Learn the essential legal requirements for running an online business — from contracts and disclosures to trademarks and privacy policies — explained in simple, easy-to-understand terms so you can protect your business with confidence.
IE 467: Legal Requirements for Online Business Made Simple with Bobby Klinck
Jenny: Are you running an online business and not sure about what legal requirements you need to have? Could you possibly end up with a big lawsuit or get yourself shut down? In today’s episode, we are going to make sure that we let you know the legal requirements that you need to run your online business confidently. Bobby Klink is the owner of Plainly Legal, an affordable option for legal solutions for your business.
Jenny: I’m excited to have this conversation about legal requirements for online businesses, made simple. Before we jump into that, will you introduce yourself and your business to my listeners?
Bobby: You made a mistake. You just handed an ex-litigator a microphone and said “talk,” which could mean I could talk for a long time. For those of you who don’t know me, my name is Bobby Clink. I’m an attorney by training, graduated from Harvard Law School with honors back in 2002.
For the first almost 10 years of my career, I did the very traditional thing; worked at prestigious law firms, worked for the Justice Department as a prosecutor, and did all of those things. But quite honestly, it never really fit me because I’m a punk rock kid from Texas. That’s what I was growing up.
Putting on a suit and representing Fortune 100 companies, fighting other Fortune 100 companies was kind of eh. But it’s what I did. I made a switch in 2010, when I was coming out of the Justice Department.
I joined a small firm, entrepreneurial, mainly on the plaintiff’s side, in bigger commercial types of cases, and made a quintessential entrepreneurial mistake when I did that. I was a partner in name only. I wasn’t actually a partner in the partnership and didn’t have any equity ownership. I had a letter that said, “Here’s what your salary will be, but you understand that we actually don’t have cash flow all the time, so we won’t be able to pay this all the time. We’ll make it up when we can.”
I did that and they treated me completely fairly along the way. But there would be periods I’d go six months without pay because we didn’t have a lot of money, and then I’d get a big chunk of money. The problem was when my wife got pregnant in 2013, and I approached him and I said, “Hey, we need to solidify something and make me partner” because I had all the downside risks, but no guaranteed upside.
We couldn’t come up with a resolution because we hadn’t talked about it in advance. Feelings got hurt when my daughter was about three months old when it came to a head. I found myself holding a three-month-old and deciding I needed to go start my own law firm. I did that in 2014.
I had a lot more time than I had clients at the beginning. I fell into the world of online marketing. I don’t know how it happened, but I got myself HubSpot inbound marketing certified along the way. This has been my path.
I opened my current business in a much different iteration, though, back in 2017, helping online business owners, coaches, course creators, anybody who’s basically selling knowledge or expertise to get their legal stuff in place.
First, the business was Your Online Genius. Then, it was just BobbyClink.com. In 2023, we switched over, started the process of switching over to a SaaS, a software offering called Plainly Legal, which is now where I do business. That is the shortest that I could give that story and do it any justice.
Jenny: It’s always good to hear someone’s story, how what they can take away from it, what they would change ultimately, and how you then learn to grow.
Many entrepreneurs jump into business without thinking about the legal side. Why is that risky?
Bobby: It’s risky because you might be making mistakes today that could be planting kind of landmines or time bombs in your business. They’re not going to go off at the beginning. They’re going to go off later when it’s very, very painful. The story of me having to part ways with that other law firm is an example of this.
I don’t know that I could come up with a worse time to have a business relationship blow up in your face than when your daughter is three months old. But that’s what happened because we didn’t do the work in advance. We just said, “We’ll deal with it later.” Those are the types of things that can happen.
I’ll give you some concrete issues. If you start a business or if you start a podcast, for example, and you don’t check the trademark to make sure that someone else isn’t already using that name, here’s what’s going to happen. You might build that podcast up, build equity in it.
If someone has a trademark, guess what? They’re not going to hear about you at the beginning because you don’t have a brand yet. Let’s say you get successful and then all of a sudden they come out of the woodwork. After six months or a year of you doing this podcast, they say, “We own that name and you can’t use that name for your podcast.”
