Legal Implications of Electronic-Commerce - Essay Example

Legal Implications of Ecommerce Inserts His/Her Inserts Grade Inserts (25, February, Outline Outline 2 Introduction 3 Legislative concerns 3 Signatures 3 Payment and security 4 Jurisdiction 7 Intellectual property 10 Conclusion 12 Introduction Ecommerce is increasingly becoming relevant in the world of business today. A considerable number of transactions are taking place through the internet, more so in Western Europe, North America and Asia. E-commerce has challenged legal assumptions about the location and meaning of markets. It has also redefined business competitors’ locations. The manner in which commercial organisations and relationships are structured is changing in this platform. Adaptation among lawyers, legislators, and legal decision makers is critical in this era. The same benefits that emanate from ecommerce also have their corresponding legal restrictions. Increased individual autonomy for shoppers poses questions on the legal validity of contracts. The convenience of buying goods or services from any part of the world affects the enforceability of transactions especially when disputes arise. Likewise, increased liberty may expose consumers to infringement of rights to privacy. It is critical for legal stakeholders to familiarise themselves with these legal concerns in order to guard against loss of business due to these issues. Legislative concerns Signatures One of the primary challenges in handling ecommerce transactions is the lack of physical signatures. E-commerce transactions take place without paper or other physical representations of transactions. In traditional business settings, handwritten signatures authenticate contracts by providing a unique form of identification for the signee (Chaudhury and Jean-Pierre, 2002). They also assist in showing the association between the person and the document being signed. Traditional signatures are highly useful in proving that the signee was actually involved in the transaction. E commerce also has its own form of authentication called the electronic signature. Sometimes it is in the form of a secret code, a pin number, a typed name or a scanned image of one’s handwritten signature (Frieden and Sean Patrick, 2006). Digital signatures may also be used; these ones come in the form of encrypted messages that only respond to a specific key when being decrypted. The latter form is highly secure in comparison to other electronic signatures. Regardless of the type of signatures chosen, certain legal implications still exist. Stakeholders are yet to decide on the circumstances in which electronic signatures ought to be trusted. Furthermore, it is still unclear whether these signatures hold the same weight as traditional ones. Some signatures seem to hold greater authenticity than others. Business persons are still uncertain about the legal effects of these various forms (Chester, 2009). For instance, a scanned image of a buyer’s signature can be easily copied and used by other parties. Similarly, it is easy for an insincere buyer to backtrack on their contract by claiming that they did not sign their name. A legal framework is clearly necessary in order to minimise the uncertainty surrounding these various options. Furthermore, parties need to harmonise the rules that govern the reliability of e signatures. Additionally, it is necessary to specify the legal liabilities and responsibilities that signatories in an e-commerce transaction have as these are already well known in the traditional business environment. Payment and security Payment systems are perhaps one of the biggest hurdles in conduction of electronic commerce. Safeguards are imperative in this area because security of private information can be compromised. Credit cards, debit cards and stored value cards are just some of the many options available for payment in e-commerce. Most times, the information being transmitted is controlled by an unofficial financial system. Unless steps are taken to secure the message along the transmission medium, then consumer data could be compromised. An effective electronic payment system is one that has features for protection of consumers’ privacy. This means that a third party should not be able to tap or access the information. It should also protect the authenticity of the message by ensuring that it gets to consumers in its original state (Frieden and Sean Patrick, 2006). The recipient ought to have a way of identifying whether the right message has been sent. Because of the invisible nature of the two parties carrying out the transaction, it is necessary to have a safety feature that protects individuals from later denying that they had performed a transaction. This refers to safety from repudiation. Therefore, three major legal issues may emanate from online transactions: confidentiality of consumer information, accuracy of the information as well as lack of security of the data (Iachello & Abowd, 2000). If a seller compromises on any of the above traits, then he or she could face legal liability for the same. The use of smart cards has a number of implications for consumers. A code of conduct does not exist for stored value cards which can be open to abuse. Consumers are increasingly exposed to hacking during these online transactions. Business entrepreneurs seem not to have considered this exposure to risk when settling for such a method of payment. Protection for these methods is relatively floppy compared to the safety measures used in other systems like credit or debit cards. Consumer laws for e-commerce are still at their infancy in terms of other issues involved in payment. For instance, buyers have the right to access various payment options and financial institutions before carrying out their transactions. Many online businesses are yet to respect this right as they only provide a narrow choice of payment methods. Additionally, payment services need to be competitively priced in order to provide equal access to consumers. In the physical paper-based world, laws that govern payment systems exist. The same case does not apply to respective sellers in the e –commerce world. After transactions have been completed, it is imperative to have proof of payment. However, this requirement is quite difficult to enforce in the internet. Sellers may not always manage their transactions properly such that it may be difficult to prove that payment did occur. Furthermore, buyers themselves rarely