New and emerging digital economies have created a unique set of challenges for today’s entrepreneurs, particularly when it comes to the early stages of brand development and brand launch strategy. From protecting your intellectual property to complying with complex regulatory frameworks, here are the top five things to consider before launching a digital brand, product, or service.
1. Brand Protection and Trademark Clearance
Comprehensive trademark clearance is a paramount responsibility for any successful brand, including in the digital space. Just like in the real world, use of another’s trademark (or a confusingly similar mark) in the digital world or metaverse can land you in hot water. A clearance search will identify the risks of registering and using your desired trademark, and will help guide your brand strategy. Once a trademark has been selected and cleared, digital businesses should consider pursuing federal registration. Ownership of a federal trademark registration has many benefits, including legal presumptions that will help you enforce your brand, and enhanced remedies in the event of an infringement. Digital businesses should also take care to avoid using third-party trademarks, except in limited scenarios (e.g., where you are using a third party’s mark to refer to that third party or its goods and/or services). Your attorney can provide guidance on what type of use is and is not permissible.
2. Risks Associated with Third-Party Intellectual Property and User-Generated Content
Budding digital businesses should be wary of third-party trademarks and copyrighted content, including user-generated content, and carefully clear all material that appears on their websites, marketing materials, and social media. The recent decision in the Hermes Int’l v. Rothschild “MetaBirkins” lawsuit, for example, underscores the peril of using third-party trademarks in connection with digital products like NFTs, even if the products themselves contain expressive elements and the brand owner in the physical world has not registered their trademark in connection with digital goods and services. Businesses should steer clear of relying on the intellectual property of third parties in crafting and marketing their digital products and services. Moreover, digital businesses should understand and consider the applicability of relevant legal safe harbors to minimize the risk of secondary liability for infringing user-generated content, such as those available under the Digital Millennium Copyright Act as well as Section 230 of the Communications Decency Act. Failure to do so could result in liability for infringing content posted to your site by third parties.
3. Complying with Privacy Policies and Cybersecurity Concerns
Digital businesses may collect and store valuable personal data and payment information in the course of conducting transactions online. In such circumstances, a comprehensive cybersecurity framework should be in place before going to market. Digital businesses should also develop and disclose a clear privacy policy detailing data security measures, data collection processes, and data use. Because internet companies often operate across jurisdictional lines, it is also important to understand and comply with all applicable federal and state regulations prior to launching a new digital product or service, including the provisions of the Children’s Online Privacy Protection Act and the more recent California Consumer Privacy Act. If your service or product is accessible internationally, compliance with more restrictive international regulations may be necessary.
4. Consumer Protections and Terms and Conditions
Developing clear, carefully tailored, terms and conditions is also vital to any successful digital product or service launch. Digital businesses should maintain contractual formalities (i.e., offer, acceptance, and consideration) in conducting transactions over the internet. Providing detailed provisions addressing product warranties and liability limits, return and refund policies, content-posting guidelines, and the like can help mitigate legal risks for digital businesses. Likewise, plainly disclosing these terms and creating a clear mechanism for consumers to accept the terms can protect both digital businesses and consumers and increase overall customer satisfaction.
5. Advertising Restrictions and Endorsements
Any digital product or service launch will likely implicate a number of advertising laws and regulations, including privacy, anti-spam, and truth-in-marketing protections. Under these frameworks, businesses have an obligation to ensure that their advertising messages do not contain deceptive statements or omit material information. Because of their increased reliance on social media marketing in recent years, brands and influencers alike have faced heightened scrutiny from the Federal Trade Commission and the Securities and Exchange Commission. Indeed, recent regulatory enforcement actions against celebrities—including in the cryptocurrency space—highlight the need for clear, transparent disclosures of certain special relationship between a digital business and its advertising partners. Businesses should consult with their attorneys to ensure compliance with applicable regulatory frameworks before creating and implementing any advertising plans.
If your organization is launching a digital brand or in the early stages of brand development, get in touch with Sharoni Finkelstein or Ally Kolsky.