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April 2001
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Web Watch

Online Dispute Resolution

By Robert J. Ambrogi

Online Dispute Resolution AS USE of the Internet to communicate and conduct business grew, disputes were inevitable. So it's not surprising that ODR (online dispute resolution) took a foothold early on in the development of cyberspace.

The range of potential disputes in the virtual world is as wide as in the tangible one, from copyright or trademark infringement to invasion of privacy. In 1996, operating on the assumption that disputes that arise online are best resolved online, a group of Internet trailblazers established The Virtual Magistrate, the Web's first forum for online arbitration and fact-finding.

The Virtual Magistrate came with high pedigree, backed by the National Center for Automated Information Research, the Cyberspace Law Institute, the American Arbitration Association, and the Villanova Center for Information Law and Policy. But its first decision -- an unenforceable default judgment against the non-participating America Online, in favor of a complainant who was affiliated with the Virtual Magistrate -- drew controversy, and the program withered. Although relaunched by Chicago-Kent College of Law, it remains sluggish. But plenty of other programs have sprung up in its wake.

Conciliation by Computer

Of this new generation, the most high tech are those that substitute software for arbitrators and mediators, resulting in a kind of conciliation by computer.

One of the first of these was cybersettle.com. Either an insurer or a claimant can initiate the process, then Cybersettle invites the other party. The parties have three "rounds" to settle. For each round, each side submits an offer or demand. If the offer and demand are within 30 percent or $5,000 of each other, the claim is settled for the median amount. If an offer is the same as or greater than a demand, the claim is settled for the demand amount. Parties pay only if they reach a settlement. Fees range from $100 to $1,000, depending on settlement amount.

ClaimSettle.com works by splitting the difference between two settlement offers, if they are within an agreed range. Parties confidentially submit proposed settlement amounts; if within a specified range, the program splits the difference and settles the case. If not, the parties can continue to submit settlement figures for a pre-agreed number of rounds. ClaimSettle's default is that the amounts must be within 25 percent or $5,000 of each other, but parties can modify those perimeters.

Another service that employs this automated approach is clicknsettle.com, but it offers a full range of traditional, live mediation and arbitration in addition to online dispute resolution. (American Lawyer Media Inc., publisher of Law Technology News, owns a small interest in clickNsettle.com.) Its online service is much like its peers, using computer software to compare offers and split the difference when they come within a certain range of each other.

If a settlement is not reached within 60 days, clickNsettle (neé National Arbitration & Mediation), refers parties to its arbitrators and mediators. Fees are based on the value of the case and the duration of the settlement process.

Soured eBay

When an eBay sale goes sour, the Web auction site refers its users to SquareTrade. So do the Web businesses DoveBid, Onvia.com, HelloBrain.com, Digimarc and eSASA. SquareTrade uses proprietary technology together with a roster of more than 250 trained mediators to provide online dispute resolution. Like clickNsettle.com, it employs a two-tiered process.

Parties to a dispute begin with SquareTrade's patent-pending Direct Negotiation. They exchange messages using a secure case page hosted by SquareTrade. The Direct Negotiation tool suggests possible resolutions and helps parties work directly with each other towards resolution. If the first tier fails to resolve the dispute, the parties can request a mediator to assist in the resolution.

All communication is done via the case page. Parties are charged nothing to use the Direct Negotiation tool. If they elect mediation, the cost varies depending on the Web business that referred them. For example, an eBay customer who files for mediation is charged $15. A customer from HelloBrain is charge $20, plus 50 percent of the value of the transaction over $1,000, up to a maximum fee of $2,500.

Computer-less Conciliation

While the sites above all use computers to resolve disputes, some still do it the old-fashioned way, using only real people. Montreal's eResolution, offers international, online dispute resolution services with respect to domain name and keyword disputes, and provides general mediation and arbitration services for e-business disputes. It is one of only four organizations in the world accredited by the Internet Corporation for Assignment of Names and Numbers to resolve domain name disputes. Disputants submit claims via the Web site; eResolution contacts parties and assigns a mediator or arbitrator. Fees vary, with domain name disputes starting at $1,250.

Rather than rely on ADR professionals, iCourthouse, strives to be a sort of virtual judge and jury, providing jury trials via the Web. Parties submit opening and closing arguments, documentary evidence, and "testimony" (actually written statements), collected into a "trial book." Jurors -- who can be any Web surfer who registers -- select the cases they would like to decide from a docket of open cases. They review the contents of the trial books, and are able to post questions to litigants.

After all the jurors have rendered their verdicts, the parties receive a verdict summary that includes the number of votes cast, the median award to the plaintiff, if any, and a compilation of juror comments about the case. The parties can choose whether the verdicts are binding or advisory. This, of course, assumes both parties agree to the proceeding in the first place, since, not being a real court of law, iCourthouse has no way to coerce defendants to participate.

Of far greater interest to lawyers is iCourthouse's JurySmart, a feature that allows lawyers to test the strengths and weaknesses of a case by previewing it to a pool of Internet jurors. Lawyers present their claims in the same manner as would other parties. At the end, they receive a written report of the results, which includes each juror's verdict, comments and questions, along with a profile that includes each juror's age, sex, occupation, education, occupation and annual income.

At a cost of $189 per report, this is an economical and effective way for lawyers to assess the merits of a case.

These are but a few of the growing number of sites available for online dispute resolution. Watch for more, including two that focus on United Kingdom disputes: The ClaimRoom.com, launched last month at the National Solicitors exhibition in Birmingham, U.K., and Liverpool-based wecansettle.com.

Robert J. Ambrogi is director of the American Lawyer Media News Service.

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