The law & the web, part 2.

A few weeks ago David Snead, one of the foremost legal experts in all things hosting offered us his first suggestions on how to get your web firm's legal house in order.

In this second and last part he dives deeper in to complex issues including liability and security. You would imagine that most of these issues would be slam-dunk and common-sense. But no, as things with the law go there are always small surprises that you should always keep track of when running your online-based business, and David will give you some insight into what these may be.


Not only do most states have laws that require certain security and breach reporting procedures, but customers expect a certain level of security.  It’s your obligation to let them know what level of security you actually provide, and how they contributed to security.  Unfortunately, many customers look at security as a onetime process if they do at all.  It’s important that you provide them with information that will help them, and you, keep their data secure, and that you set realistic expectations about the security your product delivers.

To address liability issues, you should talk with an insurance broker.  It is inevitable that someone will threaten to sue you.  Rather than worry about the damage that that a lawsuit may cause, it is much easier, and efficient to procure a good insurance policy.  Remember, you need both general liability and errors and omissions policies.  When talking with your insurance broker, be honest.  Don’t try to artificially reduce your premiums by concealing a risky aspect of your business.  Quite honestly, there likely isn’t a risk that a broker hasn’t seen before, and insured against.  However, if you conceal it, it is highly likely that the insurance company will use that fact to deny coverage when you make a claim.

To figure out where unique liability may be, and how to defend against it, subscribe to some industry publications that include lawyers as contributors.  For example I write and blog for theWHIR.  Like many lawyers who write, I typically include basic advice to my readers on how they might avoid the liability I’ve identified in my post or article.  In these articles, you’ll learn about general trends in the law, and will be able to make wise decisions that will help you create a business that is both legally compliant and also less likely to attract litigation.


There are two issues I frequently blog about that are very important for online businesses to understand:  the Digital Millennium Copyright Act (DMCA) and the Communications Decency Act (CDA).  As most online companies know, the DMCA was enacted to proved online businesses with a “safe harbor” from copyright infringement suits against them based on the content they host.  However, most don’t learn more about the DMCA than that.  The problem is that the DMCA doesn’t protect you unless you comply STRICTLY with its provisions. That means you need to register with the Library of Congress, list your designated agent on your website, and develop and administer a policy that complies with the DMCA.  Failure to do any of these things takes your out of the safe harbor provisions.

The CDA is different.  The CDA provides a “safe harbor” from allegations that by hosting defamatory or libelous content, you are also responsible for that content.  Unlike the DMCA, there are no strict statutory procedures for you to follow.  However, the CDA does not provide blanket safe harbor.  In order for the CDA to apply at all times, you really can’t have any control over the content.  So, in essence, for the CDA to apply, in black and white, a business would operate like a telephone company.  However, since no business is exactly like the telephone company, you need to look into the law to determine exactly where your company would fall in the CDA’s definitions.

Taking these small steps will go a long way to helping your business become more compliant and legally efficient.  It is also important to know that while lawyers can be expensive, they don’t have to be.  If you spend a little bit of time reading about the law, and identifying issues that might cause legal issues for your business, you can efficiently use a lawyer’s time.  In addition, many lawyers offer creative fee arrangements that might make their services more affordable.  However, the most important thing is to get started.  Just as you don’t wait for a server to go down to figure out your backup procedures, neither should you say “I haven’t been sued yet” as a reason for not taking legal issues into consideration I your business.