|Legal responsibility for website content|
Is a disclaimer sufficient to protect individuals who publish online?
Somebody recently told me that he thinks of founding a company and transferring the property of his website to this company to get rid of some of the legal responsibility; I never really trusted disclaimers and was wondering if anyone has more experience with legal aspects of online publishing.
If you freelance for a magazine, all responsibility is with the firm that owns the mag; if you publish as a private individual on a website - aren't you responsible? And in case you get sued, what is taken into account: the country where the servers are, where the owner lives, the nationality of the owner?
I feel that this is a topic generally neglected, or maybe I just failed to find the right forums, but it seems to affect most of us so I thought discussing the issue might be useful.
Re <If you freelance for a magazine, all responsibility is with the firm that owns the mag>
If only that were true... It isn't. Magazine and book publishers TRY to offload some of the risk onto writers.
Magazine writers' article contracts contain indemnity clauses, to indemnify the mag against idiot writers.
Wise writers strike out the idemnity, because you don't know what oddball hacking of your words will be done by editors and sub-editors.
|I feel that this is a topic generally neglected |
That's because the only people qualified to give legal advice are lawyers.
Anything else is likely just opinion and speculation, however well-intentioned.
Actually, very true - same applies to photography, if you get sued as a photographer and your are a freelancer, it's all your responsibility.
As for the lawyer-advice: I agree. Does anyone know how many professional webmasters and webpublishers seek legal advice before they publish? How burning is this topic actually?
I know that the webpublishing business is still rather young, but rapidly consolidating and maturing - the legal stuff seems to be a bit forgotten, but this, IMHO, is only a matter of time until it chatches up (if it hasn't already).
|If you freelance for a magazine, all responsibility is with the firm that owns the mag |
IANAL but I'm led to believe that the deciding factor is whether the content has been reviewed.
If the content is posted to your site and an operator of your site has reviewed or moderated it, then the responsibility lies with you.
|That's because the only people qualified to give legal advice are lawyers. |
Without offense to lawyers, in my opinion that's not true. The only people qualified to give legal advice are members of the judiciary. Advice from a lawyer is no more legally binding than advice from a dustman, however well-intentioned.
Of course what a lawyer tells you isn't legally binding but to equate it with the advice of dustman, that's absurd. The key difference is that a lawyer has spent a minimum of a few years actually studying the law and has a professional responsibility to provide sound avice.
With that said, I personally hate when everyone refuses to answer and says "consult a lawyer". Obviously to get an answer with some authority, you need a lawyer. However, it is useful for people here to have a sense of what the legal issues are.
Most people here are people just starting out who can't afford to lawyer up every time they have a legal question. They just need a quick swag to determine their level of tolerance for legal risk. I, for example, don't consult a lawyer each time I throw something away in a public trash receptacle, but depending on what I throw away where I live, there might be consequences (for example, where I live items deemed personal could be considered personal rather than public trash and I could be fined for misusing a public resource).
With that said, I really don't know how to answer the original poster's question with precision.
If you dig around here you will find at least 3 or 4 threads where I analogize bus accident liability to webmaster liability.
If a bus driver runs a stop sign and hits a client I will sue not only the "bus company" that owns/"operates" the bus but I will also sue the bus driver. Why? Because the driver did it: he caused the harm.
If you review the submitted article (or fail to review) and you upload the article or otherwise participate in the actions associated with publishing the copyrighted material you may expose yourself to accountability. There is no fast and easy answer that covers liability in all situations, but I would most concerned about wholesale copying and republishing of an original work without permission. I would tend to take a "follow the money" approach to accountability.
A corporation acts through its employees, which is why the corporation is "vicariously liable" however the existance of a corporation does not excuse any individual from his/her personal responsibility.
A corporation may shield owners of the corporate entity - the shareholders - from direct accountability for the negligent acts of employees. However, if the shareholders are also active in the day to day affairs of the corporation those shareholders may, once again, but subject to personal legal accountability.
If you form a corporation but you are actively involved in the business and "you do the wrong thing" (infringe copyrights, ship out a broken product knowing it was in dangerous shape, libel someone, slander someone, defraud someone, etc.) you will also very likely get sued.
