1.0 NEW MEDIA LEGAL NEWS + COMMENTARY
1.1 LEGAL NEWS IN BRIEF
NetNames, one of the UK's leading domain name registrars, is taking legal advice over an alleged trademark infringement following the recent launch of a new ISP service called FreeNetName. This offers subscribers free domain names for as long as they continue to use the ISP's services.
US Bancorp of Minnesota has obtained an injunction to prevent a small Philadelphia bank from using the domain name usabanc.com on the grounds that it infringes the trademark of the Minnesota bank, which has registered the usbank.com domain name.
DoubleClick Inc has been granted a US patent that protects its Dart advertising server technology, which is used to deliver online ads to a network of affiliated web sites. DoubleClick says it could use the patent as the basis for suing or demanding licence fees from commercial rivals which it suspects have copied its proprietary ad server technology.
Internet retailer Amazon.com has filed suit in Delaware against CITI Services Inc for alleged trademark infringement. CITI sells Greek books and music to US customers via an Athens-based site with an amazon.gr domain name.
It has been reported that the Nigerian banking scam, traditionally carried out by fax, has now migrated to the Internet with fraudulent messages arriving by e-mail. As with the original fax fraud, the scam takes the form of an unsolicited message asking the recipient to provide confidential bank account details so the sender can have a temporary home for large sums of money recently accumulated in a business transaction. In return for this favour, the recipient is promised a substantial share of the money.
Patrick Naughton, an executive vice president at Infoseek, was arrested in Santa Monica, California, last week when a 13-year-old girl he had arranged to meet for a sexual encounter, via an Internet chat room, turned out to be a male undercover FBI agent who had been monitoring Naughton's activities since March. Infoseek say Naughton, who was due to play a role in the new Walt Disney Go.com venture, is no longer employed by them but refused to say whether he resigned or was fired. Naughton, who lives in Washington state, was released on US$ 100,000 bail after being charged at a Los Angeles court with the federal offence of interstate travel for the purpose of engaging in a sexual act with a minor.
"Cyber gossip" Matt Drudge, who was at the centre of the Sidney Blumenthal/AOL Internet libel action in the spring of 1998, is the latest person to have had his web site attacked by a group of hackers calling themselves the United Loan Gunmen. Earlier this month the ULG left a series of bizarre messages on the official web site for the NASDAQ stock market.
On Wednesday (22nd September) Microsoft filed lawsuits in Arizona, Missouri and North Carolina against a number of businesses and individuals linked to an organisation called the Online Software Club of America which, Microsoft alleges, are involved in an "elaborate worldwide Internet scam" involving the sale of pirate software. The courts have already issued injunctions ordering the companies, who solicit business via spam e-mails, to halt their sales activities. Microsoft said its private investigators had discovered "a convoluted tangle of counterfeiting and spamming activity" during which an estimated 25 million individuals around the world had received spam e-mail messages from the defendants.
Pentium chip manufacturer Intel has commenced federal court proceedings to permanently close down a pornographic web site with the domain name pentium2.com. Intel filed the suit against Newtown Communications and its owners. According to the suit, the word Pentium is a "unique and fanciful" trademark that was "coined and created" by Intel.
1.2 MICROSOFT TRIAL DRAWS TO A CLOSE
After 76 days of trial, US District Judge Thomas Penfield Jackson heard the closing arguments from attorneys in the US Justice Department's antitrust suit against Microsoft on Tuesday 21st September. Each side was given two-and-a-half hours to plead its case on the proposed findings of fact. New York assistant attorney general Stephen Houck claimed Microsoft "has maintained an unshakeable stranglehold on the market for PC software... it is like the emperor with no clothes, everyone, including Microsoft, knows it is a monopoly. Microsoft's attorneys took the opportunity to describe the DoJ's case "specious," "fiction," "fantasy," "silly" and "pure baloney."
Judge Jackson is expected to deliver a ruling on the question of whether Microsoft is in fact a monopoly within about a month. Depending upon this decision, there will then be a second set of hearings next year to decide what penalties Microsoft should face. One option, currently being advocated by Justice Department lawyers, would be to split Microsoft into two separate companies - one responsible the Windows operating system and the other handling the applications products, including Microsoft Office.
