If you are a small company, it is important to do whatever you can not to get sued, because a lawsuit will eat up all your time and money, even if you think you did nothing wrong. I am frequently presented with business opportunities that would probably make a good profit, but I avoid them because there is too big a risk of getting in trouble. Here are some examples and some things to watch out for:
1. Sites that let you watch free TV shows, free movies, or listen to free songs online. Several major lawsuits by record companies, TV networks, and movie companies have made it illegal for you to create a site that links to pirated/illegal content, even if you don’t host any of the content on your own server. There are some ways of doing it legally though, like by linking to content on legal sites such as Youtube.com or Hulu.com.
2. Celebrity related sites – Celeb gossip and fan sites usually get a lot of traffic, but almost all of them are using illegal content. For one thing, all of the celebrity photos are copyrighted by the photographer or agency. Then on top of that, on a fan site for example, the website owner is making money from the celebrity’s name and image without compensating the celebrity, and that is illegal.
3. Pre-made sites and databases – For $25-$100, it is easy to buy a pre-built site that offers free recipes, jokes, funny videos, etc. The webmaster creates these sites ahead of time and sells multiple copies of them, so that is why they are cheap. In general this is a good deal of you are looking for a cheap way to start a network of sites, but be aware that sometimes that content is copied illegally from other sites. For example, if you buy a recipe site with 40,000 recipes for $100, you can’t expect that the webmaster thought of all those recipes himself. He obviously copied them from other sites, or all from one big site. There are a lot of legal and moral grey areas when it comes to this sort of thing, and most of the time it works out fine, but just be aware there could be potential problems. For example, I had to shut down my site that analyzed peoples’ dreams, because the dream database I bought many years prior turned out to be copied from another site, and I could not find another database to buy to replace it. The same thing happened with a smilies (little smiley faced graphics) site I bought. I also once had to redo the graphics on a site I purchased, because another webmaster said the site design was copied from his site. It is very rare these small situations ever lead to lawsuits, but you need to realize that if another website (or their lawyer) contacts you about something like this, they are probably right about it.
4. Celebrity domain names – It is usually illegal for you to own a domain name that has a celebrities name in it, like britney-spears.com. This is a violation of their trademark, and in some cases is even considered cybersquatting which can in extreme cases be punishable by jail time. Usually they just take the domain name away from you though. Even bidding on trademarked search terms in a search engine to get traffic to your site can be illegal.
5. Typo domain names – If you own a domain name that is a typo of a famous brand or company (for example pepsy.com), and you don’t have a legitimate reason for having it (like it is your last name or you owned it before the big company or brand became famous), there is a good chance it will eventually get taken away from you, and you may even get sued.
6. Sites with user uploaded content – If you create a site that lets users upload videos, photos, or songs, you are opening yourself up to the risk of a big lawsuit. Many websites have been put out of business by lawsuits from giant companies with teams of lawyers that sue if your users post content that violates their copyrights. Youtube.com was sued for this, in a $1 billion lawsuit filed by Viacom (owner of MTV, Paramount Pictures, Comedy Central, etc.), and years ago a large website named Bolt.com was put out of business just because their users posted copyrighted music videos. Don’t think you are protected just because you are not posting the content to your site yourself.
7. Email marketing. You can get into major trouble for sending spam type emails to promote your site, and you can even get into trouble by paying another company to do it for you. Aside from legal problems it can cause, there is a very good chance upset recipients will complain to your web host, and your web host will shut your site down. Even if the email list you used was opt-in, if it results in complaints, your site can get shut down. Your web host won’t care if you did things correctly or not. Another problem is that many companies that say they use only opt-in email lists don’t really use them or are not careful about their opt-out methods, resulting in complaints from recipients.
8. Certain types of sites require state licenses, such as if you are selling/brokering concert tickets, boats, or real estate. Another example is that there are all sorts of federal and state laws when it comes to giving out loans. The vast majority of sites don’t need to worry about this issue, but it is something to keep in mind.
9. If you are running an e-commerce site (online store), make sure that you charge sales tax. You need to register as a business in your state, and that will get you setup to pay sales tax. Also, there are new laws that make it so that if you have sales in other states, you will need to pay sales tax to those states, so make sure to check on that.
10. Unlicensed images – Many people think it is OK to copy photos from Google image search or from other sites, but it isn’t. Almost all images you would want to use are copyrighted. Even if you remotely load the images from the source site, and don’t host them yourself, it is still illegal. For several of the blogs I purchased over the past few years, I received photo copyright infringement lawsuit threats from lawyers, and I settled each of them for $200 – $2000 and then sold the sites.
Most of the time, the types of legal problems I have discussed here are easily resolved without the website owner getting in much trouble. In my 20 years in business, I have never been sued or had to use a lawyer. For the first 5-10 years, I did not worry too much about stuff like this, because I did not have much to lose. It is only once I became a big company that I started to play it safe, because I knew it would be more worth it for people to sue me.