[Ecommerce] Victims of lost files out of luck

[James Love]

http://news.com.com/2100-1023-887849.html

    Victims of lost files out of luck

      By Lisa M. Bowman
      Staff Writer, CNET News.com
      April 22, 2002, 4:00 AM PT

      Until late last year, Debbie Lander was a big fan of online storage.
      Lander paid $19.95 a year to keep photos of her custom embroidery at
PhotoPoint.com. But shortly before Christmas, the North Prairie, Wis.,
resident ran into what she thought was a server snag: She was repeatedly
unable to access the PhotoPoint site.

      Only after searching Internet message boards did Lander discover that
PhotoPoint had shut down without notifying its 1.5 million customers.

      "I basically had to start over from scratch," said Lander, who used
the site for years to help sell her embroidery online. She became doubly mad
when PhotoPoint later said it would release files--if the owner paid $25.
"To me, that's really deceitful," Lander said.

      The dot-com demise has left a trail of wreckage; once-hot companies
are shutting their doors and auctioning off foosball tables, and former
product managers are assembling triple macchiatos at Starbucks. Among the
fallen are numerous online storage companies that have gone belly-up or shut
down consumer services, adding more victims to the pile: people whose files
have evaporated like so much dot-com paper wealth.

      But in the largely unregulated world of the Web, consumers have little
or no remedy when it comes to getting their files back.

      "There isn't a great deal you can do about it," said Ira Rothken, a
lawyer who has successfully argued on behalf of consumers against credit
card companies that accepted online gambling charges, among others. "Usually
when a company shuts down, it doesn't have any money. In most instances, a
person is out of luck."

      A whole new game
      Nearly seven years after Netscape Communications went public and the
masses began discovering the Internet, policies intended to make the Web
safe for businesses are looking increasingly dated. Millions of people head
online as part of their daily routines and entrust bits of their lives to
cyberspace. Yet some are beginning to wonder whether rules aimed at
fostering e-commerce have created a double standard for consumer protection,
with regulators turning a blind eye to online practices that no one would
stand for in the real world.

            "Usually when a company shuts down, it doesn't have any money.
In most instances, a person is out of luck."
            --Ira Rothken, consumer attorney
      High-profile failures have many people calling for federal regulation,
but such recourse may be long in coming. For now, legal experts say, most
companies are protected by sweeping terms-of-use contracts that consumers
agree to before uploading files or saving messages.

      In addition, defunct companies frequently have no assets that
customers can lay claim to, particularly when they are looking to replace
something that holds personal but relatively low monetary value.

      Last summer, several online warehouses reached the end of the road
after burning through their cash, forcing customers to scramble to retrieve
their files. Others abandoned free services and started to charge customers
for storage. But in most cases, it was too late.

      Some companies that cut off free consumer storage, including
Myspace.com and i-Drive, gave customers a few days to download their files.
Other sites, like PhotoPoint, sent no warning at all.

      The rapid death spiral of consumer storage caught many customers off
guard. People who didn't check e-mail during the critical download period or
didn't back up their records lost them.

      When high-speed Net access provider Excite@Home closed its doors
earlier this year, its cable partners became the exclusive providers of
broadband service to its 4.1 million customers. The transfer caused massive
disruptions in Internet and e-mail service, and some people were unable to
access archived or forwarded e-mail for several weeks. Complaints about
customer service ensued when the cable partners directed questions about old
mail to Excite@Home, which declined to say whether people would eventually
gain access to archived mail.

      Rothken said he's received a lot of e-mail from people who've lost
files and messages after a dot-com company went under. He said that concerns
escalated when Excite@Home shut down, leaving people worried they would lose
e-mail access and anything stored in their mail folders.

      Regardless of how the Excite@Home shutdown shakes out, legal sources
said that in general, companies include contract language in their customer
relationships that makes it relatively easy for them to walk away scot-free.

      "Usually, these organizations have click-through agreements that
absolve them of a lot of liability," said Neil Smith, a lawyer with San
Francisco law firm Howard Rice.

      Most of the agreements warn customers that the storage company isn't
responsible for preserving files should it go out of business--a prospect
that may have seemed unthinkable during the dot-com heyday, as the online
storage phenomenon was sweeping the Web and attracting millions of
customers.

      For example, in July of last year, just as PhotoPoint's then-President
Dale Gass was telling customers that "recent changes at PhotoPoint.com
ensure a long and stable future for the site and your photos," the company's
terms-of-use agreement declared that "materials in and operations of this
Website are provided as-is and there is no warranty made that they will be
free from errors, interruptions, or loss of data."

      These days, Gass says that notifying customers was impossible because
the company was in a severe financial crunch.

