Online sales is, at this point, still a fairly informal venture. Most online merchants get by just fine without special legal expertise or representation. There are, however, a few legal issues online store owners would benefit from addresssing head on. They involve establishing and running a small business, contending with FDA regulations, and properly handling intellectual property (both your own and that of other businesses).
Starting a Small Business
Thriving online stores are more than simple side hobbies- they're honest-to-goodness small business. With this being the case, you may want to think through establishing a business structure and complying with relevant business laws and regulations. The Small Business Administration offers excellent resources that will help you make more informed decisions.
We recommend starting with the following resources, which are most relevant to your pursuits as an online merchant:
- Choosing Your Business Structure
- Choosing and Registering a Business Name & Registering with State Agencies
- Obtaining Business Licenses & Permits
- Filing & Paying Taxes
- Online Business Law
- Advertising Law
- Employment & Labor Law (for at eventual point at which you scale up your business)
- Understanding Fair Practice
Contending with FDA Regulations as an Online Merchant
Should you sell cosmetics, it is important that you thoroughly review the section of the Food and Drug Administration's website dedicated to cosmetic products, specifically the section for manufacturers, packagers, and distributors. It offers helpful overviews of laws addressing the products you sell, authoritative sources on specific rules and regulations, reference points for common issues you may encounter, guidance documents, and even references to relevant trade associations and publications.
If you sell food products, be sure to review the FDA's online materials addressing the food industry. The FDA's guide to starting a food business will be particularly helpful in helping you determine whether your business will be subject to regulation, how you might register a facility, how you will need to keep records and properly label products, and how to adequately address a litany of other requirements, rules, and regulations.
Ideally, you will become well-versed in important rules and regulations well before opening your online store. If your store is already up and running, make this research a top priority.
Protecting Your IP as an Online Merchant
Copyright, trademarks, and intellectual property is less of an issue for online merchants than you might imagine. Those with whom we have interviewed have shared that, in the few instances in which their products or designs have been copied, polite notes to intellectual property infringers have been effective in getting them to cease and desist.
Should you discover that an infringing individual does not respond to polite requests, you may need to take additional action. For detailed guidance, review our guides to protecting and defending your intellectual property from theft and sending DMCA complaints to copyright infringers. The gist of what you will need to do entails:
- Sending a DMCA complaint to the copyright infringer
- Sending DMCA complaints to the infringer's website host, advertisers, and/or search engines
- Registering your work with the United States Copyright Office (if you decide you want to litigate)
- Taking the infringer to court
Typically, a DMCA complaint will be enough to compel an infringing individual to take copied content or products down. The steps outlined above address increasingly-severe scenarios.
In most cases, it will probably not be worth it to invest time and resources in pursuing copyright infringes at all. The important thing is that you move first and provide a superior customer experience. Should you chase after every single person who copies your products or designs, you will ultimately waste a lot of time and money and pull resources away from what matters most: creating great products and giving your customers a first rate experience.
Avoiding Others' IP as an Online Merchant
Did you know that selling a cake depicting a copyrighted character (e.g. Mickey Mouse) could land you with a fine as high as $100,000? Did you know that there have even been instances in which agents, posing as parents, have requested copyright-infringing cakes from bakeries in an attempt to catch them in the act and take legal action?
The moral of this stark reality is that you, as an online merchant, must be extremely careful about other companies' intellectual property. It is one thing to employ a patented process without realizing that it is patented; it is an entirely different thing to include a depiction of a well-known, obviously-copyrighted character in one of your products. While it would be impractical for a major organization to go after every instance of infringement, pushing boundaries is not worth the risk.
The same goes for trademark. Some business owners assume that so long as they don't use a company or product's exact name, they can sail through professional life, free of legal quagmires. Not so. Trademark violation takes place when a reasonable consumer might confuse one product or business name or mark with another. So if you sell form-controlling undergarments and call your company "Spanks," you may very well be sued by Spanx for trademark infringement (in reality, Spanx has taken legal action over its trademark before).
Though it would be wise to avoid others' intellectual property for legal reasons, we also consider originality to be a sign of good form. It is far more honorable to contribute unique value to the world than to attempt to make a buck by capitalizing on others' successes and ideas. If you are going to go through the trouble of launching and maintaining an online store, make a point of selling products that demonstrate your unique abilities and talents (whether they involve good curation abilities or amazing design skills). Stand behind your work. Be proud of it.
This is not to say that you should never utilize others' work. Should you need to incorporate more engaging images into your online materials, but not have a large collection of relevant personal photos or a stock image budget, you can use others' images while still respecting their intellectual property rights by drawing from the internet's vast collections of Public Domain and Creative Commons images. Just be sure to attribute Creative Commons images properly- and consider sharing some of your own work under a Creative Commons license to give back!
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