E-Commerce: Worries and Cures

What is E-Commerce?
All commercial use of the internet

What are some of the E-Commerce liability risks?

A: For companies that create and/or distribute media content:

1. Defamation: The publication of a false statement or fact, of and concerning a person or entity which causes damage to the reputation of the person/entity.

2. Invasion of privacy: Such laws create liability for revealing private facts of another without permission and for intruding into the seclusion of others. A major concern here is that user habits will be matched up with real world names, addresses and credit information to create profiles of surfing and online buying habits.

3. Misappropriation of name or persona: If a company uses a picture of a celebrity on its web site or in a software product, the company may be liable for misappropriation of persona unless it obtains the right to use the picture.

4. Trademark infringement: Questionable or improper use of domain names. “Cybersquatters” – – persons or entities registering multiple domain names and then offering them for sale.

5. Copyright infringement: Perhaps the greatest risk for companies doing business on the Internet and the most common type of intellectual property claim. Copyright law imposes absolute liability (injunctive or monetary relief whether violation is intentional or accidental).

Median cost of defense through trial:

Trademark cases $180,000
Copyright case $249,000

(From the American Intellectual Property Law Association’s Report of Economic Survey 1997).
These costs are often higher, as extra steps must be taken to educate the judge and jury on the particular technology involved.

6. Libel and Slander

7. Publisher’s Liability: The United States Patent and Trademark Office (USPTO) ruled that all Web content now falls under the category of periodicals.

B: For E-Commerce Merchants:

1. Trademark disputes: Single largest category of Web litigation. An imperative for the owner of intellectual property – – “DEFEND IT OR LOSE IT!”

2. Advertising and Consumer Protection: Product disparagement on the Web will be viewed as made in interstate commerce and will fall within the jurisdiction of the Federal Trade Commission. FTC actions are likely to seek fines, penalties and equitable remedies such as digorgement and injunctive relief to change behavior.

3. Fulfillment failures

4. Privacy concerns: Web sites may include reviews, interactive chat rooms and other opportunities for users to add comments which could result in statements about third parties that raises the potential for both defamation and invasion of privacy.

5. Security issues: Liability for possible loss of date – – such as theft by hackers.

6. Interaction with other sites or merchants: There are regulatory concerns about price fixing, collusion and other forms of anti-competitive conduct. “Hyperlinking” may result in the listing site being liable for contributing infringement.

7. Loss of access

C. For use of e-mail:

1. Your employee sends e-mail with attachment that contains a virus of logic bomb.
2. You monitor employees e-mail without advance risk management.
DID YOU KNOW?
a) Most forms of traditional insurance will not cover these exposures.
b) There are new E-Commerce coverage products now available from specialty insurers.
c) For many businesses we can add this type of coverage at no additional cost to existing policies!

Lack of legal precedent, the complex technology involved, the relative scarcity of expertise among the bar and the speculative nature of many damage claims all make these cases expensive to defend.