Ewan McIntyre is head of the IP/IT Group of Edinburgh law firmRobson McLean WS (www.robson-mclean.co.uk).
The Scottish Group of the Society for Computers & Lawarranged a series of three seminars on e-commerce and its legal implicationsjointly with the Faculty of Advocates Information Technology Group, held inNovember, December and February. Alec Nacamuli of IBM, Iain Veitch, New BusinessManager, Government Scotland, with BT and Nigel Miller, Head of the IT &Cyberlaw Group at Fox Williams were the speakers.
Each of the meetings was chaired by Iain Mitchell QC,Vice-Chairman of the Scottish Group and Chairman of the Faculty’s IT Group.
Alec Nacamuli
Alec Nacamuli gave a stimulating overview of issues arisingfrom Business to Consumer E-Commerce (B2C), Business to Business E-Commerce(B2B) and the developments in dealing in equities. As far as B2C was concernedAlec saw some key issues worthy of comment, namely:
- an obvious need for IT to be able to cope with volume
- the need to be able to fulfil customer requests
- the increasing importance of branding
- requirements for consumer protection
- the impact of the Internet for the way marketing activity is priced – as the success of marketing campaigns can now more accurately be gauged, will marketing become priced on a results basis?
- development of payment mechanisms, perhaps to include low-value transactions.
Turning to B2B e-commerce, Alec identified the final stage inthe evolution of a business e-commerce strategy as being a move away from simplytransferring existing business activity to the Net or even firms extending theirreach and range to an expansion of the activities of the business itself.
The Group was given some pointers to the new roles opening upfor third parties, such as providing certification or registration authority ortransaction authentication. Alec suggested some opportunities that might bethere to be taken by banks in bill presentation, guarantees and letters ofcredit, financing and even factoring.
Finally, he looked at the trading of equities. Bill Gates,said that the Internet changes everything. If we need a reminder of the speedwith which business activities can be revolutionised, we need only look atstockbroking. There are now a host of online share dealing services offering cutprice commissions and a wealth of market data in an accessible format fordelivery straight to the public. As a holder of one of the 5 million onlineaccounts, the writer looks forward to the time anticipated by Alec whencommission free deals will be available – only those companies providingincreased value will be able to continue charging commissions.
Iain Veitch
Iain Veitch gave a thought-provoking presentation on the useof e-commerce in the practice of law, commencing by reminding the group of thePrime Minister’s statement that by 2002 25% of Government transactions shouldbe capable of being conducted electronically. Since Internet usage was risingdaily (with 11,000 new users in the UK alone), it was clear that there was adesire both from government and from customers to push forward with e-commerceand it was for lawyers and others who might in a sense act as intermediaries toprovide the means of doing business in this way.
Iain highlighted again the significant cost savings which itis now accepted can be made with e-commerce and the benefits for government,including a reduction of the percentage of GDP spent on government functions,the freeing up of resources for fundamental local service delivery and theempowerment of individuals. He had found e-commerce could serve to allow accessto information from a range of locations using different access methods, such aslaptop or mobile phone. He envisaged smartcards as the key enabler and a moreefficient round the clock service, 7 days a week.
He identified the folly of some IT spend with the formula: CO+ NT = ECO (or Current Organisation + New Technology = Expensive CurrentOrganisation).
Iain turned his attention to some of the barriers to change,such as an inadequate business case for change, lack of resources, seniormanagement inertia, IT integration and a lack of vision/strategy.
BT had obviously pursued a fundamental change of theirbusiness model resulting in the reduction of staff numbers from 240,000 to140,000, mainly cuts in middle management roles. 95% of purchase orders forindirect goods and services were through e-business, 20% of tenders were pursuedwith online bidding and 50% of stock was acquired using Just In Time systems.The result of the IT revolution for the company? A 35% increase in productivityover two years and £600m cost savings using the Internet/intranet. In additionto the financial benefits, staff became used to far more flexible workingarrangements. The intranet had become the virtual nervous system of the company,being used for matters such as meetings and briefings.
