Tuesday, July 24, 2012

B.A.F.F.L.E.D. Tops

Top 9 Legal Issues for Etsy Sellers - Part 2
In collaboration with Elspeth Crawford of Attorney Fee

Last week, we gave you the foundation of this e-commerce trailblazer and their legal concerns.  Here's the rest of this story:

Working with Etsy, sellers are protected, in some aspects, from many possible legal predicaments. Etsy’s terms of use operate as an agreement for sellers and any other users of the site, and provide a legal policies. For instance, Etsy cannot guarantee true authenticity of the sellers, buyers or items for sale, but will step in if issues arise between parties. Parties may file “claims” with Etsy over many issues, including invalid transactions and copying, and Etsy reserves the right to correct problems.

Another top Etsy seller, Cindy Lee of the jewelry shop ‘edor’, recently found another Etsy seller using one of her original photographs in her shop without Cindy’s permission. “I researched about copyright infringements online and read the Etsy copyright policy and decided I had a good reason to file a complaint through Etsy. The issue is now resolved and Etsy notified the seller and the photo has been taken out of her shop.”
What if Cindy’s photo was being used commercially by a non-Etsy business, could Etsy still protect her rights of copyright? Etsy’s ‘Copyright and Intellectual Property Policy’ does not make reference to such instances that arise outside of the web site, so Etsy sellers would have to consult an attorney.

This raises the question: Do Etsy sellers need lawyers? In certain instances, attorneys are needed to protect such businesspersons from legal liability and could be needed to mitigate. However, of the Etsy shop owners questioned, their online business was a primary, if not sole, career and none had ever consulted a lawyer. 

Because all brick and mortar retailers must impose state and local sales taxes, they often lose sales to e-commerce merchants.  The main culprits these days are Amazon, eBay, and rising star Etsy.  These marketplaces do not have to impose taxes if their merchants don't have a physical presence in the state where the consumer is purchasing.  Many states have attempted to right this electronic wrong by strengthening their tax codes to include any nexus to the state or other requirements to capture tax revenue.  This has pushed some online retailers out of states, hurting job markets.  It is also a struggle for businesses solely with a presence online, because lower prices is how they survive.  

There have been bipartisan bills circulating in Congress over the last few years to provide a national fix, but because of votes wavering and heavy lobbying, the fight between physical stores and virtual stores remains.

Unfortunately, counterfeiting is easy on the internet.  Website are set up, and knockoffs go up for the taking. As of late, legislators and lobbyists have worked to find solutions, including some which online marketplaces find over-inclusive.  Much of the proposed legislation holds the site, like Etsy in a lot of cases, responsible for not policing counterfeit goods posted by their clients.  This is tough seeing as the internet is updated literally every second.  In many instances, merchants will post what appears to be a genuine product, but ship a fake.  Some are bold enough to even just market the fakes.  Prices are always attractive, regardless of the approach they take.  Again, this is a rough circumstance for online retailers, as they often only have their sites as revenue streams.  These limits bring challenges and compromises, like seeking legal counsel--to protect their brands and also be sure they are marketing within the law.  

Additional legal concerns for Etsy sellers include:

7.  Online sales taxation
8.  Contracts, terms of use, and policy breach
9.  Improper business formation or incorporation

Thanks again to Elspeth at AttorneyFee for the bulk of this article.  She did amazing work!

We hope this info was helpful, especially to our small business and Etsy readers.

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