MORE LEGAL PORTAL FAILURES ON WAY ?
Speaking at a keynote seminar at this month's Legal IT 2001 event, Baker Robbins UK consultant Andrew Levison predicted that the next year would see a number of other UK legal portals "go the same way as Law.com/uk," which closed its content service just before Christmas, at a cost of over 10 jobs and £2 million. Levison said such services - and he identified one well-known portal - were doomed because they had no obvious business rationale and had to rely on advertising for their sole revenue stream.

UK LEGAL SYSTEMS MARKET HEADING FOR MELTDOWN ?
We thought it was just six but Legal News Media has now identified at least eight UK legal systems vendors whose directors or shareholders have in the past 12 months expressed an interest in selling their companies, or at least the legal IT arms, to third parties.

But, if the discussions we have had with would-be purchasers is any indication, most are unlikely to find a buyer.

One problem is with what has been described as these companies' "ludicrously high" valuations. In the current market the most buyers are prepared to offer is five or six times annual earnings yet some suppliers are seeking a sale based on valuations of between 14 and 30 times annual earnings.

A possibly bigger problem is that even if the price is right, many suppliers lack a 'succession management' structure to run the business when its founders retire. The result is purchasers are only interested in talking to those companies where the current management is also prepared to commit to staying on for a five year buyout period.

There is also concern that many of these suppliers - who between them account for nearly 60 percent of the practice management systems in use in the UK law firms today - have substantial users bases of law firms still running older legacy Unix systems (and some are very obscure versions of Unix) raising the prospect of any would-be purchaser being faced with hardware and software maintenance problems.

WATFORD CASE UPSETS THE LIMITED LIABILITY APPLE CART
The Court of Appeal's ruling earlier this week in the Watford Electronics -v- Sanderson CFL case has upset perceived wisdom on the way companies should respond to computerisation disasters and their ability to attack system suppliers limitation of liability clauses.

Four recent cases - South West Water -v- ICL, Pegler -v- Wang, Horace Holman -v- Sherwood and the High Courts decision in the Watford case - have all held that in such disputes the buyers were able to overturn the suppliers' limitation of liability clauses by claiming that the clauses were unreasonable - and therefore invalid - under the terms of the Unfair Contract Terms Act (UCTA) 1977. However this position has now been reversed in the Court of Appeal.

The Watford case concerned the supply of a software system based on two software packages, together with some work of modification. There were many problems with the system and Watford claimed £5.5 million, as seen against the initial total contract price of a little over £100,000. In the High Court the trial judge ruled that Sanderson had contracted with Watford on its standard written terms of business and thus fell within UCTA. He then looked at the terms purporting to exclude consequential and indirect loss and limit liability to the contract price and found these unreasonable and invalid.

The Court of Appeal only considered one issue on appeal, namely the question of reasonableness under UCTA. However, the comments in the judgment are of far wider application and the full effects need to be taken into account by both IT suppliers and procurers of IT systems.

The Court of Appeal found the judge's approach to be wrong. Lord Justice Chadwick said that where experienced businessmen representing substantial companies of equal bargaining power negotiate an agreement, they should be taken to be the best judges of the commercial fairness of that agreement. The Court should in these circumstances be slow to intervene to substitute its own judgment. The Court of Appeal also approved of the use of clauses which provide that the parties acknowledge that they have not relied on any representations made but not recorded in the agreement.

So where now does this leave exclusions and limits of liability? According to the law firm Masons "Clearly IT suppliers will want to examine the detail of the Court of Appeal's judgment and consider how they have incorporated the reasoning of the court into their forms of contract. Procurers of IT systems and services will also need to review their practices: after the earlier, first instance, judgments, some users were not negotiating standard form contracts (or at least exclusions or limitations) on the basis that if there was a dispute it was easier to argue later that they fell within UCTA and were unreasonable. This approach would now be most unwise."

THREE MORE THINGS WE DID NOT KNOW ABOUT THE INTERNET
Latest research by the UK ISP NetBenefit suggests that the average web user now has at least three email addresses. Typically these are for professional and personal use, with separate ones for web site registration where perhaps identity is an issue.

Meanwhile LawOnTheWeb.co.uk, one of the more useful online referral panels for solicitors practices in the UK, reports that despite the high profile offline advertising campaigns being run by many web sites, according to its research 80 percent of web site traffic is derived from people running key word searches on internet search engines.

