International E-Commerce Laws – Part III

International e-commerce laws have been evolving since the inception of the information technology age. International e-commerce transactions take place over a network of computers and have become more streamlined with technology advancements. The following topics will be evaluated and addressed in this article: alternative dispute resolution and insurance.

Alternative Dispute Resolution (“ADR”) is an important factor when it comes to international e-commerce transactions. It is much easier to resolve local disputes without geographical challenges. However, that is not the case with international commercial transactions because the parties can be anywhere in the world. So, tracking, identifying, or locating the customer is not an easy task for international commercial transactions and presents jurisdictional issues. In most cases, they are related to contractual disputes for the purchase and sale of products or services. There could be non-contractual disputes such as trademark, copyright, data protection, and domain name disputes. The parties should have the option to engage in mediation or arbitration to resolve the dispute. Mediation is conducted by a neutral expert who renders a non-binding decision after reviewing the file. Arbitration is conducted by a neutral expert who renders a binding decision after reviewing the file. Our international mediation and arbitration attorneys regularly provide professional legal services to clients.

In some European countries, the customers are permitted to file a lawsuit against the e-commerce company in their own country or where the e-commerce company is located even if the company has no business operations therein. For example, in LICRA v. Yahoo, the French courts issued an order against Yahoo, which is based in the United States, to prevent French residents from purchasing Nazi memorabilia through its website.

Insurance is another important factor when it comes to international e-commerce transactions. Business owners should obtain insurance policies that are suitable for their operations. For example, that may include a general liability insurance policy and cyber-insurance policy. There could be issues related to cybersecurity breaches to business interruptions due to dysfunctional network servers, websites, or electronic devices. There is also an issue of liability towards third parties for transferring malware or violating their intellectual property rights. Business owners and entrepreneurs should consider the scope of coverage when purchasing insurance policies. There are “first-party coverage” and “third-party coverage” insurance policies. First-party coverage protects the policy holder’s property. Third-party coverage protects the policy holder for personal injuries or property damages the policy holder causes towards third parties.

Business owners and entrepreneurs should consider a Commercial General Liability policy which can be part of the company’s liability prevention and asset protection plan. It covers liability that can result from personal injuries and property damages caused towards third parties. It can cover defamation (e.g., libel, slander) or related claims that may have resulted from the policy holder’s advertising or marketing activities. Our international e-commerce law attorneys recommend reviewing the insurance policy and its exclusions before purchasing it.

Insurance policies can be complicated when it comes to technology related transactions. For example, we have clients who buy and sell hardware and software products. We also have clients who regularly deal with intellectual properties. Thus, it is important to review the insurance policy to determine whether it covers damages to a third-party’s property even if it is not tangible. The courts have ascertained the issue of property damage and held that the insurance provider can owe a duty to defend the policy holder for faulty hardware or software products. However, in other cases, the courts have evaluated whether computer programs are tangible properties. The Ninth Circuit has held that trade secrets do not qualify as “tangible property” and a Commercial General Liability policy does not cover the damages. The courts have also assessed whether there was an “actual loss” or only “loss of benefit” when facing insurance related disputes.

Intellectual property infringement should be addressed in corporate insurance policies simply because the policy may not extend to them. In some policies, such coverage may be granted under the corporation’s advertising practices. In other words, the policy holder could be granted coverage if it proves the intellectual property violations (e.g., trade secret theft) resulted from its advertising activities. In these cases, the courts look at the following factors: (1) whether the claim is a recognizable advertising injury; (2) whether the defendant participated in the advertising injury; and (3) whether there is a causal connection between the advertising activity and advertising injury. Now, with that said, it is crucial for companies to regularly review and evaluate their insurance policies.

It’s important to know your legal rights and responsibilities when it comes to international e-commerce transactions. In summary, the following rules and regulations may apply to these transactions: Digital Millennium Copyright Act, Uniform Commercial Code, E-SIGN Act, UCITA, UETA. Please contact our law firm to speak with an international e-commerce attorney at your earliest convenience.