Chapter 10Public Policy:

From Legal Issues to Privacy

1

Learning Objectives

• List and describe the major legal issues related to electronic commerce

• Understand the difficulties of protecting privacy and describe the measures taken by companies and individuals to protect it

• Describe the intellectual property issues in EC and the measures provided for its protection

• Describe some of the ethical issues in EC and the measures taken by organizations to improve ethics

2

Learning Objectives (cont.)

• Understand the conflict between Internet indecency and free speech, and the attempts to resolve the conflict

• Describe the issues involved in imposing sales tax on the Internet

• Discuss the controls over exporting encryption software and the issues of government policies

• Differentiate between contracts online and offline

• Describe the measures available to protect buyers and sellers on the Internet

3

Legal and Ethical Issues: an Overview

• Privacy• Intellectual Property

• Difficult to protect since it is easy and inexpensive to copy and disseminate digitized information

• Free Speech• Internet provides the largest opportunity for free speech

• Taxation• Illegal to impose new sales taxes on Internet business at the

present time• Consumer Protection

• Many legal issues are related to electronic trade

4

Ethical Issues

• What is considered to be right and wrong?

• What is unethical is not necessarily illegal.

• Whether these actions are considered unethical depends on the organization, country, and the specific circumstances surrounding the scenarios.

5

Ethical Issues (cont.)

•Code of Ethics•Many companies and professional organizations develop their own codes of ethics

•A collection of principles intended as a guide for its members

•A guide for members of a company or an association

6

Organize IT Ethical Issues into a Framework

7

PrivacyCollection, storage,

and dissemination of information about individuals

AccuracyAuthenticity, fidelity,

and accuracy of information collected and processed

PropertyOwnership and

value of information and intellectual property

AccessibilityRight to access

information and payment of fees to access it

Protecting Privacy

•Privacy•The right to be left alone and the right to be free of unreasonable personal intrusions

•Information Privacy•The “claim of individuals, groups, or institutions to determine for themselves when, and to what extent, information about them is communicated to others”

8

Protecting Privacy (cont.)

•Two rules The right of privacy is not absolute.

Privacy must be balanced against the needs of society.

The public’s right to know is superior to the individual’s right of privacy.

9

How is Private Information Collected?

• Reading your newsgroups’ postings

• Finding you in the Internet Directory• Making your browser record information about you• Recording what your browsers say about you

• Reading your e-mail

10

Web-Site Self-Registration

•Registration Questionnaires• type in private information in order to receive a

password to participate in a lottery, to receive information, or to play a game

•Uses of the Private Information• collected for planning the business• may be sold to a third party• used in an inappropriate manner

11

From the Eighth User Survey by GVU (1988)• 40% of all users have falsified information when

registering online• 66% of all U.S. and European respondents don’t register as

they don’t know how the information is going to be used• 63% don’t feel that registration is worthwhile considering

the content of the sites• 58% don’t trust the sites collecting this information from

them

12

Cookies

•Piece of information that allows a Web site to record one’s comings and goings• Web sites can ‘remember’ information about users

and respond to their preferences on a particular site, process is transparent to users

• Web sites can maintain information on a particular user across HTTP connections

13

Cookies (cont.)

• Reasons for using cookies• to personalize information• to improve online sales/services• to simplify tracking of popular links or demographics• to keep sites fresh and relevant to the user’s interests• to enable subscribers to log in without having to enter a password every

visit• to keep track of a customer’s search preferences• personal profiles created are more accurate than self-registration

• Solutions to cookies• users can delete cookie files stored in their computer• use of anti-cookie software (e.g. Cookie Cutter and Anonymous Cookie)

14

Cook

Privacy Protection• 5 basic principles

• Notice/Awareness— Customers must be given notice and be able to make informed decisions.

• Choice/Consent— Customers must be made aware of their options as to how their personal information may be used. Consent may be granted through ‘opt-Out’ clauses requiring steps.

• Access/Participation— Consumers must be able to access their personal information and challenge the validity of the data.

• Integrity/security— Consumers must be assured that the data is secure and accurate.

• Enforcement/Redress— There must always exist a method of enforcement and remedy. The alternatives are government intervention, legislation for private remedies, or self-regulation.

