Boalt Law School Lecture
What is e-commerce?
Example 1: theglobe/Websurfer. theglobe conducts direct response campaign for theglobe memberships. Viewers call telemarketing service. Telemarketing service takes orders for memberships and tries to upsell Websurfers to callers.
Issues: need to track data flows, cash flows and the flow of physical objects.
· Who collects the money?
· Who ships the goods? Is this a UCC contract, or just a marketing contract?
· What happens if there is a warranty return? What happens if there is a refund? What happens if there is a chargeback? What happens if the credit card is just fraudulent?
· The authentication of data transfers. How much authentication is needed?
· Control over user data. Can Websurfer market our competitors to our users?
Example 2: USA.Net Reseller program. USA.Net operates a web interface to email (describe template). USA.Net wants to authorize resellers of this service. Issues:
· Tracking the data flows. USA.Net to Reseller to Corporation to Users. Who controls and develops what interfaces?
· Tracking the cash flows.
· What service levels apply? More generally, how can anyone resell a “service”?
Example 3: eBay—provides infrastructure for users to make matches. Describe business model. Issues:
· How to keep transactions within scope of business model?
· Developing community reputations.
· Liability for user wrongs (especially copyright infringement).
1. The importance of understanding your client’s business. It is crucial to know the stress points for their future revenue stream and build in protection from day 1. For example, protecting user data as a trade secret requires confidentiality clauses throughout the chain.
2. Development and Hosting. Who develops? Who controls the branding, and are there approval processes? Who hosts? And what standards apply to the hosting? Difficulties of implementing security and authentication (SSL, SET, digital signatures).
3. Revenue issues. Defining net revenues/net profits. How many third party expenses can be deducted before the split? How much money is a prepay against royalties, and how much is “hard” money? (Note accounting differences)
4. Defining exclusivity. Control over “editorial spaces” vs. control over all aspects of the site. How does exclusivity get diluted in a network of sites?
5. User data. Negotiating user data sharing clauses. Protecting user data as an asset. Protecting user data from use by competitors, by advertisers, etc.
6. Sysop liability. Developing a scheme to manage risk for user generated content or user activities.