Over the past three decades, companies have utilized e-commerce websites to access markets beyond the reach of their traditional brick-and-mortar operations, offering customers the flexibility to shop at their convenience. While launching an e-commerce website presents exciting opportunities and potential new revenue streams, it also comes with a host of legal issues that need to be addressed. Ensuring compliance with data protection regulations, intellectual property rights, and consumer protection laws is very important. As transactions often cross borders, being attuned to international regulations and local nuances becomes crucial. Failure to properly handle these legal concerns can result in significant liabilities and tarnish a brand’s reputation.  This article examines four key legal concerns that businesses should address when launching or relaunching their e-commerce websites.

Data Privacy 

Data privacy consistently ranks among the top legal concerns in e-commerce discussions.  This not surprising, given the escalating focus on these issues by state, federal, and international authorities.  Many e-commerce merchants probably know of the more prevalent data protection laws in existence, such as the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA); however, the landscape is rapidly evolving.   In 2023, five US states will rollout data privacy laws that protect the privacy rights of its citizens, and another seven will have legislation taking effect over the next 3 years (also, many other states have data privacy bills working through their state legislatures).  Internationally, in addition to the GDPR, countries like Canada, Australia, South Africa, and Brazil all have data protection laws that can impact e-commerce activity.  Importantly, non-compliance with many of these laws can lead to hefty financial penalties, which can add up quickly when assessed on a per individual violation basis.

So, what are some steps that a company can take to ensure that its e-commerce site remains compliant with various data privacy laws?

• Know the Market(s) – E-commerce platforms expand a company’s reach beyond traditional physical store limits, potentially exposing them to the data privacy laws of various regions. To mitigate risks, a company needs to be aware of the jurisdictions it is marketing to and their respective data privacy regulations. If the company is looking to not operate in certain states and countries to avoid their data privacy requirements, many platforms offer tools that can prevent customers from those areas from making purchases on the company’s site.
• Only Collect What is Needed – Tools like Google Analytics provide valuable insights into customer behavior. However, a good rule of thumb to help minimize a company’s exposure under data privacy laws is to collect only what it needs for its business operations. Minimizing data collection not only simplifies compliance but also reduces the risk of data mishandling.  The less data collected, the less data to track and potentially to mishandle.
• Provide Necessary Notifications and Links – A company should ensure that its e-commerce site displays all legally required notifications and links. This includes cookie banners and links like “Do Not Sell or Share My Personal Information”.  For instance, the “Do Not Sell or Share My Personal Information” link is required on a site if a company is collecting information from California residents.  
• Map Data – Understanding the journey of the data that a company collects, from its origin to its final storage location, is important. Further, companies also need to know who has access to and control over that data.  Creating a data flow map (and keeping it up to date) can be instrumental in ensuring compliance, as it provides clarity on data movement and on control within the system.  If a customer ever makes a request to limit use of its information (or to delete it entirely), having a good grasp on where that data is and who can assist with the request is essential.

Accessibility

When launching an e-commerce site, accessibility should never be an afterthought. This is not just about inclusivity; it is about mitigating legal risks and broadening a company’s customer base. Lawsuits under the Americans with Disabilities Act (ADA) or California’s Unruh Civil Rights Act can be costly, both in terms of financial penalties and brand reputation. These laws have become good revenue sources for the plaintiff’s bar.

To steer clear of these pitfalls, consider aligning digital assets with the Web Content Accessibility Guidelines (WCAG). These guidelines provide a comprehensive framework for making digital content accessible. Additional steps to consider include:

• Consult Experts – Engage accessibility consultants early on to provide insights that in-house teams might overlook.
• User Testing – Test the accessibility features with actual users who have disabilities. Their feedback can be invaluable.
• Regular Audits – Conduct ongoing accessibility audits to identify issues before they escalate.
• Legal Review – Involve legal counsel to ensure the e-commerce site complies with the latest federal and state accessibility regulations.

By proactively incorporating accessibility into e-commerce website plans, a company not only reduces legal risks but also unlocks access to approximately 15% of the world’s population who have some form of disability. This expands market reach and strengthens brand reputation for inclusivity.

Intellectual Property

With regard to intellectual property, there are two sides of the coin when it comes to an e-commerce website.  On one side, a company wants to make sure that its e-commerce site does not infringe upon the intellectual property rights of another party.  On the other side, a company wants to make sure that the work and content that it puts into its site is protected against another party ripping it off.  We will look at each of these sides respectively.

Secure Rights to Use Content and Features.