Returning to the principal topic, what of the legalprofession? He had the vision of technology being used for documentation flow,training and the provision of legal services. There was an interestingdiscussion after the presentation, largely focussing on security issues. Iainwas keen to remind all of the security issues facing us in more‘traditional’ ways of doing business and the feeling was that people shouldnot become unduly concerned about security although there were commercialproducts available to give some comfort in these areas. Clearly some discretionhad to be used as to the type of business which one would feel comfortableconducting electronically and the varying levels of security justified.
Nigel Miller
The title of Nigel Miller’s presentation was ‘Setting upan E-Business – Key Legal Issues!’
Branding
Nigel took the meeting through the differences between onlinebranding and branding in the traditional world. Rather than looking to create alink between product and origin, one view of branding online is to try to link abrand to the values of the target audience.
Trade Marks & Domain Names
With the lawyer’s role primarily being to protect theclient’s brand, an obvious first step is to check that the proposed domainname is available. In a situation where the .com domain name is preferred but isalready registered, alternatives might be found in the .net or .org domainswhich are now less restricted in availability than was once the case. Nigelreviewed the key differences between trade marks and domain names, highlightingthe possibility of registering as a domain name a word which could not beregistered as a trade mark and gave a reminder that the Internet Corporation forAssigned Names and Numbers (ICANN) Dispute Resolution Policy is now in operationwith the first decision having been at the instance of the World WrestlingFederation. (A check of the ICANN site (www.icann.org)will show the volume of applications now lodged for determination under thepolicy.)
Protecting the Business Model
In addition to the protection of brand, advisers need to lookat protection of the business model underlying the e-commerce venture itself.
- Patenting – Traditionally a difficult form of protection for business models to attain. One should however ask whether part of a technological process which is part of the venture is sufficiently novel and inventive to have the potential to be patented – the ‘one-click’ technology used by Amazon.com being an example.
- Confidentiality – Confidentiality agreements can be terribly important especially if the intention is to apply for patent protection.
- Copyright – Material on a Web site attracts copyright. In the environment of the Internet, there are obviously issues about implied licences to temporarily cache and store such content and perhaps even to download and print. Given the uncertainty, however, clear copyright notices indicating the scope of rights granted to the visitor are worth considering.
- Web Site Development and Intellectual Property Rights – Clients should check they own or have suitable licences for all content of their Web sites including graphics and sound. Funders might require warranties to this effect as part of a funding package.
Auditing the Business Model
Looking at the concept itself – how is it proposed that itwill generate revenue? Do any regulatory issues arise from the proposed venture?Financial services and auctions are obvious examples.
Raising Capital
Nigel went on to look briefly at possible sources of fundingfor businesses including:
- venture capital
- private equity – business angels, friends, family
- Ofex/AIM/Techmark markets
- incubator funds.
He also considered some relevant legislation such as theCompanies Act 1985, s81(1) (which prohibits a private company offering shares tothe public), the Public Offers of Securities Regulations 1995 (which requires aprospectus to be issued where securities are offered) and the Financial ServicesAct 1986, s57 (which, subject to some exceptions, prohibits those who are not‘authorised persons’ from issuing ‘Investment Advertisements’).
General
The Group were directed to other points to note ine-commerce:
- Terms and Conditions – advisers need to advise clients on the contractual issues arising from e-commerce. Points to note include the proper incorporation of terms and conditions into the contract as to jurisdiction and governing law. Consider also questions of contract formation – does the contract actually have to be in writing? It might be wise to stipulate in the terms and conditions whether the content of a Web site is an invitation to treat or an offer. If it is to be only an invitation to treat, watch the use of automated replies which might serve as an acceptance of an ‘offer’ from a customer!
- The Electronic Communications Bill will provide inter alia for the admissibility of electronic signatures and digital certificates in court.
- Distance Selling – note the Distance Contracts Directive (to be implemented in the UK by the The Consumer Protection (Contracts Concluded by Means of Distance Communication) Regulations 2000) and the Financial Services Directive.
- Electronic Commerce Directive.
The enlightening presentation was concluded with a look atthe intellectual property issues arising from linking and meta-tags and finallythe implications of the Data Protection Act 1998, in force from 1 March 2000.
