Practical Ecommerce

Legal Issues for Membership-based Ecommerce Sites

Membership-based ecommerce websites — those that offer products, services, or additional benefits to members — have their own set of complex legal issues that do not apply to traditional online retailers. I’ll address those issues in the article.

License to Use Website

Membership-based websites should ensure that they have adopted a terms-of-use agreement to outline the relationship between the website and the members. Specifically, these websites should provide a license to use the website provided the members conform to the website’s acceptable use policy.

An acceptable use policy typically prohibits members from transmitting spam emails to users, imposing a disproportionate load on the website’s servers, accessing the website through automated means (such as a bot), or posting or transmitting harassing, pornographic, or infringing content.

User-generated Content

Content submitted by members — such as images, text, videos, and comments — is one of the key areas of liability for membership-based websites. This user-generated content can often be the main draw of the site, but it can also be a haven for potential liability. Again, membership-based websites should ensure that they have adopted a terms-of-use agreement to control, by contract, the submission and use of user-generated content.

… user-generated content can often be the main draw of the site, but it can also be a haven for potential liability.

A well-drafted terms-of-use agreement will contain provisions that ensure that members warrant that any content they submit to the website does not infringe on the rights of third parties, including intellectual property rights, does not violate any laws, and does not constitute harassment or defamation. A terms-of-use agreement will also contain provisions that ensure that any user-generated content submitted to the website is original and can be licensed to the website for its use.

Digital Millennium Copyright Act

Though a well-drafted terms-of-use agreement requires that members warrant that they have not submitted infringing content, they often do. Thankfully, the Digital Millennium Copyright Act provides a safe harbor for claims of copyright infringement against a membership-based website if the website quickly removes infringing content upon its receipt of a notification from a rights-holder.

To take advantage of the DMCA, membership-based websites must file a designation of agent form with the U.S. Copyright Office. Upon receipt of a notice of copyright infringement under the DMCA, the website owner must quickly remove the content in question to retain its immunity for copyright infringement.

Websites need only act on proper notices, which must contain a physical or electronic signature of the copyright owner, identification of the works alleged to have been infringed, the location of the copyrighted works on the website, contact information, and a statement, under penalty of perjury, that the use is not allowed and that the information in the notice is accurate.

Though a well-drafted terms-of-use agreement requires that members warrant that they have not submitted infringing content, they often do.

Section 230 of Communications Decency Act

Membership-based websites can also protect themselves from defamation and other tort claims by taking advantage of Section 230 of the Communications Decency Act. Section 230 states that a membership-based website, which is considered an interactive computer service provider, will not be treated as a speaker or publisher of any information provided by a user of its website. This means that, as long as the membership-based website does not create the content itself, it cannot be held liable for its republication of defamatory or invasive content contributed by its members.

Section 230 has opened the door to rating-and-review sites like Yelp and product reviews on ecommerce websites, such as Amazon. Membership-based websites do not need to take any special actions to take advantage of Section 230.

Wrapping Up

Though these are not the only liability pain points for membership-based websites, these are key areas that should be addressed and monitored. As always, speak with an attorney for legal advice specific to your business model.

John Di Giacomo

John Di Giacomo

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Comment ( 1 )

  1. Carlos Rivera March 21, 2017 Reply

    I have never head this topic discussed before. Very important! Thank you for educating us!