E-Commerce Law

Paul Todd

• Publisher: Routledge-Cavendish
• Year: 2017
• ISBN:
  9781135329082
• Edition: 1
• Topic: Droit
• Subtopic: Théorie et pratique du droit

This book includes detailed coverage of intellectual property, contract, encryption and liability issues, including allocation of domain names, use of metatags and other forms of search engine optimization, digital signatures and the position of ISPs and other intermediaries. There are case studies on electronic conveyancing and e-taxation.

Though the book is written from a UK perspective, comparative material is included from other jurisdictions, including America and Singapore in particular.

Part 1
Introduction

1
Introduction

1.1 What is E-Commerce?

1.1.1 The medium

At the core of e-commerce is the Internet, but it is certainly possible to define the activity more widely than this. The following, for example, is taken from a description of the role in e-commerce of the World Trade Organisation (WTO):¹

. . . electronic commerce is broadly defined as referring to six instruments, namely: ‘the telephone, the fax, television, electronic payment and money transfer systems, Electronic Data Interchange and the Internet.’

Another example of a wide definition of e-commerce is:²

Any business transaction concerning goods and services, where participants are not in the same physical location and communicate through electronic means.

It can be seen that these definitions include, for example, contracting over the telephone, or by telex or fax. However, these do not raise issues which differ from any other kind of contract and, therefore, I do not propose to cover them in this book. Definitions can in any case vary, depending on the use to which they will be put. If a wide role is argued for the WTO, then a wide definition of e-commerce may well be appropriate. Conversely, the United Nations Commission on International Trade (UNCITRAL) refers to e-commerce as involving ‘the use of alternatives to paper-based methods of communication and storage of information’.³ This clearly excludes communicating by telex or fax and, indeed, as we will see, the EU concept of the Information Society is confined to communications and transactions that take place online.⁴

It is clear, then, that there are no generally accepted definitions of e-commerce. For the purposes of this book, it seems sensible to exclude anything that does not raise special issues that are particular to e-commerce. My own working definition, therefore, is narrow, as follows:

Any transaction involving goods or services where digital electronic communication performs an essential function.

This is a commercial law book, so we shall also assume the existence of a commercial party, at least on one side of the transaction. The other party may also be a commercial party (‘B2B e-commerce’), or a consumer (‘B2C e-commerce’).

The reference to digital communication is intended to exclude telephone conversations (since these are often analogue) and, for the same reason, telex and fax communications. It is not confined to Internet communications, however. In principle, this definition could include short message service (SMS) and local area network (LAN) communications and any other connection between computers. It also includes commerce within a closed electronic system, such as CompuServe, and also electronic data interchange (EDI) systems between businesses. All these raise issues which are peculiar to the method of communication. Future developments are also covered, insofar as they can be predicted – for example, the use of television and mobile phones, the last of which, in particular, may give rise to interesting issues.

To this extent, therefore, e-commerce law is wider than Internet law. In practice, of course, e-commerce will nearly always involve the Internet, at least part of the communication being either by e-mail or the World Wide Web, and to this extent there is an overlap between the two fields. E-commerce is narrower than Internet law, however, in that we are concerned only with commercial activity, and not (except peripherally) with criminal issues, such as pornography. Defamation is covered, however, because it can arise in a commercial context (for example, electronic newspapers), and also because much of the material on ISP liability, considered inChapter 12, relates to defamation.

1.1.2 The transactions

There is no doubt that the real impetus to e-commerce has been the development, since about 1994, of the World Wide Web (WWW). Certainly, this was the impetus for the consumer-based e-commerce, around which quite a large proportion of this book is based. However, e-commerce includes more than just the obvious example of Internet shopping. Commercial activity includes not only sales, but also matters such as advertising and the provision of information (price lists, timetables, etc) to assist a commercial transaction. E-commerce includes reading an e-newspaper like the Shetland Times (on which there is a well known case, considered in Chapter 4 of this book),⁵ the purchase of information products such as music, or database information such as LexisNexis or Westlaw.⁶ Some of these activities are impossible in the paper-based world.

Ultimately, however, this book is concerned with commercial transactions, involving goods or services, including the provision of online services, and delivery of electronic goods.⁷ Transactions can be purely commercial, between businesses, for example with EDI, or can involve consumers, dealing either with businesses or with other consumers. The book is also concerned with the support infrastructure for electronic trading, for example the allocation of domain names for business websites.

1.2 Some Features of the Internet and the WWW

However e-commerce is defined, most of it is currently Internet-based8 and, as we will see, it has been transformed by the emergence as a major force, in the mid-1990s, of the WWW. It is impossible to understand e-commerce law without at least some understanding of how it all works and, since most e-commerce is Internet-based, how the Internet works; some of the unique features of the Internet need to be grasped.

