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

From: Declan McCullagh (declan@private)
Date: Mon Apr 05 2004 - 08:46:28 PDT

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    -------- Original Message --------
    Subject: Net Jurisdiction Study Finds New Digital Divide
    Date: Mon, 5 Apr 2004 09:00:43 -0500
    From: Michael Geist <mgeist@private>
    To: Declan McCullagh <declan@private>
    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
    Column at
    <http://shorl.com/jagredipupryhy> [Toronto Star]
    World resists one-size-fits-all Web laws
    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
    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
    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
    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
    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@private              http://www.michaelgeist.ca
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