SELLING
AMERICAN TECHNOLOGY TO "OLD EUROPE"
By Vito A. Costanzo, Attorney, Holland & Knight, LLP
The strong
alliance between the U.S. and Europe has faded significantly since
the U.S.war in Iraq. Many Europeans recall the statements by U.S.
Secretary of Defense Donald Rumsfeld that those who opposed the
Iraq war were living in "Old Europe". This environment,
along with the strong common identity that Europeans are attempting
to forge with the European Union ("EU"), make it increasingly
difficult to develop a strategy for sales of technology in Europe.
An understanding of the attitude of the EU toward regulation of
technology and the Internet is important for any U.S. technology
company doing business in Europe.
Unlike the
U.S., with its consistent regulatory environment, economic cooperation
among Europeans has long been plagued by regional differences
in everything from labor to banking rules. The EU seeks to change
this patchwork environment with a consistent regulatory framework.
With a membership of 25 countries and a population of approximately
300 million, the EU now seeks to rival the U.S. in economic power
and influence.
The EU has
its roots in a 1950 French proposal to integrate the coal and
steel industries of Western Europe. In 1957, Belgium, Germany,
France, Italy Luxembourg and the Netherlands formed the European
Economic Community and the EU was finally created in 1992.
While a central
goal of the EU is to assert itself as a block against the dominance
of the U.S., unlike the U.S., the EU governing bodies are not
intended to replace the governments of its member states. Consequently,
while certain principles are becoming common in Europe, there
are still important regional differences that one must contend
with. These differences range from Britain's refusal to adopt
the Euro as its currency, to emphasis on employee benefits in
German and France as opposed to Britain.
However, the
EU has successfully imposed certain consistent principles in its
regulation of commerce, particularly when such commerce involves
technology. For example, the EU places a higher value on privacy
in advertising over the Internet, while regulations in the U.S.
demonstrate a much more business-friendly environment. The EU's
attitude toward privacy is codified in an EU Directive (No. 95/46/EC,
dated October 24, 1995), which describes privacy as a "fundamental
right". Therefore, technology companies that target customers
in Europe must pay special attention to their unsolicited communications
with potential customers in Europe.
Specifically,
the European Parliament's Directive on Privacy and Electronic
Communications requires the recipient's explicit consent to receive
unsolicited commercial e-mail. The same directive prohibits the
use of "cookies" unless the target users opt in by providing
explicit consent. Otherwise, the use of "cookies" is
prohibited as an invasion of privacy.
The European
Commissioner for Information Services has suggested that member
states adopt a system of fines against violators of the new "spam"
and "cookies" regulations. Some countries are considering
criminal penalties for violators. U.S. technology companies advertising
over the Internet should pay special attention to these rules
if some of their target customers are in Europe.
U.S. technology
companies also must contend with a sales tax applicable to on-line
transactions with Europeans. As EU agency - the Council of Europe
(COE) -- recommended that member states adopt regulations taxing
sales over the Internet. In some countries with high value added
tax (VAT) rates, such as Denmark, this leads to price increases
as high at 25%.
The EU also
imposes greater protections for the owners of digital databases
through the creation of new rights irrespective of any creativity
in the assembly of such databases. For example, an EU member state
is free to prohibit the fair use of portions of databases for
use in scientific research, teaching or illustration. This, of
course, is contrary to U.S. law, which places a high value on
such fair uses and allows almost any use of a database short of
outright copying. Importantly, this EU protection does not extend
to U.S. database owners, since the U.S. has not adopted a similar
law. Repeal of these protections in the near future is unlikely
following the European Commission's December 12, 2005 evaluation,
stating that there would be considerable resistance to any change.
Consequently,
a U.S. technology company's database is not subject to the heightened
protections afforded EU companies, while at the same time, the
U.S. company must be wary of not infringing on an EU member's
database protections.
These differences
in regulation of technology and on-line transactions represent
more than simple ad-hoc variations in law. Rather, they are the
result of subtle differences in attitudes toward business and
privacy. The EU seeks to safeguard the privacy rights of its citizens
and to provide them with a high level of social services. In contrast,
the U.S. places an emphasis on business-friendly environments.
An understanding of these philosophical differences is crucial
to any technology business seeking to succeed in Europe.
© Holland
& Knight, LLP 2005
 |
Holland
& Knight is a global law firm with more than 1,250 lawyers
in 25 U.S. offices. Other offices around the world are located
in Mexico City, Tokyo and Beijing, with representative offices
in Helsinki, Caracas and Tel Aviv. Holland & Knight is
among the world's 15 largest firms, providing representation
in litigation, business, real estate and governmental law.
Our interdisciplinary practice groups and industry-based teams
ensure clients have access to attorneys with the best expertise,
regardless of location. For further information, contact,
Vito A. Costanzo, Holland & Knight, LLP, 633 West Fifth
Street, Suite 2100, Los Angeles, CA 90071, tel. 213-896-2409,
fax, 213-896-2450, vito.costanzo@hklaw.com,
www.hklaw.com. |
