Intellectual Property As An Investment: A Look At How ADR Relates to the European Union’s Proposal for Electronic Commerce in the Single Market

A Background Paper for the UNESCO World Press Day Conference in Geneva

By Melissa Devack

INTRODUCTION

[*57] The Internet has revolutionized the way in which businesses and consumers interact. The convenience of this new medium has created commerce in both physical products and information that distinguishes the present from the past. Electronic commerce (“e-commerce”) has enabled merchants to distribute their products to a larger consumer base and buyers to purchase these products from almost anywhere in the world.[1] As a result, the global market has become more economically efficient.[2]

Every seven seconds, someone new accesses the Internet to explore the repository of information it contains.[3] Accordingly, an economic market for that information has emerged.[4] The creation and dissemination of ideas has become a prevalent economic activity, and the protection of these ideas by way of Intellectual Property (“IP”) rights is essential to the future of the virtual marketplace. Without such protection, the market risks destruction and collapse.[5]

While Europe has been able to make the single market function in many forms of business, it faces a new challenge in making it work for online commerce.[6] While Europe seeks to expedite its commercial entry into the Internet market, the European Union (“EU”) should take precautions to ensure that its financial sector reaches full potential[7] by providing for intellectual property protection. Unauthorized reproduction and widespread distribution of information would not only jeopardize its chances for success, but could also erode the virtual market of communication altogether.

An increase in the level of IP security will directly influence the degree of economic success the EU will be able to attain in the e-commerce market. Steps should be taken to control the impressive level of access to information now available because of the Internet, and reliance on existing copyright law alone will no longer be sufficient. Various alternative dispute resolution (“ADR”) mechanisms are increasingly being accepted as viable solutions to the deficiencies of existing IP laws.

There has been a recent global trend toward reliance on ADR procedures to resolve IP disputes in commercial transactions.[8] The benefits derived from the use of ADR in this area can be naturally extended to the complex disputes that arise in the Internet context. The introduction of e-commerce has stimulated the market economy and put pressure on IP law, as relationships unanticipated by traditional spatial law have been formed. IP laws vary from country to country. Among the EU countries in particular, these laws must now function in a world that has no borders and bears no customary law.

The Directorate General is presently considering proposals for a coherent legal framework for e-commerce in the single market.[9] Adaptive and effective means need to be created for approaching and reconciling novel disputes that result.[10] [*58] Concentration on resolution procedures, such as arbitration, will improve their design. Resolution of disputes will be prompt, economic and efficient. The growth of international communication and investment will be encouraged. Overall, this framework will help avert the possible instability and collapse of the common market and, therefore, the curtailment of European competitiveness. However, despite the global trend towards the use of ADR mechanisms for IP disputes and their promise for Internet conflicts, the EU seems reluctant to adopt them.

This Note addresses the importance of designing effective ADR provisions to the EU’s Directive on Electronic Commerce in the Single Market. The advantages arbitration offers will be demonstrated through its current use in settling copyright disputes that arise from online activity. Part I will define e-commerce and will outline the forum for its online transactions, the Internet. In addition, it will discuss the difficulty of regulating activity in virtual space and the types of issues left for the legal field to resolve. Part II will set out the framework of the EU and its vision for economic and monetary union. It will examine the EU Directive on Electronic Commerce in the Single Market and its proposed reliance on ADR procedures. Part III will describe the use of ADR in international business and the benefits arbitration provides for resolving international commercial disputes. Further, it will explain the Union’s reluctance to rely on arbitration, despite the global trend in this direction. Part IV will explore the problems that copyright laws face on the Internet and pose to the future of e-commerce. It will demonstrate how arbitration is a viable solution for resolving copyright infringement disputes. In addition, it will provide a checklist of important elements one should keep in mind when drafting or adopting a dispute resolution provision. Finally, this note will conclude by suggesting an approach the EU could use to include ameliorative dispute resolution provisions in its Directive on Electronic Commerce.

I. DOING BUSINESS IN THE DIGITAL ERA

A. Electronic Commerce and the Internet

Electronic commerce has become a worldwide term of art, although its evolution makes it difficult to define. In general, electronic commerce or “e-commerce” refers to commercial transactions (involving both organizations and individuals[11]) based on the processing and transmission of digitalized data, including text, sound and visual images that are transmitted over open networks, such as the Internet.[12] More simply, e-commerce is the conducting of any kind of business over the Internet.[13] While e-commerce broadly refers to the use of technology to conduct commerce between and among businesses and individuals, it cannot be separated from its noncommercial applications.[14] Many use the Internet to purchase products. Many also use the Internet to engage in activities such as entertainment, communication, research and education.[15] Conventional distinctions between commercial and noncommercial uses of the Internet are no longer relevant.[16] All of these activities operate in the same organizational infrastructure of the virtual marketplace and are cohesively part of the larger e- commerce process.[17]

The forum for these transactions, the Internet, is a collection of thousands of linked computers and computer networks which allow users to communicate with or to use the services located on any of the [*59] other computers or networks.[18] The common language these networks share enables component computers to “talk” to each other,[19] permitting the transfer of information to and from all over the world. The Internet is a tool for communication, commerce, information and entertainment. Its commercial importance has proved particularly noteworthy. The attractiveness of e-commerce has sparked the interest of sellers and consumers. It has changed the way in which business is conducted.[20] Businesses have capitalized upon the pervasiveness of the medium and have improved their processes and organizations.[21] The Internet offers new types of commodities from newspapers and magazines to audio products and financial instruments at the click of a mouse, bringing the market to one’s fingertips.

Internet technology has had a profound effect on trade on a global scale.[22] In the last decade, world trade involving computer software, entertainment products, informational services, technical information, product licenses, financial services and professional services has grown rapidly, with an increasing share being attributed to online transactions.[23] Digitalization allows reproduction to be instantaneous, fast and perfect. As a result, sellers are able to transmit their products directly to the consumer in a quick and inexpensive manner. What distinguishes e- commerce and the business of digital products from that of a physical and traditional commercial framework is the overwhelming expansiveness of technology. Whether the activities performed online are commercial or noncommercial, convenience and immediacy will measure their success. The business potential of e-commerce is contingent upon the transactional efficiency of this environment.

B. Regulatory Barriers and Legal Implications

E-commerce presents opportunities for businesses to function in new ways. They are no longer confined to working within a traditional commercial framework. E-commerce impacts their marketing, production and consumption forces.[24] Consumers can search for product information, order and pay for products online, negotiate with sellers, and exchange information.[25] Such information can then be used to customize products, forecast future demand and formulate business strategies.[26] However, a number of barriers may make this opportunity difficult to realize.[27]

The experimental nature of e-commerce has left troubling questions for the legal field. Recent discussion of e-commerce and its relative “cyberlaw” has turned on a few common and recurring issues, including: regulation of e-commerce, contract formation and execution, consumer protection, market access, and intellectual property.[28] In addition, e-commerce presents challenges to the legal principles of jurisdiction based on physical presence, and verification of written documents.[29]

The Internet’s behavior is far from traditional because information travels instantaneously and events in virtual space occur simultaneously.[30] The unique nature of the medium raises problems for policy makers in determining how to regulate virtual space. Its characteristics also present questions for lawyers in the resolution of regulation disputes.[31] In real space, legal jurisdictions are defined by geography. As the Internet is not confined by political boundaries, e-commerce is not defined by the rules of one government entity.[32] Because this medium does not fit neatly into [*60] the jurisdiction of any existing sovereign entity, territorially defined laws and rules become difficult to apply, raising both personal jurisdiction and conflict of laws issues.[33]

The legal backdrop for business has also changed with regard to contractual and property rights.[34] The new digital environment challenges their stability on multiple levels.[35] Doing business on the Internet has altered the formation of contracts,[36] as well as the creation and implementation of consumer protection and intellectual property rights.[37] While business models are in the process of conforming and adapting to these changes in technology and economics,[38] special consideration should be placed on the importance of one’s copyright ownership. Distributors of text, pictures, music and software fear rampant violations of authentic IP rights due to the present ease of copying digital material. These fears are evidence that the Internet promises to be a rich arena of new conflicts and disputes.[39]

The legal system must evolve and adapt to accommodate the needs of the electronic marketplace. For its economic potential to be fully realized, governments must adopt a market-oriented approach to e-commerce. They must facilitate the emergence of a predictable legal environment and support business and commerce on a global scale.[40] While contract and property rights form the legal infrastructure for doing business, they are of no use without an enforcement mechanism to protect them. Allocating rule-making decisions to those who best understand the Internet will ensure its growth and strength. It is in this situation where the flexibility, expediency and general acceptance of ADR techniques can play a prominent role in digital activity.[41]

II. THE EUROPEAN UNION

A. The Organization and its Economic Vision

Even though the Internet became more technologically developed and more rapidly used in the United States, the European growth rate has been consistent and strong.[42] It has been estimated that 35 million Europeans are currently “wired.”[43] Further data indicates that the worldwide net commerce is predicted to hit $6.8 trillion in 2004.[44] While North America, including the U.S., currently represents a majority of this trade, its dominance will fade with the extraordinary growth that will occur in Western Europe in the next two years.[45]

Increasing use of the Internet leaves governments and international institutions with the responsibility of creating a regulatory framework that allows nations to realize the opportunity for commercial gain while preventing criminality and abuse.[46] Legislators throughout Europe face the same challenge as those in the United States: how to encourage e-commerce while preserving consumer protection.[47] The EU has acknowledged the necessity of addressing problems caused by the Internet, and the importance of finding sound solutions for them.[48] Given the potential benefits of a single financial market, dependence on the Internet and its capacity for economic gain will grow. It is essential that the EU understand the legal concerns and repercussions that this dependence involves.

Presently, each EU member state has its own contractual and jurisdictional rules, subject to the Brussels and Rome Conventions.[49] While the members can think on a global scale, they may only act regionally. Therefore, even if one country declares its e-commerce legislation, it will [*61] possess little value if other countries do not adopt it as well. Without European-wide solutions, national legal systems have devised their own standards. However, the EU, as an intergovernmental organization, does have the authority to sign treaties effective on all member states.[50] The European Council can, according to its Treaty,[51] establish regulations and directives. These directives bind member states as to the objectives to be achieved. However, each country maintains the responsibility of translating the directives into its language of preference, as well as the power to choose the method of incorporating them into its national law.