1.3 NEW MEDIA REGULATION - LATEST MOVES
President Bill Clinton has announced plans to reverse the US government's long established policy on computer security products by eliminating most of the export restrictions on encryption technology. The administration has already dropped plans for compulsory key escrow/trusted third-party "back doors" for law enforcement agencies and the latest moves follow industry complaints that the restrictions on encryption were hampering the growth of international e-commerce.
At a meeting in Paris in mid-September, senior executives from some of the world's largest media, publishing, IT and telecoms companies, who make up the Global Business Dialogue on Electronic Commerce (GBDe) agreed plans for an online "trust mark" scheme to help provide consumers with confidence that online e-commerce transactions were secure and that their privacy would be protected. The GBDe also called for less government intervention and for the Internet and new media industries to be allowed to regulate themselves.
http://www.gbde.org
In the UK, the Department of Trade & Industry has announced a joint Office of Fair Trading/OFTEL investigation into the potential barriers to creating online businesses. The investigation, which is expected to report by March next year, will be looking at obstacles to competition connected to the potential abuse of dominant positions by early market entrants and making recommendations about whether the current regulatory structure is appropriate. The DTi has already indicated three issues it is concerned about: whether cable companies and digital broadcasters may acquire excessive control over access to the Internet; whether popular portals,such as Freeserve and Yahoo!, have obtained an excessive share of the online advertising market, and whether "walled garden" Internet service providers could abuse their market position.
In a related development Chris Smith, the UK Secretary of State for Culture, Media & Sport, announced plans to switch off analogue television transmissions once 95 percent of the population had access to digital equipment. Mr Smith said he expected this point to be reached by the year 2010 but was conscious of the problem of creating an information underclass among the elderly and people on low incomes who could not afford to switch to digital. Mr Smith also promised legislation bringing a "fundamental review" of industry regulation, including a rationalisation of regulators and a "lighter touch" control of content.
The World Intellectual Property Organisation (WIPO) has launched what it calls a "digital agenda" to promote the global development of e-commerce. As well as reviewing the current intellectual property regime, to ensure they can encompass the needs of developing nations, WIPO also wants to define the liability of online service providers in cases of IP disputes and to investigate the use of electronic systems for collecting royalties on music, films and software delivered through the Internet.
1.4 COMMENT - CATALOGUE OF ERRORS LEADS TO ARGOS WEB DISPUTE
At the beginning of September the Argos web site experienced an enormous growth in traffic. A 21" colour television, which should have been priced at £299, was advertised for £2.99. At least one million pounds worth of orders were placed, with one customer reportedly ordering 1700 sets, before the error was spotted. Argos is now refusing to honour the deal.
Although "web-wrap" or "click-wrap" agreements have been approved in US courts, (for example, in the 1998 case of Hotmail Corporation v. Van Money Pie Inc - see October 1998 newsletter) there is currently no established case law on the point in the UK. However, if the US model is followed here, then Argos could find themselves in some difficulty.
The Argos web site itself probably amounts to no more than an "invitation to treat". Customers can browse the site, and add items to their shopping basket, until they are ready to place an order. At that point, it is necessary to tender payment details, confirm delivery, and the view Argos data protection notice before clicking on the "Purchase" button. This will almost certainly amount to an offer on the part of the customer, since all of the critical terms of the contract have been determined.
This process then generates an automated response, which confirms that the order has been received, and the goods will be delivered subject to availability. The preferred view must be that this automated response creates a binding contract, and Argos will therefore be obliged to honour their commitment to those customers who placed orders for televisions at £2.99.
It may be possible for Argos to avoid liability if it can show that there was a mistake as to the contractual terms. Argos may allege that consumers must have realised that the offer was not serious, and therefore cannot expect to enforce any agreement. However, the test for this is objective, and must be set against a context of other "ridiculous" offers which currently appear on the Internet. Lastminute.com have regularly included similarly reduced offers, deliberately hidden within their web site, to attract browsers. It will be difficult to show that a consumer should have distinguished the Argos case as being different from any number of other special
offers.
With just a little thought, Argos could have avoided these problems altogether. By incorporating their standard terms and conditions within the online purchasing process, Argos could have stipulated that the automated response does not amount to an acceptance. The option to accept or decline could then be exercised at a later stage, after a human filter has been used.
