Goodbye, Electronic Handshake

In case anyone thinks the Internet is still dominated by free-spirited, business-shy computer junkies, wake up and smell the lawsuits brewing.

"The online world is now just an extension of the real world and the ethics of regular business have been transferred to the Internet," said Ed Cavazos, a Houston attorney who specializes in computer and information law.

Doing business over the Internet has become just as dangerous as traditional commerce, and some say it's even riskier because the law is not clear when it comes to contracts, rights and obligations. Also, when two parties make agreements electronically, neither really know who they may be dealing with. "If you're relying on Netiquette in doing business deals, you're probably walking on thin ice," Cavazos said.

The Federal Trade Commission monitors Internet business activities that affect the public, such as in a recent case where the agency tracked down a man responsible for a credit-repair scam. But for businesses that are duped by less-than-ethical trading practices, their best bet for restitution is in the courts. Two young businessmen who may be heading there themselves recently discovered that electronic communications, such as E-mail, are no substitute for in-person meetings and signed contracts. Chris Donnell, who began publishing an online newsletter, Entrepreneur Weekly, earlier this year, alleges that Reed Caldwell of ServInt Corp. misled him about the age and resources of ServInt, a small firm that helps companies put their businesses online. Donnell says Caldwell told him he would supply secure transactions for the newsletter subscribers that Donnell sent to ServInt. However, the two did not meet face to face (Caldwell is in McLean, Va., and Donnell is in Columbus, Ohio) and there were never any contracts signed. "I know now that was a mistake," Donnell said.

After finding out Caldwell could not provide the services Donnell says he promised, Donnell told his newsletter members to use another firm. Reed Caldwell's attorney said there is no evidence Caldwell ever misrepresented his company and that ServInt believes it has grounds to sue Donnell, who's been spreading his thoughts about ServInt over the Internet. "If you're doing a business deal on the Internet you have to be more cautious because you don't know who you're really dealing with," said Jayne Levin, editor of the Washington, D.C.-based Internet Letter. At some point, she said, you have to put things in writing like a traditional business transaction, such as a contract. But even contracts agreed to over the Internet pose a potential problem because the laws haven't been tested. Lewis Rose, an attorney with Washington, D.C.-based Arent, Fox, Kintner, Plotkin &amp Kahn, who's been advising clients on doing business on the Internet, said contract law on the Internet hasn't really been tried in courts because there has not been much business done yet. "Once more commerce starts being done, I think we'll see more disputes," he said. In addition to legal contract issues, information rights are also dubious when it comes to Internet business. In one case, 36-year-old Steve Guest is suing Cincinnati law enforcement officials for seizing a local electronic bulletin board system that Guest used to operate his network consulting business.

Guest is actually one of seven bulletin board subscribers who filed a class action lawsuit Aug. 7 against Cincinnati's sheriff and other law enforcement officials. Those officials raided the offices of the Cincinnati Computer Connection BBS on June 16 and seized the entire computer system, including all the private electronic mail of the subscribers.

The officials were reportedly looking for 45 computer image files suspected to be pornographic. This is the first case where a user of an information service has filed a suit challenging the government seizure of computer material, said Peter Kennedy, an Austin, Texas, attorney who represents the plaintiffs. Kennedy said Guest lost a couple weeks of work and still would be out of business if the head of the bulletin board system (who has been charged with disseminating obscene material) had not spent his own money to get the service back up and running.

"In the search for these 45 images, the government was willing to ignore the fact that all of these businessmen were using the system," Kennedy said. "It's a fundamental principle of law that, even during legitimate investigations, the government must limit its searches and seizure to things related to the crime under investigation."

In a similar case decided two years ago, a judge found the U.S. Secret Service guilty of violating the Electronic Communications Privacy Act of 1986 and the Privacy Protection Act of 1980 when it seized a private electronic bulletin board system in 1990.

"The Internet is still an uncertain business endeavor since you can't even get insurance without doing a lot of work," Cavazos said.