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Intellectual Property Law

: IBLS Internet Law Blog

A Legal Guide for Online Global Universities

By Jerry

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A Legal Guide for Online Global Universities

By Holly Tapper, J.D., M.B.A.

December 2009

Operating a business in an online environment presents unique legal challenges.[1] Virtual contact, electronic agreements and online payments replace a handshake, written work orders and receipts. When the business is a university attracting students from around the globe, adherence to certain e-commerce precautionary measures is critical to the success of the business. This paper addresses five areas of concern for online global universities: (1) jurisdiction, (2) international e-commerce regulations, (3) intellectual property, (4) contracting, and (5) financial aid.

(1) Jurisdiction

In the past several years, courts have distinguished between interactive and passive websites in order to determine whether sufficient minimum contact has been established between the business and the customer?s home state.[2] This determination dictates the personal jurisdiction needed for a court in the customer?s home state to hear a dispute between the parties.[3] Online universities rely on potential foreign students landing on their website while searching for schools, and clicking through their programs and courses. Interested student candidates then typically select a link requesting more information from the university, and an admissions representative follows up via live instant chat or e-mail. The website information, promotion and interactivity are likely sufficient to establish minimum contact with the student candidate in his/her home state.

Establishing international jurisdiction for foreign students is potentially more complex. Although many international conventions have developed various rules, none provides clear guidance.[4] If businesses want to avoid defending lawsuits around the globe wherever they have customers, their contracts must contain specific choice of law and choice of forum language.[5] For example, an American online university with its principal offices in the state of Minnesota should add the following language to its enrollment and financial aid agreements: ?This agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota, U.S.A.; and only the Minnesota courts shall have jurisdiction over any controversies arising out of this contract."[6]

Additionally, because certain countries have not participated in these international e-commerce conventions, their legal doctrine regarding establishing jurisdiction over foreign online businesses is less predictable.[7] A global online university should specifically exclude these countries and refuse to accept these citizens as students if the university wants to avoid the uncertainty of legal trouble in uncharted, foreign, territory.[8]

(2) International E-commerce Regulations

Businesses operating in foreign jurisdictions need to know what types of business offerings are illegal in that jurisdiction. A university may offer courses in sexual therapy or the influences of Christianity, or it may have classroom activities based on wagering ?- and these topics could be impermissible in other countries.[9] Online universities must have policies to allow students to take substitute courses or complete alternate projects, so students are not forced to participate in course work that is illicit in the student?s home country.

Another example of a foreign rule that would affect online universities is from the EU Data Protection Directive, Article 4(1). This rule requires businesses that collect data from European customers to comply with each country?s privacy laws and maintain a local legal representative in each country.[10] Universities must collect private data from enrolling students, but the cost of appointing legal representatives in each country may be prohibitive. Universities may choose to weigh the costs of compliance with the risks of noncompliance and perhaps, hire an agency to assist with legal representation. But most importantly, global universities should be aware of this rule.

Finally, the signatures of students on admissions application materials, enrollment paperwork, coursework and practicum agreements must be valid. International rules require more than an e-mail exchange to constitute sufficient identity of the party.[11] An online university must use encryption methods with a private password to comply with the internationally mandated authentication rules.

(3) Intellectual Property

As online universities distribute educational materials ?- notes and lectures authored by contributing faculty, audio and video presentations, e-books, etc. ? they have a substantial need for control and ownership of their work. The World Intellectual Property Organization (WIPO) Copyright Treaty of 2002 joins countries around the globe to offer licensure and copyright protection for such creative works.[12] Under the WIPO Treaty, universities would have exclusive rights to make and authorize the online distribution of their educational products to students domiciled in member countries.[13]

However, copyright rules are different in China. Under current Chinese law, if an online university disseminates a faculty lecture, for example, the courts may not protect the work. All such creative materials must contain a statement announcing that copying and editing are forbidden in order to protect the ownership of the work.[14]

Such specific announcement of ownership is necessary in the European Union with regard to trademarks as well. Whereas in the United States, mere usage of a mark proves ownership, in the European Union, the owner must actually register the mark.[15] For a university whose main trademark is its name, a solution is to register the university name as its domain name in Europe. The e-Europe Action Plan designates this new top-level domain (the .eu domain) as a way for businesses to avoid having to register domain names in each member country.[16]

And finally, in many countries, companies must similarly register their trademarks in order to protect the mark (mere usage is not sufficient).[17] So an online university should engage in such registration practices in order to protect its name worldwide.

