Transcript: Thanks, Allan. This is David Brower with your 20 Minute Podcast. Our special guest today from San Diego is Richard Chapo and he’s the attorney that helps you protect yourself in this ever-changing world of the internet. Hey, Richard. How are you?
Richard Chapo: Doing well. Thank you for having me on.
David Brower: Hey, you’re very welcome. It’s good to have you. My sense is, and obviously, you would know this much better than I, but my sense is, people get so wrapped up in the internet and websites and social media and all those kinds of things, in our instant gratification kind of philosophy, do they even think about the legal problems that could occur?
Richard Chapo: No, typically not. The reason for that is, people are being entrepreneurial in nature, and when you’re doing that, it can be exciting and motivating. When it started, it was very much the wild, wild, west. There weren’t very many laws that applied to it and those that did were really kind of designed to help it grow. Along came the DMCA that protected websites like Facebook and Twitter and what have you from copyright infringement claims and things of that sort.
What we’ve seen in the last five years is something called the splinternet. That phrase has been used by a number of different people. But it’s basically governments coming online or economic institutes coming online and trying to assert their authority, if you will. And it’s leading to the internet, at least it’s commercial medium, is starting to split up. You’re starting to see things that most of us thought we would never see such as a lot of US newspapers are no longer viewable in Europe. LinkedIn is not viewable in Russia. All these different countries.
David Brower: Wow.
Richard Chapo: Yeah. And the thing is you’re always going to have those outliers. If your website isn’t viewable in North Korea, it’s probably no big deal. But the fact that Europe, in particular, has become so anti-America or anti-United States from a regulatory standpoint that they’ve issued all these rules and regulations, it’s really forcing businesses, particularly small businesses and startups, even mom-and-pop operations into very uncomfortable situations as they try to look at some of these regulations that are abroad. And then try to figure out how they’re going to comply with them or not comply with them or what have you. Because, of course, the benefit of the internet is it’s worldwide which gives you a huge market. That disadvantage of that, of course, is that’s it’s worldwide.
David Brower: Well, yeah exactly. It’s the old catch 22 thing. So when you have a relatively new entrepreneur and they’re … Let’s say they’re an online business first and foremost. And then, they get in and they start finding out that they need some help. You mentioned I Can which I’m familiar with because of the websites that I have and godaddy.com comes out to confirm all that kind of information.
The DCMA though. I don’t know what that is. How can listeners use the, or I’m sorry, how can listeners use the DMCA, that should be, to protect their website from copyright infringement lawsuits?
Richard Chapo: One of the biggest issues that you have online and when the internet first was created was … Well, let’s think about pre-internet so let’s take a book. Let’s say Stephen King writes a book. It’s a paperback novel. It’s the kind of thing you read at the beach. For you to go ahead and copy that and recreate it, you really have to have a malicious intent to do that.
David Brower: You bet.
Richard Chapo: And I guess that’s something that’s easy to do. Once the internet found its foundation and people started using it and we moved beyond dial-up, the ability to copy and republish content became very easy. It’s literally right click, save, and publish.
David Brower: Right.
Richard Chapo: And so, you look at the environment in Washington DC now and it’s kind of hard to believe but in 1998, Congress and the political parties got together and they realized that the internet was a potentially huge medium from an economic point of view and they decided to support it and passed a number of laws.
The DMCA, the digital millennium copyright act, it was enacted in 1998. And what it says basically … Well, it’s a number of different things but the area we’re interested in is Section 512 and it talks about giving websites immunity from copyright infringement claims based on content that people upload to those sites.
So if we take a classic case of Facebook. Facebook has I don’t know how many users, 1.5 billion or something. It would be very difficult obviously for them to monitor everything that people load to their pages. And so, what the DMCA says is as long as Facebook follows a particular procedure, a compliance procedure, it can’t be held liable if I, for instance, go ahead and I read an article I like. I copy it from the New York Times or whatever newspaper and then I repost it on my Facebook page. Well, that’s copyright infringement. I can be held liable for that but under the DMCA, Facebook cannot. And so, it creates what’s called a safe harbor immunity and it’s been critical for the internet to grow, quite frankly particularly in North America because copyright infringement is probably the number one issue that we see pop up online from a legal perspective.
