Select Committee on European Union Written Evidence

Memorandum by the Law Society of Scotland

What needs to be done to create confidence and to stimulate e-commerce?

1.  The issues of security, encryption and electronic fraud will no doubt be dealt with at length by other contributors to this consultation exercise. We would wish to focus instead on two of the more peripheral issues which have an effect on confidence in e-commerce. The first of these matters is the approach of the US Courts to Electronic Commerce disputes, the other is the issue of parallel imports in an EU context.


  2.  In relation intellectual property matters and their inter-relationship with e-commerce, a pattern is developing in the USA whereby the US Courts exercise jurisdiction over foreign companies with only the most tenuous connection with the USA. An example is the recent decision in eToys Inc v etoy. In this case an existing European company with an existing web site was forced to take the site down because subsequently a large American concern with a similar name put up its own site. It was held that, as the American company had a registered trademark in the USA which was older than either of the web sites, in order to protect itself it was incumbent upon the European company to register its trademark in the USA. In the absence of that registration, the Court found in favour of the (later) American site. An approach of this kind inevitably creates uncertainty as to position of companies using e-commerce in their business and may lead to unwillingness to participate in e-commerce in some areas. There is also a problem with the unresolved position in the EU on the jurisdiction applying to consumer contracts concluded using e-commerce. The negotiations on the proposed Brussels Regulation relating to civil jurisdiction are ongoing but until a final agreement is reached the uncertainty in this area could impede increased growth in e-commerce.


  3.  One inevitable aspect of e-commerce is the influx of goods from outside the EEA into the Member States, often in the form of "grey market" unofficial imports or "parallel" imports. The European Court of Justice has not made a definitive statement as to whether a brand owner can or can not use its trademark in the EEA to prevent parallel imports. Apparently conflicting decisions such as Silhouette International Schmied (C-355/96) (which favour the brand owner) and Zino Davidoff (Judgment of the High Court of Justice Chancery Division of 24 June 1999) (where the national court appears to come down in favour of the parallel importer), only serve to heighten the confusion. It is desirable that a balance between the consumer interest and the interests of business be struck. This is an area where decisive action could be taken to come to some agreement on the position of goods imported into the EEA in this way, other than through the necessarily piecemeal approach of references to the European Court of Justice. Again, this is an area where clarification of the law will help to create confidence and stimulate e-commerce.

1 March 2000

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