make legally verifiable hard copies of transactions. In the event of a dispute, neither party may be unable to prove their case (Mitnick & Simon, 2003. Regulations are necessary in order to accommodate the divergent climate of the ecommerce environment when dealing with this issue. The problem of security should also be addressed from a moral perspective. Filtering offensive material is quite necessary in e-commerce transaction. This means getting rid of viruses as well as sexually explicit content like pornography. Presence of this information in consumers’ data may lead to law suits against the business entity. Sometimes they could be accused of character defamation or other similar charges. In response to security concerns, some sellers have opted to encrypt their data. This may work in preserving the integrity of the information being transmitted but could contravene national security issues. Some countries allow their government representatives to access private communication between entities in order to protect its citizens. Law makers often struggle with finding the right balance between consumer privacy and national security. These matters have been heightened by the easy availability of information electronically. Jurisdiction It is particularly difficult to decide on the laws applicable to a case in the event of a dispute. Even without disputes, parties still need to settle on certain laws that govern transactional issues. Commercial laws are necessary in business in order to outline the obligations and the rights of parties involved. However, some countries may not have a well-developed ecommerce environment, so appropriate jurisdiction could be absent. Geographic boundaries often determine the laws applicable to a certain situation. This stems from the premise that all states are sovereign and have the right to control activities within their borders (Australian Campus Network, 2012). When business stakeholders operate in different jurisdiction, it may be particularly difficult to decide on one system. Perhaps Indian laws lack consumer protection legislation that is key to success of the transaction. However, UK laws may be more precise, but almost 70% of the transaction may have taken place in India. One’s position in the contract can determine whether to choose UK or Indian laws. It is often very difficult to explain whether the agreement was an Indian one and not a British one. Therefore, disputes in ecommerce transactions may not just arise because of the matter at hand, but could also stem from the power of the court that is hearing the case (United Nations, 2007). This problem can even be manifested in terms of the nature of the laws under consideration. For instance, what can be tried as a criminal case in the UK could be a commercial case in India. Most business deals involve the transference of goods from a supplier to a buyer. If this occurs across nations, then different taxation laws will come into play. Parties often find it difficult to determine the right taxation laws for their contract. In case agreement is reached on the taxation laws, difficulties may also arise in terms of the enforcement of those laws as one of the parties could be kilometres away, in another continent. The key goal behind taxation laws in any system is to strike the right balance. Parties should not escape taxation because their transactions occur on the internet. Conversely, they ought not to be subjected to double taxation due to these jurisdictional disparities (Suh and Han, 2003). Sometimes, intellectual property may be involved and here individuals need to agree on the copyright laws being breached. It is very likely that none of the parties will settle for a system that finds them guilty, so this could create a dilemma amongst them (Grewal and Shivani, 2012). Take the example of an issue like Copyright Law. It could be illegal in one country and legal in another. If a movie has been produced in Hollywood, where downloading it without legal arrangements is illegal, then a viewer in Thailand may object to his criminality if downloading it in his country is legal. Such a case may pose challenges in terms of determining who the offender really is. Should it be the party that downloaded and distributed the movie or simply the one that downloaded and kept it for personal consumption? Even deciding on the penalty for such a case could be a problem as the offended party may not know how to enforce the penalty. The internet is also highly unique in that an agreement can be made by simply clicking on the yes icon on a website. These are called clickwrap agreements. Many people have questioned the authenticity of click-wrap agreements and may claim that no evidence exists to bind them to the agreement (Conklin et. al., 2004). Despite this, a supplier may already have committed their financing by shipping the products to the perceived consumer. Legislators and other business regulators ought to think about these issues before passing any laws that govern e-commerce. The perpetual problem of enforcement is one that the latter stakeholders have not looked into. It is useless to have a court order which cannot be applied to the person under consideration. A legal decision is only as good as the action that proceeds from it. For instance, an individual in Ukraine may plagiarise work from a UK blogger’s website. It is particularly difficult to sue that person for stealing one’s work especially because UK laws have no relevance in that country. During an actual trial, certain problem areas may also be present. A court may question the admissibility of evidence as electronic records are not always permitted. This arises from problems in authentication of the electronic communication made (Ray and Ray, 2002). The guilty party may have altered it in some way thus destroying its authenticity. Few laws exist concerning the creation of hard copy documents that will be presented in court. Not all parties can have the discipline and time to retain their records. Many even question the application of laws that were created for physical contracts written on paper, to the cases that are in electronic formats. In retrospect, some legal players even object to the interference of judicial bodies in these transactions. A number of them believe in free market economics, where the market can find a way of regulating itself. On the other hand, others feel that self regulation is insufficient in ecommerce. Instead, there should be