Chapter

Key Points• Understand connection between internet issues,

international relations and globalization• Investigate interplay of market forces, ethics and law in

emerging area of the internet• Identify current status of internet legal issues of

jurisdiction, speech, privacy, contracts, intellectual property and taxes

18

Internet Law and Ethics

The Internet and Globalization

The internet has brought: Whole new “communities” of interest Free interchange of communications and ideas around the world A potential increase in the transparency of government decision

making An exponential increase in global interconnectedness

These developments raise fundamental questions: What substantive law should govern the internet? What process should be used to develop global internet standards? What government can legitimately impose standards and sanctions

over internet activities? Are we seeing the evolutionary beginnings of a world government?

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Critical Thinking: A Caution

The internet is not only a superhighway for information, but also for misinformation. Problems include: Out of date information Inaccurate information (both innocent and intentional) Uninvestigated, untested information Biased and slanted information

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Some Internet Ethics Issues

The Digital Divide: Accessibility and the Internet Within the U.S., the digital divide may be lessening. Globally, the inequality of internet access is substantial.

Community: Pros and Cons Is the internet, because of its immense communication efficiencies,

strengthening our sense of community, particularly at the global level?

Or are our increasingly computer-dependent lives leading to new, previously unimagined levels of alienation?

Marketing and the Internet What are the ethics of: Banner ads? Pop-up windows? Commercial

sites designed to capture kids? Mouse-trapping? Typo-piracy? Unauthorized home page substitutions? Spam?

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Legal Issues and the Internet

Even at this early stage: It seems that, although market forces and ethics will influence

behavior on the internet, alone they won’t be sufficient to foster the extensive expansion of the internet.

Thus, we are already seeing, both in the U.S. and in international arenas, both application of existing laws and development of new laws governing the internet.

The remainder of this chapter presents snapshots at this point in time of select areas of law developing around the internet.

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Jurisdiction

There are two fundamental jurisdictional questions: What court has jurisdiction over the issues in dispute (the subject

matter)? What court has jurisdiction over the parties?

The latter question, of personal jurisdiction over the parties, can often be an issue in internet relationships: In the U.S., a court can constitutionally assert personal jurisdiction

over defendants if they have sufficient minimum contacts with the forum state such that being sued there is considered fair and just.

Jurisdiction over non-nationals is problematic. Example: Yahoo! v. La Ligue Contre Le Racisme Et L’Antisemitisme

(N.D. Cal. 2001)

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Free Speech and the Internet

Internationally, different countries have differing standards as to what is acceptable speech, which standards may collide over the internet.

In the U.S., the 1st Amendment protects us from most government restraints on the content of speech, although reasonable restraints on the context (time, place and manner) of that speech may be permissible. Some content can be prohibited, such as unlawful threats of violence

(e.g., on an antiabortion website) and online content harmful to minors (per the Child Online Protection Act).

Commercial speech receives less constitutional protection; for example, spam (mass e-mails) that is deceptive in nature.

Example: State v. Heckel (Wash. 2001)

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Privacy and the Internet

The internet opens up previously uncontemplated possibilities for intrusion: Many public records are now online, such as property, tax and court

records Totally new information such as a web surfer’s “digital silhouette”

Because of market pressure, many online companies now have privacy policies, although they may not always be followed.

The Children’s Online Privacy Protection Act (COPPA) prohibits websites from collecting personal information from children under 13 without parental permission.

The right to privacy and the freedom of speech may sometimes collide: Example: Immunomedics v. Jean Doe (N.J. 2001)

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Internet Crime

The Council of Europe has drafted a Convention on Cybercrime, which about 30 nations, including the U.S., have already signed. It requires the criminalization of a long list of computer activities.

Computer security: Cyber attacks of computer systems seem to be on the rise, perhaps in part due to the January 2000 U.S. decision to remove most prohibitions against exporting encryption technology.

