Practical Ecommerce

End-of-year Legal Checkup, for Ecommerce

It is that time of year — an opportunity to spend time with family, reflect on the successes and failures, and make plans for 2017. It is also time to reflect on the things that you may have been putting off, such as legal compliance.

Here is a checklist to help you review what you may have been neglecting and make plans for the end of the year or for next year.

End-of-year Legal Checkup, for Ecommerce

Business entity. Any head-to-toe review starts at the business entity level. Now is a good time to review whether your entity is in good standing with your state of incorporation, in the case of a corporation, or organization in the case of a limited liability company. If it is not in good standing, now is the time to renew your business entity and ensure that your required annual statements have been filed with your state.

Additionally, ensure that you have an operating agreement or bylaws and that they are up to date. If any changes have been made to your business entity structure, such as the addition of an equity partner or shareholder, or if you have had any major life events, it may be time to review these documents and make any needed changes.

For example, my wife and I had a child this year, which meant that it was time for me to seriously look at my law firm’s operating agreement to ensure that we knew exactly what would happen upon my death or disability.

Employees and independent contractors. Now is also a good time to review your agreements with employees and independent contractors. For both, ensure that you have employment or independent contractor agreements in place that contain confidentiality provisions, trade secret provisions, and, if necessary and allowed within your state, non-compete and non-solicitation provisions.

In the case of employees, all works created within the scope of their employment are owned by the company. In the case of independent contractors, however, all works that are created by an independent contractor are, by default, owned by the independent contractor. Consequently, it is extremely important that all independent contractors sign an independent contractor agreement containing both a work made-for-hire and a copyright assignment clause to ensure that any works created by an independent contractor are assigned to the company.

Business assets. It is also important to make sure that your business assets are protected. Start with domain names, the theft or loss of which is a common source of headaches for my clients.  Ensure that your domain names are protected by two-factor authentication, wherein access requires not only a password and user name but also something that only the user knows. Most modern registrars offer two-factor authentication to protect against unauthorized access to a domain name account.

Additionally, now is also a good time to file for copyright registration. I generally recommend that merchants with a large number of SKUs and product shots file for copyright registration of their website content on a quarterly basis because this schedule allows them to obtain up to $150,000 per work infringed. Using a site export tool, such as SiteSucker, will help you prepare a deposit to be filed with the U.S. Copyright Office.

And it is also a good time to review your trademark portfolio. If you have not yet done so, filing for trademark registration is an important step in protecting your brand and creating a business asset that can provide you significant value upon the sale of your company.

Trademark rights are territorial — your rights stop at national borders. Thus, if you have an international ecommerce store, it is important that you protect your rights in all jurisdictions in which you operate. European Union Community trademarks are one way to add tremendous value to an ecommerce business because they can provide protection across the entire European Union for one low fee.

Contractual agreements. Finally, the end of the year is a good time to review your contractual agreements to ensure that they are up to date and continue to protect your business. For example, review your terms-of-use agreement, privacy policy, and copyright policy to ensure that these important documents remain compliant with the law. There have been several major changes in the law over the last year that may have had an effect on these documents.

For example, the U.S. Copyright Office recently issued a rulemaking that requires all service providers that desire to take advantage of the Digital Millennium Copyright Act to re-file interim designation-of-agent forms with the U.S. Copyright Office or otherwise lose their safe harbor protection for secondary copyright infringement.

The E.U. and the U.S. have struck a new deal, the Privacy Shield, to allow for the cross-border transfer of personal and personally identifiable information. This new deal requires significant modifications to existing privacy practices. And the E.U. has also made major changes to the General Data Protection Regulation that have a substantial effect on any business that collects personal or personally identifiable information from citizens or residents of the European Union.

There is no better time to save yourself future legal headaches. As always, consult with an attorney for specific legal advice, and have a wonderful holiday season and a happy new year.

John Di Giacomo

John Di Giacomo

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