San Diego Internet Business Lawyers | E-Commerce Law
The Internet, and by default, Internet business is here to stay. Today’s possibilities for online E-Commerce businesses are incredibly exciting. New technologies constantly emerge, allowing businesses to promote themselves, and sell their products and services online. But, for any Interent business or business leveraging the Internet to promote their products or services, the online business landscape is constantly shifting and evolving. This constant evolution is making it incredibly challenging to keep up with what’s current. This shifting landscape makes it even tougher to separate what’s real, from what’s just hype.
How Deep Do You Go with E-Commerce?
Every business must consider to what degree it will operate online. How much will the business leverage the Internet to the businesses’ advantage. At a minimum, businesses should have an online presence, even if it’s a simple website to act as a “online Internet business card”. While some businesses use the Internet to promote their brick and mortar existence, many businesses operate entirely online.
If your business was originally conceived as an online Internet business, like a graphic T-shirt company, you probably have a clear idea of what online activities you should focus on. But if you run a brick-and-mortar business, like a bakery, you may end up stumbling into bigger e-business activities than you can handle. If you handle that growth well, that could be a “positive problem” to address to your advantage. On the otherhand, many businesses find themselves in all matter of chaotic messes should the Internet bring more business and more challenges faster than you can plan for them.
Any Increase in Internet Business Exposure Needs a Business Plan!
Online sales tend to involve a whole new set of details you’ll must concern yourself with. You’ll need to worry about managing online sales reports, shipping, and online customer service. If these activities weren’t included in your original business plan, you may quickly find yourself overwhelmed and incapable of keeping customers happy, which is a recipe for disaster for any business. But, strategic thinking beforehand you can help avoid these mistakes. It can be extremely beneficial to discuss your deepening venture into Interent business with an experienced lawyer who has helped other businesses clean up after their online disasters.
For example, Diana is opening a store selling handmade jewelry. She wants to start a website and starts talking to web designers. Some of the web designers tell her that she can capitalize on online sales. She had never really thought about that online sales. She really just thought she would sell to local boutiques, and at local markets. But, after some consider she thinks it’s a great idea. Think about how many more customers she can reach. Unfortunately, her business plan did not account for the logistics involved in online sales. While some tasks, like billing can be somewhat automated, other tasks would need to be handled by her, an employee, or subcontractor like a web developer.
What the Internet GIVES, the Internet can TAKE AWAY!
The Internet can spark a surge of demand for your product or service. That’s good, right? It can be, but saying “YES” to more demands than you can meet can KILL your business before you can sit down at tax time to smile about your new growth!
EXAMPLE: San Diego Bakery Increases Internet Business Exposure
Imagine you are the owner of a San Diego bakery that has been offering supurb service, custom-ordered baked goods, and off-the-shelf tasty delights to walk-in customers for 2-years now. You’re happy. Your customers love you. You have 20+ unsolicited, but appreciated, glowing 5-Star Yelp reviews. Those Yelp reviews, and the resulting growth they generated, gave you the idea to expand your Internet footprint and Social media exposure.
For starters, you commissioned a website. While writing your content you had a wild idea to offer catering and delivery service just to see if there was any demand. You set up a Google Plus page, a Google My Business page, an Instagram account and a Facebook business page.
Your efforts worked! They generated more walk-in traffic –and– surprisingly, you started getting delivery and party catering requests. You hadn’t done any planning for this new business coming from your Internet outreach, but by the seat of your pants, you managed to kludge employee hours and daily proceedures together to make it work. It never occured to you that offereing delivery and catering services was like opening a whole new business. In the fog of making it through each week, while all was seemingly going well, you still had a chance to sit down for a few hours and ponder a thorough business plan, but you never took the time.
Your bakery was slammed with work – growing too – but without a plan! You were busier than a one armed paper hanger ordering supplies, calendering special orders baking, scheduling too-few employees for baking, counter work, and running deliveries. On top of that, you coordinated weekend party and corporate catering gigs! You were making money. Growing. Finally.
