There is no magic formula you can follow to prevent your IT business from being sued, but there are several steps you can take to reduce your liability exposure. We asked attorneys to share some best business practices for IT consultants that may reduce the chance of being involved in a lawsuit. To summarize, be sure to:
- Document client meetings.
- Don't violate copyrights.
- Notify clients about breaches as soon as they happen.
- Use written contracts.
Here are the details.
1. Get It in Writing
If you often meet with clients in person or over the phone, be sure to document the meeting in case a discrepancy arises.
"The best way for small business owners to prevent lawsuits is to regularly memorialize things in writing," says
senior counsel with the
Snell Law Firm.
"This applies to events, interactions, business deals, etc. The writings should be clear so they are not subject to misinterpretation, and they should be stored in an organized way so that they can easily be retrieved in the future."
For example, if you discuss a change to a project with a client by phone, send a quick follow-up email asking the client to confirm the new direction you discussed. That way if the client later denies authorizing the change, you have documentation you can refer back to. You might also consider purchasing Errors & Omissions Insurance, which can pay your legal expenses if a client claims you didn't live up to your end of the professional bargain and decides to sue.
2. Don't Violate Copyrights
If you design websites, your clients may provide you with images to include on their site. You could logically assume that because the client provided you with the photos, they're safe to use. But that's not always the case. Your client may not actually hold the rights to the images they sent, which means you, and your client, may violate someone's copyright.
"We frequently see cases where one party claims that another is using content, typically a photograph, on a website without permission, and thus infringing the owner's copyright," says
Marc Misthal, an
attorney at the intellectual property law firm
Gottlieb, Rackman & Reisman, P.C.. "The best way to avoid such a claim is by not assuming that all content on the internet is free and available to use. Presume that permission is needed to use any online content unless you or your client created it, or if it is available royalty-free."
To avoid potential copyright infringement lawsuits, you can:
- Confirm with clients that they hold the rights to any images they send.
- Take any photos needed for the website yourself, or hire a photographer.
- Pay to use stock photos from a website such as Shutterstock or iStock.
Another step you can take to protect your business against copyright infringement lawsuits is to purchase General Liability Insurance. Not only does this policy pay for claims related to third-party injuries and property damage, it also covers advertising injuries, such as:
- Libel and slander.
- Copyright infringement.
- Misappropriation of advertising ideas.
- Invasion of privacy.
You can learn more in our article "A Copyright Infringement Primer for Technology Businesses."
3. Be Proactive if a Data Breach Occurs
If your IT company protects client data and you experience a breach, let affected clients know right away. In many states, you’re legally required to notify them.
"Always communicate any data breaches to your clients," says
Farid Yaghoubtil, a
partner at the
Downtown L.A. Law Group.
"Often the biggest mistake business owners make is trying to hide these issues. As a result, punitive damages may be assessed in the event a lawsuit ultimately is filed."
Yaghoubtil recommends letting a client know right away if you discover a breach. Not only is it the right thing to do, it can make your life easier if you land in court as a result of the breach.
"If a clear pattern of communication is shown, it will demonstrate a documented method of resolving issues," says Yaghoubtil. "This shows goodwill in in the eyes of a potential judge and or jury. It also proves to your client that you're working on the issue."
Cyber Liability Insurance can also provide an extra layer of protection for IT business owners by paying for data breach lawsuit expenses and data breach notification costs.
4. Use Contracts
To minimize the chance of a lawsuit, use contracts with everyone you work with, including:
Unless you are an expert in contract law and legalese, consider hiring lawyer to create your contracts.
If you are working on projects that involve multiple parties, it can become even more critical to use contracts.
"For IT business, clear contracts are really critical," says
Peri Berger, a
Harris Beach PLLC.
"Multiple companies may work on the same system or device, and knowing where one company's liability ends and another begins is important. If a contract is clear on what everyone is supposed to do, or not do, it makes it less susceptible to interpretation and, by extension, less likely to be the basis for a lawsuit."
If you need more ideas on what to include in contracts, read "Professional Liability Clauses to Include in Contracts."
About the Contributors
is a partner with Harris Beach PLLC
. He has over a decade of experience litigating complex matters in federal and state court in New York, New Jersey, and nationwide. Peri also counsels small and startup businesses on the specific and nuanced issues they face in a variety of fields, including consumer services, technology, and consumer products.
Marc Misthal is an attorney at Gottlieb, Rackman & Reisman, P.C., a Manhattan-based intellectual property law firm specializing in all aspects of intellectual property, including: patent, trademark, trade dress, and copyright matters. Mr. Misthal has counseled a wide range of clients from around the world, including businesses in the fashion, apparel, computer technology, restaurant, entertainment, jewelry, luxury goods, furniture, cosmetics, retail, and consumer goods industries.
is a senior counsel attorney at the Snell Law Firm
. His practice focuses on business and civil litigation, including contract disputes; shareholder and partner disputes; business torts; unfair competition; real estate litigation; construction litigation; entertainment law; and plaintiffs' class-action litigation. In his spare time, J.R. loves spending time with his lovely wife, Diana, and his two dogs, Churro and Molé.
is a partner at the Downtown L.A. Law Group
. Mr. Yaghoubtil's career as an attorney actually started at a young age representing his family in various business disputes. Since then, he has maintained and developed a passion and understanding for the law. Regardless of the size of the case or the parties involved, Mr. Yaghoubtil has dedicated his career to defending his clients' rights.