LEGAL
Until relatively recently, individuals and legal entities, such as corporations, wishing to establish a new business followed what might be referred to as the "bricks and mortar" approach: they found a physical location such as an office, a storefront or a warehouse; they moved their goods into this physical location and remodeled it to preserve their goods and make the location an inviting place for customers; they recruited employees to operate the location and interact with customers; and they distributed marketing materials and other information through what have become known as "old school" channels such as newspapers, magazines, television, billboards and flyers. However, with the rise of the Internet things have changed forever. For in-house legal departments this has meant the addition of specialists in a number of new areas and general counsel have had to learn how to advise executives, managers and specific departments and business units on how to act in a brave new "online world."
The starting point for effective legal counseling and business planning for Internet activities is recognizing and understanding the concept of "Internet governance," which the United Nation's Working Group on Internet Governance has defined as "the development and application by Governments, the private sector and civil society, in their respective roles, of shared principles, norms, rules, decision-making procedures, and programs that shape the evolution and use of the Internet." Internet governance is filled with complex issues and diverse stakeholder interests that will continue to create uncertainty. It is generally acknowledged that the development of the Internet must be done in a manner that recognizes that this new technology touches on basic human rights and fundamental freedoms and that there is a need to preserve access and promote and facilitate diversity.
However, the challenge for all parties involved is guaranteeing basic principles of human rights, as well as individual privacy rights, while also developing appropriate regulations to incentive investments in new Internet technologies and infrastructure, facilitate e-commerce and police nefarious and dangerous activities such as cybercrime, "hateful speech" and cyber-bullying. In fact, responses to cyber-bullying illustrate some of the novel issues that legislators, courts and communities must address as the use of the Internet spreads: what rights and responsibilities should attach to the autonomous identities of persons on the Internet and involved with social media and who should be responsible when one child uses a social media platform to inflict emotional harm on another child? Moreover, the Internet has raised questions about the scope and utility of traditional legal institutions such as intellectual property rights and consumer protection. Finally, the extraordinary reliance of the Internet for business activities and provision of public services has triggered ongoing debate regarding the best way to manage critical Internet resources.
A number of excellent and balanced reports and surveys on Internet governance are available from respected sources such as the Internet Governance Forum and the Diplo Foundation and the Diplo Internet Governance Community. Corporate counsel looking to be involved in Internet counseling should seek out these materials and review them carefully before discussions begin with businesspeople. Through this educational process counsel can begin to create his or her own framework of reference that can be used to develop global compliance strategies and/or conduct due diligence relating to the business and legal issues that will likely arise when the company decides to establish a Web presence in a new market.
In order to support counsel's learning process the following sections touch briefly on five key areas that are regularly addressed at conferences attended by Internet governance experts. To create a more practical context, counsel might think of the following series of questions that must be answered while working on a strategy for entering a new market via the Internet:
Relying on the analogy to the traditional storefront, it makes sense to begin with understanding and evaluating the technological infrastructure in the market that will be used by merchants to set up their Web presence and by local consumers to access, view and otherwise use the website. Internet governance experts often extend the scope of infrastructure issues to include efforts relating to "standardization," which would presumably reduce the costs and challenges of establishing and maintaining a Web presence in multiple jurisdictions and allow consumers in one country to easily access and use websites in other countries.
Perhaps the first thing to consider in this area would be the elements of the existing telecommunications infrastructure and related policies in the market. On the technical side, this means looking at how Internet access and connectivity is provided, the reliability of connections, and the costs associated with connectivity. In other words, how does one go about establishing their Web presence from the technical side and how difficult and expensive is it for local consumers to access a website that interests them. In addition to the current state of the telecommunications infrastructure, notice should be taken of the status of initiatives to improve access and connectivity, such as efforts to facilitate universal access and overcome other hurdles commonly referred to as the "digital divide."
Another issue to consider is the existence, sophistication and evenhanded application of antitrust and competition policies designed to ensure the development and maintenance of fair and competitive markets and prices. Finally, the strength and reliability of the infrastructure depends on legal standards and systems, which are the topic of the next "big question."
All countries, regardless of their stage of economic development, are struggling mightily with the expansive range of legal issues that have been created by the explosion of interest in Internet usage generally and in e-commerce specifically. Legal issues touch on areas that have long been considered to be fundamental human rights, at least in most countries, such as "freedom of expression," and the Internet has raised legitimate questions relating to expansion of fundamental human rights to include access to, and free participation on, the Internet. The push for freedom of expression in this new medium of communication has been met with opposition, or at least calls for some sort of "reasonable restraint," by governments around the world and debates will likely fester for decades about governmental content policies.