David Brower: Well, and more and more, I think unless they are malicious like you were saying, I think people sometimes, oftentimes probably, look at an article and say wow, I didn’t know that. I’m going to share that with my friends on Facebook. And unbeknownst to them, they could be setting themselves up. Is that right?
Richard Chapo: Yes, absolutely. It’s kind of a divide. I tend to see the ugly side just given the nature of my profession but there are people that have bots out there that would just automatically copy and republish them on a new domain.
David Brower: Yeah.
Richard Chapo: And they’re blackouters and they’re trying to make money quickly off of that before it gets taken down. And so on and so forth. So you get both sides of it.
David Brower: Yeah, that’s true.
Richard Chapo: But yeah, a lot of people that are doing copyright infringement don’t really realize it. And again, that’s the nature of the web. It’s also the nature of a fundamental change in our society which is before the internet, the idea of sharing a lot of your personal identity with a bunch of people was something you wouldn’t have done. I wouldn’t have.
David Brower: Right. Yeah, here’s a picture of my dinner. How you doin’?
Richard Chapo: Right, exactly. And now the nature of social media, particularly Instagram, people share everything.
David Brower: Yeah.
Richard Chapo: And that’s a fundamental change and so the mentality that many people have particularly is as you get younger is that this is okay. And in a social media context it is and that’s fine because those images and that content is meant to be shared, to go viral, and all of those kinds of things. But a lot of people just assume that applies to everything online and obviously it doesn’t. So you get into issues of is copyright infringement innocent or was it malicious?
And it tends to vary greatly for a malicious copyright infringement action. A judge could award damages of $150,000 per infringement.
David Brower: And you can’t claim ignorance, right?
Richard Chapo: Well, you can. You can. If you just were clueless and didn’t know and you can show that. And the evidence tends to show it eventually, the judge would still award damages against you but it could be as low as $200.
David Brower: Okay. So one of the things that you mention when I read through your bio are seven steps to protect yourself when running a business online. And can you share those with us and see what kind of epiphanies people might have in listening today?
Richard Chapo: I think that there are a number of different ways to go with these things. But one of the important things to keep in mind is that before we talk about this is these are just precautionary steps. They are things that people need to think about. It’s kind of like a to do list. When you’re an attorney and you do any kind of interview, there’s always a little bit of wariness about people start getting scared and decide not to take the steps that you want them to take.
So yeah, the basic initial ones are to obviously consider forming some kind of a business entity to protect you. The reason that you want to do that is it will create a shield between the business assets and your personal assets. Unfortunately, businesses fail. It’s kind of the nature of the game. Everybody has a great idea but you’re never really sure if it’s going to take off.
David Brower: Is that as simple as setting up an LLC or something like that?
Richard Chapo: It is. It is. And now there are quite a few advantages to it particularly from a tax perspective. The Trump tax changes. Whatever you think of the politics involved, that does create a rather huge deduction for people who are now running businesses through LLCs or any kind of pass through entity. So it’s definitely something you want to look at, something you want to consider.
Another one that a lot of people don’t think about is insurance. Going out and getting insurance, liability insurance, for your business is important because even if you form an LLC, you run into a situation where let’s say you get sued for copyright infringement or something of that sort. Well, how are you going to pay a lawyer to defend the case? That’s a big dollar item typically. We don’t come cheap. And in that situation you need to have a pool of money. Well, most small businesses don’t. So instead the answer is to go with liability insurance.
Liability insurance will do two things. One, it will pay for your defense fees. And second thing is it will pay any settlement or judgments against your business up to the policy limits.