The process under which European Commission (“EC”)[52] directives attain the force of law entails several stages. First, the European Parliament reviews the proposed directive.[53] Second, the Commission finalizes the proposal.[54] Third, the European Council promulgates it.[55] Finally, the member states are given a period of time, usually two years, during which they prepare and implement national legislation embodying the terms and implications of the EU’s enacted directive.[56] Even if the directive is adopted quickly, years may pass before the laws of all member states are harmonized.[57]

The EU has taken an enormous step in its path toward integration through the creation of economic and monetary union. On January 1, 1999, the euro became the official currency of eleven EU member states, with a fixed conversion rate into their national currencies.[58] Although euro notes and coins will not appear until January 2002, many consumers, retailers, companies, and public authorities already use the new currency in non-cash form.[59] At the completion of the phasing-in process in 2002, the Central Banks of the different member states will be replaced by a single monetary policy conducted by a new European Central Bank.[60] In addition, steps will be taken by the EU to develop its policy-making capacities.[61] Consideration will be given to coordinating economic policies and leveling the prosperity of member states through economic and social cohesion.[62]

The completion of this union will create a more efficient market.[63] Transparency of price and elimination of different currency fluctuation will create a more certain environment for business.[64] As a result, Internet sales will grow. However, failure to coordinate Internet regulation on the EU level will cause a refragmentation of the common market.[65] Lack of consumer and business confidence caused by uncertainty regarding the regulation of e-commerce in Europe will reduce the effectiveness of the Internet as a business forum.[66] Without access to a free market for e-commerce, EU member states will be at an economic disadvantage.[67]

B. Recent State of Legislation: EC Directive on Electronic Commerce in the Single Market

The EU seeks to establish tighter links among the member states in order to attain economic progress in Information Society services.[68] On November 18, 1998, the European Commission proposed legislation in the form of a draft directive designed to establish a coherent legal framework for e-commerce within the EU, thereby assisting Information Society services in benefiting from the single market infrastructure. It covers online newspapers, databases, financial services and entertainment services.

[*62] E-commerce will add a new dimension to the single market in prompting easier access to goods, increased trade, and stimulated competitiveness.[69] However, the law has not kept up with the growth of e-commerce. [70] Activities conducted online will be governed by the fundamental principles of “internal market”, “country of origin”, and “mutual recognition.”[71] EU member states are required to accept the laws of other member states as providing a level of protection equal to their own.[72] Overall, the proposal does not seek to enact new rules. Rather, it seeks to ensure that preexisting EU and national laws are given effect.

Mutual confidence among the member states is a key component of governing the e-commerce marketplace, especially with the continuing transition to a single currency. Enforcement mechanisms will also play a prominent role in the economic process. The Directive, therefore, does not intend to secure enforcement through reliance on the principle of mutual recognition and EU codes of conduct by themselves. The proposal aims to increase cooperation between national regulatory authorities by setting up an effective cross-border dispute resolution system.

The EC Directive incorporates several provisions governing the legal procedure and ADR processes of such systems.[73] These provisions state as objectives that member states should encourage out-of-court settlements and that they should ensure that national legislation does not hamper such out-of-court settlement schemes. Article 17 of the Directive aims to establish the pan-European ADR mechanism that will be used in e-commerce transactions.[74] Article 18 seeks to ensure that member states make available legal remedies, such as injunctions, in cases of urgency.[75] Article 19 prompts cooperation between governing authorities in their regulation of the Internet.[76] Finally, Article 20 permits the implementation of measures for facilitating ADR by electronic means.[77] However, the only enforcement mechanisms yet proposed are those of a local scale, which will be of limited help to those consumers who aim to enforce contracts with individuals or businesses outside the EU.[78] Consequently, the EU hopes that the reciprocal measures it establishes will catch on worldwide.[79]

C. Where the Proposal is Now

On September 1, 1999 the European Commission presented an amended proposal for the Directive to institute a coherent legal framework for e-commerce within the Single Market. The amended proposal reflects the favorable opinion given by the European Parliament in May of 1999 on the Commissions’ Single Market approach. The amendments suggested by the Parliament are largely of a technical nature. The material regarding the ADR mechanisms discussed in Section II B above is still in place. The amended proposal has been forwarded to the European Parliament and the EU’s Council of Ministers for adoption under the co-decision procedure.[80]

On December 7, 1999, the Council of Ministers reached political agreement on a Common Position for the proposed Electronic Commerce Directive.[81] The Parliament and the Council have reached preliminary agreement in just over one year of development. This rapid progress reflects the importance placed on defining a legal framework for e-commerce that enables economic growth, investment in research and development, and job creation in Europe.[82] By the year 2003, the global e-commerce market could be worth $1.4 trillion.[83] In Europe alone, e-commerce is [*63] presently worth $17 billion[84] and is expected to reach $340 billion by 2003.[85] After the Common Position was formally adopted without discussion at a Council meeting, it was sent to the European Parliament for its second reading under the co-decision procedure of the European Council Treaty.[86] The European Parliament approved the Directive on Electronic Commerce on May 4, 2000, which enables the measure to become law within the following eighteen months. The Directive was approved by the Parliament without amendment and was adopted in accordance with the co-decision procedure set out in the EC Treaty, requiring no further consideration. The European Council officially promulgated the Directive 2000/31/EC on e-commerce on June 8, 2000.[87] The next step requires Member states to accurately and in timely manner implement the Directive into their national legislation.

III. ADR IN INTERNATIONAL BUSINESS

A. Complexity of Global Business Relations

The shifts taken by many countries towards market economies and the advance of modern technology have created an increasingly globalized world economy.[88] In addition, the integration of markets on a regional level, as in the EU, has altered the parameters of business activity.[89] The EU has projected its transition into a single-market economy to be accomplished in less than two years. However, the phasing-in period will require reconciling diversity in language, culture, and business custom.[90]

The increase in contacts between borders has fostered not only cooperation, but also competition among participants. The economic success to be derived from multinational agreements will depend on whether the parties can establish a constructive working relationship, and whether they can manage the conflicts that will inevitably arise.[91]

International business relations are more vulnerable than domestic ones. Different legal systems use different terms and definitions that complicate business communication. In litigation, legal issues such as which court has jurisdiction, how the procedure will be conducted, which rule will be substantively applied and what effect that court’s judgment will have in other countries will complicate matters even more. Neither legal nor non-legal sanctions have been able to provide parties with the stability they need in their relationships when considering whether to take business risks.[92] In fact, control mechanisms such as sanctions have been shown to be less effective when dealing with international business relationships.[93] For these reasons, the growth of e-commerce in the EU and the introduction of the single market call for efficient conflict management. The shortcomings of litigating business disputes have largely enabled international commercial arbitration to become the “preferred” means of dispute resolution in international business.[94]

B. International Commercial Arbitration

In light of the problems associated with transnational litigation in national courts,[95] arbitration has become a common process for resolving international commercial disputes.[96] Arbitration is a private and informal process by which parties agree to submit their disputes to impartial persons who are authorized to resolve the controversy by rendering a final and binding judgment.[97] The legal rights of [*64] the parties are determined by the application of law by an arbitral tribunal instead of a court.[98] Arbitration has been regarded as having several advantages over multinational litigation on two levels: (1) legal framework i.e., how to deal with conflicting national legal systems; and (2) process, i.e., how to manage disputes in cost-efficient means to best serve the parties’ interests.[99]

There are many ways in which the characteristics of arbitration can help avoid some of the dangerous pitfalls associated with multinational litigation. First, agreeing in advance to venue and choice of law can eliminate forum shopping. The perpetuation of parallel lawsuits is therefore less likely. Pursuant to local law or treaty, most countries will also oblige their courts to decline jurisdiction when arbitration agreements have been made. [100]

Second, transactional costs will be reduced as most arbitration proceedings are conducted without the need to resort to the court system. [101] Discovery may be minimal and formalities may be relaxed. The finality and enforceability of arbitral awards are enhanced by the absence of judicial review on the merits.[102] The overall effect is to increase the speed and decrease the costs of decision-making.[103]

Third, neutrality and confidentiality can be accomplished in a simplified environment,[104] as judicial involvement is kept to a minimum. Parties have the ability to choose their own judges, including ones that are multilingual. Multilingual judges help to ensure that individuals on the panel can understand the parties’ position and explain it to others. The language the parties speak and that of the contract in dispute can be interpreted in a confidential arena.

Fourth, the legal framework of arbitration permits a high degree of flexibility, which supports the autonomy of the parties.[105] Few mandatory rules are imposed and the laws of national and international arbitration are confined to a minimum standard,[106] thereby empowering the parties to shape and tailor the proceeding to their liking. They can also select arbitrators that have subject matter expertise, which could prove especially beneficial in disputes involving e-commerce and the Internet.

Fifth, foreign arbitral awards are easier to enforce than foreign court judgments, due to the high degree of international currency of arbitral awards.[107] This enforceability may encourage voluntary compliance or amicable settlements.[108]

As the majority of e-commerce transactions are international, full service ADR providers must be able to satisfy and keep pace with the evolving needs of a global constituency.[109] Arbitration may be the vehicle with which to fulfill these needs, provided that the efforts made to implement arbitration are both committed and forceful.