15

Protecting Your Privacy• Think before you give out personal information on a site• Track the use of your name and information• Keep your newsgroups’ posts out of archives• Use the Anonymizer when browsing• Live without cookies• Use anonymous remailers• Use encryption• Reroute your mail away form your office• Ask your ISP or employer about a privacy policy

16

Legislation

•The Consumer Internet Privacy Act

•The Federal Internet Privacy Protection Act

•The Communications Privacy and Consumer Empowerment Act

•The Data Privacy Act

17

Electronic Surveillance - Monitoring Computer Users

• Tens of millions of computer users are monitored, many without their knowledge

• Employees have very limited protection against employers’ surveillance

18

Personal Information in Databases Databases of banks and financial institutions; cable

TV; telephone ; employers; schools; insurance companies; and online vendors

ConcernsUnder what circumstances will personal data be released?Do you know where the records are?How are the data used?

Privacy Policy Basics

19

Data Collection Data Accuracy Data Confidentiality Data should be collected on individuals only to accomplish a legitimate business objective.

Data should be adequate, relevant, and not excessive in relation to the business objective.

Individuals must give their consent before data pertaining to them can be gathered.

Sensitive data gathered on individuals should be verified before it is entered into the database.

Data should be accurate and, where and when necessary, kept current.

The file should be made available so the individual can ensure that the data are correct.

If there is disagreement about the accuracy of the data, the individual’s version should be noted and included with any disclosure of the file.

Computer security procedures should be implemented to provide reasonable assurance against unauthorized disclosure of data.

Third parties should not be given access to data without the individual’s knowledge or permission, except as required by law.

Disclosures of data, other than the most routine, should be noted and maintained for as long as the data are maintained.

Data should not be disclosed for reasons incompatible with the business objective for which they are collected.

Protecting Intellectual Property

• Copyright• A statutory grant that provides the creators of intellectual property with

ownership of it for 28 years

• Trade Secret• Intellectual work such as a business plan, which is a company secret and is not

based on public information

• Patent• A document that grants the holder exclusive rights on an invention for 17 years

20

Copyright Protection Techniques

•Digital watermarks•embedding of invisible marks•can be represented by bits in digital content•hidden in the source data, becoming inseparable from such data

21

Legal Perspectives• Electronic Theft (NET) Act

• imposed criminal liability for individuals who reproduce or distribute copies of copyrighted works even if no commercial advantage or financial gain exists

• Digital Copyright Clarification and Technology Education Act• limits the scope of digital copyright infringement by allowing distance learning exemptions

• Online Copyright Liability Limitation Act• seeks to protect Internet access providers from liability for direct and vicarious liability

under specific circumstances where they have no control or knowledge of infringement

22

Legal Perspectives (cont.)

• Digital Millennium Copyright Act• reasserts copyright in cyberspace• makes illegal most attempts to defeat anti-copying technology• requires the National Telecommunications and Information

Administration to review the effect the bill would have on the free flow of information and makes recommendations for any changes two years after it is signed into law

• lets companies and common citizens circumvent anti-copying technology when necessary to make software or hardware compatible with other products, to conduct encryption research or to keep personal information from being spread via Internet “cookies” or other copy-protection tools

• forbids excessive copying of databases, even when those databases contain information already in the public domain

23

International Aspects of Intellectual Property

•The World Intellectual Property Organization•more than 60 member countries to come up with an international treaty

•part of the agreement is called the ‘database treaty’• its aim is to protect the investment of firms that collect and arrange information

24

Domain Names

25

Two controversies Whether top-level domain names

(similar to com, org and gov) should be added

The use of trademark names by companies for domain names that belong to other companies

Domain Names (cont.)

• Network Solutions Inc.• Contracted by the government to assign domain addresses

26

Trade Name Disputes Companies are using trade names of other

companies as their domain address to help attract traffic to their Web site

Increase Top Level Names Idea is that an adult only top-level name will be

created to prevent pornographic material getting into the hands of children

Defining Freedom of Speech

• The Bill of Rights First Amendment to the Constitution of the U.S. of America reads

• “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

27

Defining Freedom of Speech (cont.)

• The united nations Universal Declaration of Human Rights in 1948 addresses the right of freedom of expression

• “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive, and impart information and ideas through any media and regardless of frontiers.”