David Brower: Something like that, you think about that with brick and mortar buildings or businesses. You rarely think about that for business online but it’s equally critical, huh?
Richard Chapo: It is. And particularly it’s become more so because if you run a business, you can run into a situation where you’ll have reviews or you may have competitors that do things underhanded. They hire somebody in the Philippines to leave hundreds of negative reviews on your site or Yelp, all these kinds of things. Defamation. Yeah, there’s all kinds of situations that pop up online.
What we’re seeing is that online environments are really molding more towards what you see with traditional businesses. There’s been a big evolution of that in the last 10 years. So having that insurance there is definitely something that you want to do.
David Brower: Makes sense.
Richard Chapo: It will give you peace of mind at night.
David Brower: Yeah.
Richard Chapo: Yeah. So another step is if you have a website and you’re selling anything that is yours. So not an affiliate site but a site that you’re selling either your own products, whatever those may be, or even your own services. You want to have terms and conditions. Terms and conditions act as a contract with your clients or customers. And here’s the key thing that’s happened in the law that a lot of people are not aware of.
David Brower: That makes sense.
Richard Chapo: Yeah. Terms and conditions are important because again, the internet, the worldwide nature of it, if you are in Colorado or you’re in wherever you may be, you have access to a large market. Well, if somebody in Seattle gets angry at you and decides to file a lawsuit, you’re going to have to go to Seattle and defend it and what have you. But in your terms and conditions, you can include a clause called a choice of forum clause.
A choice of forum clause is essentially that in any legal dispute that arises between the parties has to be heard wherever you are located.
David Brower: Oh wow.
Richard Chapo: So it makes a big difference then.
David Brower: Fairly. It raises the question for any online business that if you even remotely in your 2:30 in the middle of the night nightmare go, “Oh shit.” Pardon my French. “I could get sued over this.” If you don’t have the terms and conditions like you say, it’s very easy that you would have to be required to go to Seattle or New York or the Bahamas or wherever, right?
Richard Chapo: Oh, absolutely. Absolutely. One of the benefits, kind of an indirect happenstance benefit, of the internet is the value of sales or the value of services that are exchanged over the internet tend not to be particularly large. We’re not buying a house. And so, the nature of the potential damages is usually low enough that they often will mitigate that happening.
So if I purchase voice services from you for, let’s just make something up, $200 bucks. I’m only going to go so far to try to collect that. Now if that number is $200,000. Well, okay now that’s a whole different deal because it makes sense for me to go for it. Right?
David Brower: Absolutely. Absolutely.
Richard Chapo: So there is that aspect of it. What we do see online is people going with class action lawsuits to try to get around that. A class action lawsuit is a lawsuit where there are many plaintiffs who have the same claim against the defendant. So you’ll see the late night commercials on TV for various pharmaceuticals. And there’s a claim that the pharmaceutical fails in some way or causes damage in some way. And what they’re trying to do is get 5,000 or more people or whatever the number happens to be to get together and pursue one lawsuit against those entities.
So again, in your terms and conditions you would want language that would limit people’s ability to do that and that kind of a thing.
David Brower: Gotcha. Fascinating.
Richard Chapo: Yeah, it’s technical and a lot of people aren’t particularly interested in it but it is something that could be a real key to saving you.
Let’s see, automatic … So if you have situation … One of the holy grails of being online is that you can have recurring billing. So that would like the situation where you’re charging somebody monthly, typically for access to something. So like Netflix and that kind of a thing.
Many states have actually passed laws requiring disclosures associated with automatic billing. And the reason for that is we went through a phase in the internet, we don’t see it too much anymore, but early on where you would sign up for a free trial for something for $1.29 or whatever it was for seven days and then it was nigh impossible to figure out how to get out of that free trial.
David Brower: Exactly. Yeah.
Richard Chapo: It was just impossible. You couldn’t find it. So these states are now requiring that there be disclosures and that there be directions. Here’s how you end the free trial before you start getting billed. An email has to be sent with a link and all these different things. So if you do pursue recurring billing, make sure that you’re aware of those laws and that you go ahead and comply with them.