C. Arbitration in Europe: The Reality

The legal authority to arbitrate disputes is codified in Acts under the national framework of the member states of the EU.[110] Although arbitration is not regulated by EU measures, EU law is therefore relevant to arbitration proceedings.[111] Like a judge, the arbitrator must decide if the national law of a member state governs the issue before him, and whether EU law is called into question.[112] It is only necessary for the arbitrator to decide an issue of EU law if it is pertinent to the case at hand. Unlike a judge, the arbitrator is not encumbered by the previous [*65] practice of the courts and may therefore apply his own interpretation of the law.[113] However, this does not mean arbitrators are permitted to contradict the fundamental principles of law already established by the courts. In fact, a court in the EU can intervene and review the arbitrability of disputes,[114] because they have the right to examine the validity of the initial agreement to arbitrate.[115]

Neither the European Court of Justice (“ECJ”)[116] nor the European Commission has been active in governing international commercial arbitration.[117] The ECJ has been granted the authority to adjudicate arbitration clauses in contracts entered into by the EU, whether public or private law governs them.[118] Despite the fact that consensual arbitration has been accepted as a resolution method for disputes involving the EU, the ECJ has not regarded it as an independent and alternative solution.[119]

The courts of the member states are encouraged to seek advisory opinions from the ECJ on questions pertaining to EU law.[120] However, private arbitrators are not authorized to approach the ECJ on such questions.[121] Arbitrators must therefore resort to a lengthier process to resolve the disputes before them, as they cannot ask about aspects of the law on which they may be unclear. If arbitrators were able to approach the ECJ with questions that they may have, they would not waste time deciding which law they should follow in resolving their disputes. The inaccessibility of the ECJ to arbitrators counters the positive characteristics of the procedure and the idea that arbitration equals simplicity.

The same is true of the explicit exclusion of arbitration in the Lugano Convention governing international commercial activity.[122] Ultimately, the EU has refused to embrace international commercial arbitration. It has also resisted regulating the manner in which arbitration is performed. It is possible that this resistance is due to the subsidiary role of its government.[123] The EU is conceptually designed as an infrastructure, not to be used in a supremacy role in European commerce.[124] For whatever reason, the EU’s lack of interest in arbitration indicates that it is not taking advantage of the benefits of arbitration.

The characteristics of arbitration are based on the avoidance of strict and pervasive judicial intervention. The form of arbitration presented and relied on by the EU counters these concepts. The EU measures have the effect of undermining the essence of the arbitration process. While it is important to allow violations by arbitration tribunals to be withdrawn, the law does not give the resolution process an adequate opportunity to place arbitration as an independent alternative to litigation.[125] Rather, the resolution process increases the need for court assistance.[126] By not actively promoting arbitration, the EU implicitly disapproves of the process. As a result, arbitration does not function at an optimal level, and the fairness and justice of the autonomous process are being sacrificed.

By contrast, the courts and the government of the United States have increased their reliance on arbitration as an independent and respectable resolution technique. In the US, there has been a recent and dramatic shift from reliance on litigation to that of arbitration.[127] This transition can be seen in the contexts of what can be settled in court and what can be arbitrated.[128] The evolution has been in favor of arbitration.[129]

[*66] Over the last twenty-five years, American courts have demonstrated strong support for arbitration in both domestic and international contexts.[130] Led by the Supreme Court, others have decisively focused on the importance of party autonomy in deciding the forum for disputes and the need for predictability in resolving them.[131] New commercial and financial relationships are now subject to arbitration, as it is considered ideal for resolving business disputes.[132] In addition, an extremely strict and deferential stance has been taken on the judicial review of arbitration awards.[133] Even in situations where “manifest disregard for the law” has taken place, a court may nonetheless require enforcement of the arbitral award.[134] Courts are not relying on arbitration as a means of preparation for trial.[135] Courts do not look at arbitration as a mere practice procedure for the parties before litigation. If treated as merely a preliminary activity, many of the advantages that make the process initially attractive would be eliminated.[136]

The federal government has complemented the reliance on arbitration taken by the courts as well. In 1996, Congress amended the Administrative Dispute Resolution Act of 1990 to provide federal agencies with the added authority to use ADR in resolving administrative disputes.[137] Under the Act, agencies are specifically directed to design ADR programs, appoint officials as ADR specialists and cooperate with other agencies to implement the Act on a government-wide scale.[138] The high level of interest taken by the US court system and government in arbitration supports a solid intention to make arbitration work in a variety of legal contexts.

Along with the London Court of International Arbitration and the International Chamber of Commerce, the American Arbitration Association (“AAA”) has responded to the change in the international commercial landscape.[139] As arbitration has become the preferred means for resolving international disputes, the AAA has established an International Center for Dispute Resolution and has revised its International Arbitration Rules.[140] During 1996, its first year in operation, the AAA handled 280 international cases.[141] The majority of these cases involved commercial transactions.[142] In refining its institutional practices, the Center has required that arbitrators have outstanding legal skills, specialized technical expertise, and management capabilities.[143] This demonstrates the Center’s dedication to providing a strong framework for confronting highly complex disputes.

To account for the increased demand for efficient dispute resolution procedures, the International Arbitration Rules have also been revised.[144] The dispute resolution process has been streamlined to encourage activist management in conducting arbitration.[145] Case administrators will schedule administrative conferences with the parties involved early in the proceedings and will conduct conferences with the tribunal itself.[146] By establishing the parameters of administrative support, this preparation proves invaluable.[147] The efficiency and certainty of the process are also advanced.[148] As a result of the above revisions, it is likely that the use of international commercial arbitration will increase.[149] More substantive law will be created and it will have a direct impact on European commerce.[150]

As the EU considers the expansion of its institutions through economic and monetary union, it should seriously consider following the US example. It is in the [*67] interest of the disputants and the Union itself to accept the global increase and popularity of international commercial arbitration.[151] Regular communication between the EU administration and arbitrators would work to its benefit. It is also to the EU’s advantage to create uniform dispute resolution measures that parallel the uniformity that is being created on an economic front through its Directive on Electronic Commerce and in its conversion to the euro. The drafting of substantive law in this area will have an added influence not only on European commerce,[152] but also on the regulation of that commerce. Therefore, Europe’s economic and monetary union will assume a magnified importance.[153]

IV. THE ECONOMICS OF INTELLECTUAL PROPERTY

A. Intellectual Property as a Business Tool

Information in the electronic world has become more important due to the increased digitalization of resources. This evolution has challenged the traditional concepts of intellectual property. IP laws are territorial, varying from country to country. Innately, they are at odds with the borderless nature of the Internet. On the Internet, the principle of territoriality becomes problematic, because posting a work online may involve the laws of every country in which the work is transmitted.[154] A work may go through several countries before reaching the end user. For example, a work may be initiated in one country, reproduced in another, resold in a third, and distributed in a fourth. The cross-border transfer of information has made IP in our global economy incredibly difficult to protect. The accessibility of IP has made it a valuable but vulnerable commodity. With international laws in conflict, the importance of designing clear and reliable rules for investment in IP is clear.[155]

Copyright has become one of the most important issues in e-commerce.[156] The economic success of the EU’s entry into e-commerce within the single market is inextricably linked to the level of security guaranteed to such intellectual property rights. Individuals must be able to trust in the protection provided for them in order for them to fully profit from the expansion that international commerce on the Internet has to offer. Complex issues have arisen as to how the existing copyright laws should be adapted to apply to the Internet and what new rights and remedies are needed for their protection.

Because of ambiguities in legal definitions and technical means of control, the digital medium requires a completely new approach to copyrights.[157] These issues have been well debated, and no clear-cut solutions have resulted. Complementing the recent trend in standard commercial transactions, IP disputes have begun to rely on private commercial arbitration.[158] The EU should recognize how international intellectual property conflicts are being handled and should encourage arbitration as an effective means for settling them. Adequate copyright legislation and dispute resolution will together assure a workable commercial environment for e- commerce.

B. Copyright and Controlling the Marketplace of Ideas

A copyright is the exclusive and sole right of ownership of the form of an expression.[159] Copyright protection covers original works of authorship from unauthorized reproduction, distribution, display, performance and translation.[160] Words on a page, voices fixed to a compact [*68] disk and images recorded on videotape are all eligible for copyright protection.[161] This protection extends only to the expression of ideas, not to the ideas themselves.[162] Over time, the scope of the law has expanded to incorporate new forms of intellectual property, including digitized files and their distribution over interconnected computer networks. However, it has become difficult to control and enforce copyright in cyberspace.

Today’s Information Age, where “selling ideas” has become a common activity, requires a re-thinking and reevaluation of the purpose and policy of copyright protection.[163] Presently, new technologies and tools are being developed to monitor digital communication, in an effort to continue safeguarding authorship rights.[164] They must be a product of their purpose. Rules for digital copyright must grow out of, and be a response to, the reason for their existence.[165] The success of these rules will be measured by their ability to fulfill the function of copyright law, whatever it is determined and interpreted to be.[166] This concept can be best illustrated by examining two strands of thought in regard to intellectual properties and the rationale for copyright protection.[167]

IP principles can be seen as extending along a spectrum, with property rights at one end and authorship rights at the other.[168] The property rights approach views the objectives of a copyright law as providing the author with a strong demand market and guarantee of revenues, thereby promoting the continuous supply and availability of high-quality products.[169] Under this view, an idea, knowledge, or intellectual activity is characterized as economic property.[170] Copyright protects the interests of the authors, their profit and market interests and concerns derived from use of their property, rather than the exact property itself.[171] As a result, the misappropriation of such property under this approach raises economic concerns.[172] However, these concerns are not novel by any means. The digital marketplace does not present any new issues demanding a complete rewriting of IP laws, but rather requires the extension of preexisting ownership rules.[173] As a result, followers of this approach see current copyright laws as adequate, and suggest that concentration be placed on developing new technological ways of auditing, identifying and measuring the digital flow of information, to complement strict enforcement of already existing property laws.[174]

At the other end of the spectrum, the authorship rights approach considers the function of copyright laws to be the protection of the author’s moral rights to his creations.[175] As such, this view seeks to enforce stricter mechanisms for controlling all aspects of storing, retrieving, altering, reproducing and transmitting of these creations.[176] Under this approach, authors have unrestricted control over their own creations, distribution, and use.[177] While this perspective can be seen as conflicting with the professed goal of IP rights laws, which is to promote the welfare of society through broad access to ideas and information, the public’s interest is not seen as paramount.[178] As a result, followers of this approach believe that copyright laws must be redefined in order to effectively control infringement of digital products, by not only strengthening, but also modifying current copyright statutes.[179]

In the center of this property/author’s rights continuum, numerous copyright problems have arisen in a context that stresses the desirability of disseminating ideas, but also seeks to restrict it. The links [*69] of thousands of computers and computer networks permit individuals to share an enormous amount of information and entertainment resources, often including copyrighted materials.[180] As a result, copyright violations have produced both pragmatic and legal problems. Current debate persists as to how copyright in the digital age should evolve. Uncertainty in legal definitions and technical control measures leave two options. Either traditional copyright terms will be redefined or novel usage patterns will be adopted. The balance that will be found between the two strands of thought will define the way in which present concepts adapt to and accommodate digital communication.[181] In other words, an even balance that falls between the two extremes will designate where market security and stability can be found.