By coincidence, a US public relations consultancy - Applied Communications - has just completed a survey of 6800 English language newspapers and reports that dotcom companies get more publicity when they are going bankrupt than when they are going concerns. In the UK the latest site to be singled out by the fickle finger of publicity is Sir Bob Geldof's Deckchair.com service, which has just sacked 25 percent of its staff to cut costs and "make it more efficient".

COULD MICROSOFT WIN ?
This week saw Microsoft and the US Department of Justice back in court for two days of oral arguments in the appeal stage of the long running anti-trust case. To the surprise of many commentators, the court savaged both the trial judge - Judge Penfield Jackson - and his order that the company should be split into two. The appellate panel said the problem of splitting Microsoft into separate applications and operating systems companies was that it would still leave Windows monopoly untouched and could give rise two companies dominating the IT market.

The court also questioned Judge Jackson's finding that Microsoft had tried to monopolise the web browser market and that it had "illegally" tried to tie its browser to Windows. They were also highly critical of some of Judge Jackson's "extrajudicial statements" and the way he had given media interviews in which he had attached Microsoft.

GNUTELLA GIVEN SOMETHING TO CHEW ON
The German unit of Ferrero, the Italian maker of the hazelnut chocolate spread Nutella, has successfully forced the owners of Gnutella.de to stop using the domain name out of fear that users would confuse the spread with the popular filing-sharing protocol. Gnutella, a Napster-like site, allows net users to search the web for everything from music to photos. A court in Cologne, Germany, ordered the owner of Gnutella.de to stop using the similar sounding domain, saying it infringes on the company's trademark. Ferrero said the product's image would suffer if "millions of internet users associate the word 'Nutella' with a virtual conglomerate of copyright pirates, rather than the family-friendly nougat spread."

92 PERCENT OF LAWYERS ARE ANTI ASP
According to independent market research, conducted on behalf of the legal systems supplier Keystone Solutions, 92 percent of UK law firms are currently reluctant to adopt an ASP (application service provider) approach because of concerns about security.

Keystone chief executive Graeme Frost told the Legal News Media that although the company had completed development work on an ASP version of its software and was fully confident in the benefits to law firms of being able to lease or rent software, rather than purchase it, Keystone had decided to delay the launch of an ASP offering "until a move in market acceptance of ASP is detected". Frost said he thought the US legal market was likely to be ahead of the UK in terms of its eventual acceptance of ASP.

ELEXICA NOW BUDGETING TO SUPPORT PALM PILOT OS
Elexica.com, the legal market specific ISP service set up by London-based law firm Simmons & Simmons is now publishing some of its content in a PDB file format suitable for user of the Palm Pilot compatible PDAs and handheld computers. The service's editor Jonathan Maas says he is also planning to produce a Palm compatible commentary on next week's planned budget speech.
www.elexica.com/index3.htm

ICSTIS TO REVIEW CODE AS COMPLAINTS RISE
In a consultation exercise running through until April, the UK's premium rate phone line regulator ICSTIS is to review its code of conduct for live services following a growing number of complaints about internet-based products. Last year over a quarter of the 100,000 complaints received by the regulator related to the internet.

What concerns ICSTIS is the way recent developments in dialler technology mean it is now possible to charge consumers - accessing sports content, betting portals and adult entertainment sites - direct to their phone bills. ICSTIS would like to sites wanting to use dialler technology or offer premium rate content to have obtained the approval of the regulator before they launch their services. As a precondition of approval, site operators would be able to charge no more than £20 for a single session online and a clock would have to be displayed on the web site so the user could see the length of the call.

WMA SAYS NO TO SPAM
The UK's Wireless Marketing Association recently held its first general meeting to discuss its proposed code of conduct, which includes a recommendation that the WMA should be able to impose sanctions on members who send unsolicited marketing messages via mobile phones. The WMA hopes to have a code based entirely on permission-based marketing, with simple opt-out clauses for consumers and a complete ban on all spamming. Other proposals include the creation of a formal consumer complaints system, requiring promoters' names to be clearly identified within communications and a name-and-shame system who breach the code.

IF THE CAP FITS
UK law firm, Dickinson Dees has successfully defended Cap Factory Limited in front of the ICANN-accredited National Arbitration Forum (NAF) in the US in a domain name dispute. The company registered "thecapfactory.co.uk", "thecapfactory.com" and "thecapfactory.net", directing internet users to its web site selling custom-embroidered baseball caps. An American business also called Cap Factory wanted the ".com" and ".net" names to be transferred to it, since it had registered two US service marks, "CAP FACTORY" and "CUSTOM CAP FACTORY", and "capfactory.com", "capfactory.net" and "capfactory.org".