Fraud: According to the Internet Fraud Watch, online auctions result in the

highest number of reported incidents of online fraud. Perhaps the biggest fraud concerns are in the securities area, where

online trading of stocks skyrocketed when the economy was booming. The SEC receives 200 to 300 fraud complaints (mostly electronic) daily.

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Contracts Over the Internet

E-Signature: The 2000 Electronic Signatures in Global and National Commerce Act (E-SIGN) gives electronic signatures the same legal stature as handwritten ones, at least for most commercial purposes.

UCITA: This model law, available for adoption by states, was designed to achieve uniformity across the U.S. in the law governing software and internet transactions. It has not, however, been well received, having been adopted only in two states: Maryland and Virginia.

Shrink-Wrap and Click-Wrap Agreements: Software license terms often say that in opening the shrink-wrap package or using the software the buyer agrees to the terms. Whether all of those terms are enforceable or not is the subject of dispute in the courts. Some seem overreaching, such as Microsoft’s End User License Agreement, as pointed out in the reading: “Megalomania: How much does Microsoft have the right to control?”

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Intellectual Property: Patents and Copyrights

Patents: Exactly what role patents will play over the internet is uncertain at this time. The grant of some early patents associated with basic methods of doing business online raised considerable controversy.

Copyrights: The copyright holder possesses the exclusive right to (1) reproduce the work, (2) prepare adaptations, (3) distribute the work by sale or otherwise and (4) perform or display the work. When anyone acts without the holder’s permission, the copyright has been infringed unless an exception applies. The 1998 Digital Millennium Copyright Act (DMCA) requires

webcasters to pay royalties to play copyrighted music over the internet.

Napster claimed that its activities qualified for a safe harbor exception to the DMCA, but lost in court. It filed for Chapter 11 bankruptcy on June 3, 2002.

Example: Kelly v. Arriba (9th Cir. 2002)McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Intellectual Property: Trademarks and Domain Names

Trademarks are words, names, symbols, devices or combinations thereof that are used to distinguish one seller’s products form those of another.

Trademark infringement occurs when that exclusive right is violated and consumer confusion is likely. Trademark dilution occurs when the distinctiveness of the mark is gradually whittled away or blurred by a nonconfusing use on an unrelated good or service.

The internet address for a web page is called its domain name. Rights to a domain name are secured simply by being the first to request a name and paying a registration fee. Disputes about domain names can be resolved with an arbitration process set up by the Internet Corporation for Assigned Names and Numbers (ICANN).

The 1999 Anticybersquatting Consumer Protection Act creates a cause of action where a trademark has been infringed upon by the registration of a domain name. The trademark holder must show a bad faith intention by the registrant to profit from the registration, traffic in the name, or use the name.

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Taxes and the Internet—Part I: In the United States

In 1992, the Supreme Court ruled in the Quill Corporation case that an out-of-state vendor cannot be required to collect sales taxes for any state in which that vendor does not have some significant present, including a physical presence. The Court found, based on the Commerce Clause, that it would be an undue burden on interstate commerce for states to be able to require out-of-state vendors to comply with each unique set of sale tax rules in each jurisdiction.

E-commerce increases the significance of the Quill decision and, to permit time for both the study and development of a workable resolution, Congress imposed a moratorium on internet taxes. The moratorium is currently set to end in October, 2003.

In the meantime, many states have joined an effort to streamline, simplify and coordinate their sales tax laws. The idea is that if state sales taxes were more uniform, the burden on interstate commerce from requiring compliance would disappear.

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Taxes and the Internet—Part II: Internationally

The problem of taxing internet transactions is just as complex on an international scale and spans the whole range of taxes, paralleling both our income tax laws and our sales tax laws. In a nutshell, what nation is entitled to tax cross-border transactions? The EU has recently amended its Value-Added Tax (VAT) to require

non-EU-resident vendors to apply the VAT (for each of the EU countries) when selling “digital goods” within the EU.

We end this chapter with some of the same questions with which we started: What substantive law should govern the taxation of international

transactions? What process should be used to develop international consensus over

what the substantive laws should be? What government can legitimately impose standards and sanctions

for violations?

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