28

The Debate about Free Speechon the Internet• Free speech debate• “Most citizens are implacably opposed to censorship in any form — except censorship of whatever they personally happen

to find offensive.”• What the boundaries are, and how they should be enforced

29

Governments protective of their role in society, parents concerned about exposing their children to inappropriate Web pages and

chat rooms, and federal agencies attempting to deal with illegal

actions

Citizen action groups desiring to protect every ounce of their

freedom to speak, individuals concerned about their right to

information on the Internet, and organizations seeking to empower

the citizens of the earth

The Debate about Free Speechon the Internet (cont.)

• Provisions in law for 2 cases that limit free speech• obscene material• compelling government interest

• “Indecency”• “any comment, request, suggestion, proposal, image, or other

communication that, in context, depicts or describes, in terms patently offensive as measured by contemporary community

standards, sexual or excretory activities or organs”

30

Protecting Children

• 3 approaches (regarding the protection of children from inappropriate material on the Internet)

• No information should be held back and parents should be responsible for monitoring their own children

• The government is the only one who can truly protect children from this material

• To hold the Internet providers responsible for all the material and information they provide

31

Protecting Children (cont.)

• Parents Governing Their Own Children

• Government Protecting the Children

• Responsibility for the Internet Providers

• Forcing Internet Providers to be Accountable

32

Legal Perspectives in the USA

• Child Online Protection Act

• Internet Tax Freedom Act

• Family Friendly Internet Access Act

• Internet Protection Act

• Internet School Filtering Act

33

Controlling Spamming

• What is spamming, why is it bad?

34

Spamming “the practice of indiscriminate distribution of messages (for

example junk mail) without permission of the receiver and without consideration for the messages’ appropriateness”

Spamming’s negative impacts Spam comprised 30% of all mail sent on America Online

slowing the Internet in general shutting ISPs down completely now less than 10%

Controlling Spamming (cont.)

• Legislation, Legal

• The Electronic Mailbox Protection Act

• The Unsolicited Commercial Electronic Mail Act

• The Netizens Protection Act

• The Telephone Consumer Protection Act

35

Controlling Spamming (cont.)

• How to cut spamming

• Tell users not to validate their addresses by answering spam requests for replies if they want to be taken off mailing lists

• Disable the relay feature on SMTP (mail) servers so mail cannot be bounced off the server

• Delete spam and forget it— it’s a fact of life and not worth wasting time over

• Use software packages, e.g. www.getlost.com and www.junkbusters.com

36

Taxation Policies

• The Taxation Exemption Debate • Internet Tax Freedom Act (8 Oct,98)

• promotes electronic commerce through tax incentives by barring any new state or local sales taxes on Internet transactions during the next three years

37

Applying existing law to new mediums of exchange is far more difficult than ever imagined. The global nature of business today

suggests that cyberspace be considered a distinct tax zone unto

itself with unique rules and considerations befitting the stature

of the environment.

Electronic commerce industries

The Internet businesses must pay its fair share of the bill for the nation’s social and physical infrastructure. They feel

that the Internet industries are not pulling their own weight. These companies are screaming that the same situation exists in the mail order business and that there are sufficient parallels to warrant similar

legal considerations.

Non-electronic commerce industries

Taxation Policies (cont.)

• Proposed Taxation Solutions in the USA

38

The Internal Revenue Service might “come to the rescue” with a single and

simplified national sales tax.

This will reduce 30,000 different tax codes to ‘no

more than 50”.

Net sales would be taxed at the same rate as mail order or

Main Street transactions.

While states could set their one rate, each sale could be

taxed only once.38

Encryption Policy

• The 128-BIT Encryption Debate• Export 128-bit encryption is 3.09X10 to the 26th power times more difficult to

decipher than the preceding legally exportable technology.

39

For the past 20 years there was a limitation

on exported encryption devices of 56 bit codes

Recent legislation allows 128 bit in

specific circumstances thus paving the way for

the Compaq permit

Secure e-commerce Government’s legal requirements

Encryption Policy (cont.)

• Data Encryption Standard (DES)• A published federal encryption standard created to protect

unclassified computer data and communications• Law Enforcement’s Plea

• Cryptographers would follow an audit trail to ensure that keys haven’t been released improperly, however, law enforcement does not trust that process

• First Amendment Right• Technology can encrypt so thoroughly, that every computer on earth,

working in tandem, would take trillions of years to decode the encryption• Business View

• EFF (Electronic Frontier Foundation) believes that software, networked communications and cryptography industries are suffering

40

Other Legal Issues

• What are the rules of electronic contracting, and whose jurisdiction prevails when buyers, brokers, and sellers are in different states and/or countries?

