Digital product creation has taken the online business industry by storm and as a digital product seller myself, I understand why. When done correctly, it can be an incredibly lucrative way of doing business and you can often become a go-to source for your industry. 

But there’s one part of digital products that a lot of people don’t fully understand… 

When you sell digital products, whether it be courses, downloadable templates, stock photos, or e-books, you’re not just selling “a file.” You’re selling the rights to use that file under specific conditions.

Unfortunately, many digital creators don’t understand the parameters around selling these rights or what exactly they need to put in writing in order to prevent any legal trouble for themselves in the future. 

Many people think they can simply slap a copyright symbol on their digital products and call it a day. And while that’s for sure a start, it’s not what’s going to protect you as a whole.

Without the right legal language, you could be leaving yourself wide open to misunderstandings, unauthorized use, and even legal disputes.

To help you fully understand what needs to go into the legal side of your digital product creations, in this blog post I’m breaking down the most common misunderstandings and sharing exactly what to include in your digital product contracts so that you’re fully protected. 

Common Legal Myths and Contract Mistakes Digital Product Sellers Make

1. “I have a copyright symbol, so I’m protected, right?”

Starting off strong, this is one of the biggest legal myths in the online business world and it’s something that I’m extremely passionate about educating on. 

The copyright symbol looks like this – © – and is usually followed by the year you first published the piece of work and the year it was last updated, followed by the name of the copyright owner, brand or business.

A copyright notice like this is a statement that YES, should be placed on any piece of work that you create to inform the public that the work is protected by copyright and to assert the rights of you, the copyright owner.

It’s essentially telling people, “Hey, just so you know, I’m claiming the rights to this work, so if you steal my stuff, you’re doing it willfully.”

Including this symbol is a great first step to protect your digital products, but it’s not the ONLY step!

Having a copyright symbol tells people you’re claiming the rights to this work, but it doesn’t tell buyers what they can and can’t do with your work.

Without a written Terms of Purchase for your digital products, you have no enforceable agreement to point to if someone misuses your content!

2. Licensing vs. Ownership

Licensing versus ownership for digital products trips people up all the time – not just customers, but also digital product creators. 

So, let’s break them down:

• Ownership = they can do whatever they want with it, including reselling it, rebranding it, or claiming it as their own
• License = they can use it only in the ways your agreement allows

When selling your digital products, you typically don’t want to sell the customer the ownership of that product – you want to sell them a license to use it!

For example, let’s say you’re a Pinterest Manager for Service Providers and you sell Canva templates for Pinterest covers. In this case, your digital product Terms of Purchase might allow buyers to customize the templates for their own Pinterest boards or client projects, but not to resell those templates as their own digital product.

When your licensing terms are crystal clear, you avoid the “But I thought I owned it” conversations and the potential legal mess that can follow.

3. Resell Rights

In addition to licensing and ownership, resell rights can be another tricky situation to navigate as a digital product seller. 

Resell rights are a specific kind of license that allows buyers to resell your product, either as-is or in a modified form, but unless you explicitly give resell rights in your Terms of Purchase, buyers don’t have them.

Here’s the kicker though: without very clearly spelling out that resell rights are not included, you leave room for a customer to argue they can turn around and sell your product to others.

For example, let’s say a copywriter buys my Copywriter Services Agreement template and also has a course teaching others how to become copywriters. They might think including my template in their course is a great bonus, but as the seller, I wouldn’t allow it.

BUT in order to avoid a situation like that, my digital product would need to specify what rights they have when they purchase. (Which they all do, btw 😉)

Overall, to avoid scenarios like this, your agreement should clearly state whether resell is allowed at all, if resell is allowed, under what conditions, and whether resell requires a special license or fee.

4. Refund Policies

Another huge thing that digital product sellers have to navigate are refund policies. When it comes to physical products, refunds are pretty straightforward – if customers want a refund, they can ship the item back and you can grant them their money back. 

But that’s not the way it works with digital products. There isn’t something to ship back, and oftentimes there’s no way for you to revoke access to your product either. 

This is due to the online nature of digital products – when a customer buys something, they receive it almost instantly.

If it’s a course, they get their login details right away and can start watching the training material. If it’s a download, they get access via their email, can download the product, and start using it immediately. 

There’s no way for them to “return” what they’ve received. Because even if they decide the course or download isn’t for them, they’ve used it in some capacity. 

This is why carefully crafting your refund policy as a digital product seller is so important!

To avoid any awkward back and forth, your refund policy for digital products should be clearly stated in multiple places, including on the product/purchase page and in your Terms of Purchase that they agree to before purchasing. 

Most importantly, your refund policy should be written in a way that covers specific cases, like duplicate purchases, technical issues, or dissatisfaction. 

And if you’re wondering if you’re allowed to say “no refunds,” the answer is YES – here’s how to go about it!

5. Chargebacks

Lastly, as a digital product seller, it’s important to understand the difference between chargebacks and refunds. 

As you likely know, a refund is when the customer requests their money back directly from the seller, and the seller processes it according to their policies. A chargeback, on the other hand, happens when a customer disputes the charge with their bank or credit card company.

While refunds are handled between you and your customer, chargebacks involve the payment processor and can lead to fees, penalties, and even account holds for the seller.

Unfortunately, chargebacks can be SUPER common in the digital product space because most digital product sellers have a no refund policy in place, so as an attempt to get around that, customers will go straight to their back to make the request. 

The super frustrating part here is that chargebacks are often granted and the money is taken out of your account before you even get a say, making them far more damaging to your business than a standard refund.

In fact, when you add in all of the additional fees and costs associated with chargebacks, it can add up to be over 200% of a single transaction value. 🤯

This is why having a chargeback clause (in addition to your refund policy) in your Terms of Purchase is so necessary!

The Ultimate Digital Product Protection Pack for Digital Product Sellers

Overall, the easiest way to protect yourself as a digital product seller is to have the correct legal agreements in place, with the most important being a Terms of Purchase that’s been specifically written and designed for selling digital products – because remember: the same rules don’t always apply to those selling physical products.

And lucky for you, I’ve already done the hard part for you! Instead of guessing at what clauses to include or trying to figure out what language to use in your contracts, my Digital Product Protection Pack was created with you in mind. 

Complete with a Terms of Purchase, Website Terms of Use, and Privacy Policy, you’ll have the 3 must-have contract templates for any brand or business owner selling digital products online, so you can trust your legally covered from top to bottom. 

All of the agreements are written by a lawyer (me!) and includes all the key clauses you need to protect your work, set clear boundaries, and sell with confidence!

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