Assuming that the intended Web presence of the merchant does not raise significant freedom of expression concerns, there are nonetheless a whole host of potential legal issues to consider, including recognition and protection of intellectual property rights relating to elements of the website (i.e., copyright protection for content on the website; trademark protection for distinctive marks; and patent protection for business methods and processes employed to facilitate e-commerce) and goods displayed and offered for sale (i.e., what degree of legal protection against online counterfeiting is available); recognition and regulation of digital signatures and other components of e-commerce transactions (e.g., e-banking, e-money and e-payments); accepted methods for resolution of disputes regarding website use and transactions including jurisdictional issues and availability of arbitration; laws, regulations and local industry standards regarding privacy rights and data collection, use, retention and protection; and the scope and application of consumer protection laws to online activities.
The list can be expanded to include topics such as encryption, spamming, regulation of Internet Service Providers (ISPs) and cybersecurity. In addition, if a Web presence is supplemented by engagement of local personnel, consideration will need to be given to labor laws and standards.
While creation and maintenance of a Web presence generally occurs for a specific purpose, with progress being measured over a finite planning period, use of the Internet is still such a new phenomenon that merchants must be mindful of Internet-related development, even in mature industrialized societies.
Internet development issues are most apparent in markets that are struggling with economic development in general and concerns in these markets include continued evolution of infrastructure and standardization, as discussed above; selected issues relating to legal standards and systems, particularly e-commerce, copyright, cybersecurity and labor laws; access and network neutrality; financial support for infrastructure development; education and training; technology transfer; development and implementation of tax laws and policies relating to e-commerce; and customs regulations.
From a public policy perspective, countries need to ensure that the growth of the Internet complements their existing development activities, including efforts to deliver basic education, health and public services.
Whenever a merchant enters a new market, consideration must be given to the broader socio-cultural environment in which people and enterprises interact. At a basic level this means that merchants must design their Web presence, particularly the content of their websites, to conform to social and cultural norms and practices in the market. In other words, it is not sufficient for a U.S.-based merchant to simply replicate its domestic website in a new foreign market. Instead, the merchant must understand and respect the needs and cultural expectations of local customers and invest time and effort in localizing the content of the website.
In addition, attention to socio-cultural issues must extend to broader concerns within each new market including a wide array of fascinating, yet quite difficult questions relating to freedom of expression, privacy, data retention and protection, cybercrime, network security, multi-lingualism, Web standards, access for disabled persons, education and the role of women, young people and indigenous peoples. For example, developing countries are keen to ensure that local content is created for, and available, on the Internet and presented in a manner that respects local culture and heritage. Another unanticipated benefit of large volumes of high quality local content is that Internet charges decline and levels of service improve.
Understanding and addressing each of the questions described above is difficult enough; however, the process gets even more complicated when one realizes that a number of different stakeholders have exerted their influence into the evolution of Internet governance. Merchants developing a continuing Internet-based business plan must be prepared to monitor the views and initiatives coming out of international organizations; professional organizations; the business sector; regional, national and local governments; NGOs, the academic research community; and groups and individuals that emerge as "Internet guardians" and activists (e.g., Julian Assange and WikiLeaks). Many of these groups not only provide commentary and input regarding policies, they also serve as formal regulators and overseers.
Merchants need to understand where regulatory responsibilities lie in each new market and, in particular, where conflicts may arise between regulators in the new market and between regulators in different markets seeking to assert jurisdiction over the same transaction or activity (e.g., cross-border transfers of non-public personal information and/or taxation of an online sales transaction involving a merchant and customer from different countries). Merchants are likely to find that laws and regulations in a new market may come from a variety of sources: the legislative branch of the national government, the executive branch of the national government and local and regional governments. In many cases issues that have not been formally addressed by laws and regulations have nonetheless been influenced by self-regulatory guidelines developed by industry groups and professional organizations, often in an effort to convince governments not to become involved.
Alan S. Gutterman is the founder and principal of Gutterman Law & Business, a leading provider of timely and practical legal and business information for attorneys, other professionals and executives in the form of books, online content, newsletters, programs, training and consulting services. Mr. Gutterman has three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company. His publications are available on the Legal Solutions website or at Westlaw at Business Counselor. Mr. Gutterman can be reached at agutterman@alangutterman.com.
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