Articles Posted in E-commerce

International internet laws are important to understand in the context of internet transactions. Also, the issue of a foreign court’s jurisdiction over the parties comes up on a regular basis. The international laws include treaties, directives, rules, and regulations. For example, the Hague Conference on Private International Laws has adopted a convention that governs jurisdiction and judgment enforcement among its members. As such, the parties will have the opportunity to select the venue, governing law, and jurisdiction for dispute resolution before executing agreements. This way, a predesignated court would have authority over the parties and could render a final and enforceable judgment. This convention allows the parties to enforce the judgment in the proper jurisdiction. It also applies to non-consumer browse-wrap and click-wrap agreements.

International internet laws can be complicated especially if there are multiple parties involved from different jurisdictions. For example, if the plaintiff is in France, and one defendant is in Germany, and the other is in the United States, a foreign court with proper authority over the case may not grant the protections afforded to the defendants by the United States laws. The court usually evaluates where the violation took place and who was affected by it. It will also evaluate whether the defendant’s actions were intentionally directed towards the plaintiff. In some cases, the courts have been inclined to apply United States laws to foreign litigants based on the facts and evidence. Therefore, it will be determined on a case-by-case basis.

A foreign court will most likely have jurisdiction if the online commercial transactions – i.e., e-commerce transactions – had a substantial effect in their country. This is called the Effects Doctrine which holds that a foreign court should have jurisdiction where the effects are felt and damages take place despite the defendant’s citizenship or nationality. This principle has been useful in online harassment and defamation cases.

Online marketing and advertising can be a complicated process since the internet has opened new channels that did not previously exist before the technology age’s expansion. Now, with the advent of sophisticated technologies, business owners, startups, and entrepreneurs have more options when it comes to online marketing and advertising.

They can use email, telephone, or other online marketing and advertising tools to reach their customers. They can also use banners, pop-ups, metatags, mass emails, mass text messages, or linking and co-branding plans. The internet has no boundaries so you should realize that even though your company is located in one state, yet your online marketing and advertising campaign may implicate state, federal, or international laws. This can be true when your company is targeting customers in other states or nations. So, your contacts with that jurisdiction whether by having offices, employees, or customers there can play an important role in determining which court has authority to resolve disputes.

There are several state and federal laws that can be relevant to internet advertising. For example, the Lanham Act, FTC Act, or California Business and Professions Code regulate internet marketing and advertising. The Trademark Act – which is also known as the “Lanham Act” – regulates trademarks, service marks, trade names, and trade dress issues. This federal statute deals with infringements and outlines the remedies. It also creates a private right of action pursuant to 15 U.S.C. Section 1125(a)(1) against the infringing parties. A private right of action (or “implied cause of action”) is the legal right granted to a private party to file a lawsuit.

International alternative dispute resolution is a necessary variable when it comes to internet and e-commerce transactions. In most cases, the parties have entered into a written agreement that yields an arbitration or mediation clause. Therefore, it is important for legal counsel to ensure the relevant provisions properly address the following issues: (1) choice of forum; (2) choice of law; (3) selection and number of arbitrators; (4) proceeding language; (5) discovery rights; and (6) remedies – e.g., injunctions, attorney’s fees, court costs.

Trustmark providers require the parties to stipulate to some form of alternative dispute resolution. A “trustmark” is a seal or banner on a website that shows the business is compliant with industry standards. So, it promotes self-regulation of e-commerce websites. In addition, the European Union has issued directives for e-commerce transactions to promote using alternative dispute resolution.

The options are clear when it comes to alternative dispute resolution (“ADR”). First, there is “arbitration” which includes a formal determination of the legal rights of the parties. Second, there is “mediation” which facilitates formal negotiation between the parties by focusing on their underlying interests.