an international body of legislation that governs practices in the internet. Problems arising from the lack of jurisdictions stem from the fact that some people perceive online transactions as too difficult. Others may think that the amount of trade taking place via e-commerce is insufficient to warrant legal attention (Connolly, 2000). This is especially true in Asia, the Middle East, Eastern Europe and Africa. Harmonisation of laws is imperative in making laws applicable to the international business environment, which is often the platform for e-commerce transaction. Intellectual property Although intellectual property has been mentioned in previous parts of the paper, it is necessary to look at this matter from a holistic angle rather than as a jurisdictional issue alone. Digital technology presents certain challenges in the protection of patents and intellectual property that were not present in the physical business world. Users can access free information across the internet, and many of them have grown accustomed to this freedom. It may be difficult for owners of intellectual property to demand for patent protection in the traditional sense (Focus on Business, 2013). Copyright laws need to be adapted to this platform. Several loopholes exist for people to abuse intellectual property unknowingly. Businesses that fail to acknowledge these differences will find that they are offending parties in a number of legal disputes. Additionally, sellers who fail to protect their intellectual property will also lose business to opportunistic individuals. A key example here is framing and linking of information. If a website uses the image and slogans of other online organisations, then it could be abusing another’s intellectual property. For instance, a company may use the slogan of another firm to advertise (Disco, 2014). Not all parties agree concerning the illegality of this behaviour; although it should be a point of concern for business regulators. When creating a business name in the traditional corporate world, one must do a search to establish whether the selected name already exists. Failure to do could cause liability on the part of the imitator. Likewise, opportunities for infringement of a company’s business name also exist in the e-commerce. However, they often have more complicated interpretations. A business could attach the name of another company in its html domain name. For example, one may use Versace as part of the domain name, and this could be a problem for some parties. Sellers also need to protect their domain names. They ought to be aware of its status as well as its interaction with other types of intellectual property. Even trademarks could be affected by these; Barbie doll has opened a series of legal suits against e-commerce vendors across the internet that use their trademark without permission. It is generally a problem to use another person’s work without their acknowledgment and consent. However, control of this use or access is rather difficult in the internet. Stakeholders may need to think about these issues seriously when coming up with new laws. In order to understand the complications that arise from intellectual property abuse, it may be necessary to look at a recent case. In the United States, the District Court of California recently heard a case between two parties that had a dispute concerning the infringement of patents. It was known as Adobe Systems v. Kelora Systems LLC [2011]. Kelora is an information technology company based exclusively on the internet. It established a parametric search system that was patented by the US government (Medeiros and Higuchi, 2012). The organisation then took ten defendants to court by claiming that they had abused the firm’s patent. Office Max was one of the defendants in the case. Adobe filed its own suit against Kelora under the case name stated above. In their response, the organisation claimed that Kelora only took legal action against Office max because they depended on technologies from Adobe. This was therefore, an attempt to sabotage their competition. The District Court decided that the patent holder had not taken action against Office Max specifically, as widespread activities operated in the case. Adobe lost its case while Kelora also dismissed its earlier motion. The above scenario shows how complicated the protection of patents can become. The retail websites has no idea that the search methods they were using were part of someone else’s intellectual property. On the other hand, it is also possible to make a countersuit in response to a patent infringement if one feels that the plaintiff has other motifs. Therefore, laws governing patents in the physical world can be interpreted into the e-commerce world. The UK may have slightly different patent laws although the principle needs to be taken into consideration. Lack of e-commerce laws necessitates the application of traditional law in these situations (Frieden and Sean Patrick, 2006). Conclusion An analysis of the electronic commerce climate indicates that several legal issues have emerged. The legal infrastructure in the UK as well as worldwide is still premature. Payment systems present challenges in security and protection of consumer privacy. Ambiguity in this area ought to be corrected even though certain electronic payment systems are quite effective. Existing jurisdictional rules are insufficient to govern online transactions. Taxation laws as well as other laws governing business transactions on the internet need to be harmonised. Policies are necessary in order to regulate these sensitive areas. However, cooperation with other nations can also go a long way in addressing e-commerce shortcomings. References Australian Campus Network, 2012. Ecommerce and the law. [online] Available at: http://www.harley.net.au/ecommerce/Week_4_Lecture_eCommerce.ppt [Accessed 25 February 2013] Chaudhury, A. and Jean-Pierre, K., 2002. e-Business and e-Commerce Infrastructure. McGraw-Hill. Chester, J., 2009. A crash course in e-commerce legal issues. 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The Impact of Customer Trust and Perception of Security Control on the Acceptance of Electronic Commerce. International Journal of Electronic Commerce, 7(3), pp.135-161 United Nations, 2007. Legal implications of e-commerce: Basic issues, initiatives and experiences in Asia. [online] Available at: http://www.unescap.org/tid/publication/swp207.pdf [Accessed 25 February 2013] Read More