Corrections or additions?

This article by Bart Jackson was prepared for the February 28,

2001 edition of U.S. 1 Newspaper. All rights reserved.

Law Comes to Cyberspace

Back in the days when no law lay west of the Pecos,

a fella could at least strap on his shootin’ iron and run rustlers

out of town. But on the new cyberfrontier, where legal precedents

are scarce as circuit judges, the rustlers simply appear and vanish

like desert oases. And more often than not, a man just can’t find

a black hat to go after.

But law hunts down rustlers everywhere, and Computer-land falls more

and more to protective legal fencings. Exactly what these latest


and Internet laws are, whom they help and whom they hem in, and how

business users need respond will all be unraveled at a day-long New

Jersey Institute for Continuing Legal Education (ICLE) seminar on

Friday, March 2, at 9 a.m. at the New Jersey Law Center in New


An eight-person panel of attorneys speaks on "E-commerce and


Law," followed by individual

topics, including patents, intellectual property rights, privacy,

registering a domain, disclaimers, and jurisdictional disputes. Cost:

$209. Call 732-214-8500.

In addition, says panel moderator Michael Schaff, an attorney

with Wilentz, Goldman & Spitzer, "the program will overlap legal

aspects with how-to business information — how to set up a


framing, advertising, stock issues, and other strategic problems."

The recent legal battles over fair use reproduction of materials have

shown how old copyright laws fumble when confronted with new


Since 1999 Napster has rolled blissfully along, providing the


through which 58 million users have shared hundreds of millions of

music downloads without paying one cent, while public libraries,

schools, and colleges have been hauled over legal coals for digitizing

too many classroom handouts. Laws that allowed document sharing if

there was "no commercial benefit" or which created "no

substantial commercial impact" seemed inapplicable. Now Napster

has been brought to heel by a panel of three Federal judges in San

Francisco who ruled in mid-February that the site

should be prohibited from enabling the swapping of copyrighted music.

"But there exists no enforceable law," says patent attorney

and panelist Raymond Moser, "that effectively inhibits some

enterprising sharer from engineering Napster II and again setting

college computer systems all ajam with the hum of ripoff


Yet if the Internet has made copyright’s legal pasture a bit soggy,

the field of intellectual property rights has become an absolute


Since his firm was founded in 1994, Moser and the 35 lawyers at


Thomason, Moser & Patterson have specialized almost exclusively in

what he calls "intellectual property mining." Moser’s mining

is simply a method of analyzing where E-business’ legal


lie and what protections are prudent. And, while he is the first to

admit that not every little basement mail order house demands the

expensive contracts of total legal coverage, he cautions that most

E-firms, now typically rushing into business with never a thought

of any protection, need to shore up basic ownership rights.

This is the case for the New Jersey Intellectual Property Law


(NJIPLA). Allen Bloom, past president of that association and

a partner with the Lenox Drive law firm of Dechert Price & Rhoads,

says a

law firm is using a domain name that is very similar to

"This is a case," he says, "where the association has

been around for a long time and the law firm thought the name would

bring it business." The association had registered its domain

name, but has now gone further. "We also applied for trademark

protection," says Bloom. "They had been using the name as

a trademark, but had not bothered to trademark it. But with all these

cybersquatters, it’s the best thing to do."

Barry Werbin, head of the intellectual property


new media practice Herrick Feinstein, a law firm with offices in


Center, proposes an additional defensive tactic. Buy up `’

domain names for your company, he says, before someone beats you to

it. These sites take a company name, say `G.M.,’ or a product name,

maybe `Buick,’ and add `’ in front of it, creating

or A client of Werbin’s, a major title company, had

a problem. Its name, paired with, led to a website

where it was being vilified. "The case law to date," Werbin

says, "is if someone buys to vent spleen — `It’s

a terrible company. I got terrible service.’ — most of the time,

it’s protected under the First Amendment right to free speech."

In the case of the title company, the holder of the site

went beyond expressing an opinion, an activity protected by the First

Amendment, and posted false statements. That moved it into the area

of illegal activity, and gave the title company legal standing to

shut it down. Absent that transgression, the trouble maker might well

have been able to maintain its site. Werbin says he now

advises all of his corporate clients to buy up all the

domain names that match their name and their products’ names.