      "Announcing to the members we would be shutting down was not a viable
option, as it would have created such a crush of traffic it would have
crippled our bandwidth and servers, as well as run up significant additional
networking charges that we knew would never be paid," Gass told CNET
News.com.

      Real vs. virtual
      Legal issues surrounding the storage of online files or photos differ
from those dealing with the warehousing of physical items, such as those
sitting in a paid storage shed along the highway. For example, storage
landlords cannot avoid liability if damage or loss results from their own
negligence, even if they specifically spell that out in a contract.

      What's more, a warranty on a parking-garage ticket saying that the
company isn't liable for loss under any situation probably wouldn't hold
true if a parking attendant were to give his friend the keys to your car so
he could steal your stereo.

            "The digital imaging industry, including PhotoPoint, has not
done a good job educating people about backup and security of digital
content."
            --Dale Gass, former president of PhotoPoint.com
      "There are things you just can't contract your way out of," said David
Maher, a lawyer with Miami-based law firm Harke & Clasby.

      But online, the gray areas are wider. For one, digital copies are much
easier to duplicate--and therefore back up and replace--than, say, your
great grandma's antique dresser. Furthermore, many people have little
sympathy for people who didn't back up their files.

      Because online storage is so new, there's little legal precedent for
consumers to pin potential lawsuits on. In addition, pursuing legal action
is expensive and time consuming.

      Those who do decide to head down a legal path have a few choices. They
can sue under their state's unfair business practices act. However, even if
they can identify a defendant--a challenge once a company has gone bust--and
even if they win, they still face the problem of extracting monetary damages
from a defunct company. In most cases, they'll have to get in line behind
all the other creditors pursuing the company through bankruptcy action.

      Class-action lawsuits are also an option, but plaintiffs' attorneys
would need to find numerous other victims of similar circumstances--and even
then, how do you put a price on a lost photo of your family's summer trip to
Thailand?

      Finding a solution
      For many consumers, it's not the money they're after--it's their
files.

      As storing files on third-party Web sites becomes more popular,
consumer advocates say, companies that want to survive are going to have to
reassure consumers that their files are safe.

      Jamie Love, director of Ralph Nader's Consumer Project on Technology,
said this is one area where he'd like to see some regulation. "The idea
would be for a very minimal approach to make it clear for people so they
could make better decisions," he said.

            "The fact that they're selling you this service and then turning
around and telling you 'We're not responsible for anything' is just
abhorrent."

            --Nanette Gallas, former PhotoPoint.com customer

      Love said his group has received several complaints about the issue,
but it has yet to take up the cause. He thinks the problem could be
alleviated if companies were to give more information to consumers.

      "I like starting out with a light touch," Love said. "An industry code
of conduct would be helpful."

      For example, sites could be required to spell out the site's liability
through an easy-to-understand agreement; have a set way of notifying
consumers when their files are at risk; and give people a standard amount of
time to retrieve their files.

      PhotoPoint's Gass said he doesn't think official regulations are
needed, but that a consumer education campaign and industry-backed
guidelines could solve many of the problems. Gass said he had no idea that
so many people kept the only copy of their photos on the PhotoPoint site.

      "The digital imaging industry, including PhotoPoint, has not done a
good job educating people about backup and security of digital content,"
Gass said. "Just like people would not leave their previous film negatives
at a store, but instead would keep them safe in a closet at home, similarly,
people should always keep copies of any valuable digital data safe at home
as well."

      Meanwhile, online storage companies continue to receive mixed reviews
from consumers.

      Mark Wyatt called his divorce from free online storage company
Myspace.com "amiable," saying he used the site for backup and was able to
retrieve his files.

      "Don't expect something that's free to last forever," he wrote in an
e-mail to CNET News.com. Representatives of Myspace and i-Drive did not
return requests for comment.

      Other consumers were less sanguine, especially those who paid to store
their files.

      After PhotoPoint's demise, Nanette Gallas spent hours reprogramming
her gift and collectible-selling site so it would point to another server
containing photos of her goods.

      Although Gallas kept digital and physical copies of many of the photos
she stored on PhotoPoint for an annual fee of about $10, she's angry about
lost time and lost business. Gallas said pictures of her gifts were
unavailable to potential online buyers for a couple of weeks when she didn't
know whether PhotoPoint was gone for good.

      "They screwed us over, that's what they did," she said.

      Gallas, who lives in Cheney, Wash., also lost a photo album she had
compiled containing photos of her deceased brother and her parent's 50th
wedding anniversary.

      Like many victims of online storage failures, Gallas is frustrated
about her lack of recourse.

      "The same business laws that apply to any business you can walk into
should apply to businesses on the Web," she said. "The fact that they're
selling you this service and then turning around and telling you 'We're not
responsible for anything' is just abhorrent."