• How can gambling be controlled on the Internet? Gambling is legal in Nevada and other states. How can the winner’s tax be collected?

• When are electronic documents admissible evidence in the courts of law? What do you do if they are not?

• Time and place can carry different dates for the buyers and sellers when they are across the ocean.

• Is a digital signature legal?• The use of multiple networks and trading partners makes the

documentation of responsibility difficult. How is such a problem overcome?

41

Electronic Contracts

• Uniform Electronic Transactions Act• Provides the means to effectuate transactions accomplished through an

electronic medium

• Uniform Commercial Code (UCC)• Provides a government code that supports existing and future electronic

technologies in the exchange of goods or of services related to exchange of goods

42

Electronic Contracts (cont.)

• Shrink-wrap agreements (or box top licenses)• The user is bound to the license by opening the packageThis has been a point of contention for some timeThe court felt that more information would provide more benefit

to the consumer given the limited space available on the exterior of the package

• Click-wrap contracts• The software vendor offers to sell or license the use of the software

according to the terms accompanying the software• The buyer agrees to be bound by the terms based on certain

conduct

43

Fraud on the Internet

• Internet Stocks Fraud• SEC brought charges against 44 companies and individuals who illegally

promoted stocks on computer bulletin boards, online newsletters and investment Web sites

• Other Financial Fraud• Selling bogus investments, phantom business opportunities, and other

fraud schemes• Other Fraud in EC

• Customers may• receive poor quality products and services• not get products in time• be asked to pay for things they assume will be paid for by sellers

44

Federal Trade Commission (FTC) Consumer Alerts

• Business opportunities• Bulk mail solicitors• Investment opportunities• Work-at-home schemes• Health and diet schemes• Effortless income• Guaranteed loans or credit,

on easy terms

45

Free goods Chain letters Cable descrambler kits Credit repair Vacation prize

promotions

The “Dirty Dozen”

Buyer Protection

• Tips for safe electronic shopping• Look for reliable brand names at sites.• Search any unfamiliar site for address and phone and fax number. Call up

and quiz a person about the sellers.• Check the seller with the local Chamber of Commerce, Better Business

Bureau, or TRUSTe as described later.• Investigate how secure the seller’s site is and how well it is organized.

46

Buyer Protection

• Examine the money-back guarantees, warranties, and service agreements.• Compare prices to those in regular stores; too-low prices may be too good to

be true.• Ask friends what they know. Find testimonials and endorsements.• Find out what you can do in case of a dispute.• Consult the National Fraud Information Center.• Check www.consumerworld.org• Do not forget the you have shopper’s rights.

47

Third Party Service

• Public organizations and private companies attempt to protect consumers• TRUSTe’s “Trustmark”

• non-profit group• to build user’s trust and confidence in the Internet by promoting the polices of disclosure and

informed consent• BBB (Better Business Bureau)

• private non-profit organizations supported largely by membership• to provide reports on business firms that are helpful to consumers before making a purchase

48

Authentication

• If authentication can be solved …..• students will be able to take exams online• fraud of recipients of government entitlements and other

payments will be reduced to a bare minimum• buyers will be assured who the sellers are and sellers will know

who the buyers are with a very high degree of confidence• arrangements will be made so that only authorized people in

companies can place purchasing orders• interviews for employment, possible marriage, and other

matching applications will be accurate• trust in your partners and in EC in general will increase

significantly

49

Biometrics Controls

• Photo of face• Fingerprints• Hand geometry• Blood vessel pattern in the retina of a person’s eye• Voice• Signature• Keystroke dynamics

50

Cathy .

Seller Protection

• Sellers must be protected against:• Use of their names by others• Use of their unique words and phrases, names, and slogans and their web addresses• Dealing with customers that deny that they placed an order• Several other potential legal issues are related to sellers’ protection• Customers downloading copyrighted software and/or knowledge and selling it to

others• Not being properly paid for products and services provided

51

Managerial Issues

• Multinational corporations face different cultures in the different countries in which they are doing business

• Issues of privacy, ethics, and so on may seem to be tangential to running a business, but ignoring them may hinder the operation of many organizations

• The impact of electronic commerce and the Internet can be so strong that the entire manner in which companies do business will be changed, with significant impacts on procedures, people, organizational structure, management, and business processes

52