Content Rights.  It is essential to ensure that a company has the necessary rights to use images and content displayed on its e-commerce site. There are many e-commerce site operators who have found themselves in trouble because they went out on the internet, found an image that suited their needs, and dropped it into their e-commerce site without bothering to get permission from the image owner.  Numerous firms specialize in identifying such violations and demanding payments.   We recommend that companies create, use, and document original content and images for their e-commerce websites.  If a company is ever challenged on its use of an image or content, it is in a better position to show that they are original to the company.

Font Licensing.  Font usage is another area where an e-commerce site operator can find themselves in trouble. Simply put, a font is the computer program that tells the printer or computer display how a letter or character is supposed to be shown. Many fonts come with licensing terms that dictate how they can be used commercially.  By either not securing the license right to the font or by not following applicable license parameters, e-commerce site operators open themselves up to potential prosecution for copyright violations, which can result in substantial penalties.  The bottom line is that before a company uses a font on its e-commerce site, it should make sure that it has the right to use that font and that it is being used in accordance with any licensing requirements.

Site Functionality and Patent Infringement.  Finally, the functionality of an e-commerce site could put the operator at risk for a claim of intellectual property infringement.  For instance, we have had clients who were targeted by patent owners claiming infringement based on the search functionality of the clients’ websites (e.g., drop-down menu nesting). While we rejected the merits of any such claim, it still was a hassle to deal with the matters. Fortunately, the clients had certain indemnification protections from the site developers that helped mitigate the issue for the clients.

Make Sure others Do Not Infringe

A company’s e-commerce site ideally will be a good revenue source, so it is important that the company take steps to protect it.  The more successful a website is, the more likely that others may try to leverage features of it for their own benefit (e.g., pulling images from the site and putting them on theirs).  Below are some of the key steps a company will want to take to help protect the intellectual property on its site.

• Register any key names, brands, slogans, and other marks with the United States Patent and Trademark Office (USPTO).  A company will put itself in a better position to challenge those who use them without permission.
• Register copyrights with the US Copyright Office.  
• Similar to registering trademarks, a company will be in a stronger position to go after those who might lift an image or content from its site.
• Pursue design or utility patents for eligible products or processes.  
• Implement tools to help scan the internet to help detect unauthorized use of intellectual property.  There are third-party tools and services in the market that can help with this.Enforce trademarks, copyrights, and patents, when possible infringers are discovered.  Failing to enforce rights could potentially result in those rights being diluted.
• Include clear “Terms of Use” and “Intellectual Property Policies” on the e-commerce site. These not only guide visitors on acceptable use but also strengthen a company’s legal stance in case of disputes or infringement.

 Contracts and Clearly Defined Roles

Launching and operating a successful e-commerce site often requires a collaborative effort involving multiple external parties.  A company might collaborate with a platform provider for the website’s technical framework, an integrator for specialized software implementations, a platform management team, and perhaps another organization specializing in e-commerce security. With multiple contributors, it becomes a complex task of coordination and, unfortunately, a situation that is ripe for finger-pointing when something goes wrong. So, how does a company keep all parties accountable?

• Clear Scope and Obligations in Contracts:  Clear contractual provisions are critical. These contracts should solidly define the scope of work, performance metrics, and timelines for each outside party involved in the project. This not only sets clear expectations but also provides a basis for legal recourse should things go sideways. It often is helpful to include a “responsibility matrix” in contracts that clearly outlines who is responsible for what, so when issues do arise, a company knows exactly who to go after.
• Regular Get-Togethers and Reporting: Regular meetings and progress reports are crucial for keeping everyone on track and accountable. These sessions allow for real-time problem-solving and task adjustments, reducing blame-shifting. To make attendance a priority, consider making it a contractual requirement for all involved parties to participate and provide updates.
• Strong Service Level Agreements (SLAs): To protect against outages and minimize downtime for an e-commerce site, it is important to establish robust SLAs with clear, strong remedies in the event a service provider fails to meet its obligations. Such agreements detail the expected service standards and uptime assurances, providing a safety net for e-commerce operations.

By integrating these elements – comprehensive contracts, routine check-ins, and robust SLAs – a company better fosters a culture of responsibility among its vendors and service providers. This strategic approach keeps all collaborators aligned, confirms they meet their commitments, and promptly pinpoints responsible entities if discrepancies occur.

Conclusion and Key Takeaways

The above is not an exhaustive list of the legal concerns, but it does highlight some key items to button-down when launching an e-commerce website.  Failing to prepare for these and to put in appropriate protections prior to launching an e-commerce site could result in costly legal issues later on, in addition to the adverse impact that those issues could have on the reputation of a company and its e-commerce practices.  Always consider getting expert legal advice to ensure your e-commerce platform is fully compliant and your business remains on solid ground.