All of a sudden, you’re going to be in a spot where you have to rebrand and you have to do it kind of in an expedited emergency way, not in a planned out, thoughtful way. That’s just one small example.
A course could be even worse because you’re going to have branding on the entire course. You’re going to have to reshoot the entire thing. You’re going to have to do all of that to get rid of this issue that you could have avoided with a five-minute search at the outset.
Either spend five minutes now and maybe find no problem. Nothing would have gone wrong. But there also might be something if you don’t deal with it, it could go wrong and it could go wrong spectacularly later.
Jenny: I love those two solid examples.
What should entrepreneurs know about protecting their content, brand, or digital products online?
Bobby: The first thing I would tell you is to make sure we kind of understand. Let’s define some terms because some people will get these things a bit confused. There are two main types of intellectual property that online business owners need to think about.
Intellectual property is just a fancy lawyer word for anything that you can own that you can’t hold in your hand and isn’t a piece of dirt. It’s not something physical. It’s something kind of ephemeral, in a way.
There’s really four types of intellectual property. One of them we don’t have to worry about is patents because those are for inventions. Generally speaking, nothing that we do is novel enough and the type of thing that could be patented. We can kind of exclude that.
There’s an area called trade secrets. This is your intellectual property that you keep secret. Anything that you keep confidential and you take steps to keep confidential. If it has commercial value, that gets protection. That can come up when we’re hiring people, when we’re doing things like that, but it’s not really as much of an issue at the outset.
The two big areas to understand are copyright and trademark. Copyright is all about content.
Trademark is all about branding. Anything that you create that has any spark of creativity or originality will be protected by copyright with a small copy at short sentences, for example, may not be copyrightable.
For example, the title of a book is not protected by copyright because it’s too short, but anything longer will. If you write a blog post, that will be protected by copyright. If you create a podcast, that’s protected by copyright. Courses, all of those types of things are protected.
The best part about copyright law is you get protection automatically. You don’t have to do anything to get protection. The second that you create something and you put it into what’s called fixed form, it gets protection.
Once you’ve created it, it’s in fixed form in a sense. Once you publish it on the internet, once you save it to a hard drive, any of that stuff, that’s fixed form. You get that protection automatically. Other people can’t steal it.
They can’t take it and use it for themselves, but you can’t actually enforce it. You can’t file a lawsuit unless you have registered it with the copyright office. There’s kind of this dance. What should you register? What should you not?
Registration with the copyright office is a pretty simple process. I forget the price but it’s about $50 per registration. You can do that yourself. It’s not complicated.
But you’re not going to go and register every blog post you put out. You’re not going to go and register every podcast episode you put out. Would you ever sue if someone stole it? The answer on those is almost certainly not, because it wouldn’t be worth it.
But you would copyright and register more substantial works. If you have a course, for example, that’s a significant part of your business. You might think about registering a copyright in that.
If you write a book, you should register a copyright in that. It’s pretty simple. You just have to give a copy, or electronic copies, fill out a form and do that, and get protection. That’s the content.
Let me point out one little caveat that is important now. AI generated content is not copyrightable. This kind of came to a head when Chat GPT was coming out. The copyright office addressed the question.
Someone had generated a graphic novel, including all of the artwork, using generative AI. The copyright office said generative AI is not copyrightable because there has to be a human author for something to be subject to copyright.
The actual output of AI is not copyrightable, but if you take that content and change it, tweak it,and organize it in certain ways, the way you put it together can be copyrighted.
In that example of the graphic novel, what they found was that although the individual images could not be copyrighted, the way that the author had put them together and organized them was copyrightable.
That’s a caveat. Courts have basically come out and said the same thing. I know a lot of people are using AI to generate content. Just understand, that may not be subject to copyright. If you go to register a work with the copyright office and there’s anything that you’ve generated with AI, you have to tell them about it.
You’re basically saying it’s not copyrightable, but the other parts are. That’s your content. When you mentioned your digital products, that will be the primary line of protection for your digital products.
