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ABA Cyberspace Committee

By Herbert Wagner,2014-05-22 17:16
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ABA Cyberspace Committee

ABA Cyberspace Committee

Internet Jurisdiction and Global e-Commerce Subcommittee

January 27, 2006

The Internet Jurisdiction and Global e-Commerce Subcommittee met on Friday, January th27, to discuss three topics:

    1. the role of international treaties and conventions in Asia-Pacific electronic

    commerce

    2. doing business with Voice over Internet Protocol (VoIP) in the Asia-Pacific

    region

    3. drafting non-compete clauses in the Internet era

    The first two topics were designed to support CLE sessions at the Annual Meeting in Hawaii in August 2006.

    The morning session reviewed the first and third topics. There were present:

    - Michael Geist and John Gregory, co-chairs of the Subcommittee

    - Andre Bywater, Eversheds, Brussels

    - Gerry Elman, Swarthmore, PA

    - Konrad Trope, Novolaw, Los Angeles

    1. the role of international treaties and conventions in Asia-Pacific electronic

    commerce

    Gerry Elman wondered if the ABA was in touch with the East-West Center in Honolulu, a non-governmental organization that focuses on the relationship between the US and Asian countries. It organizes conferences that include governments and academics. It may have ideas about experts for ABA sessions. He has a contact there if desired.

    The meeting discussed a number of conventions that may be applicable to an electronic transaction in the Asia-Pacific region. These are in addition to any bilateral conventions applicable in particular cases. The discussion was at a fairly high level.

    The most time was spent on the new UNCITRAL Convention on the Use of Electronic Communications in International Contracts. Since that was a new convention, it was not yet in force anywhere. It would make more official and uniform the basic rules of the UNCITRAL Model Law on Electronic Commerce, removing legal barriers to the use of electronic communications where local laws required writing, signatures or originals. Several advanced countries, including the US and Canada, have already made the Model Law effective for their own laws.

    The greatest advantage for many such countries in adopting the new convention was that the new convention would apply to the interpretation of other conventions to which those countries were also parties. Thus writing or signature requirements in other conventions would be interpreted as permitting electronic communications, without the need for

    formal international amendment and re-ratification of those conventions. How this will work in practice depends on the degree to which any country adopting the new

    convention includes or excludes other conventions for the application of this rule.

    Other conventions or international rules of law that should be taken into account in a panel discussion of Asia-Pacific e-commerce were:

    - export controls

    - anti-trust rules

    - data retention rules (arising from the Cybercrime Convention or otherwise)

    - Hague Convention on the Choice of Courts

    o Jurisdictional issues in general, and their impact on dispute resolution in

    international e-commerce, would need review.

    The Subcommittee did not have experts to propose on these topics. It was agreed to remit these ideas to the people organizing the panel.

    2. drafting non-compete clauses in the Internet era

The meeting discussed agreements by employees not to compete with their employers

    after the end of their employment. Such agreements are generally enforceable if they are reasonable in scope (i.e. the activities restricted), in time and in space. Some state courts may put more onus on the employer to show the damage from competition, i.e. to justify the restriction on the employee’s ability to make a living, while others focus more on the

    terms of the agreement itself rather than its justification.

The question was whether it made sense to limit geographical application of the non-

    compete clause, e.g. “employee shall not compete within 50 miles of employer’s

    headquarters”, in days of Internet communications. Many services can be provided, or goods advertised and sold, from anywhere in the world. The (ex-)employee could solicit and perform much business from afar with customers across the street from his or her (ex-)employer.

    The meeting considered briefly the non-compete clause in the contract between Microsoft and Kai-Fu Lee, which was the subject of litigation when Mr. Lee moved to Google.

    That clause had no geographical limit, but that was probably because Mr. Lee’s

    responsibilities were global, working with a global company on global strategies.

Here are some of the observations made:

    ? one may be able to bargain time for geography, i.e. restrict competition for a

    shorter time to justify a wider (or world-wide) scope. It was pointed out that

    product development cycles varies among industries. In some, with longer cycles,

    an ex-employee could do the employer a lot of harm even a year after the

    employment, while in other industries, the knowledge would not be useful for that

    long.

    ? One might be able to restrict the employee from using a dot.com or dot.biz

    domain name (or other domains likely to be credible with potential customers).

    One may also wish to spell out what technologies of communications may be

    used in competition.

    ? The non-compete clause should be linked with a non-disclosure clause. The

    knowledge not to be disclosed must be carefully described for enforceability.

    ? Consider the enforceability of a geographic restriction extending beyond the

    borders of the usual jurisdiction of the courts. Will the courts of the other state, or

    of the other country, where the employee is located enforce your contractual

    restriction on competition? A choice of court and choice of law clause may be

    advisable.

    ? The recitals to the contract should set out the importance of the non-compete

    clause and the agreement of the employee that the restrictions are reasonable.

