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This article by Stuart Adams appeared in The Advisor Fall, 1996
Many people around the world are jumping on the Internet bandwagon for their businesses, in order to reach the vast number of people capable of accessing this global shopping and business arena. Although the Internet has been around for years, its sudden explosion in the last few years has caused a dramatic transformation and expansion of this "cyberspace." What started as a military and academic forum, has now rapidly evolved into a global "cyber-bazaar" for commercial activities.
Many large and start-up businesses are now rushing to prospect in what they perceive as a new gold rush. The Internet existed and expanded partially because it was largely unregulated and used by those who communicated with a sense of noncommercial "honor." Commercial use was frowned upon and largely nonexistent a few years ago.
The rapid change in commercialization of the "Net," along with the continuing implausibility of regulation on a systemic basis, makes the Internet both a potentially fruitful and possibly dangerous place to do business. Recent improvements in security for monetary transactions, as well as the creation of "virtual" banking outlets, has facilitated the actual consummation of contracts over the Net. Although security issues are far from being resolved, there are a number of legal issues you should also consider before your business ventures onto the Internet.
Many businesses are attracted to the Internet by virtue of its seemingly effortless transcendence of geographic and political boundaries. By posting a home page from your local address, your marketing material can be accessed around the world in seconds. The ease of global access to commerce was previously unheard of. The very existence of this unfettered communication system gives rise to conflicting legal theories which might seriously impact your business.
A major debate is emerging around the world on the issue of whether a business in one location submits itself to the jurisdiction and laws of another and possibly remote political system, simply by virtue of the ability of its message being viewed or downloaded in the second location. While it is likely this issue will be clarified eventually in this country, local state and various federal courts are starting to issue diverging opinions on this matter. Currently there is no clear legal precedent in this country on whether you might find yourself subject to court process in another state or country by virtue of your marketing "success." Several courts have recently ruled that advertising on the Internet does subject you to local court process where your web page can be viewed.
The situation is even less clear internationally. Germany, for instance, forbade a U S company from providing Internet access in Germany to pornography, as defined by the German government. This may alter our traditional U S sense of due process. It may also increase foreign legal entanglements unexpectedly.
Another major area of concern in cyberspace transactions involves conflicting concepts of the impact of the Internet on trademarks, copyrights and other proprietary or trade secret rights. Our intellectual property rights system has worked pretty well over the years, but never contemplated how the mechanics of computer storage of data and Internet "browsing" would fit in. The manner in which computers and popular "browser" software programs "copy" and store material which comes across your screen as you "surf" the Internet, stretches the conceptual basis of our copyright infringement laws to the breaking point.
When your eye reads a page of a copyrighted book, it does not copy the protected page in an unlawful manner. When your computer "reads" a page, however, the same may not be true and this may violate certain laws designed to protect such works from copying. This, plus the ease with which the images and other data, such as corporate trademarks and service marks, can be captured, edited and republished, is giving rise to a surge of litigation around our country and others.
While the courts and legislative bodies try to sort all this out, and not necessarily as a team effort, this will continue for quite some time as another area of legal limbo. Meanwhile copyright and trademark issues continue to arise in ever unforeseen ways. New conflicts have arisen between those registering their "on line" addresses, or "domain" names, and those who have already registered trademarks and service marks. Courts are already opening their doors to litigation over conflicting rights to use a name for a company, product or mere web site. There is a thriving market for companies to "buy back" their registered names, as web addresses.
Another erupting area of concern is the issue of contractual formality. With virtual signatures we are entering an age of electronic, and sometimes computer automated, shopping and contracting. Computers can now search the Web on a continuing basis and offer to contract when they find goods or services electronically matching their search instructions. Without further human thought, does this digital dating game constitute a valid contract? These and other questions remain for the future, along with issues of criminal enforcement of laws, such as the Communications Decency Act, and the refusal of some commercial services to allow "spam" or unwanted electronic mass e-mail to be posted to large numbers of their customers.
The legal ramifications of Internet commerce are as uncertain as any area of the law has ever been. The potential of this cyberspace bazaar is also seemingly unlimited. The wise businesses owners will factor the potential dangers and benefits into their business plans, since both are present.
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