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| Web Site Traps - Don't be Caught... Unaware |
November 10, 2005 |
By Jim Middlemiss
EVERY COMPANY NEEDS A WEB SITE, BUT ITS MERE EXISTENCE CAN OPEN YOU UP TO LEGAL HEADACHES.
When California theatre company Showmax wanted to open a large-format motion picture theatre in Montreal, the firm advertised that fact on its Web site. Showmax included a link to the Web site of the Old Port of Montreal, and this link appeared within a frame on the Showmax site.
Fine, except for the fact that the linked page contained information about an IMAX theatre, including IMAX’s trademark, which was then juxtaposed with the Showmax trademark.
IMAX took exception to Showmax’s marketing endeavors and argued the framing and linking meant viewers would infer IMAX was somehow connected to the Showmax theatre, which it was not.
sought an injunction prohibiting its rival from opening a theatre using the Showmax name, stating this would confuse consumers. A federal court judge agreed with IMAX.
The IMAX-Showmax dispute is an example of what can happen when a firm’s Web site steps over the boundaries of intellectual property law.
While the link wasn’t the sole reason the judge granted the injunction preventing Showmax from using its own name, the link slip-up was strong evidence that helped IMAX build its case. And similar traps can trip any unwary business.
Corporate Web sites can invite everything from lawsuits for breach of copyright to actions for violating trademarks to claims for improper disclosure of confidential information or product liability.
Factor in the international nature of the Web, which means residents of other countries with different laws can access the site, and this multiplies a firm’s legal exposure.
Intellectual 101
Companies should start with a basic understanding of intellectual property law, which covers the use of trademarks and copyright.
The federal Copyright Act grants authors protection over their works that lasts the life of the author plus 50 years. It applies to a broad range of categories such as songs, books, plays and articles.
There is also an associated moral right, which means the author has the right to the integrity of the work. Copyrights can be assigned or sold, but a moral right can only be waived.
Developed largely for the paper-based world, intellectual property protections are feeling the strain of the Internet, where file sharing allows users to quickly download “free” music, videos or books that consumers would otherwise have to pay for, and digital images can flash across a screen in seconds.
Gilles Daigle, an intellectual property lawyer with Gowlin Lafleur Henderson LLP in Ottawa, said people often have a basic misunderstanding of how intellectual property rights apply to the Internet. “They apply the same way as they apply to all other media,” so just as in the real world, you can’t copy or reproduce items you don’t own or use trademarks or trade names unless you own or have licensed them.
The most common mistake businesses make, Daigle said, is “they don’t understand what they can and can’t do in terms of copyright. They put on their Web site materials they don’t have the right to.”
Daigle represents newspaper companies and said businesses often simply copy articles and post them on Web sites. This contravenes the law even if they give the author credit for the work. “If you are making a copy of a photo or article, then you need the owner’s permission.”
He cites the instance of one Web site that purported to do automobile reviews. At some point the business owner simply started posting entire car reviews from an Ottawa newspaper and the activity was quickly stopped.
Michael Manson, an intellectual property lawyer at Smart & Biggar in Vancouver, said businesses can also be exposed to copyright infringement through the acts of an employee. He cited the case of a company that hired a university student to work on its Web site. That person posted content from a third party without permission and the business later got sued.
The bottom line, Manson said, is businesses need to pay attention to where copy originates and who owns it.
Whose design?
One area often overlooked is the question of who owns the copyright when a designer creates a corporate Web site. Howard Knopf, an intellectual property lawyer with Macera & Jarzyna in Ottawa, said “if you don’t take the appropriate steps to own the rights in your own Web site, you can become hostage to the Web design firm.”
As well, a company may not be able to shift its business to a different design firm. “If you have a falling out or anything like that you want to be able to take [your Web site] with you. That has to be dealt with by contract,” Knopf said.