Then, one frustrating week — BANG! — you get three “Nasty-Grams” – three negative 1-Star Yelp reviews on your 2-year old, stellar, 5-Star Yelp review page. That was a horrible week: random issues out of your control. Your delivery person rushed to Phoenix to be at her dying mother’s bedside. That same day, your huge primary oven went down; the critical part 5-days out even with FedEx. You had been overbooked and stretched thin for months – but managed. Now, an employee’s absense and a cracked gas valve have brought your bakery to its knees. Those minor issues turned familiar customer smiles into never-seen customer frowns. That week your failures to deliver upset a handful of new Internet business customers and some long-time loyal customers!
Your 2-Years of glowing 5-star Yelp praises were ERASED by 3 negative reviews in 5 short days! Walk-in traffic went down, phone and online orders fell to a crawl; all because three “mean people” with too much time on their hands posted negative reviews! Mulling over the catastrophe, you realized, at best, you should have had contingency plans for employee issues, equipment problems and other unanticipated challenges. At worst, you should have had a simple policy to “SAY NO” to customer orders if there is EVEN a remote possibility that saying “YES” might end in a bad customer experience!
When a company ventures onto the Internet for direct sales or digital promotion, it must be understood that any GOOD the Internet brings can be TAKEN away: quicky and HARSHLY! Even if 99.5% of the time you can make customers happy, all it takes is a few BAD REVIEWS to cripple or kill your business when you expand your presence on the Internet!
A BrightLocal’s recent consumer survey report found:
- 84% of people trust online reviews as much as a personal recommendation
- 90% of consumers read less than 10 reviews before forming an opinion about a business
- 74% of consumers say that positive reviews make them trust a local business more
- 58% of consumers say that the star rating of a business is most important
In closing out our imaginary San Diego bakery story. This example parrallels most small business stories we hear about – those that survived to where they then sat down with us to brainstorm and map out an Internet business plan. In this analogy, the bakery had collected 20 5-star Yelp reviews over 2-years and then, in one awful week, received 3 nasty, negative 1-star reviews rocking their world: a years-long setback.
The real world takeaway is this: For our Bakery with 3 new negative reviews, it will take 36 new 5-star reviews to recover their now-lost stellar 5-star position! On a 5-star numerical format crowd review website like Yelp, for EITHER a Mom-N-Pop bakery, or a multi-millon dollar, 100-employee, E-commerce business, it will take 12 positive reviews to cancel out the nasty side effects of EACH negative review. That is how critial it is is to have a business plan for venturing into Internet business and promotion. You must learn about and plan for “Reputation Management” issues.
Failing to Plan Is Planning to Fail
All too often, business owners fail to define specific and achievable goals for their online efforts. Typically, online business goals would include:
- building recognition of the business and its brand,
- attracting new clients and customers, either to come the physical business or to call the business,
- collecting email addresses or other contact information for marketing efforts,
- showing work samples and portfolio items,
- selling products (otherwise known as e-commerce),
- answering common customer questions to decrease customer service calls,
- attracting investors, and
- publishing late breaking information such as news about the most recent technology releases.
How Do I Make Money Selling Stuff Online?
You might have a traditional brick-and-mortar store. But, you see your website as a great way to expand sales. You might have an idea for an online only operation such as selling vintage concert posters. Either way, selling products or services online adds complexity and costs to your website. You’ll have to add a shopping cart. You’ll have to have a merchant account. You’ll need to have a “payment gateway”. Each of the services charge their own sets of fees.
You can do it entirely your own, which is more expensive and riskier. But, one alternative to hiring a web developer, and building your site, is opening your store with an existing e-commerce site like Amazon, Etsy, or eBay. It’s quicker, easier, and less expensive. Typically, the registration processes are easy to complete. If you have good photos of, and copy about, your products, you can be up and running in days or even hours. The downside, is that you are in a “huge shopping mall” where your products might get overlooked. But, if you have brand recognition, you can gain traction and reach customers in places you had never dreamed of.
Do I Have to Collect Taxes on Online Sales?
If you’re selling goods, and products online, and some of your customers are in California, then you must be aware of California’s internet sales tax rules. The current default is that you must collect sales tax on internet sales to customers in those states where your business has a physical presence. It doesn’t take much to give you a “physical presence”. It can be a warehouse, or a store, or an office, or even a sales representative. In addition, California is one of a growing number of states that has enacted “Amazon Laws” that force larger, out of state internet retailers to collect and pay taxes. You can find a sales tax rate by shipping address here: https://maps.gis.ca.gov/boe/TaxRates/.