Corporations that are undercapitalized (empty shells, mere corporate form, without assets) are subject to attack and, in some cases, courts will disregard the corporate form - allowing for the financial responsibility to attach to the owner/officers/executives. Search "piercing the corporate veil".
THE answer for liability issues - besides doing no wrong - is insurance that is appropriate to the business risks and potential scale of damages. Talk to an insurance professional experienced with "commercial lines".
Liability for damages varies from State to State and country. The law of one State does not determine the law of another, so you need to talk to lawyers versed in local law. The WWW expands the idea of local so be prepared to address the scope of your web business.
The smartest answer is insurance. Next, in order, is to do no wrong. On that score you may also need to talk to a lawyer to ascertain what the rules of fair play are that attach to your business.
[edited by: Webwork at 2:10 pm (utc) on Feb. 14, 2006]
>>transferring the property of his website to this company to get rid of some of the legal responsibility;
This is a case where seeking some real legal and accounting advice would be an excellent idea. Determining the type of company to form, the tax implications of transferring the property, how site income will be handled, etc., require someone who knows what he/she is doing. Botching this could result in little or no additional protection and a lot more accounting, plus potential tax ramifications.
A corporation DOES provide some insulation for the individual. In most cases, a financial judgment against the corporation can't be forced onto its shareholder(s). If you get into areas like illegal acts, slander, etc., though, it isn't clear that the corporation will provide a perfect shield.
The site owner needs to think about exactly what kind of legal problems he is trying to avoid, and then consult an attorney in his jurisdiction to see if incorporating would provide the protection he wants, and what kind of corporation would be appropriate. (In the US, there are C, S, and LLC corporations, for example, all of which have very different tax implications).
I know that small businesses often can't afford to run to a lawyer every time they have a legal question, but this is one of those important ones that needs professional help. (Cost saving idea: one small-business attorney I use is also a CPA - he answers questions like this without having to say, "...but you really need to check with your accountant, too". I don't know how common this dual role is, but it's handy. Small business lawyers and CPAs, though, generally know enough about forming a tiny business to give advice without shuffling you off to another professional.)
<added>I was writing at the same time as Webwork was posting his excellent advice. Listen to what Webwork says...</added>
what is the deal with linking to a site that might without your knowledge commit some offense or be accused of committing one. If I link to site A and some client of theirs encounters an issue such as late delivery or damaged good. Am I going to be legally liable?
If so, we might as well close down the internet and go home.
Great thread. I'm interested in the insurance aspect of all this. When I worked in the hardware and networking side of things we had errors and ommissions insurance. However, with the internet it seems more difficult to get this form of insurance. I have spoken to a few insurance companies and did not get many clear answers. One big company said it has this insurance for Internet, but it hadn't introduced it in my country yet.
The other aspect of this problem is in what to insure. As an Internet company you can have many different activities. You may run content sites, shopping sites, sell software or info-products, do ppc campaigns, email newsletters, affiliate marketing, control a lot of type-in domains, etc. How do you get insurance to cover all of this stuff?
Also, there is the jurisdictional issue. Will an insurance contract protect you if an action is taken against you in another country? Whenever you agree to a TOS you are agreeing to a certain jurisdiction. These are usually jurisdictions other than your own. Would an insurance contract protect you in such a case?
|transferring the property of his website to this company to get rid of some of the legal responsibility |
So now that property is an asset of the company, in addition to the legal issue, there's also the accounting issue as the transaction will have some tax implications. Whether the implications are immediate or delayed depends on exacly how the assets are transfered to the company- selling the property to the company for cash, trading assets for shares of stock, etc.
If the company gets sued, the company could be forced to sell the assets to pay for the judgement. Or if the company goes bankrupt, those assets would be sold to pay creditors as part of the bankruptsy settlement.
Thanks to everybody who gave advice. How are you independent webpublishers doing? Despite of being new here, I think one can divide members of WW into people who run websites in a non-pro, often non-commercial way and just seek advice; people who are SEOs and in the business without necessarily running own buisinesses; and people who run their own sites to live off them - I would be particularly interested in how the third group deals with legal responsibility.
