Chapter 11 - Legal and ethical issues; internet taxation. This chapter includes contents: Right to privacy, internet and the right to privacy, network advertising initiative, employer and employee, protecting yourself as a user, protecting your business: privacy issues, defamation, sexually explicit speech, children and the internet, alternative methods of regulation.
Chapter 11, Legal and Ethical Issues; Internet Taxation Outline 11.1 Introduction 11.2 Legal Issues: Privacy on the Internet 11.2.1 Right to Privacy 11.2.2 Internet and the Right to Privacy 11.2.3 Network Advertising Initiative 11.2.4 Employer and Employee 11.2.5 Protecting Yourself as a User 11.2.6 Protecting Your Business: Privacy Issues 11.3 Legal Issues: Other Areas of Concern 11.3.1 Defamation 11.3.2 Sexually Explicit Speech 11.3.3 Children and the Internet 11.3.4 Alternative Methods of Regulation 11.3.5 Intellectual Property: Copyrights and Patents 11.3.6 Trademark and Domain Name Registration 2001 Prentice Hall, Inc. All rights reserved Chapter 11, Legal and Ethical Issues; Internet Taxation Outline 11.3.7 Unsolicited Commercial Email (Spam) 11.3.8 Online Auctions 11.3.9 Online Contracts 11.3.10 Online User Agreements 11.4 Cybercrime 11.5 Internet Taxation 2001 Prentice Hall, Inc. All rights reserved 11.1 Introduction • Real space – Our physical environment consisting of temporal and geographic boundaries • Cyberspace – The realm of digital transmission not limited by geography 2001 Prentice Hall, Inc. All rights reserved 11.2 Legal Issues: Privacy on the Internet • Difficulty of applying traditional law to the Internet • Technology and the issue of privacy 2001 Prentice Hall, Inc. All rights reserved 11.2.1 Right to Privacy • Implicit in the First, Fourth, Ninth and Fourteenth Amendments • Olmstead vs. United States – Telecommunication of alcohol sales during Prohibition era – New application of the Fourth Amendment • Translation – Interpreting the Constitution to protect the greater good 2001 Prentice Hall, Inc. All rights reserved 11.2.2 Internet and the Right to Privacy • Self-regulated medium – The Internet industry governs itself • Many Internet companies collect users’ personal information – Privacy advocates argue that these efforts violate individuals’ privacy rights – Online marketers and advertisers suggest that online companies can better serve their users by recording the likes and dislikes of online consumers • Financial Services Modernization Act of 1999 – Establishes a set of regulations concerning the management of consumer information 2001 Prentice Hall, Inc. All rights reserved 11.2.3 Network Advertising Initiative • Network Advertising Initiative (NAI) – Approved by the FTC in July 1999 to support self regulation • NAI currently represents 90 percent of Web advertisers • Determines the proper protocols for managing a Web user’s personal information on the Internet • Prohibits the collection of consumer data from medical and financial sites • Allows the combination of Webcollected data and personal information 2001 Prentice Hall, Inc. All rights reserved 11.2.3 DoubleClick: Marketing with Personal Information Feature • Regulation of the Internet could limit a company’s efforts to buy and sell advertising • DoubleClick – Advertising network of over 1,500 sites and 11,000 clients • Abacus Direct Corp – Names, addresses, telephone numbers, age, gender, income levels and a history of purchases at retail, catalog and online stores • Digital redlining – Skewing of an individual’s knowledge of available products by basing the advertisements the user sees on past behavior 2001 Prentice Hall, Inc. All rights reserved 11.2.4 Employer and Employee • Keystroke cop – Registers each keystroke before it appears on the screen • Company time and company equipment vs. the rights of employees • Determining factors – Reasonable expectation of privacy – Legitimate business interests • Reasons for surveillance – Slower transmission times – Harassment suits – Low productivity 2001 Prentice Hall, Inc. All rights reserved 11.2.4 Employer and Employee • Notice of Electronic Monitoring Act – Proposed in 2000 – Would require employers to notify employees of telephone, email and Internet surveillance – Annual updates or when policy changes are made – The frequency of surveillance, the type of information collected and the method of collection would also be disclosed 2001 Prentice Hall, Inc. All rights reserved 11.3.5 File Sharing and the Copyright Debate Feature • Present significant challenges to the traditional treatment of copyright protection • MP3 – A compression method used to substantially reduce the size of audio files, with no significant reduction in sound quality • Napster – Operates as a centralized service – Offers software that allows users to download MP3 files from the hard drives of other members • Gnutella – Operates as a decentralized service – Individuals with Gnutella software installed on their computers operate as both a client and a server 2001 Prentice Hall, Inc. All rights reserved 11.3.5 File Sharing and the Copyright Debate Feature • Legal issues – Freedom of exchange (enabled by technological advancements) vs. copyright infringement – Ability to voice one’s opinion and circumvent efforts of censorship – If copyrighted works are distributed over the system, creators will have less incentive to continue generating original works • Sony Betamax (1984) – Courts awarded the victory to Sony, suggesting that the Betamax provided other uses (recording for personal viewing) that justified its existence 2001 Prentice Hall, Inc. All rights reserved 11.3.5 United States vs. Lamacchia Feature • Changed the face of copyright protection (1994) • Posting of copyrighted material • Not guilty under the Copyright Act of 1976 – The violation must have been conducted "willfully and for purposes of commercial advantage or private financial gain” • LaMachhia did not profit from the copyright violations • LaMacchia was not convicted for his