WHAT MAKES E-BUSINESS DIFFERENT

All e-business is potentially worldwide in scope. There are no national or territorial boundaries on the internet. The jurisdictional exposure to uncertain and possibly conflicting laws is great. The ease of access to e-business businesses through the internet coupled with their 24x7 availability presents a strong likelihood that customers from around the world will visit sites. This global exposure and related legal risks associated with the absence of territorial

boundaries as well as business hour limitations need to be kept in mind.

E-business websites are private property. They may be thought of as a piece of virtual real estate in cyberspace. Because they are positioned in cyberspace there is an implied invitation to visit them. They are intended to be visited. Visitation is encouraged further by advertising. This is one reason why websites need to implement applicable Terms of Use so that customers and visitors are on notice as to the house rules applicable to the websites, their content, services and use. Website Terms of Use have become the principal legal strategy for managing the legal risks associated with e-business or virtual business websites.

Another major characteristic of e-commerce business applications is to recognize their dependence on information technology. The risks of computer errors, hackers, computer viruses, denial of service attacks, power outages, computer malfunctions and unplanned downtime need to be appreciated. Security, reliability and scalability are thus very important to e-commerce businesses and promise to become increasingly more important in the years ahead. Cyber security has become increasingly more important as the risks become increasingly more threatening.

Another factor is the anonymous nature of the relationship between e-buyers and esellers. Fraud is much more of a risk in e-business transactions because of the anonymous character the relationship. There are concerns over possible export control violations,

customers being children or other persons who are not competent to enter into a contract with the seller, or being someone using another party’s identity or account number. Identity theft has become a major concern. These concerns are more problematic because of the anonymous,

virtual relationship that exists in e-business transactions. It is also important to recognize that

brand names and branding strategies are much more important in e-business. E-business

companies need to recognize the importance of a trust relationship with their customers. Trust

has emerged as a critical success factor.

It is important to recognize that most e-business applications involve intellectual property

considerations. Linking, framing, caching and downloading, for example, all implicate the copyright laws. Access to and use of most of website content also may require copyright analysis. Patent, trademark, domain name and trade secret issues may also need to be considered. The intellectual property analysis should be an integral part of the early planning and design for new e-business applications. E-commerce business models are usually based on the network effect. Network effects arise when the value of the e-business application increases with the addition of each participant. Supply and demand do not have the traditional economic relationship. E-business agreements tend to be short in duration with due regard to rapidly changing market conditions and advances in technology. Exponential improvements in technology keep occurring year after year. These differences need to be appreciated.

E-business transaction data and site usage data are becoming increasingly more valuable. “Click-histories” and customer data are considered to be very valuable commercially. Likewise, privacy policies and procedures are given more heightened concern in e-business transactions

compared to other brick and mortar transactions.

The internet is a communications medium. First Amendment issues may arise. Much of e-business is carried out through electronic agreements and electronic communications which implicate some specific legal issues and requirements. Electronic communication and transactions are being carried out at internet speed. The speed of these communications and

transactions also needs to be appreciated. There is less time for reflection and more potential for mistakes. Computer software errors and data input errors, for example, may cause serious

problems.

Finally, the internet affords dramatic possibilities for opening up societies that are relatively insular and closed to the outside world, although that promise remains unfulfilled particularly in countries that block unfettered access to the internet or that control ISPs. However, there are many countries that block access to the internet, or regulate the content that may be seen by citizens in their country. Efforts to obstruct content stand starkly in the way of the free flow of information and technology that has led new markets to emerge, in part, as new technologies have matured.

These are some of the principal characteristics of e-business that make it different. These

differences are useful to keep in mind when developing legal risk management strategies for

today’s e-business applications and tomorrow’s potential problems.