A Tale Of 'He Said, e-Said'

News flash: Business lawyers must be prepared to advise clients who have taken their business online. Oh ' that's not news to you? Of course not. Any practicing lawyer knows that no one can practice law today without thinking about how traditional rules apply in the e-world. And few entrepreneurs, CEOs or others engaged in the daily give-and-take involved in pocketing and stretching a dollar can think about it, either; or sometimes become anxious over the possibilities of those traditional rules not applying in the world of electronic commerce, or of being broken.

Yet, far too often the developing law of e-commerce can't provide a definite answer to routine business questions. Certainly, the once unregulated Wild, Wild Web has now been fenced in by many laws on 'hot button' issues ' privacy rights, intellectual property and protection of minors, for instance, have all been regulated online.

Not As Noticed, But Not An Excuse

But traditional business issues that arise in e-commerce ' contract formation and interpretation, for example ' haven't attracted the same attention. e-Discovery in business litigation has spawned a cottage industry of consultants and newsletters (American Lawyer Media, the publisher of e-Commerce Law & Strategy, produces the monthly newsletter e-Discovery Law & Strategy ' see, www.ljnonline.com/alm?edisc), but 'production in native format' probably remains foreign to most conventional trial attorneys outside the Wall Street corporate firms. Even the e-laws that have received legislative support, such as digital signatures, have not always been widely used in practice.

But the law not keeping up with technology hasn't stopped online commerce, or those who were first to see the profit opportunities inherent in e-commerce. Firms that chose not to invest any effort in e-commerce, whether because of the legal uncertainty or simple fear of the unknown, have been left behind in e-commerce's wake.

e-Commerce entrepreneurs, by contrast, have plunged ahead despite the risk of legal uncertainty. They are comfortable that the opportunities available online are worth the challenge of having to constantly adjust to shifting legal rules. Under these conditions, business lawyers do their best to advise e-commerce firms with a mix of law and business judgment. Because of the legal void, that balance is frequently heavily weighted in favor of advice based on judgment and experience, rather than on unquestioned law.

Do You Know What You Think You Know?

But do e-commerce clients really understand when they cross the imaginary boundary where the law stops and the ambiguity begins? In other words, do lawyer and client realize what each knows ' or thinks he or she knows ' about Internet law, on the one hand, and the realities of online business, on the other hand? Do clients realize how much lawyers don't know about e-commerce law and business, and how much law hasn't yet been developed?

The truth is that without knowledge of that distinction, clients may be unable to make fully informed business decisions. Clients may not realize the difference between what the law may require, and what it does not, when business lawyers must ' of necessity ' provide advice that is such a mixture of law and experienced judgment. Instead, clients must evaluate the e-commerce business judgment of an attorney just as they assess the worth of any consultant's advice ' and decide whose judgment and experience to trust in online matters. Clients must be able to evaluate how informed counsel's judgment may be on e-commerce issues. An illustration: An expert on the legal issues involved in mergers or banking may not understand the business dynamics of e-commerce combinations.

Knowing What's What ' And Then Some

In markets, skilled traders routinely exploit such information inefficiencies to find profit opportunities. Outside the world of business, psychologists have labeled this disparity the 'theory of mind.' Wikipedia has defined it as 'the ability to understand that others have beliefs, desires and intentions that are different from one's own.' (See, http://en.wikipedia.org/wiki/Theory_of_mind.) As explained in Wired News (www.wired.com/wired/archive/9.12/baroncohen_pr.
html), the 'Theory of Mind' questions whether one person 'understands that what they know and what (the other person) knows are different.'

As academic as this theory sounds, it has critical importance in law and business. As the late William Lazier, professor at the Stanford Graduate School of Business and Law School, said before the dawn of e-commerce: 'To excel as a business lawyer, one must understand the world of business from the vantage of the clients one counsels. ' Lawyers have to realize that they are going into business. No matter what field of law, you are in business.' (See, www.bizjournals.com/sanjose/stories/2005/01/03/daily38.html.) For all the science involved, this principle relies on an everyday concept familiar to anyone who has ever enjoyed game shows such as 'Family Feud' or 'Password.' The audience and host know a secret ' but the contestant doesn't.

