Chapter 1: Regulatory Paradigms for Electronic Commerce
1. Setting the Stage: The Legitimacy and Possibility of Government Regulation of Online Activity
a. Geographical Boundaries
i. Geographical boundaries have a historical and political context which makes the imposition of laws based on these borders valid. They are based on a number of considerations:
1. Power – In order for laws to be effective the government must have some means of enforcing them. The US government cannot impose it laws on Brazil in part because it has no power to enforce them in Brazil.
2. Effects – The laws of a physical space are valid because they affect the people within that space.
a. Ex: A Brazilian trademark is only valid in Brazil because it will not affect businesses in other countries.
3. Legitimacy – In order for laws and a government to have credence the people in the region must have consented. The people in the region must have some role in the formation of laws.
4. Notice – Physical boundaries provide notice that people entering the zone will be governed by certain laws.
b. Anti-Geographical Regulation
i. In contrast to the physical world, cyberspace is not founded on location. The speed and method of transmission of information is not related to physical location in the world. Most people do not even know the location of the information or people they are corresponding with. Nevertheless, most governments are imposing their laws based on the physical locations of individuals.
1. Technology is not at a level where effective and efficient regulation of the internet by location can be accomplished.
ii. Choice of Law: Difficulty in deciding which law applies. Where does the act occur? The entities do not necessarily know where the other exists.
1. If the rule was “the consumer law applies” then the seller would be subject to every jurisdiction in the world. A choice of law provision in an online contract might not be effective.
2. Danger of the most restrictive jurisdiction controlling. Then the most restrictive country would govern.
iii. Some countries/states attempt to regulate any website that can be accessed from within their territory. However, if this means that every website it subject to every jurisdiction throughout the world.
iv. There is no government which has a legitimate control over the users of the internet. The people of the internet have not consented as a whole to any particular group.
c. Pro-Geographical Regulation
i. Currently, a government can impose its laws on a case when the dispute in someway effects the territory they govern. This is an easy requirement to meet and it can be applied to cyberspace. Thus, several jurisdictions can be applied to any given case. It is nearly impossible to give notice of which law will eventually decide the dispute.
1. In many cases the laws of one country/region govern a company from another region.
ii. A state can enforce its laws in another location by regulating the content providers, ISPs, and other internet services which users rely on while performing transactions over the internet. These companies which reside in the governing jurisdiction would change their policies and procedures and the consumers would feel the effects
iii. A state can enforce a default judgment against a defendant through the full faith and credit clause of the Constitution.
1. The Due Process Clause requires PJ be gotten over the defendant – PJ must be from purposeful availment of the benefits of the jurisdiction. It is not sufficient that a user simply places information on the web which can be accessed in the jurisdiction. There must be an intent for it to be accessed in the offending jurisdiction.
iv. Extradition can allow foreign countries to enforce their laws. Typical extradition treatises require the offense to be against the law in both countries in order for extradition to succeed
A. The Internet as Evolutionary, Not revolutionary
a. Real space legal system
i. RS choice of law is based on easy met “significant contact” standard
1. Multiple jurisdictions laws could apply to the case – choice of forum typically decides choice of law
ii. RS has weak notice requirement to inform a person that the states local laws apply
iii. The application of one forum’s laws will mean that other jurisdictions can’t apply their own laws (“spillover effects”)
1. Ex: Hartford Fire Insurance Co. v. California: English company violated US law when it failed to sell certain people in the US insurance but under English law they have done nothing wrong. The trial in the US meant that the English law would not apply to the case.
iv. The RS legal system assumes that spillover permits one country to preclude the use of another companies laws and that spillover is commonplace in the real world
b. Feasibility of Cyberspace Regulation
i. In order to enforce laws the jurisdiction must have some control over the person or their assets. If the individual has no assets in the jurisdiction where the law is being broken then it is impossible to enforce.