The other piece is trademarks, which are your names for products; your brand name. Trademarks protect names, logos, and slogans. It can be used to protect sounds. For example, the Netflix sound that comes on when you first load Netflix is a trademark sound. The NBC chimes are trademarked.
Sounds won’t generally apply to us. It’ll generally be names. You can do logos. Generally, it’s not worth it because is someone gonna steal your logo? Probably not. But with a trademark, it’s a bit different because you get some level of protection automatically without doing anything, but it’s limited.
You get what are called “common law rights,” and these are geographically limited. In the old days, in the non-online world, that was usually enough.
If you were starting a brick and mortar store in any town, USA, you really only cared about having protection in that area, right? People weren’t going to confuse you with some other store 3,000 miles away. But in the online world, we theoretically are competing with everybody, nationwide, worldwide, et cetera.
But the law doesn’t grant you protection just because you’re marketing to people all over. It’s not really clear how much protection you get. Is it because you make a sale? Is one sale in an area enough? It’s not clear how big of an area that would be. If you really want to lock down rights, you have to register a trademark for the name, whether it’s a brand name or a product name.
That process is a bit more complicated. It will cost $350 in government filing fees. You’re going to want to use some kind of filing service, either an inexpensive one, if it’s simple. If you want to go with a full-blown law firm, it will cost you more to do that.
I use courses as the example just because I can think of it. You shouldn’t go out and register a trademark for a course right at the beginning. Validate it first. Whatever it is, make sure your brand has legs, make sure you’re going to be using that name for a period because it’s going to take you about 18 months to get protection or to get a registered mark.
You want to make sure this is important. I say that as someone who owns probably10 trademarks for things that we no longer use. That’s money I wish I hadn’t spent because by the time they were actually issued, we weren’t even using the brands anymore.
I always like to tell people from a business perspective, don’t rush out and do that, but do make sure you run the search first. Because again, the first thing is make sure no one else already has a trademark. If they do, that’ll cause you problems.
With so much focus on email marketing, what are the legal requirements around email list building and communication?
Jenny: I think that that’s something we talk about a ton on the podcast is the importance of your list. Don’t go to social and just expect to be able to get immediate gratification. It’s not actually going to convert. How can we use our email list?
Bobby: I’m first going to talk about what you probably expect me to talk about, which are rules about collecting and privacy. But then, I’m going to talk about some other things that people don’t talk about, like using memes and GIF’s in emails. I’ve got to talk about that because it’s an important thing for people to realize.
But let’s start on the other piece: building a list, privacy issues, et cetera. If you’re a United States business and we’re only collecting and emailing people in the United States, it is the wild, wild west. Effectively, there is no law.
There is a law, it’s called CANSPAM. But as long as you’re not spoofing and faking an email address or doing something like that, you will be in compliance, as long as you allow people to unsubscribe. You meet the US requirement. But there are other rules in play.
The GDPR, in Europe, is the most prominent one that people may have heard of. It was the big thing about a year after I first entered the online space.
Effectively, it requires you to get an affirmative consent from someone to add them to your email list. In other words, you have to get permission for anything, anytime you are going to process their private information.
That includes sending them an email. When it first came out, all the lawyers looked at it and said the way this was written, you could not require people to give you that consent as a requirement of downloading a freebie, for example, a lead magnet.
Decisions have come out and said since then that have said if that’s the entire notion of the transaction, you’re giving them something in exchange, that is okay. But a couple key things. You can’t automatically do it.
You have to have a checkbox and they have to manually check it. It needs to be unchecked when they’re first signing up. That is the key to meeting it. If you meet that standard, you’re gonna meet the standards pretty much everywhere because the GDPR kind of set this consent bar that most people who’ve passed laws since then will follow.
There are a couple of nuances there to think through. A lot of people ask me, “Do I need a double opt-in?” From a legal perspective, double opt-in is not required and doesn’t help you. You either get consent up front or not.
