Management & Finance

Legal: The Future Of The Law Of The Web

One of the compelling aspects of Web 2.0 is the leveraging of user generated content (UGC) on a much more integrated and wide-scale basis. The laws dealing with UGC are nothing particularly new. A site that allows informational postings by third parties today already has to deal with risks arising from defamation, copyright infringement, trademark infringement, privacy violations and other user generated problems. But until recently this content was the actual product sold. Under Web 2.0 the purpose of the UGC changes. It is now used to promote or sell a distinct product or service, often in a highly competitive environment and at the expense of a competitor. Consequently, the likelihood of legal problems arising evolves beyond the content centric litigation we see today. The legal issues are becoming harder to manage; the interpretations of legal principles are still evolving; and technology will outpace court decisions and legislation at an increasing pace. It’s not going to get any easier to manage risk here in the United States.

But by far the biggest issue for all web companies to face will be the coming international legislation affecting the web and the application of international laws to businesses with customers in foreign countries. A company located in Europe but with paying customers in the United States is likely subject to our laws. As other countries pass new laws and begin to enforce their own existing laws on websites located exclusively in the United States it is not hard to see that the risks associated with international ecommerce increase almost without bounds. The high level rule of thumb today is to follow U. S. law, and if you can afford to do so then follow the Canada, E. U. and U. K. laws. How many small or mid-size businesses can really afford that level of expensive legal help? Not many. And that is why we will see, over the coming five years, a serious impact of the laws around the world on the businesses located right down the street.

The worst part is that there is no apparent answer to this coming challenge. Before the advent of the web every company knew that if it wanted to do business outside of the United States it needed legal assistance in that country or region of the world. The Internet changed everything, created a level playing field for competition, and contributed mightily to the globalization of industry and commerce. Have small and mid-size web businesses now positioned themselves so that the only way to compete will be to create enough leverage through consolidation to be able to afford legal assistance around the world? I believe so. Will we have a “flashback” to the competitive landscape of the early 1990’s? Quite possibly.

Where does that leave your business? Unless you are prepared to invest heavily in legal counsel around the world it leaves you selling your product or service in the United States, and maybe a few other small countries. Your desire to grow will be curtailed by a virtual “international license fee” by country: The legal and registration expenses to permit you to advertise and sell goods or services to customers in a foreign country. So, keep in mind as you plan for your expansion that there is a road bump ahead. Running an interactive website that targets and signs up foreign customers and takes payments will likely by adequate to require that you follow the laws of that country.

The information in this article is not intended to be legal advice. Always consult your attorney when faced with legal issues.

John W. Dozier, Jr.

John W. Dozier, Jr.

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