E-commerce and the Law—Be Prepared, Not Sorry

MAR-APR 2014|BY MINA ZOULOVITS, PARTNER, PHILOTHEIDIS & PARTNERS LAW OFFICES, (E-COMMERCE LAW FIRM OF THE YEAR 2014 IN GREECE AT CORPORATE INTERNATIONAL GLOBAL AWARDS)
How to exploit legal tools for a well-structured online or mobile presence of your business

Enhance your online company’s value and credibility by building on a solid legal foundation.

E-commerce is “a game” for the well prepared and determined. A clear and solid legal operating framework enhances a company’s trustworthiness and credibility towards its two most important stakeholders: clients and potential investors.

Legal tools to strengthen your company’s online presence or expansion—be proactive.

A. The Power of Successful Branding

As soon as a business idea goes online, it can be immediately “copied” (for instance the business idea of “deal services” websites). You should make all efforts to legally safeguard all the intangible assets that are key to the reputation, identity or marketing efforts of your company. These protective legal actions will also increase the value of your business and its soft assets for a potential investor.

  1. Register the domain name(s) in all target markets. Prior to finding a “name” that is suitable for the online presence of your company make sure the domain name is available, not only in your initially targeted market(s), but in other, potential future markets. In addition, it is recommended that you register all the domain names that could logically associate with your company’s prime domain name (i.e. mybagg.com, my-bagg.com, mybag.com, my_bag.com). Often, when a domain name becomes famous, a competitor registers a similar name (as in the previous example). Acting proactively could save your company from costly and lengthy litigation or negotiations to forbid or to acquire the usage of that domain name.
  2. Create your trademark registration strategy. While in the process of choosing the “name” and creating the associated logo of the product/service to go online, you should look up whether that name is already a registered trademark in the targeted country(ies). Before investing time and money to start or expand your business in a specific market, take some time to find out whether any constraints exist that could possibly ban your company’s product or services there.
    Trademarks are distinguished in 45 classes. This means that you should choose in which class(es) you would file a trademark registration based on your product/service. Moreover, your company must decide whether it would opt for a Greek/local, European, or international trademark, following its business plan regarding the markets targeted and the money you are willing to spend for registration.
  3. Deal with IPR issues at an early stage: IPR issues (like copyright) are associated with multiple, intangible assets of an online or mobile company. For instance IPRs are related to the construction and maintenance/support of your company’s website. They are also related to the content used in your website (product photos, articles, music, videos). So, to safeguard your company’s IPRs it is imperative that the parties involved execute detailed and precise licensing contracts that clarify who owns those rights and under what terms these rights can be used.
    If your company’s “product” is intangible (i.e. online services or mobile applications), IPRs are related to the commercialization of the product itself. Hence, first and foremost you must ensure you own your “product.” You should either purchase it from those who created it or acquire the proper license to use or distribute it. Otherwise you could face complex legal issues in relation to the ownership of the “product” when it becomes popular and, hopefully, profitable.

B. Define Your Addressable Market(s) and the Exact Nature of Your Product/Services by Using Legal Tools.

While structuring the business model of your online or mobile presence or further expansion, it is important that your company undertakes legally informed decisions with the aid of experienced consultants a) to prepare a more accurate business plan and b) to find possible alternatives that would allow you to eliminate, as much as possible, legal risks. For example, basic legal steps include:

  1. Receive the necessary administrative licenses (if any). There are many categories of business ventures that require a specific administrative license to operate. Most often, those same rules apply irrespective of whether the business is offline or online. For example, in Greece there are multiple strict prerequisites to operate as an offline or an online seller of food products. Greece is not alone in this respect. Diverse rules and licensing schemes apply in many countries for the sale of food products.
    So, prior to entering a new market you must examine what regulations are applicable and determine the cost to abide by them (for instance, in some business categories it is adequate to receive a license only in one EU country and all other EU countries must acknowledge that license; in other business categories one must acquire a license in each single country).
  2. Draft precise and well-structured Terms of Use. A website’s Terms of Use is in fact the contract between the company and its customers. This is why this contract should be tailor-made for every specific website. In reality, every third party (including future investors, supervising authorities, consumer ombudsmen and even fiscal/tax authorities) expects to learn within the Terms of Use precise information, such as a Company’s identity, how it operates (payment processes, information provided to consumers, IPR, shipment of products, downloading of services), what exactly is the legal nature of its products/services, whether the company follows any special legal rules that govern its products or services and the like. Hence, defining the precise legal nature and structure of your company’s business online with the assistance of experts could protect you from unknown legal risks in the future and help you avoid severe legal or tax implications.
    In addition, the Terms of Use, when they are clearly drafted, boost customer satisfaction and trust. It is also proven that they assist the company’s customer relations department to prevent, or respond quickly to, complaints by simply directing the customer to the precise clause therein that lays down a specific business process. That is why these terms should be regularly updated with any changes made to the business operation or processes.
  3. Follow applicable data protection rules.  Data are among the most valuable assets of any online or mobile company. However one must bear in mind that those data that are associated with a natural person or create a profile related to his/her preferences, habits or interests are considered as personal. Within the EU, the personal data protection regime is very strict and imposes severe obligations to the controller of these data. Lawfully obtaining and using personal data consists of a first-class foundation to establish a relationship based on trust with your clientele and to trigger the interest of potential investors as well as to avoid fines. To achieve that, your company must design its systems and use only those marketing tools that abide by an existing, approved privacy policy that you are obliged to adopt before soliciting customer data.

In my experience, some entrepreneurs tend to underestimate legal risks and, as a result, pay little attention to the legal rules when they launch or expand/restructure their ventures. The consequences and latent costs can sometimes be expensive. In a nutshell, my advice is to consult the industry’s experts to save money by identifying and spending wisely in those basic but absolutely necessary legal protections and strategies that are applicable to your online or mobile business at all times. This could also help you achieve better performance and faster ROI—with the minimum possible legal risk.

Mina is a lawyer, expert in the field of commercial & corporate law as well as in IT and E & M-Commerce Law. She consults well established Greek and multinational online companies, with a local and global presence, as well as ambitious startups and VCs interested to invest in innovative business. She participates in major e-government projects, she educates entrepreneurs (long term co-operation with AIT & Eltrun) and she provides pro bono mentoring guidance in several startup incubators and associations programs.

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