The way that traditionally double opt-in worked, that most people were using it, it wasn’t gonna help because it wasn’t gonna overcome an issue because if you had to get consent from them, you could just get it on the front end.
When lawyers thought you couldn’t require consent to get a freebie, everybody was requiring you to click that double opt-in to get the freebie. It wasn’t gonna help you anyway. Every email service provider says double opt-in is a good idea. I’ve toyed with it in different ways. That’s more of a business decision rather than a legal decision.
Separately, I want to point out that people may have heard about some other state privacy laws that have been passed in the last five years or so. The first one people would have heard about was in California, the CCPA, which was then modified.
There have been others since then. I like to tell people you almost certainly don’t have to follow those laws. Not because it’s good to flatten laws, but because those laws are targeted at bigger businesses.
All of them will have some kind of threshold requirement. Most of them are structured so that you’re subject to the law if either you collect private information from a certain number of people within a state in a year or make a certain amount of revenue. Those revenue numbers, like the California one, for example, it’s $25 million a year or collecting personal information from 100,000 California residents in a year.
If you’re subject to that kind of law, you really shouldn’t be listening to a podcast to understand your legal stuff. You should have a privacy lawyer on speed dial who can answer those questions. Other states have different thresholds, but it tends to be those same kind of orders of magnitude. I’m gonna pick one, a state that I don’t think has one.
Montana, for example, might have it and it says 10,000 Montana residents. Well, 10,000 residents in Montana will likely be kind of the same order of magnitude as 100,000 California residents. You’re probably not gonna have to follow any of those. Get consent on the front end and allow people to unsubscribe, and you will be complying with that part of legal requirements.
The other thing, putting a GIF, a meme, or an image in an email is very risky. GIFs and memes are protected by copyright law. Remember, we talked about how anything I create is automatically protected? Guess what? Anything they create is also automatically protected.
GIFs can be the worst because oftentimes the GIFs themselves are infringing the copyright of a movie. They’re taking a movie clip, for example, or something like that. If you include that in your email, you are almost certainly infringing someone’s copyright.
Now, there are services (Gify, etc.) you go through those and do it legitimately and make sure the license is appropriate. It can work. But I just tell people, be very careful.
As someone who loves email, who wrote a book about email marketing, who loves to amuse people with email, I’ll tell you, I get it. I understand why people want to include it, but I will tell you I’ve never included a GIF in any email I’ve sent other than GIFs of me that we created of myself because I’ve just decided it’s not worth the risk.
There was a case of people who were running a Facebook page. They posted a meme that it was levels, like levels you would use in a building that had tape on it with “wrong” written on it. It was saying things were wrong on many levels.
This was a meme that someone else had created. He sued them because their post went viral. He sued them and was seeking hundreds of thousands of dollars in damages because it was a copyright infringement. Be careful about that stuff and think twice. Anytime something is created by someone else, probably don’t use it as the safest bet.
Jenny: I think that’s great guidance. I often tell my people we want to keep emails short, simple, sweet, and get to the point with them. People don’t have time. Most people are reading everything on their phone.
If you’re over 40, your phones are ginormous with the text. It takes you 33 times just to scroll through a three-sentence email, anyways. That is excellent.
What are the most common legal “blind spots” online entrepreneurs overlook?
Bobby: It is what I call the “right-click, save as” problem. It comes back to copyright. It’s you’re you’re scrolling around the internet on something you like. “I’m gonna right-click save as this image, to my computer somewhere.” It’s a copyright problem.
When I first entered the online space, I started going on podcasts. I think this was back in 2016 before I even had an offer. It seemed like every single show I went on, the hosts would either tell me a story of themselves or someone they know getting a Getty Images letter.
Getty is one of the companies that owns the copyrights on a ton of images online. If you accidentally use one of their images without a license, they don’t write you a letter saying take it down.
They say they write you a letter saying something like “Thank you for using our image. The licensing fee for that image will be $5,000. Pay it now, or we will take legal action.”
They will come after you and people ask me, “Well, what do I do?” You can negotiate with them, but you infringe their copyright. You also have to be careful, even with images that maybe you’re getting from a website somewhere. You have to make sure you understand the terms of the license.
