behind social networking is nothing new- it allows people to connect with and communicate with each other. The reason for the incredible growth of social networking on the Internet is the result of a combination between (i) the evolving technology that allows the average person to post content easily and instantly; and (ii) the viral nature of these networks.
Just as the need to have an Internet presence with a static website became a necessity for any business (offline or online) in the past decade, the clear benefits of having social interaction on business websites are becoming the next step for any business to leverage the Internet to do more business.
So now, there are bowling alleys using Flickr to allow customers to show off their bowling skills and interact with other customers. And then you have your local Mexican restaurant owner wanting to add social features to their sites where customers can review their food or atmosphere. And some services based businesses are even going so far as to enable a chat amongst visitors on their sites and in their forums to discuss the company.
Social media really comes down to “user generated content” which can come in many forms such as customer or user reviews, blogs, instant messaging, comments, videos, and any other communications taking place on your site.
First, adding a social element to your site does have some business risk because the medium allows comments that can both help and hurt your business. Social media gives power back to the people but this also means that competitors, unscrupulous customers and anyone else can use it to your detriment.
Second, by allowing user generated content on a site that you own, a myriad of legal issues come into play including privacy and intellectual property laws.
Given the unbelievable developments in technlogy (which will only continue) and the nature of the Internet where any content can spread like wildfire, the laws will never be able to keep up.
So, it is important that your terms of service or user policies be well drafted to give you the business flexibility and ownership over content to address both the business issues and the legal issues that may come up.
There will always be some risk to using social media elements in your business but the rewards will likely far outweigh the risks. Even so, there is a lot you can do to minimize these risks by having well drafted terms of use, user policies and privacy policies governing any user generated content contributed to your website.
An Internet Marketing Business Provides the Best ROI with the Least Amount of Risk
It still amazes me the percentage return on investment that is possible with an Internet business. For myself, I have several online businesses which each required about a $1,000 on average to launch and get to a point where they were bringing in revenue. This includes everything from all the infrastructure, web design, keyword research, and marketing. These sites are now each bringing in between $ 80 to $+5,000 in net income a month.
At the low end, a site that costs $1,000 and brings in $80 a month in passive income is close to a 100% ROI return annually. Now, $80 a month is not a lot of money but it can be if you rinse and repeat. And the sites that are bringing in $5,000 profit a month create a whopping 6000% ROI return annually.
Nothing can beat these returns especially when the time to get to these returns is usually a few months to a year. And, they can keep improving as you optimize each online website. Now, I have had some unsuccessful sites, but the most I have ever risked on a website before finding out it will not be profitable enough for me is about $1000 a site. This is not a bad stop loss.
Just to compare- I also invest in residential real estate where typically I need to put up (or borrow) capital of about $150,000 in order to make $15,0000-$30,000 in profit. This ROI for the deal is 20% and there is a lot more capital at stake if things do not work out.
Also, I have several clients that have put up hundreds of thousands of dollars to launch a business which will take several years to possibly pay off by creating a consistent revenue stream or a business that may be lucrative to a potential acquirer. This is a lot of risk to take.
Now, these companies are exciting to work on and for the smart entrepreneur, it is worth the capital, risk and toil, but from a straight risk and ROI perspective, it seems like the traditional Internet marketing based business model is more attractive to the average person thinking of starting a small business.
Currently, it is a perfect time for anyone to start an Internet business. While we are in the midst of a struggling economy and the real estate market is horrible, the percent of transactions being transacted on the Internet is growing. More people are going online and more companies are advertising online. Once you add in the revenue potential and the minimal amount of capital, any person thinking of starting a business (part-time or otherwise) should strongly consider an Internet based business.
Start an LLC to Prevent Being Personally Sued for Your Internet Business
I recently created a video for The LLC Expert website- explaining why any business owner should always do business through an asset protection vehicle such as an LLC (limited liability company). Many think through this analysis of whether to start an LLC the wrong way.
For example, it is improper to think that you do not need LLC protection just because you are the sole owner or because your business is just starting and not making money. Liability protection has nothing to do with either of these factors.
I usually get people to understand how to think through this by using examples.
My video talks about a colleague in the internet marketing industry who recently started an internet consulting business. She only started her consulting business less than 3 months ago. And, she is facing a PERSONAL lawsuit from her first client who only paid her $250 for consulting. The shocking part is that the client is suing her for $10,000 in damages.
Her client spent over $10,000 in adwords advertising after the consultation and is now complaining to her about her advice. They are want her to pay for the $10,000 that did not turn into an sales.
