Businesses on Internet open to far-flung litigation

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Brett A. Robinson and Arthur L. Smith are members of the law firm of Husch & Eppenberger LLC. Robinson practices in the Springfield office. Smith practices in the firm's St. Louis office.|ret||ret||tab|

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The Internet has brought us great new business opportunities. A merchant in Springfield can advertise his goods or services on a Web page and expand his customer base throughout the rest of the United States or even to other parts of the world with limited additional capital investment. Presumably, those wider geographic markets mean greater profits brought down to the bottom line.|ret||ret||tab|

However, no business reward can be attained without incurring some business risk and doing business on the Internet is no exception. Although the Internet may be a marketplace without geographic boundaries, it still operates in the real world of earth and stone where there are more than 50 sets of state laws to contend with as well as hundreds of national and international legal hurdles to overcome. Every businessperson considering venturing into the world of electronic commerce needs to stop and consider these risks and weigh them against the rewards.|ret||ret||tab|

For one thing, doing business on the Internet may make a corporation amenable to being sued in the courts of another state or even a foreign country. Dow Jones recently found this out the hard way. Dow Jones was hauled into court in Australia to defend itself against defamation claims brought by an Australian resident, even though the alleged defamation occurred in a U.S. publication circulated within the United States.|ret||ret||tab|

The alleged defamatory article also appeared on the Dow Jones Web site that was, of course, accessible from throughout the world; the court found this Internet publication sufficient justification to bring Dow Jones into court in Australia. In the United States, the attitudes of the courts of the 50 states vary widely on the subject of bringing out-of-state corporations into local courts based upon doing business on the Internet.|ret||ret||tab|

As a generalization, the more inter-activity there is with the local resident of the distant state and the more business that is transacted within that distant state, the more likely it is a corporation can be hauled into court in a distant state for disputes arising out of the Internet business it has been doing. |ret||ret||tab|

The Internet Tax Freedom Act is up for renewal by Congress. It is a widely held misconception that this act frees Internet commerce from state and local taxation. The truth is far from that. If a business has a "nexus" with another state, it will be obligated to collect sales taxes in connection with Internet sales into that distant state and to remit them to the state taxing authority. The nexus can be anything from a storefront located in the state to a distribution warehouse to an Internet server hosting the Web site. The rules vary by state, but it is important for every business to know what it is getting itself into when it starts up on the Internet.|ret||ret||tab|

Yet another risk is another state will try to force a corporation to comply with local registration laws. Texas wanted Ford to register as an auto dealership because of its Internet offering of cars. California wanted eBay to get an auctioneer's license to do business in that state.|ret||ret||tab|

At the top of the list of priorities for transacting business on the Internet ought to be insuring a company has an enforceable contract that will stand up in court if there are problems. Generally, a contract made electronically without the usual exchange of paper and without manual signatures will be just as binding as the traditional paper contract. The customer's acceptance of the contract may be signified by a click of the mouse or a check box or even by means of an e-mail message replying to an order.|ret||ret||tab|

However, even though the contract may meet the legal requirements to be enforceable, there must be proof those requirements have been met, proof that will stand up in court. This means it becomes vitally important to adopt record-keeping systems that allow companies to track their Internet sales and capture the "mouse tracks" or other digital signals, which form the basis of the evidence of the contract. |ret||ret||tab|

None of these risks presents an insurmountable hurdle to doing business on the Internet; as we know, billions of dollars of trade and commerce is taking place each year. However, the companies that succeed take the time to ensure they know their legal rights and the risks they are taking and they know what preventive steps can be taken to avoid problems.|ret||ret||tab|

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