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Doing business online: What are the legal issues?

Friday, 15 March 2013 | By Lachlan McKnight

Over the coming weeks, StartupSmart will be running a five-part series that covers the legal basics involved in starting a business.


The first instalment, by Lachlan McKnight, CEO of LegalVision, looked at legal structures. Today, McKnight focuses on the online sector.


If you’re running a start-up, big or small, the chances are you’re doing business online – you will be providing information, goods or services through your website.


A website is your portal to potential and actual customers, as well as other stakeholders. It’s therefore really important that you get the legal issues relating to your website spot on from the beginning.


First things first – your URL


Before getting started on your website design you obviously need to register the URL. This is easy enough, but a number of businesses make the mistake of forgetting to check:

  • if the name they intend to use is already being used by someone else;
  • if the name or logo that they intend to use (and later trademark) is already trademarked;
  • if the name or logo that they intend to use can be protected by trademark registration.

You don’t want to build a website and brand and then be forced to change your name and URL because someone else is using the name or you’re infringing their trademark. You definitely don’t want to discover that you can’t protect your name/brand with a trademark!


Before starting your business and choosing your name you should do two searches:

  • an organisations and business names search; and
  • a trademark search

Make sure you own your website!


Before you start doing business online you will need to have your website designed and built (unless you’re doing this yourself). A web development contract governs the relationship between you, as client, and your developer.


It is vital that you read and understand this agreement; if possible you should be the one to provide it.


The most important clause relates to copyright. Some unscrupulous developers try and retain control of the website’s copyright after they’ve been paid in full, which is completely unacceptable.


If you are launching a start-up you need to retain the freedom and flexibility to run the business as you see fit.


Once the website has been built it should therefore be wholly and completely yours. Make sure your web development contract clearly states this!


You should also ensure that you get a warranty from the developer that their work product does not infringe anyone else’s copyright.


You don’t want to be on the hook if your developer turns out to have lifted the code from a third party.


Make sure your developer indemnifies you against any costs or liabilities resulting from any breach of this warranty.


Finally, be careful with placing any image, text or other media on your website. Make sure these either belong to you or you have a licence to use them.


Otherwise you will be in breach of copyright.


What documents do you need to provide?


It is important that you ensure your website prominently displays two legal documents visible to all visitors and preferably visible on every page; a set of website terms and conditions and a privacy policy.


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Website terms and conditions (and disclaimer)


It is standard practice that every website specifies the terms and conditions under which visitors or customers can access it. Even if your website does not sell anything, it is prudent to set out terms and conditions that govern its use.


This ensures that you have a clear agreement in place for visitors and allows you to limit what visitors are able to do with the information and intellectual property on the website.


You will simultaneously minimise the risk of visitors taking legal action against you or your business as a result of their use of your website.


Important points that your website terms and conditions should cover include: ownership of the website, purpose for which information on the website is provided and copyright notice.


If you are running a website that provides goods or services your terms and conditions should also set out your refund and cancellation policies.


Lastly, your website terms and conditions should contain a disclaimer. A website disclaimer states the limitations of a company’s liability for the use of its website and the information it contains.


Examples of the type of liability that a company may face include defamation, copyright infringement and breach of privacy. Any disclaimer must be displayed prominently. If it isn’t, it may be ineffective.


Privacy policy


A website privacy policy states how a company will respect the privacy of the users of its website. It states what information the company will gather from its website users and how it will use and secure the information.


Anyone with a website should have a privacy policy; it is essential as it serves as a disclosure document; alerting your users to the level of privacy they will be entitled to whilst using your website.


Changes were made to privacy laws in December 2012 to introduce 13 new Australian Privacy Principles (‘APPs’) that detail new requirements for dealing with unsolicited information; reform consumer credit reporting and strengthen the powers of the Australian Information Commissioner.


While the changes do not commence until March 2014 and are unlikely to apply to many start-ups, businesses should check whether the laws apply to them; and if so, clarify their obligations under the laws and start preparing for them.


How to manage employees online


If your company has employees, it’s important that you put in place an internet use policy. An internet use policy sets out the responsibilities which the employees of a company face when accessing company internet in their daily working activities.


The policy enables the company to reserve its rights to place content controls and filters on company systems to prevent inappropriate internet use.


Having a company Internet Use Policy also ensures that employees are given clear advice on the approach the company takes to the use of the internet.


Important terms that should be covered in such a document include: prohibited use, monitoring and penalties.


Lachlan McKnight is the CEO of LegalVision, a start-up that provides SMEs with access to online legal services, including customised legal documents.