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What You Need to Know About Online Contracts

Here are some of the specific issues faced by SaaS, cloud computing, social networking, and other online service companies.

Online E-contracts

One of the common questions in dealing with tech companies deals with legal and contractual questions when you don’t have an actual customer sitting in your office that you make a deal and sign a physical contract.  On the web, these take the form of those long and wordy pop-ups that everyone usually just clicks “okay” to and moves on; however, those are often legally enforceable agreements.  There are a number of laws that deal with related issues too lengthy to go over here, but the main ones are the Electronic Signatures in Global and National Commerce Act (E-sign), Uniform Electronic Transactions Act (UETA), and the Uniform Computer Information Transactions Act (UCITA).  The intent of these laws is to have certain requirements that need to be met for websites, online e-commerce, or social networking sites to utilize in order to have a valid and enforceable contract.  The requirements are too specific to go over in detail, but this is a very important area to have a qualified attorney if any part of your business relies or will rely upon electronic agreements.  If you comply with these requirements, yes, those common terms and conditions and other forms that you click on can be validly executed contracts.

Online contracts often involve or require items like an end-user license agreement or similar license agreement, terms of use, privacy policies, and link policies or agreements.

End-User License Agreement

Although there is a separate section discussing License Agreements, the end-user license agreement (EULA) is appropriate to discuss in this section.

The EULA or a similar type of software use license agreement is a very important document to protect the company’s IP and try to limit any potential lawsuits down the road.  These need to cover certain areas that are covered in traditional license agreements but also relate to the issues related to software, code, and the electronic nature of the agreement.  Failure to properly license certain items of intellectual property could result in loss of ownership rights.

Open-source licensing can present its own set of unique problems.  Simply because the company believes it is giving free access to its code, it doesn’t mean that they should not worry about legal issues and consult with a qualified attorney.

Terms of Use

Every website or an online business should have policies and procedures in place, not just for their physical operations, but also for their online commerce and interactions.  Clearly displaying your company’s terms of use is very important.  There are a number of provisions that should be included, but again, these are legal documents to protect the company and a licensed attorney should be consulted to, at a minimum, review your terms of use before launch.  These clauses deal with things like who owns rights to the site’s content, are there trademark or copyright rights being asserted, are granting a limited license right to the user and what are its terms, and descriptions of what services you are providing.

Privacy Policy

Just like a website or online company should have some form of terms of use published, they should also adopt and display the company’s privacy policies.  This is another protection for intellectual property and to avoid potential lawsuits related to confidentiality and privacy.  Most of the time the privacy issues are covered in the EULA or other licensing agreement used, but the site itself should have a general privacy policy.  In California, commercial websites doing business in the state are required by law to have and post a privacy policy online.

The main concerns that need to be covered are things like what personal information may be collected through forms or cookies, how is that information used (is it sold to a third party), how is it stored and protected or destroyed, and how to handle children’s data.

Dealing with Links or Other Content

Various laws such as copyright may come into play when dealing with outside websites or content.  You cannot simply start copying content or placing links on your own website in many cases without the express written consent of the company or person who prepared and published the information.  As discussed in the section on IP protection, there are various copyright, trademark, or other legal ownership rights that may attach and use or reproduction without consent may result in infringement.  This can also apply to something as simple as a picture on a website that you copy and use on your website.  Just because something is in the public domain, it doesn’t mean anyone can copy it.  Think of a website as a movie or book, you can’t start making copies of part of it and using them to profit without generally violating various IP laws and in some cases, criminal laws.  This can include downloading content like music or videos.  In most cases, hyperlinks alone will not be ruled to constitute copyright infringement, but you should still be cautious and seek written permission first.

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