    ? Perhaps try to arbitrate the agreement, as arbitrators may be more willing than

    judges to enforce a contractual clause of restriction. However, consider that if the

    employee wins, the employer has lost the remedy; if the employer wins, the

    employee may not comply, and the employer will face the same skeptical court as

    would have heard the case without arbitration.

    ? A strong case was made to put geographic limits into contracts, even today. One

    should not exaggerate the amount of telecommuting, or how easy it is to do

    business online. Clients and potential clients still like in-person contact. One may

    specify the location of major competitors that the employer would not want to see

    hiring the employee, or even the competitors themselves by name.

    ? It is worth working on a parallel agreement not to solicit from actual or likely

    customers of the employer. This non-solicitation clause, along with a non-

    disclosure clause, may do much of the essential work of a non-compete clause.

    The meeting discussed what the Subcommittee might do with these thoughts. Some

    suggestions:

    ? An accessible article for an ABA publication like e-source or BLT ? A model contract term with annotations or commentary

    ? A list of best practices in this area (but how does one know what is “best”)

    ? It would be necessary to have up-to-date research on judicial decisions on these

    questions, since this is an area where the judges are still making the laws.

It was thought that the ideas raised at the meeting should be made available for comment

    by other members of the Committee, and also employment lawyers including litigators

    who might have insight into what provisions might run into trouble

Note: on the cross-border nature of commerce, two books were mentioned: “The Death

    of Distance”, by Frances Cairncross (www.deathofdistance.com) (particularly prescient

    in 1997) and “The World is Flat” by Thomas Friedman.

    3. doing business with Voice over Internet Protocol (VoIP) in the Asia-Pacific

    region

This topic was discussed in the afternoon session. Present were:

    - Michael Geist and John Gregory, co-chairs of the Subcommittee

    - Andre Bywater, Eversheds, Brussels

    - Konrad Trope, Novolaw, Los Angeles

    - Kristie Prinz, Los Gatos CA

    - Richard Field, New Jersey (chair of the ABA Science and Technology Section,

    co-sponsor of the VoIP program in Hawaii)

    - Candace Jones, Cleveland, chair of the Cyberspace committee (part of meeting).

Konrad Trope was going to lead a program in Hawaii in August, assisted by Kristie Prinz,

    on the use of VoIP in international business. Konrad presented a document showing the

    basic regulatory approach of twelve countries in the Asia-Pacific region. This material

    would be used either as background or as a springboard for discussing business

    opportunities in those countries. The program is intended for information, not as a debate

    on regulatory policy, but there will be some review of points of policy contention that are

    likely to have a practical or transactional impact.

He discussed the reasons for disagreements between the former Chair of the FCC and law

    enforcement authorities about the classification of VoIP under the Telecommunications

    Act, 1996, and why it mattered to them. He invoked as well the “Brand X” decision in

    the Supreme Court in June 2005 on the difference between an informational service and a

    telecom service under that Act. He also mentioned some of the economics of standard

    and VoIP phones and how that affected their operation.

Discussions for panelists in Hawaii would focus on why VoIP was important at all, what

    the business model for using it would be, and what the business and legal opportunities

    and issues were presented by its use. The civil effect of fighting cybercrime would be

    worth mentioning, especially as it affects data retention rules for VoIP providers.

    However, one did not want to turn the whole session into one about privacy. That said,

    rights to intercept VoIP signals is clearly a top-six issues.

    Government activity becomes relevant in looking at taxation of VoIP and possible tariff issues. The requirement that VoIP providers carry an “e-911” function has led to debates.

    The two-nature regulation invited by the US federal constitution creates special difficulties. Security concerns for users are a worthwhile topic as well. The example of lawyers in their practices was raised. IP issues arising out of the convergence of voice, image and text may be worth pursuing too. There might be an ethics element, as well, in questions of the uses of encrypted VoIP. That could help attract participants to the session.

    The meeting discussed just how the Pacific Rim countries were to be brought into this discussion. Why would, say, Thai lawyers want to come to this session? Many of the issues, including the ethical ones, were thought to have a fairly broad appeal. The Asian client rather than the Asian lawyer might be a good focus.

    The program was thought to offer a bit of something for everyone. Some of the Asian perspective may be provided because many lawyer who actually attend will be from California and have a pro-Pacific point of view and with luck, experience.

There is potential for a program part of this one or another on ethical aspects of VoIP

    implementation for clients and for lawyers themselves, especially given the security issues and potential for system breaches that VoIP represents.

    The program is in its early development. Anyone wanting to contribute is invited to contact Konrad at ktrope@novolaw.com.

    Note: Konrad, Candace and Richard discussed the prospects to have the session’s expenses at least partly covered by private sponsors with an interest in VoIP. As with sponsors of athletic events, their money would buy them visibility, not a say in the content. This needs to be coordinated with general ABA policies on such matters.

[There being no further business, the meeting ended.]

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