Who Owns My Website?
It’s crucial that you and your web developer have a contract. That web development contract should clearly indicate terms of ownership and permissions, for any materials the web developer created for your website. Your web development contract should clearly layout who owns any copyrighted materials. Other electronic property laws such as trademark, and patents issues may also come into play. But, trademark and patent issues are not nearly as frequent as copyright issues.
Copyrightable materials include: text, photos, artwork, and designs as well as technology developed for your site such as databases and programming. As you can imagine, serious problems can come up if ownership of any aspect of your site is in dispute. In general, the person who creates the content, owns the copyright. However, if the work qualifies as “work for hire” then the hiring party, not the creator, legally owns the copyright to it. For example, when your employee creates any work in the course of employment, the work is considered a work for hire. So, you, the employer, not the employee, owns the copyright to that work.
When an independent contractor, (like a web developer) creates certain types of content, the hiring party owns the copyright in the work if the parties have a web development agreement. The written, web development agreement is essential. You need work for hire agreements whenever nonemployees create web content. Without a written work for hire agreement, the nonemployee web developer owns copyrights to the materials he or she develops for the website.
But, there’s a twist. You can’t turn every kind of creative work into it work for hire using written agreements. Work for hire agreements will give you copyrights only if the content is:
- part of a larger literary work, such as an article in a magazine or a poem or story in an anthology,
- part of the motion picture or other audiovisual work, such as the screenplay,
- a supplementary work, such as an afterward, introduction, chart, editorial note, bibliography, appendix, or index,
- an instructional text,
- a test or answers for a test, or
- an atlas.
While you’re trying to figure out how lawyers came up with the above categories, it’s important to note what’s not up there…That’s right. Websites. So, if websites can’t be the subject of “work for hire” agreements, how do you get ownership from your web developer? You need a written and signed copyright assignment, an outright sale of all copyright from the contractor to your business.
Of course, there are many situations in which a web developer might insist on retaining ownership. Developers sometimes will maintain ownership of technology that they’ve developed, such as content management systems, shopping carts, or other functions. Developing web applications is the lifeblood of some web firms, so they’re unwilling to transfer ownership of that program code to your company. Instead they give your business a license to use the technology in specific ways. That’s perfectly normal. But, you’ll need to be careful about a couple of things:
- you need to protect your company’s ability to make changes to the site down the road, and
- if you’re hiring the developer to create functions, or other programming code that will give your business a competitive online, then you want to obtain full ownership of that code so that it can’t be used for other businesses who could become competitors.
- be on the homepage or conspicuously linked,
- disclose what type of personal information is collected through the online service (that’s your website and/or mobile app) and the third parties this collected personal information may be shared with,
- describe how users can request changes to any of the personally identifiable information that was collected,
- disclose how the operator responds to the “Do Not Track” requests of users, and
- disclose whether other third parties may collect personally identifiable information about users through the operator’s service (that’s through the website and/or mobile app)
What If People Upload Content to My Site?
Does My Website Have to Comply with the ADA?
Website accessibility is becoming a hotbed for litigation. Years ago, disabled plaintiffs teamed up with disability lawyers and filed lawsuit after lawsuit against businesses that failed to comply with the Americans with Disabilities Act (“ADA”). Most people are familiar with the ADA with the brick and mortar ADA rules. But, few know anything about ADA web rules. Ask your web developer about ADA compliance and you’re likely to get a blank stare and a confused look.
Any business that is a “place of public accommodation” must provide equal access to services under the ADA. The DOJ has ruled that websites should be designed so they are accessible to individuals who have vision, hearing, and physical disabilities. There is a growing body of case law requiring ADA compliance, along with payment of heavy penalties and fines. So, what are some things that make your website ADA compliant?
- easily readable text,
- photos with text descriptions,
- videos on your website and social marketing should include audio descriptions and transcriptions for people who have difficulty hearing, and
- a text only option, with all functionality accessible through a keyboard for visitors with mobility issues.
Concerned about opening an Internet Business?
You might be concerned about opening an Internet business. But, it can really help. Look at Jeff Bezos and Amazon. He started off by selling used books out of a garage. Now he sells just about everything, to everyone, everywhere.
McCarthy Law is here to help. You can schedule an appointment (day or night) right now!