(4) Contracting

Online contracts pose special challenges for universities as admissions representatives negotiate sales (enrollments) through e-mail and instant chat exchanges. As courts have struggled to consistently rule on the validity of electronic contracts, such as click-wrap agreements, the American Bar Association (ABA) recommends six rules for creating enforceable agreements.[18] Online universities should use these rules when submitting enrollment agreements, allowing textbook and course materials purchases, or offering other electronic contracts to students.

The ABA rules are as follows: (1) the student must have an opportunity to review the terms of the agreement before completing the transaction; (2) the terms should be fully displayed (without separate links to additional terms); (3) the student will be forced to agree to the terms by clicking a button that says, ?I agree? or the like; (4) the student understands what will happen if s/he chooses to reject the terms of the agreement; (5) the student will always have the opportunity to correct and confirm the agreement; and (6) the university will keep records to prove that the student agreed to the contract.[19] It is common practice for businesses to send an e-mail receipt to the customer to provide written documentation of the agreement. These rules protect electronic contracts in the European Union as well.[20]

Finally, electronic signatures are an important consideration in a valid online agreement. In the United States, E-Sign federal legislation protects the validity of electronic signatures between parties who have agreed to transact business with each other. This protection applies regardless of the type of electronic signature involved.[21]

(5) Financial Aid

The Organisation for Economic Co-operation and Development (OECD), an international policy-making organization based in Europe, suggests that any business engaging in international e-commerce and collecting payments online provides the following pieces of information on its website: (1) the identity of the business, including business name, physical address, e-mail address, phone number, and any governmental registration numbers; (2) effective ways for consumers to communicate with the business; (3) appropriate dispute resolution processes; (4) service of legal process; and (5) business locations.[22] These guidelines also contain specific rules regarding the transaction (e.g., terms of performance, cancellation details, and guarantees). A university collecting online payments should carefully review these rules and the examples provided on the OECD website.[23]

In conclusion, this paper provides guidance to universities offering online courses to international students. College websites and enrollment agreements must contain unique provisions regarding jurisdiction and intellectual property, as well as specific transactional and identifying details. Schools may choose to target global students in the European Union or other areas of the world in which e-commerce rules are more predictable. But in this exciting time of electronic global expansion, conscientious business practices can be financially rewarding and help shape the future of international e-commerce laws.

[1] See Anthony M. Balloon, From Wax Seals to Hypertext: Electronic Signatures, Contract Formation, and a New Model for Consumer Protection in Internet Transactions, 50 Emory L.J. 905, (2001).

[2] E.g., Inset Systems Inc. v. Instruction Set, Inc., 937 F.Supp. 161 (D.Conn.1996) and McDonough v. Fallon McElligott, Inc., 1996 WL 753991 (S.D.Cal. Aug. 5, 1996), and most notably Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D.Pa.1997).

[3] See International Shoe Co. v. Washington, 326 U.S. 310 (1945).

[4] See, e.g., The Hague Conference on Private International Law, and the Rome Institute on the Unification of Private Law; and Yahoo!, Inc. v. La Ligue Contre Le Racisme et L'Antisemitisme, 169 F.Supp.2d 1181, 1218 (N.D.Cal.2001)(stating that, ?More important, even if the French court were to impose a monetary penalty against Yahoo!, it is exceedingly unlikely that any court in California-or indeed elsewhere in the United States-would enforce it?).

[5] ?In general, courts respect the choice of law that parties agree upon to resolve their private disputes.? General Elec. Co. v. Deutz Ag, 270 F.3d 144 (3d Cir. 2001).

[6] One commentator explains a typical forum selection clause in this way: "[B]oth parties agree that only the New York Courts shall have jurisdiction over this contract and any controversies arising out of this contract." Whereas a choice of law provision might say, "This agreement shall be governed by, and construed in accordance with, the law of the State of New York." Leandra Lederman, Viva Zapata!: Toward a Rational System of Forum-Selection Clause Enforcement in Diversity Cases, 66 N.Y.U.L.Rev. 422, 423 n.

10 (1991).

[7] See the website for the Hague Conference on Private International Law at http://www.hcch.net/index_en.php?act=states.listing for a complete and up-to-date list of member countries. All other countries not participating in such international conferences would have questionable doctrine.