If someone engages in reproduction, distribution or adaptation of a work without authorization from the author, a copyright infringement has occurred.[182] These three primary author’s rights represent integral parts of the larger copyright protection process.[183] Their intertwined relationship is accentuated when considered in the context of the Internet.[184] This is due to the manner in which digital products are transmitted and used.[185] For example, when one downloads or views a digital file, it is automatically copied and reproduced.[186] That file can then be distributed.[187] For this reason, advocates for IP rights have focused on preventing improper duplication and reselling of digitalproducts.[188] While reproduction is only a single aspect of copyright protection for digital products, it has been widely recognized as the most problematic one.[189]

The definition of “reproduction” is a copy of an original work fixed on a permanent medium.[190] Unfortunately, there is ambiguity as to what constitutes a fixable and a permanent medium when digital products are transmitted over the Internet. When users make “copies,” it is clear that the exclusive right to reproduce comes into play.[191] With paper-based products, concern arises from the simple act of photocopying.[192] With digital products, the situation is not as obvious.[193] Due to the nature of the Internet, many kinds of copies are made during the transmission and display of works.[194] When a file is displayed on a computer screen, a temporary copy is found in the computer’s internal RAM memory.[195] When a file is deleted from a computer’s hard disk, it is not erased from the computer until written over by another file.[196] When a digital file is sent over the network, intermediaries who route and forward the file may make copies of it.[197] Also, when one is searching on the web, web browsers may automatically and temporarily store pages that have been accessed.[198]

Are the above activities fixed expressions of ideas that are protected by copyright law? Interpretation of the terms “fixation” and “permanency” will provide answers.[199] The way in which the traditional definition of copyright is applied to the digital world will dictate whether the above copies can be considered reproductions that infringe copyrights.[200]

Legal experts have not yet provided clear definitions for terms such as “copying,” “fixation” and “permanency.”[201] In the meantime, novel complications continue to arise. Time will pass before the right conclusions are reached.[202] Therefore, an economic approach for protecting copyright in the virtual marketplace of the Internet should be based on the market.[203] While reproduction without distribution [*70] does not affect the market size of the copyrighted work, it does when it is coupled with distribution.[204] The issue that follows in e-commerce, then, is to what extent the reproduction technology available to consumers will erode the market to the detriment of content owners.[205] Will present technology eventually lead to widespread and unauthorized distribution?[206] Will future technology be able to prevent unauthorized reproductions?

Intellectual property is unique because it is a non-competitive good.[207] It can be consumed again and again on different days and at different times.[208] Once the good is created, copies can be made and distributed on the Internet at a marginal cost, which is assumed to be zero.[209] This has been labeled as the beauty behind digital products.[210] They can be reproduced, stored and transferred easily.[211] However, if the producer cannot appropriate the fixed cost from the market, the quality of that product will diminish.[212] In the extreme scenario, the product will be withdrawn from the market altogether. Therefore, ambiguity as to copyright’s legal protection can cause a withdrawal from the information market.[213] Authors may decline to generate products and content owners may refuse to put them on the Internet. The uncertainty of a good’s product quality and the inadequacy of copyright protection will not only discourage content owners from offering their products, [214] but will also jeopardize the prosperity of the virtual market of communication.

Intellectual property laws are essentially economic measures.[215] While these laws are usually referred to in the context of intellectual creativity and the promotion of knowledge of ideas, these goals cannot be attained without incentives, which are usually economic.[216] Therefore, implementation and enforcement mechanisms of these economic standards must be evaluated in terms of how effective they are in achieving market potential.[217] Any steps taken in the realm of digital copyright must be evaluated in how well they fulfill these terms.[218] The justification behind protecting an author’s right to reproduce and distribute his works is that it will propel the further creation of them.[219] Financial incentives may act as a driving force.[220] These incentives will also complement any capital already received pursuant to word of mouth and the author’s reputation.[221] In order to keep market forces competitive, resolution procedures must be capable of reassuring concerned individuals that their property rights will be protected. Intellectual property and the market for copyright owners have become investments that must be well provided for.

C. ADR and Copyright Disputes

Statistics show that ADR techniques are being used more regularly and with more success in settling disputes involving IP rights and online technology.[222] In addition, arbitration has been lauded as an effective alternative to litigation in the resolution of IP disputes, including those that cross international borders.[223] The recent trend in commercial transactions that cause IP disputes to be resolved by private commercial arbitration[224] can be carried over into disputes arising in the Internet context.[225] Technological change has created the challenge of a new global business environment. By examining the complexities of IP disputes and the advantages that the ADR mechanism of arbitration has to offer, it appears that it is a wise, rational and flexible choice for accommodating the nature of the technological medium.[226]

[*71] Novel intellectual property disputes have been created in a medium where reproduction is practically instantaneous. System administrators may be found liable for copyright infringement when they allow users to send files that can be downloaded or copied by other users.[227] It may be irrelevant whether or not the administrator had been aware that the files sent were copyrighted. [228] Private bulletin board services often receive hundreds of files a day.[229] This basis of liability suggests that they have the heavy burden of screening all files that have been uploaded to them.[230]

Another example may be found in the recording industry where performance rights are called into question. Rights of music publishers and recording artists cause confusion in cyberspace.[231] Licenses are not easily applied to digital communication.[232] For the payment of royalties, the question of duplication is essential.[233] Computerized communication lends itself to the quick and unauthorized duplication of copyrighted works, due to the ease with which patterns of bits can be stored and transferred.[234] As a result, a gap has formed within copyright law, which focuses on real space and the policies it seeks to promote.[235] IP in a digital form faces a constant threat. Every duplication, through uploading and downloading, has a chance of technically being considered a copyright infringement.[236] This interpretation is developing in direct opposition to what many nations have established under their traditional laws.[237]

Intellectual property disputes are as expensive to litigate as they are fact-intensive.[238] In addition, they are technically complex, and frequently require field experts.[239] The stakes are often high and time sensitive,[240] but it may take years for cases to be resolved in the court system and the outcome of litigation is always difficult to predict.[241] Litigation will frequently produce unsatisfactory results and inflexible terms.[242] It may also harm the business interests of both parties involved.[243] Intellectual property disputes on an international level make matters even more difficult.

There are basic conceptual differences in the way in which various nations view and interpret IP rights.[244] As a result, divergent perspectives in IP philosophy affect the level of protection IP rights are afforded. The continued development of Internet technology will foster further confusion, further conflict and further international litigation.[245] This increase in international litigation has led to a need for reliance on arbitration in managing IP disputes.[246]

In the evolving global market, the advantages of resolving international intellectual property disputes through ADR techniques are particularly substantial.[247] The benefits that these methods provide take on an enhanced importance when applied to the innately complex matters of these disputes.[248] The following are some examples. It was previously explained that ADR processes resolve conflicts in an expedient fashion. As such, it may take less time to correct an injury and solve the IP dispute at hand.[249] In cases that involve highly technological and rapidly changing mediums, this element is of paramount importance. It will be essential that matters be addressed before an issue becomes obsolete.[250] The market will also be prevented from becoming saturated with infringing materials to the extent that no level of remedy could correct an injury if a damaged party had to wait until a trial date.[251]

[*72] Another advantage of ADR techniques is flexibility, as parties have the ability to tailor the process chosen to meet their needs.[252] This can create a more predictable and favorable environment. Ultimately, the flexible tribunal will take into account divergent international concepts of IP and accommodate or harmonize their differences.[253]

In addition, the advantage of confidentiality provided by ADR may be of particular importance to parties in IP cases. The privity of the resolution process would prevent technology and financial matters from seeping to the public, or competitors, via the media.[254]

The pronounced strength of ADR in international intellectual property cases, as demonstrated by some of its benefits identified above, parallels its suitability for networked communication and makes it an ideal choice for handling complicated questions that persist.[255] The rapid development of technology has permitted individuals to discover novel and superior ways to infringe and protect intellectual property.[256] Lack of industry standards leave many holes in the safeguarding of copyright protection. Legal analysts are confronting the question of whether any property right can exist and whether it can be transferred over international lines.[257]

The problem can be outlined as follows. A European database transfers data to a U.S. company through a remote access, which passes through a Mexican computer.[258] Has an infringement occurred? If the data contains factual material, the relevant EU directive supports the adoption of the principle of reciprocity as governing the protection of IP rights.[259] Therefore, the European country that sent the data actually owned the right to prevent or monitor extraction of that material from its database.[260] However, the U.S.’ principle is based on the premise that no such rights would exist.[261] The conditions in Mexico might fit under either perspective, or possibly under its own.[262] This situation demonstrates the serious issue of jurisdiction.[263] Arguably, arbitration is the most skillful resolution technique to overcome obstacles such as those explored above.