FAO Schwarz, the famous toy store, is a client of Werbin’s, and, on

his advice, bought up all the names not only for the correct

spelling of its name, but for any close matches. "We just


four names for them," Werbin says. "Someone had changed one

letter," thereby creating similar names. As ‘Net surfers often

make typos, these names would bring a fair number of visitors to bogus

sites. Werbin was successful in getting the names away from the


by proving bad faith.

Anyone who holds the name of an easily-recognized company, but is

not able to show a legitimate business purpose for doing so, is


to be operating in bad faith, Werbin says. Other indications of bad

faith include asking the company for an amount of money for the name

that is more than was paid to register it. "That’s extortion,"

Werbin says. Still, he often advises clients to pay to get control

of a name. "If arbitration costs $5,000, and they want $2,500,

it’s a no brainer. It hurts to write the check, but it’s a business

decision." Besides saving legal fees, paying off the holder of

a domain name has the advantage of getting it back right away.

Cybersquatting is illegal under laws passed by Congress and


of ICANN, the international organization that regulates Internet


names, Werbin says. Often, the best way to win back control of a


name is through arbitration, he says. "It’s quick. It’s easy.

And it’s cheap." The decision of an arbitrator can get a domain

name back, but it doesn’t provide monetary compensation for the


party. Companies seeking that relief need to go through the courts.

Protecting a name on the Internet is far from a company’s only worry.

In a recent case, Werbin defended a New Jersey-based horse boarding

farm whose name was being sullied in the chat rooms of the online

version of a horse breeding publication. "Someone starting posting

terribly libelous comments," he says.

Werbin tried to shut down

the Internet Service Provider, which, in this case, was the publisher

itself. It didn’t work, he says, because of a safe harbor exemption

that frees ISPs from responsibility for comments individuals post

in chat rooms they host. Going after the people who post the comments

is not easy either. "They often use aliases," he says. Werbin

finally was successful in getting the publication to remove the


material from its chat rooms, but this case illustrates how easily

a reputation can be harmed on the Internet and how important ongoing

Internet surveillance is for companies large and small.

Another case, this one involving theft of a left wing publisher’s

material by a website espousing a socialist philosophy, illustrates

the level of vigilance companies need exercise over the Internet.

The publisher found large amounts of his material posted verbatim

on the socialist site. "They said they didn’t believe in property

rights, and thought the left wing publisher should agree," Werbin

says of the transgressor’s defense. The purity of the claim was


a bit by the fact that they were caught selling the publisher’s


on a CD. The socialists finally removed the pirated material, but

Werbin says, it could pop up again at any time on a `mirror’ site

anywhere in the world. The left wing publisher is now paying to have

a Herrick Feinstein paralegal scan the Internet once a month looking

for misuse of its material. Werbin says large companies with


legal departments can do this themselves, and that every company

should consider

instituting such a program of ‘Net watching.

High profile individuals would do well to keep an eye on the Internet

as well. In a recent case, a judge found the name of singer Celene

Dion had been illegally appropriated as the name of a website,, by one Jeff Burgar, who claimed he was using

the name for a fan club, and not for commercial gain. An arbitrator

for the U.N. World Intellectual Property Organization ruled that the

name’s rights belonged with Dion. Burgar, the arbitrator found, had

a history of registering the names of celebrities. Werbin says the

mere amassing of hundreds of domain names can constitute bad faith.

Courts are ruling that names aren’t the only part of a website that

deserve protection. In Chicago, the Recruiter’s Bible, a directory

of free Internet recruiting sites, has just won a settlement in a

copyright infringement case brought against a recruiting firm called


in Personnel. The recruiting firm had appropriated the Recruiter’s

Bible’s directory, posting it on its own website. An attorney for

the company says this is a violation of copyright law because the

directory is a hand-selected, filtered list of websites, rather than

a simple compilation of every recruiting site in existence. The


in this case not only agreed to remove the directory, but also to

give a cash award to the directory’s owner, and a donation to a


union or other group that performs pro bono work for writers whose

copyrights have been infringed.