While we can laugh at the expense of the person who acts foolishly because of that ignorance, it will be no laughing matter for a business that gets incorrect, ill-considered or even harmful legal advice because of information that was not shared ' facts that the client knew, but never told its attorney, or weaknesses in a legal theory that counsel never explained to his or her client. When lawyers and clients make assumptions about what the other knows, errors can occur that may lead to wasted effort or liabilities. As my high-school geometry teacher told me, long before anyone but some folks in the Defense Department had ever dreamed of the Internet, we all know what 'u and me' become when we 'assume.'

This concern is especially true in e-commerce, because so little law or custom has developed to provide guidance in planning or settling disputes. While good business lawyers' professional advice has always mixed explanation of the law with seasoned judgment, in e-commerce, legal and business decisions depend even more heavily on both parties' judgment.

But it isn't just judgment, because judgment depends heavily on the facts of a matter, and an understanding of how the business works. If an attorney doesn't understand e-commerce, his legal advice may be flawed on the law and on the facts. In fact, a business lawyer's experience may be so distant from e-commerce that she doesn't realize how much e-commerce issues may be different from those with which she is accustomed ' and how her advice may be flawed as a result.

In such an environment, certainly every e-business would prefer to be represented by an attorney who understands the salient matters at hand ' and why ' without wasting time with entry-level questions. Yet the reality is that many lawyers' online knowledge is limited to how to access their AOL account, or performing simple, blunt Google searches.

As a result, the knowledge base behind a typical business lawyer's answers to his tech clients' questions may not reflect much beyond the pre-Internet computer applications he studied in college, or searching on Lexis. The cutting-edge questions to which the tech client needs answers may force the client to explain much to counsel, or hire someone with that experience.

Just What Exactly Do You Know?

Let's consider some e-commerce areas where the question, or thought, 'Do you know what I think you know' can become more than an interesting comparison to a television game show. For example, most lawyers today always have Internet connections on, with unlimited online use, protected by constantly monitored firewalls and antivirus software. So do firms that try to compete in online business. But is it safe for law firms and their client firms to assume that their customers have the same access and security resources? While the number of those on dial-up connections is steadily decreasing, many with broadband access may not be as free to use it as they would like ' and as online business would prefer.

Consider those whose primary access to broadband is at work or school, rather than at home. Restrictions on permitted sites and Net use have long been common in both locations. For example, due to the popularity of music-sharing Web sites, many colleges ration online access by capacity. The extra music download in September may make the research for the final exam in December very expensive. The Wall Street Journal recently reported a move to change Net-access pricing to 'pay as you go broadband plans that would allow operators to charge customers by the amount of bandwidth, or Internet capacity, they consume.'

While many early Web sites were stripped down to optimize for dial-up connections, today's designer may have become lazier. Customers charged by volume may not feel charitable about the privilege of paying ' again and again ' to download and read a lengthy privacy policy, or graphics-laden legal disclaimer. Therefore, site design and marketing campaigns may soon have to take into account the new economics of bandwidth, in ways that were believed unnecessary as broadband use increased. The upshot here for lawyers for such firms is that they won't stay employed for long if they don't fine-tune their language.

Similarly, many potential customers may be so frustrated or deterred by what counsel considers 'routine' security precautions that they avoid online transactions. For example, despite the wealth of advice on encrypting e-mail, how many Internet users (lawyers included) regularly take that step, unless their e-mail software does it automatically?

Truly a Global Market Now

Another reality of today's worldwide Web is that the online market is, in fact, worldwide and not just a reference to the wishes of the people who developed the Web. At a minimum, e-commerce businesses must consider whether to offer terms ' pricing and shipping charges, for example ' that are valid for Montreal, Mexico City and New Delhi, as well as for New York City. To accept orders from wide areas, they must contract with local fulfillment partners or make local alliances.