I noticed that many pages claim to be run by a company, but do these really exist and if yes, in which form? And are there real legal and tax advantages? DOes that depend on the revenue of a site?
I looked into the issue of disclaimers when I started out, because the way the law is written pertaining to one aspect of my niche, a huge grey area is opened whenever someone asks certain questions about totally legal products. I discovered that it is a federal offense to sell even innocuous things when you have the reasonable suspicion that they will be used in a way that is illegal, and answering questions about illegal use would be proof that I had reason to suspect that these widgets would be used in a way that the law does not allow. Bad.
The way competitors handled this was to put up a disclaimer along the lines of "Widgets to be used for display purposes only." However, they would then go ahead and answer customer questions that showed that they knew that the widgets were going to be used for purposes other than display. Lots of these people ended up being arrested in all sorts of fed Internet "sting" operations. Their disclaimers did nothing to protect them.
For instance, there was a company that was selling perfectly legal, non-scheduled, non-listed chemicals. They had a disclaimer saying these were sold for research purposes only, but in fact the owner had a reasonable suspicion that people were buying them to get high, and he got sent to jail. His disclaimer didn't do jack for him. Would a corporation have shielded him? How? He broke the law.
I decided that a disclaimer is just hypocrisy in any case and also ended up shedding products that tended to attract people who wanted to use the product for something illegal and involve me in their stupidity. There are plenty of other ways to make money, after all, ways that don't put you in any legal grey zones.
If this guy is structuring his business specifically to avoid legal problems and is thinking a disclaimer is going to protect him, he is in for a real rude surprise. Yes, a corporation does offer financial protection but it's not going to help him if he's committing criminal acts. And it is way easier to commit a criminal act that one would imagine. Plus since it's the Internet, it's the feds he would be dealing with, not some State buffoons. Think endless money, endless time, and endless necessity to justify their existence by producing arrests.
|I would be particularly interested in how the third group deals with legal responsibility. |
There is a field of law called asset protection that specializes in these types of questions. The problem is that many of the lawyers who claim to be asset protection specialists are themselves scammers or part-time insurance salesmen. Many will set up expensive and complicated off shore trusts that have either not been tested by case law, or worse yet have been tested, and done nothing but get the trust owner literally thrown in jail. Or they will try to sell you expensive insurance policies that are inappropriate for your level of income just to collect the commissions.
This guy who owns the web site listed below on asset protection has a good site on the common scams and is co-author of what I think is the best and most pragmatic book on the subject. The book is called:
Asset Protection: Concepts and Strategies for Protecting Your Wealth
The site is:
The second best resource I have found is the Nolo Press site and their books on business structure, setting up corporations and LLCs and copyright law books.
Unfortunately in my experience this is one area there are few, if any, true experts on the subject, even among attorneys. So if you are an analytical perfectionist and really want to do a thorough job, this is one area where you have to spend a lot of time researching and reading books for yourself.
I make my writers sign a hold harmless asserting the originality of the content and indemnifying me against any claims.
|I make my writers sign a hold harmless asserting the originality of the content and indemnifying me against any claims. |
I'm sure this is a good idea, but as Webwork says:
|If a bus driver runs a stop sign and hits a client I will sue not only the "bus company" that owns/"operates" the bus but I will also sue the bus driver. Why? Because the driver did it: he caused the harm. |
If one of your writers did something truly awful, I'd imagine you'd get sued as well as the writer. How watertight would your indemnity be?
Perhaps you should ask an insurance company to cover you against this - if they believe your indemnification processs is watertight then the premium ought to be low... :-)
I should add that if you don't have complicated finances then for many people just getting a basic business insurance policy and having an LLC or corporation for your business is a good start.
In the U.S. it is good to have either a corporation or LLC to protect your personal assets if your business ever gets sued. LLCs are actually even safer than corporations in terms of personal asset protection, but depending on your income a corporation may have some tax additional tax benefits. Nolo press has a good book on helping decide the business structure that is best for you.
The idea behind asset protection is to segment and protect your assets using a variety of structures like LLCs, corporations, family limited partnerships and trusts so if one business gets sued and you get a judgement against it, then you don't want your creditors to be able to get at your other businesses or personal assets. Or, if you get sued personally, you want to try to shield your business assets and business income from any personal judgements.
