Copyrights. The owner of any kind of copyrighted work has the exclusive rights to make copies of, display, perform, make revisions to, and publish that work. To use or sell third-party works on your Web site, you need the permission of the copyright holder. You may have to pay for those rights, either up front or based on the income you earn from those works. Payment arrangements will depend on the type of use. For example, if your site sells other artists’ CDs and videos, your license agreement with the artists, their labels, and their publishing companies may allow you to post their work for no fee up front, but require you to give them some of the money you get from unit sales. Some of the copyrighted works you want licenses for are photos, artwork, text, music, and videos.
The performance rights societies (ASCAP, BMI, and SESAC) try to keep up with the licensing and royalty collections for musical compositions delivered through Web sites. If you get a blanket license from each society, you can play any song from their catalogs on your site. Contact the performance rights societies to learn the procedures for obtaining performance licenses.

Of course, if your site will feature only your music and artwork, you won’t need permission to use it. You should, however, copyright anything you have created for your site. Doing this through the U.S. Copyright Office is easy.

On each page of your Web site, include a tagline noting that all images, text, and music are the exclusive property of the copyright holders, and give the date of the copyrights. Some online businesses opt instead to devote a page to the various copyrights and trademarks connected to the works on the site. It’s a simple way of dealing with the issue because updating one page is easy.

Trade secrets. In the fast-moving and highly competitive world of Internet commerce, protection of concepts, contacts, technology, and information—also known as trade secrets—is crucial. The nondisclosure agreement (NDA) is the legal ammunition used to safeguard trade secrets. Parties to NDAs disclose what information they obtained prior to their relationship and then promise that they will not disclose to others their respective secrets or use the information for their own ends. For example, if I disclose to you what I already know at the outset of our business relationship, you can’t claim that I developed the idea while we were working together and then try to stop me from pursuing it on my own in the future. Our NDA would prevent you from claiming that it was our idea and not mine alone.

NDAs can also protect technology, information, and intellectual property developed during the course of a business relationship. If you’ve thought of a brand-new online business or a completely different approach to an existing business, it is worth your time and effort to prepare a well-drafted NDA and have it ready when you let others—such as potential partners and investors—know about your idea.

Personal rights. In setting up your online business, you’ll have to consider the personal rights of the individuals appearing on your site. These rights stem from our constitutional rights to privacy. Furthermore, laws in many states protect an individual’s right to the publicity and exploitation of his or her name, likeness, performances, and biographical material.

So, before using any of those items online, obtain a release from the involved people that includes online display and distribution rights. Some audio/video production companies and record labels may have releases that were created before online rights were a consideration, so review the existing releases and negotiate to extend the rights to include online uses if necessary.

Keep in mind that so-called unofficial fan sites and flaming sites—which allow and even encourage people to share opinions and information about individuals—may open site owners to libel or disparagement lawsuits. Free speech online has been well respected and supported so far, but publishing false information that damages a person’s character or reputation is a definite no-no. Check your site for any libelous material.

Business Basics
Structuring your company as a sole proprietorship, general partnership, joint venture, limited liability company, or corporation can have enormous impact on the future of your business. Determining which of these forms of business is best for you is beyond the scope of this checklist, but here are some questions to ask yourself: Do you want to take on partners? Are you raising capital to get the business started? If you intend to sell the business later on, how much of your ownership and management share are you willing to give up?

The media has focused a great deal of attention on the “instant millionaires” who cashed in on their stock options after their Internet companies went public. If you are handing out pieces of your company in exchange for spec work, just be sure you retain enough of the ownership to control the management decisions and see your vision through.

Negotiate contracts with third parties with the Internet in mind. Review your deal with your Internet service provider. ISPs handle business accounts differently from personal accounts, and technical reliability, volume of use, and types of services vary widely. Don’t get locked into a long-term contract with an ISP that might not be able to meet your needs as your business grows. Your contracts should spell out royalty and sales splits with content providers (including artists and record labels), online distributors, and other e-commerce businesses.

The government is currently encouraging sales on the Internet, but it’s still determining federal and state taxes. Keep an eye out for any changes in tax policy. (See the sidebar “Online Research and Advice” to learn where to get the latest business and technology news and free legal and business advice online.)

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Reprinted with permission from Magazine, November, 2000
© 2000, Intertec Publishing, A Primedia Company All Rights Reserved