[8] The university should provide a disclaimer on its website that specifically states that it is not directing its activities toward citizens of certain named countries. This is from the Brussels Regulation (EC Regulation 44/2001).

[9] See, e.g., Odia Kagan, Internet Law - The Israeli Police Orders Gambling Websites to Shut Down. (2007), http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=1660. This author remarks that in Israel, gambling is prohibited by the Israeli Penal Law 5737 ? 1977. And in Pakistan, ?Section 295(c) of the Penal Code calls for a death sentence for anyone who defiles the name of the Prophet Muhammad.? From The Farsi Christian News Network, How Christians Are Treated In Muslim Lands. (2008), http://www.fcnn.com/index.php?option=com_content&task=view&id=1812&Itemid=63.

[10] The European Union (EU) Data Protection Directive 95/46/EC (DPD), article 4(1).

[11] Electronic signatures in the United Kingdom are governed by two acts -- Electronic Communications Act 2000 (2000) and the Electronic Signatures Regulations 2002 (SI No. 318 of 2002) (2002)-? to implement European Union (EU) Directive 1999/93/EC. Electronic signatures are electronic data used for authentication and associated with other electronic data. In addition, the 2002 regulation defines an even more secure electronic signature called ?Advanced Electronic Signature? or AES. An AES has four characteristics: (1) it identifies the party who signed, (2) in a unique way, (3) while under the sole control of that party, (4) and is attached to the data so that any further changes would be detected. A Certification Authority provides ?qualified certificates? that comply with these regulations.

[12] For more information, see http://www.wipo.int/copyright/en/. Member nations include Argentina, Belarus, Bulgaria, Burkina Faso, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Ecuador, El Salvador, Gabon, Georgia, Guinea, Honduras, Hungary, Indonesia, Jamaica, Japan, Kyrgyzstan, Latvia, Lithuania, Mali, Mexico, Panama, Paraguay, Peru, Republic of Moldova, Romania, Saint Lucia, Senegal, Slovakia, Slovenia, Ukraine, and the U.S.

[13] World Intellectual Property Organization, Standing Committee on Copyright and Related Rights, 18^th session in Geneva (2009).

[14] Examples of the necessary copyright language are located on the China Import and Export Fair website. (2003), http://www.cantonfair.org.cn/en/common/copyright.shtml, in an article entitled Implementing Measures for Copyright Administrative Penalties.

[15] If you want trademark protection in countries who are members of the European Union (EU), you can apply for a Community Trade Mark (CTM) through the Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain. Your application will cover the following countries

Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,Spain, Sweden, United Kingdom. From the Intellectual Property Office of the UK, http://www.ipo.gov.uk/types/tm/t-manage/t-abroad/t-ohim.htm.

[16] Regulation (EC) No 733/2002 of the European Parliament and of the Council (2002) The .eu Domain Name Registration Policy is found here: http://www.eurid.eu/files/reg_pol_EN.pdf.

[17] Agencies such as the Marcaria.com Network engage in such international trademark registration services worldwide. For more information, see this website: http://www.marcaria.com/?gclid=CI7a2p-5uZ4CFRPyDAodHTyPmw.

[18] See Specht v. Netscape Communications Corp. 150 F. Supp.2d 585 (S.D.N.Y. July 3, 2001) stating that a click-wrap agreement was invalid. But see Caspi v. Microsoft Network, L.L.C., 732 A.2d 528 (N.J. Super.Ct.App.Div. 1999) stating that such agreements are valid. The American Bar Association recommends six principles to solve this confusion. Infra note 19.

[19] ABA Online Contracting Experts Distill Option for Writing Valid Click-Through Deals, 6 Electronic Com. & L. Rpt. (BNA) 827 (Aug. 8, 2001) reprinted at 70 U.S.L.W. 2112 (2001).

[20] EU E-commerce Directives, 2000/31/EC Rules for Distance Selling.

[21] Electronic Signatures in Global and National Commerce Act (E-Sign) 15 U.S.C. 7001 (2000).

[22] Guidelines for Consumer Protection in the Context of Electronic Commerce, the Organisation for Economic Co-operation and Development (1999) at http://www.oecd.org/document/51/0,3343,en_2649_34267_1824435_1_1_1_1,00.html.

[23] The website is located at http://www.oecd.org.

Full post as published by IBLS Internet Law Blog on December 08, 2009 (boomark / email).