She made two mistakes. One, she should have started an LLC for her business so this would be a business problem not a personal problem. Second, she should have used a contract which limited her liability.
Watch the short video here for more details: LLC Protection Explained
The LLC Expert website has an in-depth learning center if you want to learn about the limited liability company and provides the fastest LLC formation service backed by a compliance guarantee.
Copying Content on the Internet Without Permission is Copyright Infringement
The Internet is fundamentally based on the creation of a widespread and viral method of sharing information and most information posted on the Internet is FREE. Despite this, the content posted by anyone on the Internet is protected by copyright laws.
Republishing or otherwise copying any articles or other content without the permission of the owner constitutes copyright infringement. In layman’s terms, it is unlawful so do not do it.
There are some limited exceptions such as the fair use doctrine which is a complicated area of the law.
Bottom line (and the practical advice here_ is that if you are thinking about copying content available on the Internet to benefit your site or your business, you should not do it unless there is permission granted already, you obtain that permission from the author or you are very comfortable it falls under a defense such as fair use.
Courts have even stated that copyright protection applies even if content is written in a PUBLIC DISCUSSION FORUM.
Are Times of Economic Hardship a Good Time to Start a Business?
The initial reaction in times of economic hardship is to buckle down and hoard money. So, many would not even consider the idea of making an investment of your time and money to start a business may not even enter into the minds of people. . . unless they have been laid off and are forced to find ways to make money in a time when few companies are hiring.
I have two friends- one who is a lawyer and one who is a banker who were recently laid off from their jobs. I helped both of them to start a “side” business while they engage in their job seeking effort. The interesting thing is in the 4 to 6 weeks of starting a business, the entrepreneurial bug has hit them both. When you feel you have no choice but to find your own way to make money, you would be surprised at how effective you can be as an entrepreneur. One friend is now focusing entirely on his new consulting business.
Corporate America is a tough place to depend on for feeding your family and as you can see corporations can turn on a dime. Entrepreneurship is difficult in its own way but the essence of owning your business is you take total responsibility for your financial security. You may not get all the perks of executive life, but what you do get is the ability to work on something you really want to do and make money at the same time.
I encourage EVERYONE, to consider starting their own businesses. . . even if you are gainfully employed. Business ownership can give you an extra stream of income, significant tax benefits (which can reduce the overall tax you pay on your W-2 income), and some financial flexibility.
Joint Ventures Grow Online Businesses Faster But Stay Away from Exclusivity
For any business, online or off, you should always be looking at complimentary services and products in your industry. Then, you should go and strike business deals with those companies to package your products or services together or to cross sell to your customers.
This is very common in the online business world where affiliate, reseller and joint venture arrangements cause companies to grow over 1000% with just one deal. This is because everyone wins. Usually there is a revenue share so both businesses make more money and the customer gets high quality products endorsed by businesses they trust.
The biggest mistake you can make when you do one of these deals is to not reduce the business joint venture to a legal document. These documents do not have to be complex but they serve an important purpose. First and foremost, they document the business terms- this is important to make sure everyone is on the same page. Second, they provide legal protections for both sides which is equally important.
One thing that savvy businesses like to sneak in is an exclusivity clause. These come in many forms but, in essence, their goal is to restrict you from doing similar deals with others. Now, there is a price for everything and so if you are getting such a unique deal or the other side is making a significant investment in the deal, perhaps one might be worth it.
However, in most cases, it is a trap that will significantly limit the growth of your business and options you may have later. Let joint ventures thrive on meeting business objectives and not based on legal ties or legal requirements.
Do Not Register Domain Names with Established Brand Names in the Domain
Another question I get often is whether an online business owner can register a domain name with a big name in their space. The goal here is that the search engines give some value from a search engine perspective to words in a domain name.
For example, if someone sells a product or service related to online auctioning, can they get a domain name like “www.ebay-alternative.com” to help them get traffic to their site?
No- this is only opening the door to trouble. There now is a specific law called the Anticybersquatting Consumer Protection Act (ACPA) passed in 2000. The goal of this law is to stop the misappropriation and improper use of domain names. While there is a lot of complexity in this set of laws and in some cases a use of a name may not be in violation of laws . . . from a business perspective, the bottom line is to not go down the path of using the brand or marks of other companies in your space to build your businesses. URLs are intellectual property and protected under the laws.
I always advise business owners to build their own brand and not try to take advantage of short cuts by using others makes and names in any way without their permission and involvement. Now, if you are doing a business development deal or a co-branding deal with another company, then you can negotiate the use and leverage of the other company’s brand. This topic is the unilateral use- just do not do it.
