U.S. Net firms more worried about overseas lawsuits than Europeans, Asians

[Declan McCullagh <declan () well com>]

-------- Original Message --------
Subject: Net Jurisdiction Study Finds New Digital Divide
Date: Mon, 5 Apr 2004 09:00:43 -0500
From: Michael Geist <mgeist () pobox com>
To: Declan McCullagh <declan () well com>

Declan,

Of possible interest to Politech -- 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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