Hand-in-hand with this issue is that many cultural issues affecting Web site design are also be triggered by an international market. A stock image that tests well in Peoria may be sacrilegious abroad. Everything from choice of language to fundamentally different intellectual property protection and commercial rules must be analyzed.

For example, a standard U.S. form for programmer-employees abroad may not give a firm the same absolute legal advantages that it does in the United States. Also, because programmers often work from wherever they choose, they may even be subject to rules of a different jurisdiction ' where they actually work. Mobile, temporary or independent contractor employees, so typical in e-commerce businesses, may create licensing or regulatory obligations for their employer in each jurisdiction where they perform their duties. The employer may even have withholding obligations, for example, or owe some corporate-level tax on an allocated share of profit as a result of the work.

But even more basically, the legal draftsman's traditional crutch of 'It's always been in the form' just doesn't make sense when the forms reflect legal and business models that no longer exist. Many clauses may still make sense for e-commerce ' but others may not. Each paragraph must be considered anew, in light of a particular e-commerce deal, rather than simply be thrown in by default.

In fact, in a world defined by ambiguity and constant change in law and technology, perhaps saying nothing ' deleting unnecessary form clauses, for instance ' will produce a better result for the client. Leaving a form clause in could lock in a rule that may not apply after future developments no one could anticipate today, or impose unnecessarily high costs that could easily be avoided in an online deal. For example, traditional paper-based written notice procedures, with mandatory waiting periods, may create unwanted delays to deals handled online and by e-mail, for which notice could be posted on a Web site.

In the face of pervasive legal uncertainty, then, such as in e-commerce, attorney and client alike must be sensitive to the very real possibility that trying to resolve every potential issue could kill the deal. This is particularly true for those that are unlikely to arise. (Does anyone remember the details of heavily negotiated Y2K clauses?) A 'good enough' contract that closes will always beat the perfect one that doesn't, as long as the client understands and agrees with counsel's judgment and assumptions on which issues may safely be left unresolved.

Play the New Game Right, and Win

Similarly, e-commerce has even changed the method and timing of contract negotiations. Most lawyers today accept an accelerated process of rapid revisions and e-mail exchanges of redlined documents as a normal part of any deal. Clients unable to keep up with the pace of online negotiations by e-mail may make decisions based on outdated information. But some clients may remain accustomed to (and prefer) reading paper printouts of drafts, and taking more time to consider all the implications of proposed changes to a deal. Clients accustomed to getting back to points not raised initially, through last minute concessions to get the deal signed, may lose them if not raised in a timely way. Opportunities may be lost, too, if lawyers and clients don't understand that proposals and replies must be generated in Internet time.

Classic TV game shows like 'Family Feud' and 'Password' kept audiences interested by giving them more knowledge than the contestant, who could be embarrassed by what he or she didn't know but that everyone else knew. While we all would prefer to be the Richard Dawson or Allen Ludden, smug with the knowledge that contestants lack, that doesn't always happen in real life because someone has to be the victim who isn't in on the joke, who doesn't have the critical information.

e-Commerce businesspeople who don't want to be the victim of a knowledge gap must be wary of the risks of trying to control legal fees caused by not giving counsel enough information about the e-commerce business or contract. They should remember that the lawyer, like the contestant, may not really understand how the e-commerce business operates, and what makes it succeed, or fail. e-Commerce lawyers who don't make clear to clients where the law stops, and when their judgment begins ' and the basis on which they feel competent to give opinions on e-commerce ' could face unhappy clients (or malpractice suits) if that judgment was based on incomplete or simply incorrect facts.

No game show contestant appreciated the mocking laughter of a host awarding a consolation prize. But in business, laughter would be far preferable to the lost opportunities or financial costs of a deal gone bad, because the lawyer and client just did not understand each other's proper role in an e-commerce deal.