Where traditional and static law is struggling to keep pace with the modern environment, arbitration can be used to resolve Internet-related disputes. Arbitration can formulate custom, and account for the nature of the Internet, without stifling eitherone.[264] This flexible method of dispute resolution may not only be the most prudent, but the only sufficient way to guard the Internet and the e-commerce market. The commercial acceptance of ADR also suggests it will play a prominent role in the proliferation of digital commerce.[265] The incentive for using arbitration in a commercial context has obvious implications in cyberspace.[266] Jurisdictional problems can be avoided and delays eliminated if parties develop arbitration agreements that stipulate their choice of law.[267] As in the commercial context, reliance on arbitration reflects its applicability for resolving those IP issues that relate to the digital, storable, global and elusive nature of technology.[268]

D. Arbitration’s Role For Online Copyright Disputes in the EU

Many nations are distressed with the present means of enforcing and protecting intellectual property rights.[269] With the revolution of the Internet and ease of communication, this frustration is exacerbated. Laws of IP vary by location [*73] and a supranational code that would govern all countries has only recently been contemplated.[270] Treaties, affecting only those nations that have chosen to participate, designate international protection.[271] Yet most copyright protection is regulated by a nation’s domestic laws rather than by treaty.[272] Consequently, laws have limited cross-border success and restricted application. Rights protected in one territory may be ignored in another. Problems of national sovereignty cause difficulty in the prosecution and resolution of transnational claims, as opposed to infringement cases on a domestic level.[273]

The fundamental differences in IP philosophy stimulate an increase in international conflict and therefore an increase in international litigation.[274] This rise in international litigation demonstrates a need for arbitration to deal with all kinds of international IP disagreements.[275]

In response to a global concern, several organizations, including the American Arbitration Association, the General Agreement on Trade and Tariffs (GATT) and the World Intellectual Property Organization (WIPO), have created their own ADR mechanisms to resolve intellectual property disputes.[276] On a more local level, the United States government, in the last twenty years, has joined in the trend to allow arbitrators to decide IP disputes between commercial parties.[277] In addition, US courts have supported the option to arbitrate.[278] With commerce on the rise on an international front, other countries and organizations should look to steps taken by the United States. Why not the EU?

The EU can include ameliorative dispute resolution provisions in its Directive on Electronic Commerce within the Single Market that will effectively facilitate a model for commercial interaction and will be considered both satisfying and successful by consumers and businesses on an international front. By designating the use of arbitration to resolve conflicts arising out of the business of its member states, cost and time will be saved and privacy will be protected. High quality decisions will also be obtained. In addition, European competitiveness will be secured in the present global market. Guidance and assistance may be what the EU needs to provide a reliable environment for online commerce. Possibly, more precise drafting of resolution provisions and a clearer understanding of the arbitral process will lead the EU to rely on arbitration as a true alternative to litigation.

In creating a dispute resolution clause, it is insufficient for provisions to merely state that “disputes arising under the agreement shall be settled by arbitration.”[279] The intent to arbitrate is clear; however, many issues are not properly addressed.[280] These issues relate to when, where, how and in front of whom the dispute will be arbitrated.[281] If they are not decided beforehand, they will be subject to disagreement once a dispute has arisen.[282] There will then be little way to resolve these disputes short of going to court.[283]

The drafter of an arbitration clause should therefore keep a checklist of elements in mind.[284] This will be of special importance in the drafting of dispute resolution provisions for e-commerce. The checklist will also prove valuable for managing international intellectual property disputes. The AAA’s Drafting Dispute Resolution Clauses Committee has outlined a well-written booklet of considerations.[285]

While not exhaustive, the following are elements a practitioner should [*74] contemplate when drafting or adopting an arbitration clause.[286] As a safeguard against loss of good will, they merit serious consideration. First, the clause should state whether it governs all or only certain types of disputes.[287] Second, all or as many potential parties as may be involved in the future dispute should sign it.[288] Third, specification should be made as to whether the arbitration panel will consist of one or three arbitrators.[289] Fourth, the clause should state where the arbitrator is to conduct the proceeding.[290] Fifth, the arbitration agreement should provide the language in which the arbitration will be conducted.[291] Sixth, parties should indicate if punitive damages are to be excluded from the judgment.[292] Seventh, parties may wish that one or more of the arbitrators were an expert in the matter at hand, such as in computer technology.[293] Eighth, parties may want to designate whether the arbitrator should or should not be a national of a particularcountry.[294] Ninth, the drafter should give consideration to specialized rules that have been established for arbitration in different practice areas, including intellectual property.[295] Tenth, parties should make clear whether preliminary relief is to be permitted.[296]

The EU should keep these elements in mind when reviewing the provisions governing alternative dispute resolution in its Directive on Electronic Commerce in the Single Market. The exponential growth of information generated in all sectors of commerce calls for a secure investment in intellectual property. This investment cannot take place within the European community unless a stable and uniform legal protection regime is created. By reflecting developing custom and accounting for evolving technology, with small risk of stifling either one, arbitration will prove to be a valuable tool in an environment where the law is struggling to adapt.[297] The EU need only be willing to recognize and process that determination.

CONCLUSION

The Internet is a phenomenon that has penetrated society faster than the arrival of electricity, the telephone and television.[298] Aftereffects have not been altogether avoided. Novel copyright issues have materialized in response to the development of digital communication and the birth of e-commerce. Many questions have been posed on the relationship between traditional copyright law and its application to Internet-based transactions. Furthermore, the global and elusive nature of the Internet has produced more difficult questions regarding its digital and storable capacities.[299] In pursuit of alleviating the after-effects, weight should be given to expanding alternative dispute resolution methods to new industries.

The world’s current focus on international competition for investment has increased the desirability of clarifying IP rules.[300] In addition, the global participation in commercial transactions has led to a reliance on commercial arbitration in resolving IP disputes.[301] Together, these two trends complement the well-established public policy concern of protecting IP rights through arbitration.[302] An extension to the Internet context seems logical. Movement in this direction has already been initiated as this resolution mechanism has been used to resolve several Internet-related intellectual property disputes.[303]

Europe faces a new challenge in making the single market function for online commerce. Any steps taken in the protection of digital copyright will be evaluated by their effectiveness in achieving market [*75] potential. As such, the extent to which the reproduction technology available to customers will erode the market to the detriment of content owners remains an issue in e-commerce. An exact answer will be difficult to find. However, application of ADR principles is a sensible and sound reaction to the concept that the Internet is essentially a “huge morass of copyright violations.”[304]

It would be in the best interest of the EU to draft and use arbitration provisions in its Directive on Electronic Commerce in the Single Market. The EU should follow the lead taken by other nations and organizations in using ADR for IP disputes, despite its past reluctance to use arbitration. This would prevent the fragmentation of the common market and, ultimately, the curtailment of European competitiveness. Where modern developments exceed the speed with which the law can respond to them, ADR should be considered a preferred alternative.[305]

[1] See Soon-Yong Choi et al., The Economics of Electronic Commerce 12-14 (1997). In a broad sense, e-commerce refers to the “use of electronic means and technologies to conduct commerce, including within-business, business-to-business, and business-to-consumer interactions.” Electronic commerce areas include searching for product information, ordering products, paying for goods and services, internal electronic mail and messaging, online searches for documents and peer knowledge, distributing critical and timely information, and tracking orders and shipments. E-commerce is a new market that offers new commodities.

[2] See Choi et al., See supra note 1, at 27.

[3] Justin Hughes, Professor of Benjamin N. Cardozo School of Law at Benjamin N. Cardozo School of Law (Jan. 24, 2000).

[4] See Julia Alpert Gladstone, Essay, Does the EC Council Directive No. 95/46/EC Mandate the Use of Anonymous Digital Currency?, 22 FORDHAM INT’L L.J. 1909 (June 1999).

[5] See Choi et al., supra note 1, at 35.

[6] See Matthew J. Feeley, Note, EU Internet Regulation Policy: The Rise of Self-Regulation, 22 B.C. INT’L & COMP. L. REV. 166-167 (Winter 1999).

[7] The EU is currently composed of the following fifteen member states: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and United Kingdom. The EU’s broad mission is to organize relations between the member states and their citizens in a coherent fashion, on the basis of solidarity. Its main objectives include the following: to promote economic and social progress; to assert the identity of the EU internationally; to introduce European citizenship; to develop a geographical area of

[*76] freedom, security and justice; and to maintain and to build on already established EU law. See http://europa.eu.int/abc-en.htm

[8] See John A. Fraser III, Congress Should Address the Issue of Provisional Remedies for Intellectual Property Disputes Which are Subject to Arbitration, 13 OHIO ST. J. ON DISP. RESOL. 505 (1998).

[9] The Internal Market Directorate General XV concentrates in the areas of media commercial communications and information society services (electronic commerce). As a matter of policy, the Directorate General aims to guarantee the freedom of establishment and the free movement of services, offering European businesses and individuals the benefit of an area without internal borders. See http://www.europa.eu.int.

[10] See Alejandro E. Almaguer & Roland W. Baggott III, Note & Comment, Shaping New Legal Frontiers: Dispute Resolution for the Internet, 13 OHIO ST. J. ON DISP. RESOL. 711-712 (1998).

[11] See William F. Fox, Jr., International Electronic Commerce, SE06 A.L.I.-A.B.A. 161 (July 1999).

[12] See id.

[13] See id.

[14] See CHOI ET AL., supra note 1, at 14. Electronic commerce includes: internal electronic mail and messaging; online publishing of corporate documents; online searches; managing of corporate finance systems; sending of order processing information and reports to suppliers and customers; and other business activities.

[15] See id. at 13.

[16] See id. at 2, 13. In a broad sense, electronic commerce refers to the use of technology to conduct commerce. It can also be used for noncommercial activities such as entertainment, communication, filing and paying taxes, research and education. These activities may also include the service of online companies. Therefore, it is difficult and arbitrary to separate electronic commerce areas from noncommercial applications of the same technology.

[17] See id. at 14.

[18] See G. PETER ALBERT, JR. & LAFF, WHITESEL & SARET, LTD., INTELLECTUAL PROPERTY LAW IN CYBERSPACE 4 (1999).

[19] See CHOI ET AL., supra note 1, at 2.

[20] See id.

[*77] [21] See id.

[22] See President William J.Clinton & Vice President Albert Gore, Jr., A Framework for Electronic Commerce, in 1128 PLI/Crop 518 (June-July 1999) , at 512.

[23] See id. World trade involving computer software, entertainment products (motion pictures, videos, games, sound recordings), informational services (databases, online newspapers), technical information, product licenses, financial services and professional services (business and technical consulting, accounting, architectural design, legal advice, travel services, etc.), now accounts for more than $40 billion of US exports alone.

[24] See CHOI ET AL., supra note 1, at 21.

[25] See id.

[26] See id.

[27] See Richard A. White, Overcoming Regulatory Barriers to Successful ECommerce, 570 PLI/Pat 705 (Aug.-Sept. 1999).