The fault which caused the problem has been attributed to "a software error", but the blame, and ultimately the responsibility for this matter will not rest there. We await the outcome of this case with interest.
Commentary by Stuart Nuttall, Internet & Technology Law Group, Jeffrey Green Russell
1.5 PIZZA FOR PORN
On September 6th, 1999 Judge Christopher Hardy at Southwark Crown Court convicted Graham Waddon, a 29-year old businessman, to eighteen months in prison, suspended for two years, for publishing obscene material on the Internet.
Mr Waddon had been running his pornography empire using servers located in the United States and argued that as publication had occurred abroad, the UK courts did not have jurisdiction. However his attempt to exploit legal uncertainty relating to jurisdiction over Internet activity was unsuccessful. The judge ruled that publication of the images was still taking place when the data was received in the UK by a web-user and it was irrelevant that the data had left the jurisdiction of UK courts in between its sending and receiving.
This case was well publicised in the tabloids not because of the legal precedent set but because Mr Waddon claimed to have spent all his ill-gotten gains, not on fast cars and fast women, but on pizza and fast food.
Reported by Steven Fullman, Internet & Technology Law Group, Jeffrey Green Russell
2.0 NEW MEDIA LAWYERS, DEALS + ONLINE SERVICES
2.1 LAW FIRM NEWS IN BRIEF
Manches Solicitors has sponsored Webspace magazine's new "Caught in the Web" pocket guide to Internet law.
Bristol law firm Lawrence Tucketts has just completed a survey of UK web sites and concluded that more than half break the law. Common faults include omitting the name and address of the business where payment is received before goods are supplied and failing to give consumers a seven day cooling-off period where a contract is made away from business premises.
The Bird & Bird web site now has a section providing practical advice and suggestions on the construction of web site disclaimers, protecting copyright and trademarks and how to bring disclaimers to the attention of visitors.
http://www.twobirds.com/library/internet/disc.htm
East London law firm Sykes Anderson has launched a web site containing free advice and guidance for litigants in person. For litigants needing some legal assistance, the firm has unbundled its services to provide ad-hoc "pay as you sue" facilities.
http://www.sykesanderson.com
CMS Cameron McKenna has opened an e-mail based business and legal information service called LawNow.
http://www.cmck.com
Osborne Clarke has launched a new web site providing free legal information and FAQs (frequently asked questions) on developments and marketing and advertising law.
http://www.marketinglaw.co.uk
Francis Currie, who until recently was based in London where he was helping establish a presence for Silicon Valley law firm Wilson Sonsini Goodrich & Rosati, has been headhunted by Davis Polk & Wardwell. His new role will be to help New York-based Davis Polk establish a Silicon Valley office.
2.2 LATEST DEALS
Tim Anderson headed the Reynolds Porter Chamberlain team that advised the Daily Mail group's Associated New Media subsidiary on the £15 million sale of its Soccernet web site to Walt Disney's Buena Vista division. US law firm Dewey Ballantine acted for Buena Vista.
Barbara Stephenson lead the Norton Rose team acting for the Internet Technology Group (ITG) on its £146 million takeover of California-based Concentric Network. Slaughter & May acted for Concentric.
Russell Booker, Victor Hawrych and data protection specialist Shelagh Gaskill headed the Masons team advising free Internet service provider Totalise on its recent launch. One unusual aspect of the project is that regular users of the service qualify for shares in the company and Masons had to ensure the launch did not breach legislation and regulations governing financial services and public share offers.
2.3 THOUGHT FOR THE DAY
Writing in the latest edition of the "AmLaw Tech" journal about the legal profession's sometimes hysterical approach to e-mail security, Mark Grossman, who heads the Internet law department of Florida law firm Becker & Poliakoff, comments: "Imagine if first class mail were new. Law journals would be overflowing with sombre warnings about the weaknesses of various glues used to seal the envelopes and analyses of opening envelopes with steam. Lawyers would probably come up with rules requiring tamper-proof envelopes.
