Technology &
Internet Law
E-Mania
This article appeared
in the May 99 edition of Business Money, the leading business banking magazine.
Like it or not, electronic
commerce is here to stay and if the growth over the last year is anything
to go by, it will soon form a major part of worldwide economic activity.
I myself have bought software,
hardware and other electronic goods over the Internet on a regular basis.
The major impediment to higher volume trading on the Internet remains the
fear of divulging credit card information to an unknown quantity. This
fear is largely unfounded because people are equally exposed to risk when
paying for a meal in a restaurant, yet no-one would refuse to eat out as
a result. That is not to say there is no risk attached to on-line trading
but it is far smaller than it is perceived. However, businesses operate
in the real world where perception rules and those hoping to trade successfully
on the Internet cannot avoid that issue.
The debate and technical
research for safer means of Net trading has gathered momentum with no useful
conclusion so far. Various forms of electronic wizardry have been developed
including types of "e-cash" (which get debited to the buyer's
account and credited to the seller's account almost immediately, just like
real cash) as well as electronic signatures to verify the identity of the
buyer. None is even close to becoming the industry standard and it will
be well into the new millennium before the dust settles and ecommerce
can realise its full potential. All the same, there is no mistaking that
ecommerce is here to stay and will probably prove the most significant
factor in social change since the invention of the printing press.
Britain appears to have
embraced ecommerce faster than most others and our Government has announced
its intention to bring in laws aimed at facilitating its development, although
leading commentators are pessimistic as to what it may achieve, particularly
since the consultation period was a mere four weeks. Mr Blair has stated
somewhat ambitiously that he aims to make the UK the world's best ecommerce environment
by 2002. Let us hope that he ensures there is more substance to this statement
than some of the current Governments other sound bites!
Too many businesses are
rushing to "get in on the action" without considering the full
implications. Designers seem more preoccupied with pretty sites whereas "techies" want
to make it do clever things; few co-ordinate these key areas let alone
marketing, PR and legal implications. The net result? At the very least,
disappointment at result achieved on the Net; at worst, a worrying trend
that I (amongst others) predicted a long time ago, namely a rapid increase
in Internet related disputes. The US has seen a large increase in litigation
in this field and we are following close on their heels. In my practice
alone, we have taken on two cases in the last few weeks.
Cases around the world
have resulted in findings that Internet Service Providers ("ISPs")
can be liable even for criminal actions (such as posting of child pornography)
and even here an ISP was found liable for libelous statements on its server.
Domain name disputes are increasingly common, as are trade mark and copyright
disputes.
As if all of this change
was not enough to cope with, we now have the Data Protection Act 1998.
Although yet to come into force, it will be retroactive from 24th October
1998 when it does
so. It threatens to be a far greater headache for most businesses than
its predecessor (the 1984 Act) which was very under-used and relatively
simple by comparison. The new Act will affect even manual records kept
in relation to individuals and will be extremely far-reaching. For example,
the Act restricts the transfer of data on individuals from the EU so that
it cannot be transferred to a country not having adequate data protection
laws (e.g. the USA and Canada), unless each person whose data they intend
to transfer has expressly consented to that transfer.
Now, it takes little imagination
to see where the problem lies in relation to the Internet with its very
borderless nature. Like most business lawyers, I have tended to treat the
old Act with little concern but one cannot afford to do the same with the
new Act issues, especially in relation to the Internet; indeed I have had
three cases involving new Act considerations in the last six weeks.
Research which we commissioned
at the end of last year showed that 86% of people with a web site had taken
no form of legal advice in relation to their site and our on-going on-line
survey verifies that result. Research by another leading law firm in this
sector, Eversheds, found that something like 80% of web sites studied were
illegal in some way or other - the very fact that Eversheds were able to
conduct this survey shows how much more transparent a trading platform
the Internet is.
To our surprise, our research
also showed that people's failure to protect themselves was not because
they thought there were no laws governing the Internet - they have simply
been burying their heads in the sand and we all know what parts are left
exposed when you do that! The key issue now is to educate business people
about the potential threats in this undoubtedly exciting new medium, but
not to discourage them. Prevention rather than abstention or cure; a legal
condom, if you like, rather than celibacy or combination therapy!
NEED TO KNOW MORE?
For further information
on electronic commerce or commercial litigation contact Maitland
Kalton or Julian Danobeitia. Should you prefer to telephone, call us on +44 (0)207 278 1817.
Kaltons Solicitors, Suite 302, Spitfire Studios, 63-71 Collier Street, London, N1 9BE. Telephone +44 (0)20 7278 1817; Fax: +44 (0)207 278 1835.
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