Inside Track

THE internet is usually perceived as an excellent marketing toolwhich opens up sales opportunities for business in a world-widemarket. But businesses need to be aware of the potential legalliabilities they face in the UK and beyond when they trade online.

The UK law states that if someone uses a third party's trademarkin the course of trade, then they may infringe upon that thirdparty's rights. The UK courts have recognised, though, that if themere use of a trademark on a website is to be "used in the course oftrade", online traders could be trading in every country of theworld and could face massive legal problems.

The UK court decided that it would be wrong to view a websiteowner as actively placing a tentacle into every market in the worldby simply setting up a website. Instead, the purpose and effect ofthe website, and whether the business has any real trade in the UK,should be considered.

Online businesses have generally welcomed the UK decisions, whichare in line with the recent approach adopted by the US courts.However, the case has been seen by some UK trademark owners as adilution of the value of their trademarks.

It is still vitally important that anyone considering tradingonline does carry out appropriate trademark searches before goinglive to guard against "cyber liability" for trademark infringement.Where there is evidence of trade in the UK, then use of a mark on awebsite situated outside the UK can result in opening up legalliability in the UK (and probably vice versa for UK sites tradingabroad).

The supplier must have been "directing" its activities to theconsumer's country before the provisions will apply, but onlinetraders are understandably concerned that they may be exposed tolitigation in all EU countries, even if they have not beenspecifically marketing there.

What exactly will fall within the meaning of "directing" is farfrom clear. Can, as the wording suggests, a business be sued in acountry merely on the basis that their website is accessible fromthat country, and a contract was concluded online?

For businesses, it is hoped a more practical definition of"directing" of activities will be adopted in line with the recent UKand US court decisions, looking at the actual site and any trade,rather than mere presence on the web.

Practically, the adoption of consistent legal reasoning bydifferent countries is to be welcomed. It will allow businesses totake account of the legal liabilities they may face when they tradeonline, and hopefully avoid any "netmares".

Gill Grassie is a partner in the intellectual property andtechnology department at Maclay Murray & Spens.