It’s also important to make sure the designer waives moral rights, he said. “You don’t want someone to say you can’t make changes because of moral rights, which translates into ‘Pay me.’”
As well, companies that develop their Web site using internal staffing resources need to make sure the task is formally documented as part of an employee’s job. What can happen, he said, is for a fired employee to turn around and claim to be the copyright owner.
Harsh penalties
Lawyers say firms need to stay onside with copyright laws because the penalties for violating them are severe.
From a civil standpoint, a court could issue an injunction stopping a business from continuing to violate a copyright. It can also order damages and an accounting of any profits earned from using the work. Or a court can automatically award statutory damages-$200 to $20,000 depending on the nature of the offence.
Someone who knowingly distributes copies of an infringing work can also be charged under the criminal law and subject to a maximum penalty of a $25,000 fine and six months in jail. In the most extreme case, a person can be fined a maximum of $1 million and jailed for up to five years for an indictable offence, although that is rare.
So anyone using a Web site to sell infringed works-knock-off videos, software or music-could face both civil and criminal prosecution.
Tracking trademarks
But it’s not just copyright that firms have to watch out for; trademarks can also be a problem. The Trade-marks Act, which is also federal law, protects “certification marks” that distinguish a ware or a service. For example, this covers the Nike swoosh symbol or a company trade name that is properly registered.
“You’ve got to be really careful when a trademark is being used,” Knopf said. “[The law] is developing in a very complex way. It’s potentially a minefield for all businesses.”
For example, if you sell wares on your Web site and use your own trademark or have a licensing agreement to use someone else’s trademark, it might only cover a certain geographic area. If your Web site is being used by consumers outside that geographic area, it could be traipsing on someone else’s legal turf. “You need to make sure you are not infringing a trademark in that country.”
Another area where businesses can get into trouble lies in the coding of Web pages. For example, some Web designers will try to beef up search positions by adding a competitor’s protected trade name to their meta tags. So a no-name cola company might use a brand name in its meta tags in the hope that someone searching for information will be directed to the site of the no-name site. That can lead to confusion, which can stop the activity “dead in its tracks,” Knopf said. “It’s something to be wary of. Some Web designers are too aggressive.”
Unless a contract explicitly states the copyright belongs to the business owner and the Web design firm waives its moral rights, a business could find itself hamstrung when it comes to changes. For example, templates could not be modified or used in other business lines.
When it comes to penalties for trademark breaches, the sky is the limit. Most of the time, firms are subject to injunctions to stop the activity and damages can follow. In a worst-case scenario it can amount to millions of dollars, depending on how flagrant the violation and how much damage the trademark owner suffers.
Disclaimers and liability
Other protections firms should consider include disclaimers and notices. “A lot of them don’t bother putting copyright notices on their Web site,” Manson said. A well-placed notice means someone who takes information from your site and uses it can’t later claim it was an innocent infringement.
As well, any disclaimers about products or services should be prominently displayed. Craig Zawada, a technology and intellectual property lawyer with Wallace, Meschishnick, Clackson, Zawada in Saskatoon, said “you want to make sure those disclaimers are obvious and preferably on the home page.”
Firms need to also consider their corporate structure when it comes to Web sites, especially if they are engaged in activity that invites attacks from competitors or disgruntled patrons, Zawada said.
Businesses need to look at the exposure they face, he said. “It may mean publishing the Web site under a separate corporate entity than the operating businesses so you aren’t as exposed.” That way assets can be protected in the operating company and kept out of the hands of a person who sues the company overseeing the Web site, he said.
Zawada said the key to keeping a company safe from legal attacks lies in upfront preparation of how it plans to build and manage its Web site, starting with the hiring of design firms and ending with the due diligence applied to the content and the manner in which the site is used. “You can never really, absolutely bulletproof your Web site (from lawsuits), but you can make it bullet resistant.”
Web copyright
Full details of Canada’s copyright law can be found at http://laws.justice.gc.ca/en/C-42
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