A Hybrid Model of Self-Regulation and Governmental Regulation of Electronic Commerce

Article excerpt

I. INTRODUCTION

The world is rapidly moving towards an age of ubiquitous globally networked communications; not just communications between and among persons, but also between the electronic devices that serve them; not just between particular government leaders, but among the vast databases and other sources of information upon which regulatory regimes depend; and not just between parties to a transaction, but among the instruments of entire economies.

Eventually, terms such as "e-commerce" will become meaningless distinctions--just as we would not today refer to business conducted over the telephone as "telephone commerce." As communications and commerce and inter-governmental regulatory and law enforcement efforts conducted over networks become commonplace, the notion that government has no role to play will begin to fade. Just as the "Wild, Wild, West" of 19th century America eventually needed a sheriff to establish order, secure the people's safety, and foster predictability for business, so too will the idea of a "lawless" Internet--upon which the networked communications at issue here are currently and may always be based--seem in retrospect a shortsighted and naive concept.

Having said that, the characteristics of the Internet and other data networks, such as their architectures, render them uniquely resistant or ill-suited to the wholesale application of existing rules and regulations. For one thing, such networks scale to virtually limitless proportions; the space of "cyberspace" is essentially infinite. As such, limited resources, a driving force behind many regulatory regimes, is effectively inapplicable. For another thing, the lack of a significant, more-or-less permanent physical presence--or at least the widely distributed "locations" of content and activity on data networks (e.g., computer hard drives and servers)--raises fundamental, perhaps insurmountable difficulties for the traditional application of jurisdictional principles and enforcement mechanisms.

This article argues that in order to foster business certainty, service providers need to continue investing in network infrastructure and applications, and that a global legal regime that harmonizes the imposition of civil and criminal liability is required. Under existing laws, the "facilitators" of criminal or injurious activity engaged in by others may be held indirectly responsible for such activity in certain situations. As illegal or harmful content or activity moves to data networks (hereinafter referred to as the "Internet"), the difficulty in identifying and accessing the actual perpetrators of criminal or injurious activity gives rise to calls from governments, intellectual property owners, victims of crimes and others to hold Internet service providers responsible for the infringement of the rights of others. The unapologetic aim of placing such a burden on service providers is to encourage them to stop, or control, the illicit activity.

We argue that, in fact, the imposition of overly burdensome regulation or legal liability will instead encourage service providers to reduce investment in infrastructure and new services, or charge more for the services they do provide. Nevertheless, we feel--and recent history supports the notion--that a certain level of regulation and legal liability for acts of third parties is inevitable for service providers. (1) Thus, a regime in which service providers and others know the ground rules, and which largely leaves procedural implementation of legal requirements to service providers, can foster an environment which provides business certainty and remedies for injured parties that is acceptable to all. The service provider liability provisions of the Digital Millennium Copyright Act of 1998 ("DMCA") (2) have generally been successful in this respect.

We note that the elemental framework of the DMCA has found its way to other proposed federal legislation dealing with service provider liability in the U. …