Chapter 5 E- Commerce and Dispute Resolution

2 Chapter Objectives 1. Describe how the courts are dealing with jurisdictional issues with respect to cyberspace transactions. 2. Identify the types of disputes that are classified as “e-commerce disputes.” 3. Discuss the role and function of the Internet Corporation for Assigned Names and Numbers (ICANN) in settling e-commerce disputes. 4. Indicate what legal principles apply in the online resolution of most disputes. 5. Summarize some of the advantages and disadvantages of online dispute resolution.

3 Jurisdiction in Cyberspace The Internet’s capacity to bypass political and geographical boundaries makes it revolutionary. This ability undercuts the traditional basis for a court to assert personal jurisdiction. This basis includes the contacts a party has with a court’s geographic jurisdiction.

4 Case 5.1 Zippo Manufacturing Co. v. Zippo Dot Com, Inc. Zippo Manufacturing Co. (ZMC) makes Zippo lighters. Zippo Dot Com, Inc. (ZDC), operates a Web page and an Internet subscription news service. ZMC filed a suit against ZDC alleging trademark infringement and other claims, based on ZDC’s use of the word “Zippo.” ZDC filed a motion to dismiss for lack of personal jurisdiction. Is the court in this case applying traditional jurisdictional rules to cyberspace or creating new rules? Explain.

5 E-Commerce Disputes Any dispute that arises in e-commerce can be classified as an e-commerce dispute. Two major types of cyberspace disputes:  Disagreements over the rights of domain names.  Disagreements over the quality of goods sold over the Internet.

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7 Online Dispute Resolution (ODR) A form of alternative dispute resolution (ADR). Accessible 24 hours a day and 7 days a week. Application of commonly accepted general legal principles when resolving disputes.

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9 Even though ODR is less expensive, companies involved in domain name disputes prefer to go to court. If the company sues the offender, it can ask for a preliminary injunction ordering the offender to close down the website until a verdict is rendered. Federal legislation allows companies to collect up to $100,000 in damages against cybersquatters. The possibility of damages may make litigation more attractive than ODR for such complaints. Is litigating sometimes better than ODR?

10 Dealing with Cybergripers “Cybergriping” or “sucks” sites are established solely for the purpose of criticizing the products or services sold by owners of trademarks. American courts give extensive protection to free speech rights, but when opinions are false and harmful to the reputation of another, a trademark owner may have recourse under tort law. Given the extensive number of insulting words in the English language, are businesses that register multiple (insulting) domain names to ward off potential criticism fighting a losing battle? Is it fair for businesses to register domain names that they will never use for the sole purpose of squelching critical cyber speech?

11 ICANNICANN In October 1998, the Internet Corporation for Assigned Names and Numbers (ICANN), a private, nonprofit organization was created. In October 1999, ICANN adopted the Uniform Domain Name Dispute Resolution Policy (UDRP) and a set of accompanying rules to be used in resolving domain name disputes. In the past, disputes have been decided in court or by arbitrators under the law of a particular jurisdiction. ICANN’s dispute resolution policy and rules, however, are independent of any other jurisdiction and are not governed by any one nation’s laws, including case precedents. How, then, in cases decided under ICANN’s rules, should arbitrating panels decide how the rules should be interpreted and applied?

12 Case 5.2 Weber-Stephen Products Co. v. Armitage Hardware and Building Supply, Inc. Weber-Stephen Products Co. believed Armitage Hardware and Building Supply Inc., was using domain names that included their registered trademarks and service marks in a deceptive, confusing, and misleading manner, intentionally in bad faith. They also asked that Armitage’s domain names be transferred to them or be canceled. Weber-Stephen filed a suit alleging trademark infringement. What did the court rule? Sometimes, a party establishes a domain name as an address for a web site before the name’s owner can take legal action. When this occurs and the owner files a suit, it may be some time before the dispute is resolved in court. Is there anything the owner might do in the meantime to prevent the other party from profiting from—or harming—the reputation and goodwill associated with the owner’s mark?

13 Case 5.3 Blue Max Technology v. Compudigital Industries In 1998, International Instrumentation, Inc. reincorporated itself under the name Blue Max Technology, after twenty-five years of using the registered trademark “Blue Max.” Blue Max uses the domain name “bluemax.net” on the internet. Compudigital registered the domain name “bluemax.com” in Compudigital refused to sell Blue Max the name, forcing them into a bidding war. Blue Max filed a complaint with the National Arbitration Forum (NAF). What did the NAF panel conclude? “Proving bad faith in the registration and use of a domain is impossible to do because whether someone acts in good or bad faith is ultimately a subjective decision.” Do you agree with this statement? Why or why not? Were the criteria used by the panel deciding this case subjective or objective in nature?

14 WIPO Arbitration and Mediation Center The World Intellectual Property Organization offers four dispute- resolution services. Each has different advantages and legal effects.  Arbitration  Expedited arbitration  Mediation  Mediation followed by arbitration

15 Case 5.4 AT&T Corp. v. Alamuddin AT&T owns trademarks with the letters “ATT” included in them. In 1998, Tala Alamuddin, a British citizen living in Singapore, registered the domain name “ATT2000.com”, which she listed for sale. AT&T filed a complaint against Alamuddin with the WIPO Center, asking for the transfer of the domain name. What did the WIPO Center panel decide? Suppose that the “ATT” in “ATT2000.com” did represent Alamuddin’s business name, that she was actually using the Web site to market products, and that there was no evidence of bad faith in her use of the domain name. Is there anything AT&T could do in this situation to prevent Alamuddin’s use of the name?

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18 Negotiation Services An online negotiation service does not evaluate the merits of a claim that is presented to it. Instead, the parties to a dispute may agree to submit offers to settle the dispute. If the offers fall within a previously agreed-on range, the dispute will be settled. If there is no agreed-on range and the deadline to respond is not met, the offer expires. The parties can drop negotiations at any time.

19 The Future of E-Commerce Dispute Resolution Advantages:  Faster, more convenient, and more efficient  24/7 access  Results easily publicized  Less costly than litigation and often free Disadvantages:  Not widely accepted  Not directly enforceable  Jurisdiction issues  Technology disadvantages

20 For Review 1. What standard are the courts developing for evaluating the exercise of jurisdiction based on contacts via internet? 2. What disputes can be classified as e-commerce disputes? 3. What is the Internet Corporation for Assigned Names and Numbers (ICANN), and according to ICANN’s rules, what is the legal effect of a decision rendered by an arbitrator? 4. What legal principles apply in the online resolution of most disputes? 5. State some of the advantages and disadvantages of online dispute resolution.