But while Dion, the Recruiter’s Bible, FAO Schwarz, and Werbin’s left

wing publisher were successful in halting misuse of name and content

on the Internet, doing so is not automatic — or easy. Ken


president of the East Windsor law firm Watov & Kipnes says that the


of protecting rights on the Internet is "completely a gray


There is no telling where courts will rule on any number of issues,

he says, and the process of getting a decision can take a long time.

Legal considerations go beyond copyright, Watov says, and into matters

of trademark and patent.

One of Watov’s clients, a company that uses the Internet in product

testing, was accused of appropriating a competitor’s website format.

"Even how they lay out pages for test results can be


he says. His client ended up changing its web page format as a result

of the charge. Watov says he now advises clients to run copyright,

trademark, and patent searches before they put up a website.

But even those searches are not as simple as they might be because

ownership and control of a website, and all of its elements, is not

always obvious. Website developer contracts are notoriously full of

loopholes. After companies have hired a young techno-wizard to whip

up a website, they are frequently amazed to learn how little of it

is really theirs. Even the firm’s trademark, if not separated, could

become part of the young wizard’s resalable design. Most likely, the

company’s employees worked with the contracted developer in aligning

the design. Yet the company may not hold automatically exclusive or

even partial right to the own website. Those spiffy graphics to which

you deliberately nailed down the rights from your designer, may very

likely not have been hers to sell. She may have sub-contracted or

"sharewared" them.

For this and other reasons, Richard Ravin, former chair of the

New Jersey Bar’s Internet Law Committee (co-sponsor of this


boldly goes so far as to say, "`Website owner’ is not really a

definitive legal term." Its intellectual properties, he says,

are too intangible and too many people are involved in its evolving


Here are some of the complex legal issues surrounding rights

to websites:

General intellectual property protection. A copyright

protects the expression of your business — the verbiage on your

site, and its graphics. Trademarks protect its name, source, and good

will. A patent will guard your method of business if it is unique.

You will at least want the first. However, before you go lavishing

costly time and funds on copyright, trademark and patents, remember,

these registrations are merely ammunition, not protections. You must

hunt down the infringer yourself, and haul him before the judge, and

document his transgressions.

Global protection. It takes one year for a patent to take

effect in the U.S. In the meantime, your business may have evolved

totally, perhaps making the patent meaningless. But in many foreign

nations, patents take effect immediately. You may want that


Utility patent. Once your website’s content is locked

up, you may want to dig beneath its surface and build some legal


around any original business functions transacted over the Internet.

Big boys like Priceline with its "name your own price" program

and with its single-click-purchase program, felt it worth

the investment. "However, the rapidity and piggy-backing of


technology," says Ravin, "frequently makes such programs


For example, has been unable to make stick an injunction

against Barnes and Noble when that company swiftly adopted the


Host agreement. Frequently your contracted website


or some other independent will be handling your site. "These sites

are not static properties," says Ravin. "They’re dynamic,

evolving. Most sites begin with an over-the-counter software program

which is customized, then re-customized." Again, the E-commerce

owner must, Ravin says "maintain, at the very least, a


right to all his website’s technology and functions."

Invention patents. Ravin insists that too many firms and

developers actually invent business processes from the software up

and leave them unprotected. Not only should your original software

be patented, but the credit and use-exclusivity contract should be


Moser ticks off an additional long list of E-commerce pitfalls, such

as liability when the system fails, fulfillment failure


tax collection problems — both domestic and foreign. The legal

mine field of cyberspace goes on. Says Moser: "The truth is,

E-trade, which everyone views as wild and free, demands more,

not fewer legal considerations than selling goods over the


But the biggest legal bombshell in Computer-land, we’ve saved for


the question of Domain. "Just recently," says Ravin, "the

Virginia Supreme Court has ruled that domain names are not personal

property, rather they are merely `a right to service contract.’"

This means that if you launch an Internet bookstore entitled `Books

R Us,’ you can use and control that name, but it cannot be added as

an asset of your firm. So when you go to the bank, they won’t value

that name or all its good will as collateral.

So while E-commerce remains the easiest business to go into, it is

full of legal ambushes. If you want to bet your money on an Internet

startup, says Moser, go with the company that knows more than software

and more than its own product — "go with the firm that

knows the laws of its own business."

— Bart Jackson

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