Global Defense

Entrepreneur, Dec, 1999 by Steven C. Bahls, Jane Easter Bahls

* If you're aiming only for a local clientele and don't want to risk being sued in other jurisdictions, keep interactive features to a minimum and don't provide a toll-free number.

* If you want to expand into some states but not others, you can block orders from all other states. When the would-be customer in a state you're not prepared to sell in tries to type in an order, a box would appear on the screen stating that the transaction is not available in his or her state. That way, you can research the laws and regulations of each state before making your product or service available there.

* If you want to use e-commerce to do business worldwide but want to avoid defending lawsuits in other jurisdictions, consider a "click-wrap agreement." The name stems from the "shrink-wrap agreements" often used on software packages, stating that by opening the package, the buyer agrees to abide by a series of rules listed in the agreement. In the same way, you can set up your Web site to require that buyers have to scroll through a list of terms and conditions and click "I agree" before completing their transactions. These might state that transactions are governed by the laws of your home state, and any disputes must be pursued there.

How enforceable are click-wrap agreements? That has yet to be decided by the courts, but a few cases have confirmed that shrink-wrap agreements are enforceable. Sutin predicts that click-wrap cases will depend on how clear the terms are to the buyer. "There's a higher likelihood it'll be enforceable if the buyer has to scroll down through the terms and click 'I agree' than if there's a hyperlink to the terms and conditions," he says. "But customers may not like it. There's a business judgment to be made."

* Because most of these cases involve trademarks, it's a good idea to do a nationwide trademark search before launching your Web site. Trademark law is territorial, but by establishing a national presence, you may be asking for trouble from another business with the same name.

* Make sure you have enough insurance. Defending a lawsuit in another jurisdiction costs more because of the travel expense, among other factors.

"Discuss the risk level with your attorney," Sutin says. "You have to balance the interests of your marketing people and your attorney."

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.