For example, if you own a fireworks business and four web sites on Roman coins, you would form at least two different companies. Then if your high risk fireworks business gets sued and loses, the goal of asset protection is to keep both your personal assets and your roman coin business out of reach of any firework suit creditors.
The problem with insurance for web businesses is that most insurers don't have policies designed for people who own web sites, and even when they do insure them they often try to exclude the types of activities web owners are actually most likely to get sued for, like advertising injury.
So you have to take a hard look at the cost of the policy, what income you make from your business, the likelihood you would ever get sued, the likelihood your insurance would actually ever cover anything in the event you did get sued and make the best choice on how to manage that risk in a cost effective way.
This is all excellent advice, thank you very much! To clearify my friend's situation: his website will be on a sport and he won't even sell anything through it, but he worried about users that might get hurt and then try to sue - based mostly on horror-stories as the McD-and-hot-coffee thing. His site will be in the US, where I think the situation is even more sensitive.
Here in the UK, many "grey-zone" websites are hosted from the channel islands or via zombie-servers from the Carribean or alike. Does that mean the country in which the server stands defines the nation responsible for the content?
How is an LLC better than a corporation for asset protection? An LLC is a pass-through entity, and so is an S corporation, but a C corporation is a separate entity with the same rights as a person. One reason why I did not form an LLC is because the law has not yet been completely worked out in regard to its tax status. That can be good, but it can also be very bad. Still, liability protection can mean that your assets are protected but that your freedom is not. You can go to jail if it is found that your corporation or LLC or whatever entity you are using is committing crimes, your products are hazardous, or you are polluting the environment.
I think some countries are chosen for website hosting because they do not honor subpoenas from other countries. So for instance the powers that be would not be able to find out the ip addresses of your visitors. But in terms of your liability, I believe what is important is where your company is located, not where your site is served from. I would think your site's server has as much bearing on your legal status as the company that puts up your billboards.
|I make my writers sign a hold harmless asserting the originality of the content and indemnifying me against any claims. |
1. Do your writers have liability coverage that encompasses issues such as claims of copyright infringement, plagiarism, libel, etc.?
2. Most insurance policies won't insure against intentional or willful wrongs, i.e., the writer just lifted the content - knowingly - and put his name on it. So, even if there is an insurance policy read the exclusions AND look for the language that says what IS covered.
3. Even if #1 applied (the writer has a writer's policy of some kind) does the coverage extend to claims against you? Doubtful. Get your own policy buddy.
4. Since it's unlikely that the writer has effective insurance (indemnification) coverage do you really think that the writer who is writing for you, as the basis of their living, has enough money and assets to pay for a lawyer to defendend thems and a lawyer to defend you - and - pay for any judgment? IF you want that type of protection you better start paying your writers one heckuva lot more. :)
Martinibuster, you know what you can do with the writer's hold harmless and indemnification agreement?
|Martinibuster, you know what you can do with the writer's hold harmless and indemnification agreement? |
A lot of the kind of writers people here at WebmasterWorld use are judgment proof, either because they are located out of reach of U.S. courts or they don't have any assets worth suing over or both. Many have no reason not to sign a hold harmless clause. If someone sues a college kid, what are they going to get? Their ipod?
|An LLC is a pass-through entity, and so is an S corporation, but a C corporation is a separate entity with the same rights as a person. |
An LLC is a pass through entity for tax purposes and a separate legal entity with all of the protection of a corporation from a liability standpoint.
|How is an LLC better than a corporation for asset protection? |
LLCs have much less paperwork and meeting requirements than coporations to follow, so creditors find it harder to find set up and book keeping flaws with LLCs than with corporations, which would allow them to pierce the corporate veil.
In corporate law, directors and shareholder of corporations are routinely sued individually, but it is my understanding that in all of the states LLC law does not allow suits against individual members of an LLC.
However, beyond asset protection there are other reasons why a corporation may be more desirable, so it is an area where you have to look at all of the factors, such as asset protection, income sheltering, tax deductions, number of owners, insurance availability, riskiness of your business, etc. make a call as to which business structure is best for you.