David Brower: And one of the thing with recurring billing, I think, is you sign up for something and there’s a little fine print down there that says this will automatically renew unless you notify us within 30 days. And I can’t imagine that everybody pays attention to that. And all of a sudden they’re going, “Oh crap. I didn’t want to sign up for this again.”
Richard Chapo: Yeah. There’s two situations with that. One, you can bring an action under law in California. The California law will say that if the disclosure is not done correctly, which most companies don’t, they consider your payments to be a gift. That you can reclaim all the payments that you’ve made plus some penalties. So yeah, it is pretty brutal. And you see large companies run into it. Dropbox and some of these other companies have run face first into a few of these things. Because they’re just not aware of it.
The other thing about internet laws is they pass laws at the European Union level. Then they pass them at the country level. Then they pass them at the state level. Then you can have regulations that nobody has heard of. Anybody listening to this that is running an online business is probably breaking a variety of different laws.
David Brower: I would think so. And I would think that would raise cause to in and have an evaluation of what I’m doing. And that’s what you can do for folks whether they’re small, medium, large, whatever. Take a look at what they’re doing and recommend steps to take to better protect themselves or in some cases just flat out protect themselves from possibilities of things. Correct?
Richard Chapo: Correct. And today what we’re really saying is with privacy law in particular. At this point, I practice in California. There are other lawyers in other states. But you really do need to sit down with somebody and talk to them about how you’re going to approach your market because the rules and the penalties have become so extreme with the GDPR and the European privacy laws that went into effect on May 25th. The penalties are 4% of your gross worldwide revenue or $24 million dollars. And obviously, those numbers are really intended more for the Facebooks and Googles of the world.
David Brower: Correct.
Richard Chapo: But each of the EU member states, which are 28, has their own enforcement agencies. Some of them are reasonable, like the ICO in the UK. And some of them are just completely out of control like the CLA.
David Brower: If people want to get an evaluation and want to learn more about how to protect themselves, I realize you’re in California but can you offer that service to people in other states or do they need to reach out to someone in their own state that can help them? What’s the best way for people to proceed?
Richard Chapo: At this point, I recommend they sit down with somebody in their own state. You can do a search online for Google for internet law or internet lawyer and then run those results through Yelp and see what clients are saying about the various attorneys.
The reason why I suggest you do it in your state is states have now become very proactive in passing laws because obviously Washington DC, we have a bit of a gridlock so not much has been done in relation to the internet. And so, states have tried to step into the void. And so, if you are in California or Washington or Colorado or wherever, you have particular laws, state laws, that you are going to need to comply with.
David Brower: Makes sense, makes sense. Well, folks if you are in California, then you need to get ahold of Richard. And that is socalinternetlawyer.com. S-O-C-A-Linternetlawyer.com. He’s on Twitter at Richard A. Chapo. LinkedIn at Richard A. Chapo. Facebook at Richard A. Chapo.
And if you’re not in California, then obviously follow Richard’s advice and do a Google search for internet lawyer. And then, do your due diligence and make sure that you are going to reach out to somebody that has some integrity, has some experience, and can truly help you out.
Richard Chapo: Absolutely.
David Brower: All right, man. Hey, really enjoyed it. Great information. Our guest, again, Richard A. Chapo from San Diego, 100 degree, California. But no fires where you are so that’s a gift, man.
Richard Chapo: Absolutely.
David Brower: Thanks so much. Really informative. You peaked my interest in a lot of things so continued success to you.
Richard Chapo: You as well. Thank you again for having me on.
Allan Blackwell: Your 20 Minute Podcast with David Brower has been brought to you by Audible. You can listen to any of David’s podcasts anywhere podcasts can be found including iHeart Radio, the Spotify mobile app, and at davidbrowervo.com/your20minutepodcast. Until next time, thanks for listening.