There are various ways to protect your intellectual property rights. First, you can register a copyright. Second, you may register a trademark or service mark. Third, you may register a patent. Copyrights are meant to protect literature, music, motion pictures, artistic works, photographs, essays, articles, computer programs, graphic design, and sound recordings. A trademark is a word, phrase, symbol, or design, or a combination of any of them that identifies and distinguishes the source of the goods of one party from those of others. A service mark is the same as a trademark but it identifies and distinguishes the source of a service. A patent grants a property right to the inventor. It grants the right to exclude others from making, using, offering for sale, or selling the invention or importing the invention into the United States. In general, patents are valid for 20 years from the application date.

So, in summary, trademarks, service marks, copyrights, and patents protect different types of intellectual property. Trademarks protect brand names and logos used on goods and services. A copyright protects an original artistic or literary work. A patent protects inventions. For example, if you invent a television, you should file a patent application. You would apply to register a trademark to protect the television’s brand name. You can also register a copyright for the product’s advertisement.

There have been multiple intellectual property disputes especially between e-commerce websites. For example, there was a legal battle between Amazon and Barnes & Noble regarding the “single click” or “one-click” buying mechanism. This legal action was confidentially settled between the parties. Google has been sued by multiple companies for selling their trademarks as keywords. In fact, American Airlines and Geico have instigated legal actions against it. Also, the infamous “Da Vinci Code” lawsuit was brought by several authors against the Random House Group claiming copyright infringement. The case was about an alleged copyright violation by Dan Brown who wrote the bestselling “Da Vinci Code” book. However, the court dismissed the case and stated that there was no copyright infringement by textual or non-textual copying of a substantial part of the subject book.

In the past, real estate transactions were consummated by signing the dotted line with ink after printing the documents. Now, most, if not all, real estate transactions are being finalized by using electronic signatures. Technology is directly affecting real estate transactions since software programs allow the parties to electronically review and sign the papers. So, in this article, we will be discussing how technology affects real estate transactions and the relevant rules and regulations.

On June 30, 2000, the Electronic Signatures In Global and National Commerce Act (“E-SIGN Act”) was passed to ensure the validity for electronic records and signatures in commercial transactions. It was formally enacted under 15 U.S.C. §§ 7001, et seq. It actually grandfathered pre-existing contracts that were consummated between users and commercial entities in delivering electronic information. Yet, any contracts that were executed on or after October 1, 2000 are subject to the statute’s provisions.

The E-SIGN Act has several requirements. For example, a commercial institution should provide notice to the consumer and obtain prior consent. It should provide notice to the consumer regarding hardware and software requirements. It should be able to associate the electronic signature with the records. It should ensure proper retention and accurate reproduction of those records for a period that is legally required.

The basic rules for commercial emails should be known by all business organizations. They should include having proper identifiers, opt-out mechanisms, and a valid mailing address in all commercial emails. In fact, the CAN-SPAM Act states that the senders of commercial emails will be acting legally if:

1) The header of the commercial email (indicating the sending source, destination and routing information) doesn’t contain materially false or materially misleading information;

2) The subject line doesn’t contain deceptive information;

Artificial Intelligence, or AI, has evolved rapidly over the past couple of decades.  The uses of AI have extended to different segments of our society, and humans have benefitted from it in various ways.  Lawyers and legal researchers have also found ways to harness the power of AI.  AI has enabled them to sort through month’s, or even year’s, worth of information in minutes.  This is especially helpful when considering how, according to IBM, over 90% of all data was created in the last two years.  However, AI in the law goes far beyond its practical uses by lawyers for information gathering and discovery.  The rise of AI has presented a number of issues and questions in the legal field, especially involving products liability.

AI and Products Liability

Recently, companies have used AI both in their creation of products, and in the products themselves.  A major issue regarding this is who should be held liable in the event the AI product causes an accident or an injury.  There is debate on whether the programmer or manufacturer of the AI product should be held liable, as well as which legal standard should apply in cases involving AI.  A main reason for this issue is the rapidness that AI has developed over the recent decades.  The government and other regulatory bodies have had difficulty keeping up with how quickly AI has evolved.  This has left people who develop AI and manufacture products from it unsure on how AI will be regulated in the future.  Adding to this issue is how there are a number of different definitions used to describe AI, as well as how it has a wide variety of usages.  While companies have benefitted greatly from AI, they also must recognize the risks its use may create for them.

