Net Jurisdiction Study Finds New Digital Divide

[Dave Farber <dave () farber net>]

Delivered-To: dfarber+ () ux13 sp cs cmu edu
Date: Mon, 05 Apr 2004 09:00:49 -0500
From: Michael Geist <mgeist () pobox com>

Dave,

Of possible interest -- my regular Toronto Star Law Bytes column highlights 
the results of an ABA/ICC global Internet jurisdiction study released over 
the weekend (full disclose - I served as co-chair of the project). The 
survey of nearly 300 companies in 45 different countries found that U.S. 
companies were far more concerned and pessimistic about Internet 
jurisdiction risk than European and Asian companies. It also found that an 
"Internet jurisdiction risk toolkit" is emerging where companies target low 
risk jurisdictions and take steps to avoid doing business in perceived high 
risk jurisdictions.

No surprise with who was most affected by Internet jurisdictional issues -- 
in light of cases such as Yahoo! France and Gutnick -- it was media 
companies that were most likely to have responded to jurisdictional 
issues.  It was also quite troubling that respondents in developing 
countries, particularly in Latin America, experienced significant 
difficulty in completing the survey as many organizational representatives 
candidly admitted that they were unfamiliar with Internet jurisdiction 
risks and with their organization's approach to the issues.

Study at
<http://shorl.com/hosaladrifrite>
Column at
<http://shorl.com/jagredipupryhy> [Toronto Star]

MG

World resists one-size-fits-all Web laws

MICHAEL GEIST
LAW BYTES
Last week's dramatic Federal Court file-sharing decision brought into sharp 
focus not only the complexity created by the intersection of copyright and 
privacy law, but also the continuing evolution of Canadian approaches to 
Internet law issues.

In fact, where once business and Internet users expected that Canadian law 
would mirror the rules found elsewhere, today we find that there are 
Canadian-specific approaches to a wide range of Internet law issues 
including copyright, privacy, Internet service provider liability, and free 
speech.

While critics suggest that this places Canada at odds with the rest of the 
world, a closer examination reveals legal differences are cropping up 
everywhere as countries become more assertive in ensuring their Internet 
legal framework is consistent with national policy priorities.
For businesses operating online, the resulting melting pot of legal rules 
presents some tough challenges. Internet jurisdiction - the question of 
whose law applies online - has always been identified as one of the 
Internet's most challenging issues and in recent years that challenge has 
intensified by virtue of competing and potentially conflicting regulations.

A study released over the weekend reveals that businesses, particularly 
those located in Canada and the U.S., are increasingly responding to 
Internet "jurisdiction risk."  These are perceived risks associated with 
being hauled into foreign courts or facing foreign (and potentially 
conflicting) legal frameworks.
In 2003, the American Bar Association's Business Law Section, Cyberspace 
Law Committee joined forces to consider the matter with the International 
Chamber of Commerce, a global leader on Internet jurisdiction policy, and 
the Internet Law and Policy Forum, a global consortium of technology 
companies. They did a detailed survey to examine the practical effects of 
Internet jurisdiction risks on companies worldwide. (Disclosure: I served 
as the co-chair of the survey project.)

The survey was translated into seven languages and distributed in 45 
countries to hundreds of companies. The survey distribution was designed to 
encompass small, medium, and multinational companies and cut across all 
business sectors including media companies, IT and financial service 
companies, and retailers.

The 277 responses suggested that there is considerable concern over the 
challenges presented by Internet jurisdiction, though a divide is emerging 
on the issue between North America on one side and Europe and Asia on the 
other.  By a ratio of six to one, North American companies said that the 
Internet jurisdiction issue has become worse over the past two years and 
four of every five companies said they feel that matters will worsen by 
2005. In contrast, responding Asian and European companies thought that the 
risk associated with the issue has improved since 2001 and will improve 
further by 2005.

Survey respondents left little doubt that the Internet was responsible for 
the problem as a majority of companies who thought that jurisdictional 
issues are an increasing problem attribute their concern to the emergence 
of the Internet and e-commerce.
While compliance challenges such as competing copyright or privacy laws 
capture much of the attention, when companies were asked which 
jurisdictional issues posed the greatest concern, first on the list was 
actually litigation risk. This suggests that the risk of being pulled into 
court is the biggest fear of companies operating online, exceeding concerns 
associated with conflicting legal frameworks. Other notable concerns 
included industrial and consumer regulations, e-commerce regulation, 
taxation, and privacy.

Consistent with leading cases such as the Yahoo! France case, in which the 
Internet portal was sued in France for content available on its site, and 
the Australian Gutnick case, in which Dow Jones was sued in Australia for 
one of its articles that appeared in Barron's magazine, it is the media 
sector that was clearly the most affected by Internet jurisdiction. For 
example, more than half of media company respondents indicated that they 
have adjusted their business operations in response to Internet 
jurisdiction risk.

The survey also revealed that some companies, particularly those situated 
in North America, now seek to influence jurisdictional outcomes by using 
both technological and legal approaches to mitigate risk.
The most common methods to achieve this include the insertion of legal 
terms on Web sites, the use of a local server, the use of a national 
(country-code) top domain name, or the posting of local content.

North American companies are also more likely to attempt to identify the 
geographic location of their users or refrain from interacting with people 
in certain jurisdictions. Sixty-nine per cent of North American respondents 
indicated that they employed techniques to identify user location, compared 
with 41 per cent of Asian companies and 29 per cent of European companies.

Companies are increasingly refraining from interacting with certain "higher 
risk" jurisdictions citing fears of liability in the target jurisdiction, 
liability in the home jurisdiction, and user fraud as the primary reasons 
for doing so. They attempt to achieve this by employing technical measures 
to block access to their site or by establishing registration requirements. 
The use of geo-locational technologies, which purport to identify the 
location of Internet users, is still relatively rare.

Although the survey provides a good snapshot of evolving Internet 
jurisdictional practice in the developed world, it is noteworthy that 
attempts to obtain information from companies in the developing world were 
largely unsuccessful.  Respondents in developing countries, particularly in 
Latin America, experienced significant difficulty in completing the survey 
as many organizational representatives candidly admitted that they were 
unfamiliar with Internet jurisdiction risks and with their organization's 
approach to the issues.

As the roller coaster ride of Internet law rules continues, it is becoming 
increasingly apparent that business approaches to the Internet are also 
changing. This new survey suggests that businesses are starting to 
proactively respond to Internet jurisdiction risk by adapting their 
approach to e-commerce. If the dust ever settles, the online businesses of 
tomorrow may be quite different from what exists today.


**********************************************************************
Professor Michael A. Geist
Canada Research Chair in Internet and E-commerce Law
University of Ottawa Law School, Common Law Section
Technology Counsel, Osler, Hoskin & Harcourt LLP
57 Louis Pasteur St., P.O. Box 450, Stn. A, Ottawa, Ontario, K1N 6N5
Tel: 613-562-5800, x3319     Fax: 613-562-5124
mgeist () pobox com              http://www.michaelgeist.ca

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