Liability on the Web

You’re probably already aware of the advantages of having a Web site for your business.

You may even have experienced the thrill of new customers from other states or countries finding your business through the Internet. This is the great promise of the World Wide Web. But your site can also expose your business to liabilities.

Every business must carefully consider its target market and customer base. This was easier before the Internet came along. If you opened up shop in Ohio, you knew had to follow Ohio laws and applicable federal laws. You paid Ohio taxes, and if you had to go to court, you walked to an Ohio courthouse.

This concept can be loosely referred to as jurisdiction. Courtrooms in Ohio have jurisdiction over you and your company if you are based in Ohio and your target customers are Ohioans.

When your business reaches out past Ohio’s borders, courts determine jurisdiction based on the relationship between the parties involved and the state where the court sits. If your customer lives in Pennsylvania and brings a lawsuit against you for a defective product, he or she would probably file in Pennsylvania because it’s more convenient. The Pennsylvania court would consider several factors to determine if your business has sufficient “minimum contacts” with the state so that it would be fair to subject you to Pennsylvania law.

So how does this transfer to cyberspace? Web sites are accessible from anywhere. It’s exciting to have customers in Russia or Japan, but what would happen if they brought a lawsuit against you in their own countries?

Courts all over the world have struggled with this, but there are only a few guidelines to help minimize potential jurisdictional nightmares.

One standard developed by several courts involves determining the interactivity of a Web site. At one end is the passive site that simply provides information about a business, similar to an advertisement in a magazine. The site may contain phone numbers, physical and e-mail addresses, and other instructions for contacting the business. Passive sites will probably not be subject to foreign jurisdictions because they do not specifically target particular customers.

On the opposite end are Web sites that engage in total e-commerce, selling and marketing their products or services to specifically targeted customers. One example is a site in French, offering to sell products at prices quoted in francs. Such a site would certainly be targeted to France. But the question looms whether it could also be considered to target French-Canadians or French-speaking Morocco, where the site is also accessible.

The most complex questions arise when a Web site falls in the middle of the spectrum. Posting contact information on a business Web site usually isn’t enough to subject one to a foreign jurisdiction, but what if that contact information results in a customer in another state, and hence, substantial and systematic contacts with that state?

Protecting your business online can be difficult. Some businesses simply refuse to transact with customers in other jurisdictions. You can achieve basic protection for your online activities by including a clause in your site’s terms and conditions of use that declares the jurisdiction for any disagreements that might arise. Courts in the past have looked favorably upon these clauses.

Our legal system is still ironing out online jurisdictional issues. Until it does, we’re in a holding pattern, hoping that our duct tape measures will hold things together until a solid resolution appears.

Right now, proper consideration of these issues is the best protection for your business. You can minimize problems by finding a knowledgeable attorney who stays abreast of trends in this area.

Cyberspace should not be a scary place, especially when it holds the promise of a larger customer base. Brett Burney is an Akron-based attorney. He can be reached at [email protected].