actions 2001 Prentice Hall, Inc. All rights reserved 11.3.6 Trademark and Domain Name Registration • Parasite – Selects a domain name based on common typos made when entering a popular domain name • Cybersquatter – Buys an assortment of domain names that are obvious representations of a brickandmortar company 2001 Prentice Hall, Inc. All rights reserved 11.3.6 Trademark and Domain Name Registration • Anticybersquatting Consumer Protection Act of 1999 (ACPA) – Protects traditional trademarking in cyberspace – Protects trademarks belonging to a person or entity other than the person or entity registering or using the domain name – Persons registering domain names are protected from prosecution if they have a legitimate claim to the domain name – Domain names cannot be registered with the intention of resale to the rightful trademark owner 2001 Prentice Hall, Inc. All rights reserved 11.3.7 Unsolicited Commercial E mail (Spam) • Cost is primarily incurred by the receiver and the ISP • Organizations distributing spam – Maintain anonymity and receivers cannot request to be taken off the organization’s mailing list – Present themselves as a legitimate company and damage the legitimate company’s reputation • Unsolicited Electronic Mail Act – Mandates that the nature of the email be made clear – Would require online marketers to know the policy of every ISP they encounter on the Web 2001 Prentice Hall, Inc. All rights reserved 11.3.8 Online Auctions • Question of government regulation • International regulation of auctions • Copyright infringement and auction aggregation services • The Collections of Information Antipiracy Act (CIAA) – Makes it easier to prosecute any group which takes listings from one organization and, in doing so, harms the original business • Shill bidding – Sellers bid for their own items to increase the bid price 2001 Prentice Hall, Inc. All rights reserved 11.3.9 Online Contracts • Electronic Signatures in Global and National Commerce Act of 2000 (ESign Bill) – Designed to promote online commerce by legitimizing online contractual agreements – Digital agreements will receive the same level of validity as hard-copy counterparts – Allows cooperating parties to establish their own contracts 2001 Prentice Hall, Inc. All rights reserved 11.3.10 User Agreements • Requires users to agree to certain terms regarding the service or product provided by the site before entering • Shrinkwrap agreement – An agreement printed on the outside of the package holding the product that becomes binding when the consumer opens the package • Clickthrough agreement – A popup screen to which users must agree before they can continue • Depending on their presentation, these types of agreements can be considered valid by the U. S. courts 2001 Prentice Hall, Inc. All rights reserved 11.4 Cybercrime • Auctions, chat rooms and bulletin boards are among the most popular forums for illegal activities • Viruses, which often lead to denial of service or a loss of stored information, are among the most common cybercrimes • Stock scams – Crimes in which individuals purchase stocks, then present false claims about the value of that stock in chat rooms or on bulletin boards to sell them back at a higher price • Web page hijacking – Web page is used as a gateway (the intermediary between one site and another) to another site 2001 Prentice Hall, Inc. All rights reserved 11.4 Cybercrime FTC “dummy” site for NordiCaLite. (Courtesy of Federal Trade Commission.) 2001 Prentice Hall, Inc. All rights reserved 11.4 Cybercrime FTC warning page. (Courtesy of Federal Trade Commission.) 2001 Prentice Hall, Inc. All rights reserved 11.5 Internet Taxation • The opposing arguments – Permanent ban on Internet taxation – Fair taxation of Internet sales • Taxation methods – If both a vendor and a consumer are located in the same state sales tax is applied – If the vendor and the consumer are not located in the same state, then the sale is subject to a use tax – If the vendor has a physical presence, or nexus, then it is required to collect the tax; otherwise the vendor must assess the tax and pay it directly to the state 2001 Prentice Hall, Inc. All rights reserved 11.5 Internet Taxation • Problems with Internet taxation – The definition of physical presence (location of the ISP, the location of the server or the location of the home page) – States vary according to what transactions are subject to taxation – Sales tax revenues are the largest single source of a state’s revenue and are used to fund governmentsubsidized programs, including the fire department, the police and the public education systems – State and local governments further argue that removing taxation methods from their jurisdiction infringes upon state sovereignty, an element of the checksandbalances system maintained by the United States Constitution 2001 Prentice Hall, Inc. All rights reserved 11.5 Internet Taxation • Problems with Internet taxation – To meet the taxation requirements of all parties in online transactions, ebusinesses would be required to know and understand all these methods • Internet Tax Commission – Reviewed the issue of Internet taxation – Revision of state and local taxes to make taxing a feasible process for Internet businesses – Establish clearer definitions on the meaning of “physical presence” – Define universal taxation exemptions 2001 Prentice Hall, Inc. All rights reserved .. .Chapter 11, Legal and Ethical Issues; Internet Taxation Outline 11.3.7 Unsolicited Commercial Email (Spam) 11.3.8 Online Auctions... 2001 Prentice Hall, Inc. All rights reserved 11.2.2 Internet and the Right to Privacy • Self-regulated medium – The Internet industry governs itself • Many Internet companies collect users’ personal information – Privacy advocates... Determines the proper protocols for managing a Web user’s personal information on the Internet • Prohibits the collection of consumer data from medical and financial sites • Allows the combination of Webcollected data and