[28] See Fox, Jr., supra note 11, at 162. The legal issues of e-commerce are not completely resolved. See id. However, there are a number of groups and individuals that are working hard to find solutions to these important issues. They include: the International Chamber of Commerce; the United Nations Commission on International Trade Law; and the National Conference of Commissioners on Uniform State Laws. See id.

[29] See White, supra note 27, at 707.

[30] See Robert C. Bordone, Note, Electronic Online Dispute Resolution: A System’s Approach-Potential, Problems, and a Proposal, 3 HARV. NEGOTIATION L. REV. 176 (Spring 1998).

[31] See id.

[32] See CHOI ET AL., supra note 1, at 32.

[33] See Almaguer and Baggott III, supra note 10, at 712.

[34] See Margaret Jan Radin & Daniel Appelman, Doing Business in the Digital Era: Some Basic Issues, 570 PLI/Pat 53 (August.-Sept. 1999).

[35] See id. Due to the digital environment, business models and the basics of the legal business infrastructure have changed. Many questions have been posed to business decision-makers and their counsel. These questions are economic, strategic, legal and political.

[36] See id.

[*78] [37] See Radin and Appelman, supra note 34.

[38] See id. at 53-54.

[39] See Almaguer and Baggott III, supra note 10, at 711.

[40] See President Clinton & Vice President Gore, supra note 22, at 512.

[41] See E. Casey Lide, Note & Comment, ADR and Cyberspace: The Role of Alternative Dispute Resolution in Online Commerce, Intellectual Property and Defamation, 12 Ohio St. J. on Disp. Resol. 207. (1996). at 201.

[42] See id.

[43] See id. The rapid growth of the Internet is due to its unparalleled potential for information exchange and economic gain. By 2000, the Internet is expected to produce almost $80 billion in yearly revenue. See id.

[44] See id.

[45] North America is forecasted to be responsible for 12.8% of total e-commerce sales in 2004, with the US contributing to most of that figure. Western Europe is predicted to be responsible for 6.0% of total e-commerce sales in 2004. See http://www.forrester.com/ER/Press/ForrFind/0,1768,0,FF.html.

[46] See Feeley, supra note 6, at 158-160.

[47] See Mark Owen, International Ramifications of Doing Business Online: Europe, 564 PLI/Pat 265 (June 1999).

[48] See Feeley, supra note 6 at 160.

[49] See Owen, supra note 47, at 270. The Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (“The Brussels Convention”) sets out the rules relating to the jurisdiction of European Union Courts and the rules for enforcing EU judgments in “civil and commercial matters.” See David Perkins & David Rosenberg, Discovery in Foreign Jurisdictions: Enforcing Judgments Abroad, SE32 A.L.I.-A.B.A. 200 (Nov. 1999). The Brussels Convention applies to proceedings brought against any party that is domiciled in any of the fifteen EU member states. The basic rule is that all other Contracting States must recognize a judgment by any Court of a Contracting State that falls within the Convention’s scope. See id. at 214. Additionally, the judgment must be enforced, if enforceable in the Contracting State in which it was given. IP disputes fall within the definition of “civil and commercial matters.” See id. at 200. The Rome Convention of 1980 also provides that effect may be given to the mandatory rules of another country with which the situation has a close connection, if under the law of that country those rules are to be applied regardless of the law applicable to the contract that was entered into. See Andrea Bonomi, The Italian Statute on Private International Law, 27

[*79] INT’L J. LEGAL INFO. 258 (Summer 1999). The Rights protected under the terms of the Rome Convention cannot be taken away when suppliers and consumers who are domiciled in different Member states enter into contracts. See David Church et al., Recent Developments Regarding U.S. and EU Regulation of Electronic Commerce, 33 INT’L LAW. 354 (Summer 1999). The Convention supports the notion that a consumer would enjoy the same rights as he would in his own country of domicile. The object of Article 3 of the EC Directive, designed to create a legal framework for electronic commerce within the EU, is the implementation of the freedom to provide services under the EU treaty. See id. at 349. This is based on determinations made regarding the Member State responsible for governing the e-commerce activities (the country of origin) and the prohibition on other Members restricting the freedom of e-commerce service providers to provide services (mutual recognition). The Article does not override the 1980 Rome Convention on applicable law for contractual obligations or the 1968 Brussels Convention on jurisdiction and the enforcement of judgments.

[50] See Trevor Cox, Information and the Internet: Understanding the Emerging Legal Framework for Contract and Copyright Law and Problems with International Enforcement, 11 TRANSNAT’L LAW. 23 (Spring 1998).

[51] The Treaty is a single coherent and comprehensive constitution. It governs the institutional structure of the EU, its composition, methods of appointment and its decision making process. The institutions of the EU include the Parliament, Council, Commission, and Court of Justice. Membership to the Union, and therefore parties to the Treaty, is limited to democratic European states. See CAPOTORTI ET AL, THE EUROPEAN UNION TREATY 17 (1986).

[52] The European Commission safeguards the general interest of the EU. The President and Members of the Commission are appointed by Member states, after the European Parliament has approved them. The Commission is the core driving force of the EU. The Commission has the right to initiate draft legislation and therefore to present legislative proposals to the European Parliament and Council of Ministers, is responsible for implementing European legislation, budget and programs adopted by the Parliament and Council, acts as the guardian of Treaties and helps ensure Community law is being properly applied, and represents the EU on international issues, for example, by negotiating international agreements. See http://europa.eu.int/inst-en.htm

[53] See David Church et al., Recent Developments Regarding U.S. and EU Regulation of Electronic Commerce, 33 INT’L LAW. 348 (Summer 1999).

[54] See id.

[55] See id.

[56] See id.

[57] See id.

[58] See http://europa.eu.int/geninfo/key_en.htm

[*80] [59] See id.

[60] See NORMAN LEVINE, THE US AND THE EU 94 (1996). The European Central banking system will consist of a central body, the European Central Bank, some regional bodies, and the already existing national central banks. The main role of the Bank is to establish and implement a single monetary policy. The primary focus of this independent institution will be on price stability.

[61] See id. at 95. The fundamental policy objectives of the economic and monetary union include the promotion of: sustainable and non-inflammatory growth; a high degree of convergence of economic performance; a high level of employment and social protection; and economic and social cohesion and solidarity among Members. See id. at 95-96. Member states are required to conduct their economic policies in a manner that furthers the above objectives. See id. at 96.

[62] See id. at 97. Emphasis has been placed on the economic and social cohesion of Member states due to the differences in their levels of prosperity. However, the EU is not suggesting that a derogation must be made in order for countries to “catch up.” Stable growth and employment creation in the European Community will contribute to the catching-up process. This will be facilitated by financial assistance mechanisms designed to help Members in exceptional situations.

[63] See id. at 106.

[64] See id. at 107.

[65] See Feeley, supra note 6, at 160. In the paper entitled “A European Initiative In Electronic Commerce,” the Commission stated that EU regulation of the Internet was necessary for preventing the fragmentation of the European market. That market is based on economic and monetary union and is aimed at breaking down internal trade barriers. Such fragmentation would only serve to inhibit the commercial potential of the European Internet Market.

[66] See id. at 167.

[67] See id. at 175.

[68] Information Society services include electronic commerce, electronic signatures and transparency mechanisms. Within the topic of electronic commerce, concentration is placed on aspects such as: definitions of where operators are established; transparency requirements for commercial communications; conclusion and validity of electronic contracts; liability of Internet intermediaries; online dispute resolution settlement, and the role of national authorities. See http://www.europa.eu.int.

[69] See Church, supra note 55, at 354. For example, a consumer in Member State A who is not able to take advantage of a three-for-the-price-of-two offer through normal retailing channels in that state, due to the existence of the unfair competition law, may dial up a web site in Member [*81] State B and receive such an offer because the web site established in Member State B will not be subject to the restrictions in Member State A.

[70] See Owen, supra note 47, at 266. Legislators in the US and Europe are being pressured to adapt laws to the new e-commerce environment. Up until recently, the state of the law had been of little relevance to Internet users. E-commerce is already commonplace, but satisfactory law has not kept up. One factor contributing to this lack of applicable law is that the speed with which personal computers have penetrated society’s homes have left little time for the law to catch up.

[71] See id. at 347. The country of origin principle means that businesses using e-commerce will only have to concern themselves with one law, that of the place of establishment, rather than fifteen different laws of the Member states. This is derived from the concept of mutual recognition, which requires Members to accept each other’s laws regardless of their differences.

[72] See Church, supra note 69

[73] Id., at 352.

[74] See id.

[75] See id.

[76] See id.

[77] See id.

[78] See Owen, supra note 47, at 271.

[79] See id. Local enforcement mechanisms will not protect the consumer in respect to contracts being entered into between parties from all over the world. For example, they will be of little help to European consumers when trying to enforce e-contracts against US suppliers. Possibly, the reciprocal measures will be implemented worldwide.

[80] The co-decision procedure requires approval at this stage by the Parliament and the Council of Ministers on the legislation that has been proposed.

[81] Every action taken by the EU is done by one of two methods: common action in the form of measures adopted by the Union institutions; or by cooperation in the form of commitments made by the Member states within the European Council. See CAPOTORTI ET AL., supra note 31 at 19.

[82] Directorate General, Commissioner Bolkestein Welcomes Political Agreement on Electronic Commerce Directive, (last modified Dec. 8, 1999), at http://www.europa.eu.int/comm/dg15/en/media/eleccomm/99-952.htm. Commissioner Bolkenstein explained, “The internal market provides an ideal basic framework for the free

[*82] movement of services and mutual recognition of each others’ rules and supervision. At the same time, e-commerce brings a whole new dimension to the Internal Market, notably in terms of making cross-border trade a practical option for both companies, irrespective of their size or location, and for consumers. Most new jobs are created by small firms in the service sector and it is precisely these firms that have most to gain from e-commerce.”

[83] See id.

[84] See id.

[85] See id.

[86] See id.

[87] See http://europa.eu.int/comm/internal_market/en/media/eleccomm/com31en.pdf

[88] See CHRISTIAN BUHRING-UHLE, ARBITRATION AND MEDIATION IN INTERNATIONAL BUSINESS 3 (1996).