The UK company had been trading under its name for a number of years, was establishing its reputation and had registered "CAP FACTORY" as a UK trademark. To differentiate itself from the US business, the UK company terminated transactions with US residents and included a statement on its web site stating that it did not deliver to the US. However, it was still receiving a steady number of inquiries from the US. It suggested to the US business they enter into an agreement whereby it would refer all American inquiries to the US business and inquiries from Europe received by the US business would be referred to the UK company. The US business was not interested and shortly before Christmas it referred the dispute to the NAF in Minneapolis. Cap Factory Limited, the UK company, instructed Mark Pearce, the head of the Dickinson Dees intellectual property team, to act in its defence.

E-DISTRICT CALLS IN THE SFO ?
In the last issue we reported the controversy surrounding Steven Laitman, the chief executive of E-District.Net who was accused of having "substantially over-stated" his company's revenue and web traffic figures, including page impressions and user numbers. Although the case raised the perennial issue of web traffic measurement metrics - what do you measure and what do the figures mean anyway - it appeared that was the end of the affair. However, this week matters became more serious with the company announcing that it had sacked Laitman and was starting legal proceedings against him. The company says it is suing for damages for fraudulent misrepresentation and breaches of fiduciary duty and has already obtained a temporary court order freezing Laitman's assets in the company. Newspaper reports also suggest the Serious Fraud Office has been asked to investigate the case. E-District trades under the internet brand name of LeisureDistrict.Net.

WELCOME TO THE BIG BROTHER AWARDS
Next week the US watchdog group Privacy International will hold its third annual US Big Brother Awards to name and shame the public and private sector individuals and organizations which have done the most to invade personal privacy in the United States in the past year. The ceremony will be held at the Cambridge Hyatt in Cambridge, Mass at the 2001 Computers, Freedom and Privacy Conference.

Three Orwell statutes of a golden boot stomping a head will be presented to the government agencies, companies and initiatives which have done most to invade personal privacy. A lifetime achievement award will also be presented to the organization that has systematically invaded privacy over a long period of time. Previous winners in the United States include The Federal Bureau of Investigation, DoubleClick, The FAA's BodyScan system, the Department of Commerce and Microsoft.

Positive Brandeis awards will be also be given out to champions of privacy. The Brandeis Award is named after US Supreme Court Justice Louis Brandeis, who is considered the father of American privacy law, describing privacy as 'the right to be left alone.' The awards are given to those have done exemplary work to protect and enhance privacy.

The judging panel, consisting of lawyers, academics, consultants, journalists and civil rights activists, are inviting nominations from members of the public. Nominations can be made directly from the site: www.privacyinternational.org/bigbrother/us2001/

META DATA CONSULTATION ENDS AMID APATHY
The Lord Chancellor's Department's recent consultation exercise, on proposals for a meta data and content classification scheme for legal advice web sites, has drawn to a close, to the apparent total indifference of almost the entire legal web developing and surfing community.

Two months of consultation produced 35 responses, including just one from a member of the public and only one from a law firm - despite the fact the 2000 plus law firms in England & Wales with web sites are likely to be at the sharp end of any proposals. However, the LCD can take heart from the fact it did receive comments from the representatives of one Commonwealth government and the members of a sixth form college.

David Lock MP, the junior minister responsible for IT at LCD, said he was pleased to see that "Most responses were broadly in favour" of the consultation paper's proposals. This is not quite correct as in fact only 14 people bothered to comment on the consultation paper as a whole - as distinct from specific, detailed issues. Of these 14, just eight were in favour of the proposals. As for the remainder, two were opposed and four non-committal.

It is also worth noting that a number of respondents had concerns about the proposals in their present form. Three of the most frequently mentioned reservations were: the need to offer web site owners an incentive to adopt the proposed standards; the importance of ensuring this project was compatible with other government meta data initiatives, such as the Office of the e-Envoy working party; and the fact greater priority should be given to the creation of content than to its classification. The full responses can be found on the web.
www.open.gov.uk/lcd/consult/meta/metaresp.htm

LEGAL TECHNOLOGY NEWS.COM - FROM THE PUBLISHERS OF LEGAL TECHNOLOGY INSIDER. NEXT ISSUE 08.03.2001