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 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.

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 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.