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There is no doubt that the Internet has changed the face of commerce in only a few years. A Web site is often someone’s first stop to learn more about your company, whether it’s to find out what kind of products you sell, to decide whether to buy your stock, to complain, or to find directions. For a relatively small investment, your company is visible all over the world. While that could be a boon to your business, you should be aware that your exposure to liability, including for violating laws alien to American legal principles, is also as big as the Internet. In the United States, a fundamental principle of law is that a person cannot be sued in a state where he or she has no presence. This originally meant that a person had to be physically within a state before he or she could be brought into court there, but over time the principle evolved. Now, whether a person or a business can be sued in a particular state depends on whether the party had deliberate, rather than random, contacts with the state in question, even if there is no physical presence. NO EASY WAY Traditional theory, then, was that a company could avoid litigating in a distant state simply by refusing to advertise or sell goods in that state. The Internet changed the theory, though, because suddenly there was no easy way for a company to avoid “entering” a state with its Web site. Courts were generally sympathetic to the problem, and worked to find a fair solution. One early case characterized Web sites as either “passive,” where there is no interaction between the viewer and content provider, like a print advertisement, and “active,” where the user interacts with the host, for example, to make a purchase. The court decided there would be no presence in the first case, but a company would be “found” in a state in the second case. Although conceptually this is clear, the application has been far more difficult. What about a Web site that only provides e-mail addresses? What about a manufacturer that directs purchase inquiries to affiliated retail sites? Nor has the standard been adopted universally. One Connecticut court held that a company that had no customers, employees or offices in Connecticut was nevertheless subject to the jurisdiction of the Connecticut court because it advertised on a passive web site that was viewable in Connecticut and had a toll-free “800″ number. Your Internet site may therefore subject you to liability in an inconvenient state or one with less favorable laws. An Internet presence becomes even more worrisome when you start to consider your liability under foreign laws. You now have a worldwide presence, good for your business, but you may be breaking laws that you did not even know existed in foreign countries. BEWARE THE FRENCH Take Yahoo for example. In March 2001 a French court ordered Yahoo to bar French citizens’ access to Nazi memorabilia for sale on the Yahoo auction site. Yahoo claimed that it was not possible to do so, but the French court was not persuaded and ordered a fine of $13,000 per day. In response, Yahoo petitioned a U.S. court, asking that the court prevent the collection of the fine in the United States. The U.S. court did so, stating that to enforce the order would violate the Constitutional protection of free speech. Nevertheless, although the judgment against Yahoo cannot be enforced in the U.S., the French plaintiff will be able to attach any assets of Yahoo already in France. And, while Yahoo managed to avoid liability based on First Amendment grounds in this instance, many other foreign laws are probably not offensive to the Constitution so that the foreign judgments could be enforced in the United States. Further, the story still is not over for Yahoo. On February 26, a French criminal court said it would indict the former CEO of Yahoo for condoning war crimes, with a possible maximum sentence of five years and a $39,800 fine if found guilty. The enforcement of local laws based on an Internet presence is also not unique to other countries. The United States brought criminal charges against a Russian company, ElcomSoft, under the Digital Millennium Copyright Act for the sale of decryption software on the Internet. ElcomSoft is currently contesting the suit, claiming that any purported violation of the law occurred outside the borders of the United States and therefore ElcomSoft cannot be liable. The U.S. District Court of the Northern District of California heard arguments this month, and its decision is still pending. AN UNFETTERED INTERNET? All of this worries those who advocate for an unfettered Internet. They claim that the result will be that the most restrictive jurisdiction will be able to set the standard for all Web sites everywhere. Several different government organizations are working on the problem, including the United States, Canada and the European Union. The European Union favors a “country of origin” approach, where the law of the country where the content originated would apply. This, though, may also be unfair, especially to consumers who would be forced to bring a lawsuit in a far-off country if, for example, they purchased a defective product over the Internet. And, even if there is some consensus among several countries on the applicable international law, no doubt other countries will adamantly protect their own citizens by enforcing their own laws no matter where the content originates. For now, until the development of software that can successfully limit access by geographic area or there is international accord on legal standards, businesses should be particularly sensitive to the laws of the countries where they ship goods or provide services. The language of the Web site, the type of currency accepted, and statements about the countries to which goods or services are provided might help to limit exposure. If a company deliberately does business in another country, the company should have its local sales office or local lawyer check the content to make sure that it complies with all laws. There is no guarantee that the company will not offend a viewer in an unknown country, but it can reduce the likelihood of being the target of an unfavorable action. Michael A. Cantor is a partner in Cantor Colburn, www.cantorcolburn.com, an intellectual property law firm with offices in Bloomfield and Norwalk, and Pamela Chestek is an associate in the trademark and litigation groups.

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