More than 130 participants came to Stanford Law School on June 25 to discuss the key legal and strategic issues that make online business such a difficult field to navigate. Hosted by the LST program, the first-ever Stanford E-Commerce Best Practices Conference, entitled “How to Deal with the Uncertainties of Online Business,” attracted a wide variety of people from business and legal communities in the Silicon Valley area and beyond. Participants and audience members alike found a startlingly prescient forum for figuring out what industry leaders should do to avoid regulatory problems, to make their contracts enforceable, and to ensure that their customers remain faithful through calamitous times. Given that online business hasn’t yet had a chance to develop a clearly defined set of best practices, what are businesspeople supposed to do in the meantime? This was the fundamental question that emerged out of a brainstorming session in October 2003. At this session, several prominent online business professionals came up with a range of topics relating to the key problems that arise when conducting business online, including contract formation, limitations and enforcement, negating of implied licenses, international jurisdiction, conflicting privacy regimes, online security, piracy of digital content, and taxation of digital content. These topics served to guide the conference through a series of business areas in which conflicts and uncertainties typically render conversations about best practices quite unharmonious. All the while, conference panelists and attendees asked, in then-Dean Kathleen Sullivan’s words, “what the best practices would be if we could be the omniscient legislators who figured out what they might look like.” How do E-Commerce best practices evolve? During the first panel of the conference, Google General Counsel and Vice President for Corporate Development David Drummond ’89 noted a concern underlying many models of online business. “We want to reach every Internet user in the world, so when you realize that there are now hundreds of different legal regimes to worry about—not just countries, but states, provinces, and municipalities—you can imagine that this challenges the traditional business model in a lot of ways.” He went on to note the importance of a scalable model, suggesting that when a product has interfaces in more than 100 languages, it is essential that designers and legal team members be able to work together to produce a product that does not need to be customized for every locale and every legal regime. RealNetworks Vice President and General Counsel Robert Kimball described one necessary feature of any successful global business model as he talked about how management might incorporate a sense of the legal review into the process of building a product. One way to account for inconsistent legal regimes would be to ensure that the product team is always kept well aware of the areas in which these regimes will affect the design process. Mr. Drummond wondered if the best way to proceed was by analogizing to the laws of other jurisdictions or by returning to the kinds of foundational documents from which one could tease out some general principles of the best course of action. Ensuring an exciting, quality user experience “requires creating a forum where lawyers and product people can both play a role in innovation,” he proposed. Visa Executive Vice President and General Counsel Guy Rounsaville took this point in a slightly different direction by saying that lawyers must be part of a structure that is constantly reviewing what is going on within a company and its merchants. The current business climate demands adherence to the principles of Sarbanes-Oxley, even for a private company like Visa that is not legally subject to the act, concluded Mr. Rounsaville. Mr. Kimball also pointed out that someone on the product team should be responsible for privacy and the crafting of a release schedule. Mr. Kimball went on to suggest that any attempts to reinvent the wheel with regard to privacy would be a huge mistake. Instead, a successful evolution requires creating a happy customer while managing the risk faced by this customer and, in turn, managing the risk faced by a company as a result of its customers’ actions. He added that one should remember to build in a certain amount of noise into a business model to account for any frivolous and unjustified lawsuits, or small complaints, which might emerge from the early risks an online business would have to take in formulating its best practices. Yahoo Vice President and General Counsel Michael Callahan described what one might call the “evolutionary” nature of privacy policy. He paid special attention to the challenges posed by the acquisition of another company, discussing how difficult it often was to amalgamate the privacy policy of a newly acquired company with a company’s own set of standards and statutes.
Panelists addressed a wide range of audience questions, ranging from when and whether a company should hire a lobbyist to the importance of creating internal documentation of a company’s own best practices. Lively discussions continued throughout the course of the day. During the next roundtable discussion, Ralph Pais, a partner at Fenwick & West LLP, and others spoke about the difficulties of enforcing online contracts and the similar difficulties a company faces in attempting to negate implied licenses. Then, in the 11 a.m. panel, two lawyers, two in-house lawyers, and a law professor convened to discuss how a company might go about harmonizing a regulatory environment over a range of international portals, including but not limited to .uk, .fr, and .jp domains. They discussed the international jurisdictional conflicts that arise when you are dealing in incompatible regulatory environments around the world. The Honorable Jeremy Fogel, Judge for the U.S. District Court for the Northern District of California, offered a historical perspective during his luncheon keynote address. He pointed out that in 1850, commerce existed almost entirely as a set of hand-to-hand and face-to-face practices. A reputation for integrity—in the explicit terms of how well a company’s agents and representatives could build the trust of their clients—was the bedrock principle for a company’s success. Today’s conference, if it had taken place 154 years ago, would not last nearly as long as it would today. At this last line, the audience laughed; nevertheless, it is clear that some of the same underlying principles of business practice still hold. Judge Fogel referenced a recent article in The Economist identifying the handful of Internet-based companies that had flourished during the bust years of the industry as those that had maintained the strongest relationships with their customers. The humorous sincerity of Judge Fogel’s address—along with his contention that clients are motivated not by abstract legal principles, but by things like betrayal, disappointment, and entitlement—carried over into the conference’s afternoon sessions, which were generally marked by a tone of good-natured collaboration and earnest discussion. Afternoon panels included “The Privacy Regimes Patchwork: How to Adopt a Globally Integrated vs. a Territorial Approach,” “Online Security: The Precondition for Consumer Trust,” and “Taxation of Digital Goods and Services: New Regulations and the Compliance Challenges for Online Businesses.” In the final discussion of the day, on the topic of the piracy of digital content, panelists pointed out that P2P networks have evolved away from Napster, which was a centralized hub, to more decentralized architectures that are self-organizing without any ongoing intermediation. These architectures disperse and fragment the activity of pirates, yielding various levels of culpability and blurred distinctions between jurisdictions. In this environment, it necessarily becomes quite difficult to figure out who to sue and how to enforce any judgment one receives. Mr. Andrew Bridges, a partner at Winston & Strawn LLP, argued that any would-be regulator of privacy needs to understand how many different players, motives, and values are involved, and how to create effective working distinctions between these motives. On behalf of Margaret Jane Radin, then-director of the LST program, Ian Ballon, the Executive Director of the Stanford Center for E-Commerce, Roland Vogl, executive director of the LST program, and conference organizer Bill Cosden, of the San Francisco Bay Area chapter of the Association of Corporate Counsel, we would like to thank all those who attended and all those who participated in the inaugural Stanford E-Commerce Best Practices Conference. We applaud the commitment of LST affiliate partners Affymetrix; Cooley Godward LLP; Fenwick & West LLP; Heller Ehrman White & McAuliffe LLP; Morgan, Lewis & Bockius LLP; Paul, Hastings, Janofsky & Walker LLP; Pillsbury Winthrop LLP; and Wilson Sonsini Goodrich & Rosati; and look forward to many more years of vibrant discussion of online best practices at Stanford Law School. |
