ASPs Across Nations

If an application service provider (ASP) breaches its contract, goes out of business, or corrupts data, can a customer recover losses? Suppose the customer is in Florida and its ASP is in India? The U.N.'s World Intellectual Property Organization has found a solution. It's called the "Dispute Avoidance and Resolution Best Practices and Guidelines for the ASP Industry," and much of the world has agreed to honor it.

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High-tech businesses can buy the latest office software or subscribe to an application service provider and “rent to use” the software online. With the latter, the business pays only for software during the time used without overhead for installation, upgrades and technical staff. What a concept. But suppose your business is in Cooper City, Fla., and the service provider is in India? If the ASP breaches its contract, goes out of business, gives your network a virus or corrupts your data, can you recover losses? If you sue, where do you file, in Broward Circuit Court, federal courts, India or a neutral location such as Geneva, Switzerland? And what if customers in other states or nations were injured by the same incident? Do their problems and yours get resolved in international courts? We’ve seen this problem before with Web site domain names, and the tech world has found a solution. It’s called the Uniform Dispute Resolution Policy (UDRP). This set of rules has been a boon to the stability of Web businesses and a boost to the credibility of ICANN, the body that oversees domain name traffic. But ICANN can’t take credit for creating the phenomenally successful UDRP. That credit goes to a specialized agency of the United Nations, the World Intellectual Property Organization, based in Geneva. Yes, the acronym is WIPO. WIPO’s brainchild provides both a hearing process and neutral mediators to quickly and cheaply end international domain name conflicts. In less than 18 months, the UDRP has resolved more than 2,400 cases, settling ownership of almost 5,000 domain names. WIPO’s own mediation and arbitration center also serves as one of four dispute resolution service providers approved by ICANN that provide the pool of arbitrators from which parties choose their experts to oversee their domain disputes. WIPO’s arbitrators have been selected to preside in more than 80 percent of all cases and they probably know more about resolving Internet disputes than anyone else. Now WIPO is extending its expertise to ASPs and online contracts with the help of Citrix Systems in Fort Lauderdale. A worldwide consortium of ASPs led by Citrix vice president Traver Gruen-Kennedy and WIPO’s Arbitration and Mediation Center in Geneva have authored “Dispute Avoidance and Resolution Best Practices and Guidelines for the ASP Industry.” The guidelines, which run almost 200 pages with exhibits on rules and process primers, analyze ASP business and supply chain issues in detail and then offer “best business practices,” such as model contract provisions, and suggested rules for international mediation and arbitration of contract disputes. The guidelines also offer advice on what to look for in agreements on quality-of-service levels. Most important, much of the world is willing to follow these guidelines. The 177 member states of WIPO, from Algeria to Zimbabwe and including China, Great Britain, Japan and the United States, have agreed to honor and enforce the decisions of WIPO mediators. To obtain consent of 177 countries on anything is remarkable. To do it in such a relatively short period of time — the guidelines were developed in approximately one year — is to be greatly commended. Gruen-Kennedy was in Geneva last week to do just that. He presented an award to WIPO’s Arif Hyder Ali, the primary draftsman and catalyst for the guidelines. The award recognizes Ali’s efforts in leading a team that developed the guidelines and convinced WIPO members to accept them. The guidelines promote contract uniformity and resolution of a large percentage of cross-border Internet contract disputes through a private, quick and economical process. There are thousands of ASPs around the world — the industry consortium alone has over 1,000 members �- and the term “ASP” is broadly applied to forms of outsourcing that go beyond software distribution. Further, as more potential customers come to believe that disputes with ASPs will be settled quickly and fairly, ASP business should increase under the guidelines. The ASP business model is still relatively new and the market embryonic. As the WIPO resolves more contract disputes, the developing body of cases will build trust in what constitutes acceptable conduct by ASPs and their customers. At the same time, WIPO’s reputation as the world leader in resolving Internet business disputes will continue to grow. And we in South Florida should take heart that a leading member of our business community led this effort to assure that Internet businesses can chart a predictable course for contracts in international waters. Scott Austin advises software development, e-commerce and high-technology companies as a partner in the Boca Raton, Fla., office of Adorno & Zeder. He can be reached at [email protected].

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