News flash: Business lawyers must be prepared to advise clients who have taken their business online. Oh ' that's not news to you? Of course not. Any practicing lawyer knows that no one can practice law today without thinking about how traditional rules apply in the e-world. And few entrepreneurs, CEOs or others engaged in the daily give-and-take involved in pocketing and stretching a dollar can think about it, either; or sometimes become anxious over the possibilities of those traditional rules not applying in the world of electronic commerce, or of being broken.

Yet, far too often the developing law of e-commerce can't provide a definite answer to routine business questions. Certainly, the once unregulated Wild, Wild Web has now been fenced in by many laws on 'hot button' issues ' privacy rights, intellectual property and protection of minors, for instance, have all been regulated online.

Not As Noticed, But Not An Excuse

But traditional business issues that arise in e-commerce ' contract formation and interpretation, for example ' haven't attracted the same attention. e-Discovery in business litigation has spawned a cottage industry of consultants and newsletters (American Lawyer Media, the publisher of e-Commerce Law & Strategy, produces the monthly newsletter e-Discovery Law & Strategy ' see, www.ljnonline.com/alm?edisc), but 'production in native format' probably remains foreign to most conventional trial attorneys outside the Wall Street corporate firms. Even the e-laws that have received legislative support, such as digital signatures, have not always been widely used in practice.

But the law not keeping up with technology hasn't stopped online commerce, or those who were first to see the profit opportunities inherent in e-commerce. Firms that chose not to invest any effort in e-commerce, whether because of the legal uncertainty or simple fear of the unknown, have been left behind in e-commerce's wake.

e-Commerce entrepreneurs, by contrast, have plunged ahead despite the risk of legal uncertainty. They are comfortable that the opportunities available online are worth the challenge of having to constantly adjust to shifting legal rules. Under these conditions, business lawyers do their best to advise e-commerce firms with a mix of law and business judgment. Because of the legal void, that balance is frequently heavily weighted in favor of advice based on judgment and experience, rather than on unquestioned law.

Do You Know What You Think You Know?

But do e-commerce clients really understand when they cross the imaginary boundary where the law stops and the ambiguity begins? In other words, do lawyer and client realize what each knows ' or thinks he or she knows ' about Internet law, on the one hand, and the realities of online business, on the other hand? Do clients realize how much lawyers don't know about e-commerce law and business, and how much law hasn't yet been developed?

The truth is that without knowledge of that distinction, clients may be unable to make fully informed business decisions. Clients may not realize the difference between what the law may require, and what it does not, when business lawyers must ' of necessity ' provide advice that is such a mixture of law and experienced judgment. Instead, clients must evaluate the e-commerce business judgment of an attorney just as they assess the worth of any consultant's advice ' and decide whose judgment and experience to trust in online matters. Clients must be able to evaluate how informed counsel's judgment may be on e-commerce issues. An illustration: An expert on the legal issues involved in mergers or banking may not understand the business dynamics of e-commerce combinations.

Knowing What's What ' And Then Some

In markets, skilled traders routinely exploit such information inefficiencies to find profit opportunities. Outside the world of business, psychologists have labeled this disparity the 'theory of mind.' Wikipedia has defined it as 'the ability to understand that others have beliefs, desires and intentions that are different from one's own.' (See, http://en.wikipedia.org/wiki/Theory_of_mind.) As explained in Wired News (www.wired.com/wired/archive/9.12/baroncohen_pr.
html), the 'Theory of Mind' questions whether one person 'understands that what they know and what (the other person) knows are different.'

As academic as this theory sounds, it has critical importance in law and business. As the late William Lazier, professor at the Stanford Graduate School of Business and Law School, said before the dawn of e-commerce: 'To excel as a business lawyer, one must understand the world of business from the vantage of the clients one counsels. ' Lawyers have to realize that they are going into business. No matter what field of law, you are in business.' (See, www.bizjournals.com/sanjose/stories/2005/01/03/daily38.html.) For all the science involved, this principle relies on an everyday concept familiar to anyone who has ever enjoyed game shows such as 'Family Feud' or 'Password.' The audience and host know a secret ' but the contestant doesn't.