We end this month’s blog with an overview on virtual currencies and the risks. Last month, we fleshed out our understanding of blockchain technology and the legal quandaries that surround it. This month we narrowed our focus to the specifics of one of its uses: currency.  Virtual currencies have great potential to provide liquidity and trust to markets, and have ushered in the beginning of a modern era of prosperity and exponential economic growth. Regulators have not quite figured out how to manage them because they are innovative and unique. Also, the courts have not quite figured out how to handle cases brought about by disputes surrounding them.

Despite their many attributes, digital currencies pose risks as well. For example, their largely unregulated status leaves them more vulnerable to the threat of hacking and any crime that might be associated with it. There have been cases where virtual currencies have been used for illegal and immoral activities, like sex trafficking and purchasing illegal narcotics.  Not only companies, but potential investors, should be aware of all the risks of noncompliance with regulation.

To quickly clarify, digital currency is any currency that exists in digital form, whereas virtual currency, a subset of digital currency, is digital currency that is not tethered to any “real” or official currency.  All digital currencies pose risks of hacking, but legal approaches to the broader category of digital currency might differ from legal approaches to the narrower category of virtual currency.

We have explored the emerging technology of virtual currencies, after delving into the blockchain space last month.  We explored how virtual currencies are being regulated—a hitherto unclear area of law that befits our general understanding of the technology itself.  After all, the blockchain was specifically designed to avoid the vicissitudes of politics that accompany regulation, which is what has allowed it to be such an engine of wealth.  The technology can be tethered to tokens and commodities, or simply used in exchange for Central Bank backed currencies.  We explored unclaimed property, gift, licensure, and tax laws, and how each applies to virtual currencies.  This week we hone our gaze on more specific laws and their effects on virtual currency: The Patriot Act and Bank Secrecy Act.  We will also focus on data privacy and security.

These two federal laws have achieved many things. Their statutory requirements can apply when something of value is exchanged between parties (e.g., goods, currencies), or stored value is issued, redeemed, or sold, or even when electronic wallets are simply held.

These requirements run the gamut regarding what those who fall under the federal statutes must accomplish. For example, often those engaging in the above-listed activities must retain specific information on whatever transfer or holding they engaged in the transaction. This helps the government track information it needs to bring the transactions under whatever legal scope it deems proper. Yet, much information is already stored, however, as the blockchain essentially acts as a ledger, but it can also be difficult to extract sometimes.

We are continuing our discussion about virtual currencies and the related issues. Because this is a burgeoning technology producing a wonderful array of blockchain innovations, regulators have struggled to determine how, or whether at all, they should regulate it.  It poses an array of novel legal questions, and its economic impact renders it of crucial importance.  Hence, it behooves regulators to assess the market and technology in order to tailor regulation. Also, many companies are not well versed in the areas of law that might affect them.  In fact, many simply follow suit, and repeat what they see other companies doing, and assume the technology’s novelty leaves them in the clear.  However, it can steer them into problems, and they often will not know they are not in compliance with the legal requirements.

In general, taxation is one area where policy matters is one that unfortunately pervades most people. Congress is currently laying the groundwork for new regulations that are innovated and tailored towards virtual goods and virtual currencies.  It is conducting congressional studies to see how best to accomplish the task. So, congressional hearings on the subject are a frequent occurrence on Capitol Hill.

As it stands, a number of states have already passed legislation imposing the taxation of “digital downloads.”  Although, this type of legislation is not directly aimed at virtual currencies and goods specifically, some state statutes are so broad that they could effectively envelop such areas.  To date, this is the extent of laws applying to virtual goods, virtual currencies, and virtual-currency transactions in our country. There has yet to be comprehensive and standard legislation that applies definitively to the whole country in these areas.  As a result, specific guidance on how to comply with taxes is spotty and unreliable, and there are no institutions that shine a guiding light.