First of all, do they allow for commercial use? Because anything you’re doing in your business is a commercial use. If you’re using an image that, for example, and you’re on a free plan, this will tend to happen sometimes.
If you’re on a free plan with software, maybe you can only use it for personal use, not for commercial use and use it in your business. You’re in violation of the license, that means you’re infringing their copyright.
There are some people who are less than above board. They own the copyrights to certain images and they put them places saying you can use these for free. But in the fine print, it says you must provide attribution to the artist or to us or to someone else.
If you don’t, that’s an infringement and they will come after you. These are people who literally have gotten in the business of buying up copyrights just so they can sue people. Understand, that’s something that happens. You need to be careful about it.
The other is not getting agreements in writing. It’s especially if it’s a friend, family member, or someone I trust. Those are famous last words.
One of the movies that I loved was Jerry Maguire. If anyone has seen that movie, he just does a handshake deal with someone to become their agent and then gets left at the aisle effectively on the night before the NFL draft by the person who’s supposed to be the number one draft pick because he didn’t have it in writing. That’s the kind of thing that happens.
When you have a disagreement with someone that you don’t have a written agreement with, it’s not actually that either side is intentionally being bad. It’s that we human beings are not nearly as good at remembering things as we think we are.
What tends to happen is if two people have an agreement, over time, each side is going to remember the agreement as favoring them more than it actually did, just because we humans tend to make ourselves the heroes of our stories. After a period of time, both people have an honest disagreement about what the agreement was. If there’s no written document anywhere, where do you go to figure out what that was?
The act of putting an agreement in writing will first of all force you to work out all those details, but also will give you something where, if six months from now, there’s a question, we just look back at the agreement. What does the agreement say? Neither party feels like they’re kind of getting the short end of the stick.
That’s what we agreed to. That solves it. That’s kind of the other big thing I tell people is, anything where there is a relationship where if it went bad, it would hurt your business, you need to have a written agreement. Period, full stop. There’s levels of good. I would say if nothing else, write it out, just plain English.
Each side agrees to it. That’s better than nothing, or you can kind of work your way up from that. The best option is if you have a lawyer who knows your business in and out and who knows this area of law and drafts it from scratch for you.
Most times you won’t be able to afford that because that’d be thousands of dollars for a single agreement. You’ll kind of normally use something in between, but just make sure you have some kind of written agreement for all of those relationships that matter in your business.
Jenny: You talked about images being copyrighted and using software, Canva. What kind of agreement, which one do I need to have? Can I get away with free use of an image? Or do I have to have the professional one where I’m paying 12 bucks a month for it?
Bobby: The good news is Canva will only give you the license or the images that you’re allowed to use. Canva is really built to be used this way. If you have the free Canva account, you don’t get access to as many of the images that they have in their library. If you pay for it, it’s licensed, and you’re good. Canva’s licensing terms are good. They know who their audience is.
Legal Manager
Bobby: Legal Manager was built to solve a very particular problem. Entrepreneurs don’t want to take a course to learn about the legal stuff. Just tell me what to do so I can solve these problems. Legal manager to do that.
- Legal Task Manager: You will know exactly what tasks you need to complete and in what order.
- Legal Agreement Generator: You get access to legal agreements built by an attorney, customized by you. There are 30+ templates with editing functionality.
- Chat Legal: You get your questions answered by a trustworthy source. It is powered by AI and can answer legal questions. There are about 700 unique answers in the database.
When someone first signs up for our software, they go through an audit and it asks you questions about your business and offers. We ask a bunch of different questions. From that, it creates a list of legal tasks for you to complete and it prioritizes those.
Each one of those tasks, you click on it, it’s gonna have a description. Sometimes, there’s tools that we recommend to people to use. Sometimes it’s you know, they need an agreement, which our software can do.
We give the legal manager away for free because I have this weird view that businesses shouldn’t have to pay to understand what they need to do on the legal stuff. They should be able to get that information for free.
Action Steps:
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