Wednesday, July 09, 2008

The World Wide Beta

Frequently heard from my beta-ready clients: “ I want as many people to try this as possible. Can we make sure the beta terms allow for users anywhere in the world?”

Let me start by saying you can do anything you want: it’s all a question of cost. And by “cost,” I mean how much do you want to pay me and various law firms located throughout the world? Beta trials are generally offered to consumers as free, “as is” licenses to trial product. This works if the licenses conform to the legal requirements of the consumer’s place of residence, and if the “as is” basis on which you offer the products for trial are also enforceable in that country.

Many beta license trials are aimed at individual end users, rather than enterprises, in the spirit of encouraging viral adoption. This means that any license likely will be subject to the consumer protection laws of each country in which an end user resides. Consumer protection legislation isn’t like corporate law – it can vary wildly from country to country. It is also one of the less harmonized bodies of law, although the European Union is making strides to correct this.

Many cash-strapped companies are tempted to simply take the risk that the beta licenses may not be enforceable in favour of encouraging widespread adoption. (I don’t particularly agree with this approach – what does it matter if your application is viral in Serbia, if the main market for you really is the United States? Why have you assumed the potential risk of not complying with Serbia consumer laws? Did it advance adoption of the product in the primary addressable market?).

If you’re going to take this approach, despite my counsel, then at least consider implementing some of the following practices:

Your terms of use should:

- Specify in a prominent part of your beta license that all information provided will be hosted on servers in Canada or the U.S., and will be subject only to the privacy laws. The end user must consent to the storage of their information there. (Note: it is not necessarily enforceable to ask users to “Opt out” of the privacy laws of their local country, but at least you have warned end users).

- Provide a dispute resolution mechanism (e.g., all issues will be dealt with first by sending a complaint to the Beta Help Desk, then to the Customer Support – a good example can be found in the eBay user terms)


- Consider having an “opt in” rather than “opt out” approach to the license and other terms. Many jurisdictions (Europe in particular) favour an e-contract that has been expressly consented to by end users.

- Although many jurisdictions do not yet have data security laws, breaches of data security are perhaps an even larger issue in other parts of the world. Consider adopting a data security policy now.

- Don’t “select” a governing law other than your own without a lawyer’s advice. The European Union permits you to specify that e-commerce contracts are governed by the country where the transaction originates (instead of where consumer resides).

- Consider having the beta run by a separate company you establish to do so, to try and limit your liability.

- Don’t get fancy in your on-line marketing of the trial. Other countries and regions are adoption new online advertising rules which make practices such as fake blogging illegal.

I’m not suggesting in any way that this is an ideal approach. However, I do recognize the reality that some businesses and services address problems that are sharply felt overseas, but may be just emerging in North America. These suggestions are offered as a basic framework to assist you in thinking about what the potential risks of a global beta might be. It’s better for me if your business is still around post-beta. I have kids to put through college and some mid-life botoxing ahead of me and someone has to pay forit.

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