Making virtual legislation into a reality

Fancy a Sony Nicam TV for £3? Well, you're too late, at least if you want to buy one from a legitimate source, like Argos.

Just a couple of weeks ago, Argos, the famous retailer, found itself on the raw end of the e-commerce revolution when thousands of people purchased TV sets from its website for just £3. Or did they?

Argos claims that they didn't, and is refusing to honour the purchases, claiming that a computer systems error was responsible. Unfortunately for the retailer, at least one of the prospective purchasers works for leading technology law firm Taylor Joynson Garrett, which is now helping its employee pursue her claim in what could be a landmark case on e-commerce.

This kind of contractual malarkey is just one aspect of the rise of e-commerce, which according to most pundits will become a dominant force in our lives over the next few years. No one really knows how big e-commerce is going to be. Global online sales already exceeded $14bn (£8.75bn) last year and many analysts expect this to increase by at least 150 per cent by the millennium.

Within a further three years some predict global revenue will reach $3 trillion, with 70 per cent of large companies expected to adopt the internet as a sales medium. By this time there could be a potential consumer base of more than 200 million internet users.

E-commerce is just one strand of a digital revolution which has overtaken all our lives: media and entertainment are becoming dominated by digital, from digital interactive TV to music which can be downloaded from the internet. Digital media have opened up a plethora of new commercial possibilities.

And with this tide of new business comes the lawyers.

The law already enters every aspect of life, so it is natural that all things digital are not exempt. Legal work on the digital frontier can take many forms:

E-commerce: dominated by contracts between businesses, which of course all require legal agreements. There are contracts with suppliers and purchasers, contracts with the companies which supply the software, contracts with advertisers if the site is a commercial one, and so on.

All contracts, of course, come with the potential to litigate. Increasingly, with retailers online, there is the tricky subject of contracts with consumers (eg in the Argos case). Beyond that, there is also the subject of parallel importing, where consumers may well be able to order goods at prices substantially lower than those in the UK, via a distributor not authorised to sell in the UK.

Websites: once again, very contract-heavy, with potential e-commerce issues, depending on whether the website is selling goods or services or is simply for marketing purposes. However, as this is public access, other areas of law rear their heads: use of trademarks (licensing or potential infringement), copyright and defamation, not to mention domain name piracy or potential infringement within the metatags of websites.

Entertainment: not just the traditional contract work, but now also involving the internet, whether it be the trademark and copyright issues mentioned above, or a wealth of commercial work relating to such topics as internet music or internet gaming (traditional gambling or lottery-type events, or even competitions or giveaways).

The rise of digital TV, particularly in its interactive form, opens up a new sector all of its own. Elsewhere, with record companies now insisting that some of their artists sign over 'their' domain names to the companies, more contentious issues are in the air.

Regulatory work: the internet is a potential regulatory nightmare, crossing national boundaries and setting up commercial contracts between parties in different jurisdictions. Not only that, but with heavily regulated activities, such as lotteries, national laws may prevent a company from operating in certain countries even though its website is accessible from that country.

Notice anything yet? There is no actual new law here. The law of the internet is a myth. In fact, the law of the internet encompasses contract and intellectual property on the content side, and is akin to IT and telecoms law (and indeed crosses over with those areas) on the other – looking at contract, regulatory, joint ventures, access agreements.

Paisner & Co partner Laurie Kaye says: "The starting point for online, is offline. For example, for internet banking, you look at the existing framework and apply it."

As regards the digital side of TV, music and computer games, the three largest sectors of digital entertainment, the issues have not changed from the traditional entertainment issues, they have merely gained a digital dimension.

Kaye says: "The difference the internet has made is that people are contracting with other people they have never contracted with before, and in ways they have never contracted before. There are some specific issues that arise. For instance, digital interactive TV or wireless technology which require existing laws to be tweaked (copyright directive, data protection, electronic communications bill)."

Law firms claiming to operate on the digital frontier do need some experience of the medium to play the game. While Glyn Morgan, partner at Taylor Joynson Garrett, says "e-commerce is not rocket science – all it requires of a lawyer is good, commercial common sense", there are basic points to consider:

Do not claim to be a digital media firm if you haven't even got your own website. It is expected. Unfortunately, most law firm websites are not that sophisticated.

Do not claim to be a digital media firm if you cannot communicate via email. The digital client demands it. This may up the stakes in terms of speed of response or the level of ad hoc advice you are required to deliver.

Do not charge premium rates if you are on the learning curve. Clients do not like it, and complain constantly about it. Be prepared to discount, both for existing businesses setting up their e-commerce activities and for internet start-ups, particularly where you haven't encountered their specific issues beforehand.

Above all, firms have to respond to the needs of the new market. As leading legal technology commentator Charles Christian points out: "If you can communicate with a supplier via email or an interactive website from anywhere in the world and at any time of the day or night, why can't you contact your lawyer after 5pm on a Friday evening until sometime during the following Monday morning?"

Bird & Bird partner Mark Haftke says: "E-commerce lawyers are now expected to work to internet time, where everything happens much more quickly. If you go onto a website, and don't get served with the information you need in 30 seconds, you're off. Imagine being a brewery, and having your customers walk out of your pubs if they're not served within 30 seconds. That creates demands on law firms and lawyers and the way they serve the e-commerce community."

Law firms are gradually responding. Some firms are experimenting with the delivery of services via digital media itself. Clifford Chance (NextLaw, at www.cliffordchance.com) and Linklaters & Alliance (Blue Flag, at www.linklaters.com) are pioneering this phenomenon, but other firms can provide good examples.

Islington specialist IP practice Briffa & Co has an online shop where clients can download standard form contracts and commercial agreements and tailor them to their requirements (www.briffa.co.uk); Hammond Suddards operates a digital client interface for its mortgage services (www.hammondsdirect.co.uk); Rowe & Maw has received plaudits for its Fastrack service to insurance clients in the Lloyd's market (www.roweandmaw.co.uk); and Field Fisher Waterhouse recently launched its Incubator service, which it claims is the first one-stop shop for those setting up e-commerce business (a separate website is to be set up for this shortly).

Simmons & Simmons partner Tom Wheadon is one of the founders of Matchco (www.matchco.co.uk), a service which launches in January 2000 and aims to match funders with internet ideas people and the professionals – lawyers, accountants and consultants – who can make the whole thing work.

"The important thing to do is to look at what the market wants and then see what lawyers can do for that market, rather than the other way around," says Wheadon.

The digital revolution represents a major opportunity for law firms. Digital media are ideally suited for the delivery of information-based services such as law, and the potential of the sector is phenomenal and will dominate commercial life within a matter of years. Those law firms not geared up to deal with it will find themselves going out of business sooner rather than later.