While we can laugh at the expense of the person who acts foolishly because of that ignorance, it will be no laughing matter for a business that gets incorrect, ill-considered or even harmful legal advice because of information that was not shared ' facts that the client knew, but never told its attorney, or weaknesses in a legal theory that counsel never explained to his or her client. When lawyers and clients make assumptions about what the other knows, errors can occur that may lead to wasted effort or liabilities. As my high-school geometry teacher told me, long before anyone but some folks in the Defense Department had ever dreamed of the Internet, we all know what 'u and me' become when we 'assume.'

This concern is especially true in e-commerce, because so little law or custom has developed to provide guidance in planning or settling disputes. While good business lawyers' professional advice has always mixed explanation of the law with seasoned judgment, in e-commerce, legal and business decisions depend even more heavily on both parties' judgment.

But it isn't just judgment, because judgment depends heavily on the facts of a matter, and an understanding of how the business works. If an attorney doesn't understand e-commerce, his legal advice may be flawed on the law and on the facts. In fact, a business lawyer's experience may be so distant from e-commerce that she doesn't realize how much e-commerce issues may be different from those with which she is accustomed ' and how her advice may be flawed as a result.

In such an environment, certainly every e-business would prefer to be represented by an attorney who understands the salient matters at hand ' and why ' without wasting time with entry-level questions. Yet the reality is that many lawyers' online knowledge is limited to how to access their AOL account, or performing simple, blunt Google searches.

As a result, the knowledge base behind a typical business lawyer's answers to his tech clients' questions may not reflect much beyond the pre-Internet computer applications he studied in college, or searching on Lexis. The cutting-edge questions to which the tech client needs answers may force the client to explain much to counsel, or hire someone with that experience.

Just What Exactly Do You Know?

Let's consider some e-commerce areas where the question, or thought, 'Do you know what I think you know' can become more than an interesting comparison to a television game show. For example, most lawyers today always have Internet connections on, with unlimited online use, protected by constantly monitored firewalls and antivirus software. So do firms that try to compete in online business. But is it safe for law firms and their client firms to assume that their customers have the same access and security resources? While the number of those on dial-up connections is steadily decreasing, many with broadband access may not be as free to use it as they would like ' and as online business would prefer.

Consider those whose primary access to broadband is at work or school, rather than at home. Restrictions on permitted sites and Net use have long been common in both locations. For example, due to the popularity of music-sharing Web sites, many colleges ration online access by capacity. The extra music download in September may make the research for the final exam in December very expensive. The Wall Street Journal recently reported a move to change Net-access pricing to 'pay as you go broadband plans that would allow operators to charge customers by the amount of bandwidth, or Internet capacity, they consume.'

While many early Web sites were stripped down to optimize for dial-up connections, today's designer may have become lazier. Customers charged by volume may not feel charitable about the privilege of paying ' again and again ' to download and read a lengthy privacy policy, or graphics-laden legal disclaimer. Therefore, site design and marketing campaigns may soon have to take into account the new economics of bandwidth, in ways that were believed unnecessary as broadband use increased. The upshot here for lawyers for such firms is that they won't stay employed for long if they don't fine-tune their language.

Similarly, many potential customers may be so frustrated or deterred by what counsel considers 'routine' security precautions that they avoid online transactions. For example, despite the wealth of advice on encrypting e-mail, how many Internet users (lawyers included) regularly take that step, unless their e-mail software does it automatically?

Truly a Global Market Now

Another reality of today's worldwide Web is that the online market is, in fact, worldwide and not just a reference to the wishes of the people who developed the Web. At a minimum, e-commerce businesses must consider whether to offer terms ' pricing and shipping charges, for example ' that are valid for Montreal, Mexico City and New Delhi, as well as for New York City. To accept orders from wide areas, they must contract with local fulfillment partners or make local alliances.