There was no inevitability about e-commerce being Internet-based, and indeed books on electronic data interchange, written around 1990, assumed that private ‘Value Added Networks’ (‘VANs’) would be set up.9 The Internet, if mentioned at all, was dismissed as being hopelessly insecure for business purposes, and really only of use as a plaything for academics. It is also true that the Internet is not, at least at first sight, particularly suitable as a medium for commercial dealings. Its traditions are almost militantly democratic (albeit somewhat elitist), and there is no central control, except as to the communication protocols to be used (see further below at sections 1.2.1, 1.3.1 and 1.3.3.1). Control is certainly not generally exercised over the content of information available, or the use to which the medium is put. There is no certainty as to who you are dealing with. There is also a tradition of freedom of information, ‘copyleft’ not copyright, even to the extent that computer operating systems are simply given away.10 It is not obviously a medium from which money can be made.

Yet the Internet is central to e-commerce today. The marriage of two apparently incompatible cultures is probably largely an accident of timing. Digital communications between computers became publicly accessible only with the development, around the mid-1990s, of the WWW and graphical browsers, such as Mosaic and Netscape. From the start, the WWW used the protocols then used on NSFNET,¹¹ the backbone of the Internet, funded ultimately by the American government. This was partly, no doubt, because NSFNET was by then a mature and high-capacity network, operating reliably, and connecting a wide range of people from all over the world. The WWW, no more than the Internet itself, however, was intended to be a vehicle for commerce.

To some extent, e-commerce has overcome the shortcomings of the Internet through technological means. Encryption and digital signatures, described in Chapter 5, allow parties to deal with each other, reasonably secure as to the identity of the other party. Information, even on the WWW, need not be free, but can be protected by password or other means. Reliable payment systems have been developed. By these means, the Internet has been moulded to suit the needs of commerce. Not everything can be resolved by technological means, however, and the law also has a role to play, as we will see.

1.2.1 Connecting computers together

The principle of telephone networks, at any rate prior to cellular and Internet phones, was to set up for each call an end-to-end communication line, exclusively for that particular conversation, for the entire duration of the conversation. If the call was long-distance, it might have to be connected via a number of exchanges and amplified to counter signal deterioration over distance, but the principle was to set up an end-to-end link every time a call was made for the duration of the call. Since most conversations do not involve long silences but make use of the line for most of the time, this did not seem inherently wasteful.

When, around 35 years ago, computers were first connected together to transfer information, it was discovered that it was not generally efficient to set up end-to-end connections for the duration of the communication, as with a telephone conversation. Computer communications are inherently bursty, the time a computer takes to send and receive data being very small, relative to its other activities.¹² For computers to communicate as telephones do would entail long silences on the line, and be extremely wasteful. You have only to think of communicating by e-mail: most of the time is spent composing the mail, and only a short burst is needed to send it. Users of dial-up Internet connections often store all their outgoing mail in an outbox on their hard disk, connecting to their Internet Service Provider (ISP) for just long enough to send it all and then hanging up, in order to economise on phone usage. Even so, the time taken to connect is often significant, compared with the time actually spent online. Telephone exchange switches are simply not fast enough, so that even if computers batched outgoing communications (to the same destination) to send in a single burst, this would be a very slow method of communication.

Another problem with the end-to-end telephone link is that it is designed to be used exclusively for a single communication. A mainframe computer, however, or today a web server, will frequently be sending data to, and receiving it from, many destinations simultaneously.

It proved far more efficient to use permanent lines connecting each computer to its immediate neighbours, data being sent out in small packets via routers.¹³ There was no need to set up end-to-end connections in order to do this, and it was found to be more efficient to send each packet to the best available router in the direction of the destination. The router would copy and forward the packet (but not store it) to the next router, and so on until the packet arrived at its destination. Each packet would take its own best route, traffic on the network being continuously and automatically monitored, and the data would be reassembled on arrival at the destination computer. This is the essence of a packet-switched network, the basis today of nearly all communications between computers.

The earliest working network of computers was the ARPANET, set up in 1969 by the American Department of Defense Advanced Research Projects Agency (DARPA). Not long afterwards, other packet-switched networks appeared not just in the US, but all over the world. From the start, ARPANET spanned America and its fast connections could be used as a backbone to which other networks could be connected. The basic idea of many computer networks all over the world, connected by a very high-capacity network, operating as a backbone and funded by the US government, formed the basis of what eventually became the Internet. In 1983, DARPA decided that TCP/IP (on which more later at sections 1.3.1 and 1.3.3.1) would be the standard set of protocols used by computers connecting t...