"Go figure. Lawyers will debate the merits of e-mail without giving much thought at all to the security breaches all around them with paper documents. Sure, the reality of a dumpster diver is a bit less interesting than a possibility of a hacker snatching e-mail out of cyberspace. But if lawyers are going to worry so much about e-mail, shouldn't that at least shred their paper documents too?"
2.4 DESKTOP LAWYER SIGNS MORE OUTLETS
Epoch Software, the company behind the Desktop Lawyer service - which at one stage during the summer was seeing nearly 1200 legal documents a day being downloaded from the Freeserve web portal, has now signed a deal with BT. The move will make Epoch's online legal documents e-commerce service available to users of the BT Connect to Business web portal. This is the latest in a series of Desktop Lawyer deals with major Internet service providers, including LineOne, Sage and Totalise, as well as Freeserve. Epoch expects to announce more deals over the next six months.
2.5 AND JUSTICE - AND SHARE OPTIONS - FOR ALL
Simmons & Simmons is to join the growing number of UK law firms that are prepared to work for new Internet and e-commerce business ventures for alternative payment terms, including accepting shares in lieu of conventional professional fees.
Following the lead of Silicon Valley law firms, who have been offering fee-for-shares deals for some time, Masons, Osborne Clarke and Field Fisher Waterhouse (which recently launched a one-stop-shop - the Incubator - for e-commerce company start-ups) are already prepared to accept shares from promise-rich but cash-poor companies. However Simmons & Simmons says its new service - MatchCo which is scheduled to launch in January - will go one step further by combining legal advice with assistance from complementary advisers, including management consultants KPMG, PR agents Bell Pottinger and venture capitalists.
Clients, whose initial access to the MatchCo service will be via the web, will pay an initial fee of £1000, followed by a two percent equity share in the companies that find funding through the service. Simmons & Simmons hopes to attract other law firms to join the scheme - Field Fisher Waterhouse has already indicated it will participate.
COMMENT - Needless to say American law firms started this trend and are now having to take it one stage further to prevent their own staff from being lured away to work as inhouse counsel for the high-tech companies they advised as start-ups.
In July Cooley Godward in Palo Alto, which has recently lost staff to companies such eBay, announced it was setting aside 10 percent of its venture funds for associates, to give them a free stake in the law firm's investments in start-up companies. The "equity handcuffs" are intended to encourage associates to staff with the firm for three to four years.
Brobeck Phleger & Harrison, in San Francisco, says a scheme it runs (the firm invests US$ 2500 per associate a year in a venture fund at no cost to the associate) has helped cut its associate "attrition rate" to less than half the industry standard of about 25 percent. Brobeck says that some of its clients have returned 150 times the firm's investment after going public and reckons that the venture fund has the potential to return as much or more than the associate's basic salary.
http://www.ecommerceincubator.net
3.0 NEW MEDIA LEGAL PRODUCTS + SERVICES
3.1 TECHNOLOGY NEWS IN BRIEF
CSafe Software in Israel has launched a new system which prevents images on web sites from being copied, downloaded or screen-saved by adding microcode tags that allows users to view an image through a browser but not capture for unauthorised use.
http://www.csafe.com
Adobe has announced plans to integrate the Xerox ContentGuard system into its Adobe PDF technology. Adobe say the move will allow publishers to implement secure e-commerce of high-value PDF documents, while allowing end-users to access these documents via a standard version of Acrobat Reader software. The new system is expected to be commercially available from later this autumn.
UK software company BreakerTech has launched a system called SoftSEAL which it claims overcomes the piracy issues facing online publishers by sealing content files within a layer of hard encryption, along with indelible details of where the files were originally created and where their licences may be purchased. The files can then be released to circulate freely on the open Internet using the web, email and even CD, entirely outside the control of the original provider. But, whenever an unauthorised consumer tries to open a file it follows an indelible link to its owner and a purchase or subscription page permitting access to the sealed content.
http://www.breakertech.com
UK-based JSB Software Technologies, the developers of the SurfContent system, is to buy the rival US SurfWatch Internet access and monitoring software for US$ 29 million in cash and shares. AIM-listed JSB plans to combine the two products to meet the growing demand for software to block and monitor Internet use. JSB says the demand has been fuelled by US concerns about "cyber-skiving", where some employees have launched lawsuits claiming they have been unfairly disciplined by their companies.
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