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Starting a new internet business?

17 September 2009

There are many reasons for starting an internet business - low overheads, expansion plans, a new business concept or strategy.

Whatever it is, there are practical and legal steps to take before receiving that thrilling first ‘hit’.

Corporate aspects

Consider first the way you will run your internet business. You may have an existing company to run it through, but if not, think about running it as a sole trader, a partnership, or via a limited company.

Influencing factors concern the size and nature of the business and the tax position. Whatever you choose will have implications on other aspects of the process outlined below – and on the information you are required by law to display on your website.

Domain name

The first thing to decide on is a domain name. Comprising only the letters A to Z and any number, it will form the basis of the website and related email addresses. This is followed by a domain name extension – for example .com and .co.uk.

Hundreds of others are available and open to anyone.  .com is still viewed as most valuable, but UK companies commonly choose .co.uk as their primary address.

Now check if the domain name is available or already registered by searching the online Whois database. If already taken, it can be bought, often via a specialist broker.

Domain names have no direct legal relationship with trade marks. Even though you might own a trade mark, it will not give automatic entitlement to use it in a similar domain name. 

Beware of registering a domain name incorporating someone else’s trade mark. This may be considered an infringement of that trade mark. Even using a domain name similar to someone else’s trade mark, company name or other branding may expose you to claims of ‘passing off’. Businesses often register the same domain name with different extensions to stop others using them.

Domain names are not owned forever, but by paying renewal fees you can use them however you wish.

Website development

With a business plan and a domain name, you can begin establishing your internet presence.

Unless you have the skills yourself, you need to employ a web developer, in which case you should ensure you have a formal, carefully worded contract in place.

The ownership of the intellectual property (IP) in the finished website is protected by copyright, and if you have used a web developer, you can only own the IP in the website by entering into a formal assignment of the copyright in the website and its content.

This can be included in the website development contract. It might be that the web developer has used some of its own copyrighted material, or that of a third party, so you will need a licence to use it.

You should also get a warranty or indemnity from the web developer to protect you if the web developer has not obtained rights to use third party material to build your site.

Website hosting

Now you need to connect it to the internet, and someone to host it on a server.

Usually only large companies do this in-house; new internet businesses find third-party service providers.

A comprehensive written contract is the best way to proceed, and should ensure the hosting service is required to maintain a certain level of ‘uptime’, with sufficient bandwidth to handle the level of anticipated use. These points are usually dealt with in a service level agreement forming part of the hosting agreement.

Website terms of use and privacy policy

Before going live, ensure that your site has appropriate terms of use and a well-drafted privacy policy, and make sure these bind every user – done by having them accessible via a prominent homepage link.

These documents should set out how site users are permitted to use its content, state that users must not post illegal or harmful content, and make clear that all intellectual property on the site is yours.

If your site collects users’ personal data, you should explain how you intend to use it, and whether you will pass it to third parties. If it does, you will need to register this with the Information Commissioner.

Website terms and conditions of sale/supply

If you intend selling or supplying via your website you must ensure it includes terms and conditions covering this.

While these will be similar to those you might use for an ‘offline’ sale, there are particular ‘online’ issues that have to be covered by law, including just how the contract with a customer is to be formed, and making sure the terms and conditions explain consumers’ rights to cancel orders, and give delivery, pricing, and payment details.

The key to use of your terms and conditions is making sure they are brought to a customer’s attention before a contract is made, ensuring they are effectively incorporated into the contract. There are various ways of doing this, ranging from having customers scroll through terms and conditions, using a hyperlink with them on a separate page, or including a tick box so customers can accept your terms and conditions.

How can we help?

Shoosmiths is ideally placed to advise an internet business from day one. Experts across the firm steer clients through the difficulties arising from such ventures.

If you require advice on how to set up this part of your business, our Corporate Team has experience advising start-ups and more established organisations on the best structures and strategies. 

Our Trade Mark team advises on how to protect, exploit and enforce your intellectual property rights, and how to develop strategies to maximise brand value.

Our Commercial Team can advise on all other legal aspects of your internet business. It comprises experienced specialist IT lawyers who understand the pressures faced by businesses in this sector, including the importance of striking a balance between meeting budget and retaining flexibility.

We advise on all types of IT contracts, including for website design and development, and can produce all the documents required in order to make a website compliant, tailored to your business needs and at a fixed price agreed with you at the outset.

© Shoosmiths. This page is for general information: it is not legal advice. Please read our full terms and conditions for details of the disclaimers and exclusions which apply.

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Get in touch

Ryan O'Sullivan

Solicitor
T: 03700 86 5153
I: +44 (0)115 906 5153
E: ryan.o'sullivan@shoosmiths.co.uk