[89] See id.

[90] See id.

[91] See id. at 5.

[92] See id. at 17. Parties in international business, therefore, are in great need of conflict resolution mechanisms. These mechanisms must be efficient enough to deal with the inevitable risks of change and conflict, which are inherent in any business activity.

[93] See id. at 16-17. Non-legal regulation consists of behavior patterns, logistical, cultural and language differences, and social pressures, such as the desire to maintain a good business reputation and the desire to continue the particular business relationship. While legal regulation, such as contractual planning and formal dispute resolution, seems like the appropriate answer to this dilemma, the above-mentioned inherent limitations also thwart its effectiveness. These inherent limitations of non-legal governance mechanisms make contractual stability of legal control mechanisms incredibly difficult. Added uncertainty in the international context makes these contracts an even less effective instrument of legal regulation. Therefore, agreements in international business face great risk and a small degree of protection,

[94] See id. at 37.

[95] See id. at 38.

[96] See George I. Zekos, Treatment of Arbitration Under EU Law, May 1999 J. ON DISP. RESOL. 9. See also BUHRING-UHLE, supra note 88, at 74. The legal framework of international commercial arbitration has been made more adaptable to resolving such disputes, as [*83] it has been streamlined and harmonized to bring more uniformity to the arbitral process. This has been accomplished through legislative reforms and conventions dealing with commercial arbitration, most significantly by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This Convention, initiated by the International Chamber of Commerce and sponsored by the UN, covers enforcement and jurisdiction aspects of international commercial arbitration. The Convention established a minimum standard for the treatment of foreign arbitration agreements and foreign arbitral awards by the national courts of member states.

[97] See American Arbitration Association, Drafting Dispute Resolution Clauses- A Practical Guide, 605 PLI/Lit 31 (June 1999).

[98] See Zekos, supra note 96.

[99] See BUHRING-UHLE, supra note 88, at 83.

[100] See id. at 84.

[101] See Zekos, supra note 96, at 10.

[102] See CHRISTIAN BUHRING-UHLE, supra note 88, at 87.

[102] See id. at 86.

[103] See Zekos, supra note 96, at 10.

[104] See Miriam R. Arfin, Comment, The Benefits of Alternative Dispute Resolution in Intellectual Property Disputes, 17 HASTINGS COMM. & ENT. L.J. 900-901 (Summer 1995).

[105] See id. at 900.

[106] See BUHRING-UHLE, supra note 88, at 84.

[107] See id. at 86.

[108] See id. at 87.

[109] See James H. Cater, International Commercial Dispute Resolution, April 1996 J. ON DISP. RESOL. 95.

[110] See Zekos, supra note 96, at 11.

[111] See id.

[112] See id.

[*85]

[113] See id.

[114] See id.

[115] See id.

[116] The European Court of Justice is the institution of the EU that ensures Community law is being uniformly interpreted and effectively applied. The Court has jurisdiction in disputes involving Member states, EU institutions, businesses and individuals. See http://europa.eu.int/inst-en.htm

[117] See Theodore C. Theofrastous, International Commercial Arbitration in Europe: Subsidiary and Supremacy in Light of the De-localization Debate, 31 CASE W. RES J. INT’L LAW 484 (Spring-Summer 1999). Of all the international accords that are in force in Europe governing the validity of arbitral awards, none have been fundamentally derived from the EU.

[118] See Zekos, supra note 96, at 13.

[119] See id. at 14.

[120] See id. at 13.

[121] See Theofrastous, supra note 117, at 488.

[122] See id. at 484-485. The Lugano Convention of 1998 contains similar provisions to the Brussels Convention previously discussed. See David Perkins & David Rosenberg, Discovery in Foreign Jurisdictions: Enforcing Judgments Abroad, SE32 A.L.I.-A.B.A. 200 (Nov. 1999). Under Brussels, the EU members have agreed that each member state must recognize the civil and commercial judgments of the courts of the other Members. See Tom Arnold, Why ADR?, 572 PLI/Pat 1013 (Sept./Oct./Nov. 1999). A State has no right to review the foreign judgments as to neither jurisdiction nor substance. See id. While the Brussels Convention operates between all EU countries, the Lugano Convention operates between EU countries and the European Free Trade Association (EFTA) countries of Norway, Iceland and Switzerland. See David Perkins & David Rosenberg, Discovery in Foreign Jurisdictions: Enforcing Judgments Abroad, SE32 A.L.I.-A.B.A. 200 (Nov. 1999).

[123] See id. at 488-489. The Commission has only once suggested that arbitrators should ask for guidance when they have a particular arbitrability question. This was regarding a patent license. In this case, the International Chamber of Commerce objected to the notification requirement, which was later abandoned by the Commission. The ICC proposed, instead, that the arbitral tribunals have direct access to the ECJ.

[124] See id. The Maastricht Treaty of 1992 states that a major objective of the Union is “to continue the process of creating an ever closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizens in accordance with the principle of subsidiary.”

[125] See Zekos, supra note 96, at 12.

[126] See id.

[127] See Richard H. Kreindler, Arbitration or Litigation? ADR Issues in Transnational Disputes, Fall 1997 J. DISP. RESOLU. 81.

[128] See id.

[129] See id.

[130] See Jose A. Cabranes, Arbitration and the U.S. Courts: Balancing Their Strengths, March-April 1998 N.Y. ST. B.J. 22.

[131] See id.

[132] See Kreindler, supra note 127. In the US, patent claims were excluded from the arbitration process until 1982 when Congress added Section 294 to Title 35 of the US Code. This Section expressly provided for the arbitrability of patent disputes. Antitrust claims, in general, are now arbitrable in international cases under US law. In addition, security claims of domestic disputes are arbitrable in the US.

[133] See Cabranes, supra note 130, at 23. Apart from very narrow statutory exceptions, courts will enforce awards in domestic cases unless the arbitration panel demonstrates a “manifest disregard for the law.” See also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995).

[134] See id. The Second Circuit recently ruled that in international cases, a “manifest disregard for the law” may not bar enforcement of an arbitral award. See also Yusef Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir.), cert denied, 66 U.S.L.W. 3427 (1998). Id.

[135] See id.

[136] See id.

[137] See Robert G. Fryling and Edward J. Hoffman, Step by Step, How the U.S. Government Adopted the ADR Idea, May 1998 J. DISP RESOLU. 80.

[138] See id.

[139] See Theofrastous, supra note 117, at 491. Since 1996, most of the independent and large arbitral organizations have revised and redrafted their international arbitration rules. These changes question whether the EU will engage in this de-localization trend and whether it will take a more pro-autonomy approach to the law. If European nations adopt these kinds of arbitration laws, the location of the proceeding will be of lesser importance and party autonomy will be maximized.

[*86] [140] See Michael H. Hoellering, Administrating International Arbitration Proceedings, Feb. 1998 J. DISP. RESOLU. 64.

[141] See id. at 65. The 280 international cases involved parties from more than 50 different countries: 40% from Europe, 25% from Canada, 20% from South America, 10% from Asia and Australia, and 5% from the Middle East. The majority of these cases involved at least one US party. Hearings were held all over the world.

[142] See id.

[143] See id.

[144] See id. at 64.

[145] See id.

[146] See id. at 66-67. The conference is aimed at establishing the parameters of administrative support, confirming the receipt of documents sent to the tribunal, apprising the tribunal of past events and clarifying any pending procedural matters. In the meeting, the appointment of the tribunal will be discussed, including the scope of her powers, potential dates for preliminary hearings will be offered and an agenda of issues will be provided.

[147] See id.

[148] See id. at 66.

[149] See Theofrastous, supra note 117, at 491-492.

[150] See id. at 492.

[151] See id.

[152] See id.

[153] See id.

[154] See David G. Post & David R. Johnson, Law And Borders- The Rise of Law in Cyberspace, 48 STAN L. REV. 1367 (1996).

[155] See Fraser III, supra note 8.

[156] See CHOI ET AL., supra note 1, at 207.

[157] See CHOI ET AL., supra note 1, at 40. Since copyright protection is given only to fixed physical expressions, not to the basic ideas themselves, copyright enforcement is connected to the physical forms that are used to express the ideas. This propels problems in deciphering [*87] whether a flickering image on a computer screen is to be considered a “fixed expression” which warrants copyright protection.

[158] See Fraser III, supra note 8.

[159] See LEWIS C. LEE & J. SCOTT DAVIDSON, INTELLECTUAL PROPERTY FOR THE INTERNET 9 (1997).

[160] See CHOI ET AL., supra note 1, at 189.

[161] See LEE & DAVIDSON, supra note 161. The US Copyright statute defines copyrightable materials as including literary works, musical works, dramatic works, choreographic works, pictorial and sculptural works, motion pictures, sound recordings and architectural works. Under these broad categories, copyright registration is also available for data compilations.

[162] See id. “Copyright protection does not extend to an idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described. Copyright protection extends only to the form of expression itself.” Id. at 10.

[163] See CHOI ET AL, supra note 1, at 179.

[164] See id. at 177.

[165] See id.

[166] See id.

[167] See id.

[168] See id.

[169] See id.

[170] See id. at 178.

[171] See id. at 179.

[172] See id. at 178.

[173] See id. at 181.

[174] See id at 177.

[175] See id.

[176] See id.

[*88] [177] See id.

[178] See id. at 184.

[179] See id. at 177.

[180] See CHOI ET AL., supra note 1, at 38.

[181] See id.

[182] See id. at 189. Rights of authors under copyright law in the US include the following seven areas: (1) reproduction right to copy, duplicate, transcribe, or imitate the work in fixed form; (2) adaptive right to modify and create derivative works; (3) distribution rights to distribute the work by sale, rental, lease, or lending; (4) performance right to perform the works in public or to transmit to the public; (5) display right to show a copy of work in public; (6) paternity right to claim or disclaim authorship; and (7) integrity right to prevent distorting or destroying of one’s work. Id. at 189-190.

[183] See id. at 192. Books are reproduced under the expectation that they will be resold. Also, adaptive and derivative works involve a reproduction of a part of the original work.

