Author: Christopher Hamel-Smith
As we begin to use the Internet to conduct e-commerce in the global market, we must be proactive in managing the risk of being sued in Courts across the Globe. Our businesses will pay a high price if we wait to react after being dragged into a foreign Court. Last week, we saw that we can use contract terms as powerful tools to reduce our risk of becoming entangled in a web of worldwide litigation. However, this risk cannot be effectively managed by the use of contract terms in isolation. We therefore need to understand our other options.
One reason that contract terms alone cannot protect us is that each country has its own laws about the circumstances in which various contractual provisions - including those that express a choice of the Courts of another jurisdiction - may be invalid. For example, it may not be possible to enforce such a contract term against consumers where the laws of their country strike down such terms in order to protect consumers from any abuse of a supplier's superior negotiating strength.
Another reason is that our commercial activities over the Internet expose us to claims by parties with whom we have no contractual relations. Indeed, we cannot conduct e-commerce or even establish a Web site without exposing ourselves to a wide variety of non-contractual claims. For example, parties with whom we have no contract may take legal action against us in their own Courts claiming, for example, that material on our Web site infringes their trademark, libels them or constitutes false or otherwise illegal advertising. Because we have no contract relationships with such parties we can hardly use contract terms to manage these risks. However, we can do a number of other things to reduce them.
First, we must become more aware of the evolving rules that determine when foreign Courts may assume jurisdiction over parties who have established a presence on the Web and who are conducting e-commerce. To date, it is mainly the US Courts that have had to address these matters. Nevertheless, there are some general approaches that can be identified and implemented as appropriate to your business. However, several of these may impact your ability to effectively implement your e-commerce strategy. The challenge is to balance our business objectives and the legal risks.
For example, applying the current US case law, it is quite clear that we can reduce the risk of being hauled before an American Court by limiting ourselves to a passive Web site, for example providing information similar to that traditionally presented in a book, magazine or brochure. However, we increase the risk of being dragged into such a Court as we increase the interactivity of our Web site, for example by adding a form for users to order products or request services. Clearly, most businesses are going to be unable to sacrifice the business benefits associated with developing an interactive Web site. However, we must be aware of the risks and consciously balance the tradeoffs involved.
Another option is to try to limit access to our Web site or to refuse to supply product or services to parties from certain Countries. For example, we may want to consider designing the structure and user-interface of our Web site to require a user to identify his Country or State. Depending on his answer, we may then deny access to our Web site or decline to accept his on-line order.
While many of our Web sites already make use of a disclaimer to manage various legal risks, not all of us have considered whether we should include language to expressly declare that our site is intended to provide information, products or services (as appropriate) to residents of specified Countries or States. For some, this may be an option.
Much of the early litigation concerning the Internet has arisen out of disputes about the ownership and use of trademarks and domain-names across national boundaries. Other preventative actions that we should therefore always consider include international trademark searches and registration of our trademarks and domain-names across the globe. Of course doing so across many jurisdictions can be expensive. However, as we begin to use the Internet to penetrate global markets, we need to anticipate and resolve possible conflicts with trademark and domain-name owners in other countries. The alternative is the real risk of litigation in foreign Courts and the loss of our valuable trademarks.
This challenge to obtain international protection for our trademarks and domain-names is critical to our preparations to use the Internet to conduct e-commerce in the global market. In my next article, we shall therefore examine it in some detail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