Hand-in-hand with this issue is that many cultural issues affecting Web site design are also be triggered by an international market. A stock image that tests well in Peoria may be sacrilegious abroad. Everything from choice of language to fundamentally different intellectual property protection and commercial rules must be analyzed.

For example, a standard U.S. form for programmer-employees abroad may not give a firm the same absolute legal advantages that it does in the United States. Also, because programmers often work from wherever they choose, they may even be subject to rules of a different jurisdiction ' where they actually work. Mobile, temporary or independent contractor employees, so typical in e-commerce businesses, may create licensing or regulatory obligations for their employer in each jurisdiction where they perform their duties. The employer may even have withholding obligations, for example, or owe some corporate-level tax on an allocated share of profit as a result of the work.

But even more basically, the legal draftsman's traditional crutch of 'It's always been in the form' just doesn't make sense when the forms reflect legal and business models that no longer exist. Many clauses may still make sense for e-commerce ' but others may not. Each paragraph must be considered anew, in light of a particular e-commerce deal, rather than simply be thrown in by default.

In fact, in a world defined by ambiguity and constant change in law and technology, perhaps saying nothing ' deleting unnecessary form clauses, for instance ' will produce a better result for the client. Leaving a form clause in could lock in a rule that may not apply after future developments no one could anticipate today, or impose unnecessarily high costs that could easily be avoided in an online deal. For example, traditional paper-based written notice procedures, with mandatory waiting periods, may create unwanted delays to deals handled online and by e-mail, for which notice could be posted on a Web site.

In the face of pervasive legal uncertainty, then, such as in e-commerce, attorney and client alike must be sensitive to the very real possibility that trying to resolve every potential issue could kill the deal. This is particularly true for those that are unlikely to arise. (Does anyone remember the details of heavily negotiated Y2K clauses?) A 'good enough' contract that closes will always beat the perfect one that doesn't, as long as the client understands and agrees with counsel's judgment and assumptions on which issues may safely be left unresolved.

Play the New Game Right, and Win

Similarly, e-commerce has even changed the method and timing of contract negotiations. Most lawyers today accept an accelerated process of rapid revisions and e-mail exchanges of redlined documents as a normal part of any deal. Clients unable to keep up with the pace of online negotiations by e-mail may make decisions based on outdated information. But some clients may remain accustomed to (and prefer) reading paper printouts of drafts, and taking more time to consider all the implications of proposed changes to a deal. Clients accustomed to getting back to points not raised initially, through last minute concessions to get the deal signed, may lose them if not raised in a timely way. Opportunities may be lost, too, if lawyers and clients don't understand that proposals and replies must be generated in Internet time.

Classic TV game shows like 'Family Feud' and 'Password' kept audiences interested by giving them more knowledge than the contestant, who could be embarrassed by what he or she didn't know but that everyone else knew. While we all would prefer to be the Richard Dawson or Allen Ludden, smug with the knowledge that contestants lack, that doesn't always happen in real life because someone has to be the victim who isn't in on the joke, who doesn't have the critical information.

e-Commerce businesspeople who don't want to be the victim of a knowledge gap must be wary of the risks of trying to control legal fees caused by not giving counsel enough information about the e-commerce business or contract. They should remember that the lawyer, like the contestant, may not really understand how the e-commerce business operates, and what makes it succeed, or fail. e-Commerce lawyers who don't make clear to clients where the law stops, and when their judgment begins ' and the basis on which they feel competent to give opinions on e-commerce ' could face unhappy clients (or malpractice suits) if that judgment was based on incomplete or simply incorrect facts.

No game show contestant appreciated the mocking laughter of a host awarding a consolation prize. But in business, laughter would be far preferable to the lost opportunities or financial costs of a deal gone bad, because the lawyer and client just did not understand each other's proper role in an e-commerce deal.