[184] See id.

[185] See id. When a digital file is downloaded or viewed, it automatically copies and reproduces it. Through this act of reproduction on the Internet, the file may be distributed. Use of a digital file incorporates other activities, which affect several of the exclusive copyright protections at the same time.

[186] See id.

[187] See id.

[188] See id.

[189] See id. at 75.

[190] See id. at 193

[191] See id.

[192] See id. at 75.

[193] See id.

[194] See id.

[*89] [195] See id. at 194.

[196] See id.

[197] See id.

[198] See id.

[199] See id.

[200] See id. Several US court cases suggest that digital reproduction, by temporarily storing a copy of a file in a computer RAM memory, by deleting files on a hard drive disk, where they actually remain until rewritten by a new file, by intermediaries making copies of files when en route to the receiver, and by web browsers automatically storing pages temporarily, does not constitute a “copy” for which there could be a copyright infringement. See id. (For RAM copies, see Apple Computer v. Formula International, 594 F. Supp. 617 (C.D. Cal. 1984); for screen copies, see NFLC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231 (7th Cir. 1995) and Stern Elec. v. Kaufman, 669 F.2d 852 (2d Cir. 1982). Id. In recent cases-MAI Systems Corp. v. Peak Computer, 991 F.2d 511 (9th Cir. 1993); Triad Systems Corp. v. Southeastern Express Co. 64 F.3d 1330 (9th Cir. 1995)-the court found copies in RAM to be fixed, thereby constituting reproductions that are governed by copyright law. If this interpretation takes force, all of the above four situations would stand as violations of existing copyright law.

[201] See id. at 193. Experts in the legal field have not fully determined whether viewing a page on the World Wide Web constitutes “copying.” There is the innate problem that they must deal with: any connection over a network involves downloading a copy of files. It is unclear whether printing a hard copy of this file demonstrates another unauthorized reproduction by the user.

[202] See CHOI ET AL., supra note 1, at 195.

[203] See id.

[204] See id.

[205] See id. at 193.

[206] See id. at 195.

[207] See Hughes, supra note 3.

[208] Id.

[209] Id.

[210] See CHOI, supra note 1, at 73.

[*90] [211] See id. at 73. After the fixed investment cost has been paid, the marginal cost of production is almost zero. See id.

[212] See id.

[213] See id. at 175-176. Consequently, intellectual property rights proponents have focused on preventing improper duplication and reselling of digital products. It is uncertain whether reproduction can ever be prevented by technology. Therefore, it is in the best interest of producers to make reproduction less valuable or irrelevant by constantly altering and improving their products.

[214] See id. at 36-38.

[215] See id. at 175.

[216] See id.

[217] See id.

[218] See id.

[219] See Post & Johnson, supra note 134.

[220] See id.

[221] See id.

[222] Approximately 350 cases involving copyright, patent and trademark disputes were filed with the American Arbitration Association in 1997, as compared to 223 cases which were filed in 1996. See Christine Lepera & Jeannie Costello, New Areas in ADR, 605 PLI/Lit 595 (1999).

[223] See id. at 597-598.

[224] See Fraser III, supra note 8, at 508.

[225] See Lide, supra note 41, at 207. In conjunction with the conceptthat cyberspace custom cannot be reconciled with that of real space, ADR can be naturally extended from its prominent use in IP disputes to reach those that arise in the this new context. IP law must find a way to adapt to a medium where duplication is almost instantaneous. See id. at 210. Considering the expediency of technological growth that gives rise to newer and improved ways to infringe IP rights, a flexible method of resolution can be seen as more appropriate for resolving such disputes than reliance on a somewhat static body of law.

[226] See Lepera & Costello, supra note 224, at 595. See also Lide, supra note 41, at 206. The protection of intellectual property in cyberspace cannot solely rely on the threat posed by civil [*91] and criminal sanctions. More viable reactions include: (1) an increased use of technology as a means of protection; (2) the development of custom; and (3) the application of ADR principles.

[227] See Lide, supra note 41, at 202.

[228] See id.

[229] See id.

[230] See id.

[231] See id. at 203.

[232] See id.

[233] See id.

[234] See id.

[235] See id.

[236] See id. at 206-207.

[237] See id. at 207.

[238] See Lepera & Costello, supra note 224, at 597.

[239] See id.

[240] See id. at 598.

[241] See id.

[242] See id.

[243] See id.

[244] See Jennifer Mills, Alternative Dispute Resolution in International Intellectual Property Disputes, 11 MICH J. INT’L L. 231 (1996).

[245] See id. at 230.

[246] See id.

[247] See id. at 231.

[*92] [248] See id.

[249] See id.

[250] See id. at 229.

[251] See Arfin, supra note 104.

[252] See id. at 900.

[253] See Lide, supra note 41, at 208.

[254] See Arfin, supra note 104, at 901.

[255] See Lide, supra note 41, at 207.

[256] See id. at 210.

[257] See id. at 205.

[258] See id.

[259] See id.

[260] See id.

[261] See id.

[262] See id.

[263] See id.

[264] See BUHRING-UHLE, supra note 88, at 71.

[265] See Lide, supra note 41, at 201.

[266] See id. at 200. Effective resolution may be found in the arbitration process, which does not rely on an uncertain and unpredictable body of law ill adapted to the present technological age. Resolution conducted by neutral parties with expertise in cyberspace custom would be particularly advantageous. The continued development of digital communication will persistently challenge the adaptability of law. It is here that the increased need for flexible methods of dispute resolution will result.

[267] See id.

[268] See id. at 201.

[*93] [269] See Camille A. Laturno, Comment, International Arbitration of the Creative, 9 TRANSNAT’L LAW. 358 (Spring 1996).

[270] See Paul Edward Geller, From Patchwork to Network: Strategies For International Intellectual Property in Flux, 9 DUKE J. COMP. & INT’L L. 73 (Fall 1998).

[271] The Berne Convention for the Protection of Literary and Artistic Works, established in 1886, and most recently revised in 1971, is one such treaty. A work copyrighted in one country is protected in other countries which are also signatories to the Convention. The Universal Copyright Convention (UCC), another international copyright agreement, allows signatory countries to specify formalities, such as copyright notice and registration. See CHOI ET AL. supra note 1, at 182.

[272] See Laturno, supra note 269, at 362.

[273] See id. at 359.

[274] See Mills, supra note 244, at 230.

[275] See id.

[276] See Laturno, supra note 269, at 359. Due to confusion as to which nation’s law holds sovereign in international intellectual property disputes, prosecution and resolution of transnational claims have proven more difficult than those arising in domestic situations. Pirate industries have been developed in newly industrialized countries under the approval of local governments. This piracy has propelled nations to seek out and create more effective dispute resolution mechanisms in the realm of IP.

[277] See Fraser III, supra note 8, at 507-508.

[278] See Lide, supra note 41, at 207.

[279] See American Arbitration Association, Drafting Dispute Resolution Clauses – A Practical Guide, 605 PLI/Lit 30 (June 1999).

[280] See id.

[281] See id.

[282] See id.

[283] See id.

[284] See id.

[*94] [285] See id. at 26. In 1998, William K. Slate II, President of the American Arbitration Association, along with Michael F. Hoellering, AAA’s general counsel, formed the “Drafting Dispute Resolution Clauses” Committee to review the organization’s booklet and determine whether improvements could be made. The purpose of the booklet is to assist parties in drafting alternate dispute resolution clauses. In doing so, the Committee revised the booklet by composing a checklist of considerations for the drafter to keep in mind and examples of explicit language that may be used in the clauses themselves.

[286] See id. at 30. The following list is not intended to be all-inclusive. See id. at 45. Rather, these suggestions reflect some of the ideas that drafters may consider when choosing to expand their dispute resolution provisions beyond the traditional form.

[287] See id.

[288] See id.

[289] See id. Generally, the AAA, under its arbitration rules, uses a listing process for the selection of arbitrators. See id. at 45. The AAA case administrator provides each party with a list of proposed arbitrators. Each side is given a number of days to object to any unacceptable name, number the remaining acceptable ones in order of preference and return the list to the AAA. The administrator then selects the arbitrators based upon the order of mutual preference. If the parties have not designated whether there is to be one or three arbitrators, the decision is left to the discretion of the administrator. The parties may also use other arbitrator selection approaches, such as the party-appointed method. Under this system, each side designates one arbitrator and the two selected appoint the chair of the panel. However, this method is not recommended by the AAA due to the possible delay in process and compromising of awards.

[290] See id. at 47. Specifying the place of arbitration holds particular importance since it implies the choice of applicable procedural law. This will therefore affect questions of arbitrability, procedure, court intervention and enforcement. When deciding upon a locale, parties should consider: (1) the convenience of the location; (2) the available pool of qualified arbitrators in the vicinity; and (3) the applicable procedural and substantive law.

[291] See id. at 48.

[292] See id. at 30.

[293] See id. at 46. Parties may want one or more of the arbitrators to be a lawyer, accountant or an expert in a particular field.

[294] See id. at 47.

[295] See id. at 30. Special ADR clauses can be used in specific contexts. See id. at 37. The American Arbitration Association uses a variety of arbitration rules through its International Arbitration Center to resolve international commercial disputes in the US. The AAA administers these cases under its own International Arbitration Rules, the Commercial Arbitration and [*95] Mediation Center for the Americas (CAMCA) Rules and the Rules of the Inter-American Commercial Arbitration Commission (IACAC) for cases conducted in the US. See id. at 37.

[296] See id. at 49. Though preliminary relief is permitted under the AAA’s commercial rules, it is proper to specifically provide for it when drafting the arbitration clause. This may come into play when interim relief is anticipated. The parties might want to specify an arbitrator by name for that purpose. Alternatively, they can authorize the AAA to name a preliminary relief arbitrator.

[297] See id.

[298] Hughes, supra note 3.

[299] See Lide, supra note 41, at 202.

[300] See Fraser III, supra note 8, at 505.

[301] See id.

[302] See id. at 505-506.

[303] See Lide, supra note 41, at 210.

[304] Id. at 207.

[305] See id. at 210.