1. If the jurisdiction can get PJ over the individual then Full Faith and Credit clause would mandate other states to enforce default judgment (only applies in interstate conflicts – not international affairs)
a. PJ requires purposeful and knowingly placement of information into the jurisdiction (mere placement on the web is not sufficient)
2. Extradition is another exception however; this requires that the law be broken in both the home state of the law breaker and the outside state
c. Protecting Online Consumers
i. Information that is posted on the internet affects certain jurisdictions more than others (ie the jurisdictions where people take in the information and fall prey to it).
ii. Virtual addressing and the speed of communications are no different from traditional communication systems. Sellers and consumers often know the location or can find out very easily the location of the other party.
iii. Just like the abundance of information which is presented through telephone and mail, internet can be screened using similar techniques. Countries like Germany, China, and Singapore have already implemented such systems
iv. Self-regulating practices which are being implemented in large part by corporations and non-profit organizations only police the good guys. People that don’t have reputations are unaffected by self regulations.
B. A Pluralist Approach to Regulation of Online Conduct
a. A Transnational Cyberspace Law
i. An international set of rules for the governance of cyberspace would eliminate the confusion of choice of law problems. It is already partially being implemented in the form of ICANN for domain name registration.
1. Unlikely to happen because to differences in views in the international community
b. Regulation by Transactional Intermediaries
i. ISPs already provide contracts to customers which prohibit IP infringement, email abuse, defamatory remarks, etc. ISPs could take a stronger role in regulation.
ii. Payment Intermediaries (i.e. credit card companies, pay pal,…) can restrict the businesses they will operate with. PayPal and several credit card companies have refused to pay for gambling services after pressure from state governments. Visa has required people who wish to pay for sexually explicit services to pay additional fees because of the high risk of fraud related to porn websites.
iii. Online Auction Ope
a. Violation exists if it places burdens on interstate commerce that clearly exceed any local benefit derived from it, and subject interstate use of the Internet to inconsistent regulations.
b. Where a statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits; if a legitimate local purpose is found, then the question becomes one of degree.
c. Commercial Electronic Mail Act (prohibited misrepresentation in any commercial e-mail message): Did not unconstitutionally burden interstate commerce; act was not facially discriminatory, act served legitimate local purpose of banning cost-shifting inherent in sending of deceptive spam, or unsolicited bulk e-mail, only burden act placed on spammers was requirement of truthfulness, and truthfulness requirements did not conflict with any requirements in other states’ statutes.
i. Geological technologies: Enable a website operator to ascertain the geographical location of a website visitor based on the IP address of the visitor’s computer.
ii. Interstate Shipment of Wine: Sales have been hampered by state laws that prohibit or tightly regulate the interstate shipment of alcoholic beverage.
Chapter 5: Judicial Jurisdiction over Disputes in Internet Commerce
1) Personal Jurisdiction
a) Test for Specific Jurisdiction
i) There must be “some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum state.”
ii) The cause of action must “arise out of or related to” the defendant’s contacts within the forum state.
iii) Assertion of jurisdiction must be reasonable, comporting with “fair and substantial justice.” (burdensome?)
b) Statutes that permit Personal Jurisdiction
i) Transact business in the state
ii) Cause tortious injury
iii) Solicit business within state.
2) Due Process Requirement Applied to Online Activities
a) Operation of Websites
i) The challenge for the courts has been to indentify those features of websites that demonstrate that the site owner intentionally directed its activity at one or more particular states.
ii) Zippo & the Three-Category Approach
(1) Service purposefully availed itself of doing business in Pennsylvania and thus could be subject to personal jurisdiction there
(2) Action arose out of service’s forum-related conduct
(3) Exercise of jurisdiction in Pennsylvania would be reasonable
(a) In addressing question of reasonableness of personal jurisdiction, Court of Appeals considers (1) extent of defendant’s purposeful interjection; (2) burden on defendant in defending in the forum; (3) extent of conflict with sovereignty of defendant’s state; (4) forum state’s interest in adjudicating dispute; (5) most efficient judicial resolution of controversy; (6) importance of forum to plaintiff’s interest in convenient and effective relief; and (7) existence of alternative forum; no one factor is dispositive, and court must balance all seven.
iii) Passive Websites
(1) There will be the requirement of having “something more.”
iv) The Interactive Criterion