CyberLaw: Text and Cases, 3rd ed. - Weebly...CyberLaw: Text and Cases, Third Edition Gerald R. Ferrera, Margo E. K. Reder, Robert C. Bird, Jonathan J. Darrow, Jeffrey M. Aresty, Jacqueline

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CyberLaw: Text and Cases, Third Edition

Gerald R. Ferrera, Margo E. K. Reder,Robert C. Bird, Jonathan J. Darrow,Jeffrey M. Aresty, Jacqueline Klosek, andStephen D. Lichtenstein

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CHA P T E R 1Introduction to CyberLaw:Text and Cases

The remarkable social impact and economic success of the Internet is in manyways directly attributable to the architectural characteristics that were part ofits design. The Internet was designed with no gatekeepers over new content orservices.

—Vinton Cerf, co-inventor of the Internet

The Internet is becoming the town square for the global village of tomorrow.—Bill Gates, co-founder of Microsoft Corporation

L EARN ING OUTCOMES

After you have read this chapter, you should be able to:

• Understand the history of the Internet and Web, which are different technologies, andarticulate different impacts on business practices.

• Gain an appreciation for the scale of cooperation and collaboration it took to build outthese technologies and how uniform standards are key to this success.

• Find that the current legal and regulatory framework is mostly inapplicable to much ofthe Internet throughout the materials of each of the chapters as they relate to variousaspect of the business environment of networked tech companies.

IntroductionThis text covers subject matter related to ecommerce and all topics at this intersection ofbusiness, technology, and law. The authors explore how the Internet has dramatically chan-ged our lives, with a focus on those effects in the business sector including business models,especially with regard to content. The authors present current cases and analysis of the lawsgoverning these business transactions. The law is being rewritten in response to the newbusiness applications made possible by Internet and information technology innovationsand inventions. This text, now in its third edition, enables business students to recognizethe legal ramifications of online business transactions. The text, cases, and case studies arepresented with emphasis on their application to this online business environment.

At the completion of a course using this text, students should be able to understandhow new technologies make new business models possible, which in turn creates novellegal challenges. This text is intended to promote managerial decision making in a legalenvironment that is very much in flux and therefore offers little guidance.

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Overview of the Internet and World Wide WebIt is difficult to overstate the impact of the Internet and the Web on our lives, our waysof doing business, our culture, even our friendships. As a reference point, try to guesshow many times just today you have already been online. We now live in an era of per-vasive computing that offers a seamless interface between our networked and personalinteractions.

Consider the impacts. For example, how do you: contact friends, find restaurants, re-view products, get music, order tickets, find jobs, check the weather, check your calendar,or read a map? It seems that every service, product, and application is now mediated bytechnology because that function has migrated to the Internet. It is no wonder then thatresearchers at the Wharton School of Finance, University of Pennsylvania, rate the Internetand the Web as top inventions.

As with all inventions, the stage was set with previous inventions, including the tele-graph, telephone, and radio. Other technological innovations facilitated these break-throughs, including the process of digitizing data, the creation of computers, and thedevelopment of ever-faster processing chips and compression technologies. The integra-tion of these capabilities has transformed society in unprecedented ways. The Internetand the Web combine to represent a communications system capable of global reachand instantaneous dissemination at little to no cost, promoting collaboration and inter-action without regard to geographic location.

This stunning development inverts traditional paradigms and modes of control. Sud-denly each of us has the publishing power of a national newspaper or broadcast network.Moreover, governments’ ability to monitor or control the flow of information is thwartedby the Internet’s decentralized structure. Its architecture of openness and model of self-governance contribute to making this possibly the most democratic platform for commu-nication ever invented.

History of the InternetThe Internet has its roots in communications systems. (Its name is derived from “inter-connected network.”) Widespread forms of communication most recently before this in-clude the telephone, telegraph, radio, and television. The Internet is the result ofimagining what could be. The Internet’s structure was enabled by a host of technologiessuch as computers, digitization of data, modems, and telephone lines.

Conception of the Internet As early as the 1950s governments and businesses artic-ulated the need to process large quantities of data, which was then done one task at atime. Researchers developed large supercomputers for this work and hooked up remoteconnections to the computers to enable time sharing. By 1958, the Soviet Union’s satel-lite launch prompted the United States to decide it urgently needed to close the technol-ogy gap that it believed existed with its Cold War rival. The U.S. government establishedthe Advanced Research Projects Agency (ARPA) within the Department of Defense toformulate and execute advanced R&D projects to exploit military potential and promotenational security.

At this same time, J. C. R. Licklider, a veteran of the ARPA team, was a professor atthe Massachusetts Institute of Technology (M.I.T.) who was crunching massive amountsof data for Bolt, Beranek and Newman, a defense contractor and private company. Hismathematical models for acoustics research had grown too complex to solve with analogcomputers; it took days to tabulate results. In 1959, Licklider envisioned a system of thefuture and described how a computer could be like an automated library with a commondatabase that distributed users could simultaneously access. He imagined that a large

4 Part 1: Business Formation, Business Models and Business Cycles


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number of distributed computers and users connected to a network would be a morepowerful resource than any one computer, no matter how powerful. He published a papercalled Man-Computer Symbiosis in 1960, and in later writings called his conception the“Galactic Network”—a network of computers. Contemporaneously, researchers at BellLabs created the modem (modulator-demodulator), a device that transforms digital signalsto electrical/analog signals and back again. This technology later became critical to thecreation of the network of computers.

ARPA, NPL, and RAND: Founders of the Internet In 1962, ARPA created an en-tity called the Information Processing Techniques Office (IPTO), headed up by Licklider.ARPA was primarily concerned with data processing, but there were other organizationsand countries pursuing projects that ultimately contributed to the modern Internet. TheRAND Corporation, an outgrowth of World War II–era R&D, was feverishly workingon related research, but with an emphasis on military uses. Based on the perceptionthat there was a high likelihood for an imminent and catastrophic nuclear ballistic mis-sile strike based on real and perceived provocations between the United States and SovietUnion, RAND researchers were commissioned by the U.S. Air Force and charged withfiguring out how to keep the U.S. communications systems operative during such a sce-nario, because neither traditional military nor telephone communications systems wererobust enough. Researcher Paul Baran figured that a centralized switching facility wouldbe easily destroyed, so he developed the idea of multiple paths to one destination

EXHIBIT 1.1 Network Designs

These are the different designs of networks, and Paul Baran, then working for RAND on a contractfor DARPA, a Department of Defense initiative to address concerns of vulnerability, command andcontrol problems of centralized assets. Defense came to appreciate the need for a survivable network;Baran came up with a network design based on a distributed network of nodes. This design struc-ture was more robust than either a centralized or decentralized architecture. His basic concept wasparallelism, and through a Packet design, there is built-in redundancy and survivability.

(b) (c)(a)

Station

Link

Source: Paul Baran, 1964. http://www.rand.org/pubs/research_memoranda/RM3420/RM3420.chapter1.html.Reprinted by permission of RAND Corporation.

Chapter 1: Introduction to CyberLaw: Text and Cases 5


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through a decentralized distributed network. He also figured that the messages should bedivided into smaller packets (message blocks) and sent around the network, not neces-sarily following the same route, and then pieced back together at the destination. Thisbuilt-in redundancy provided sustainability as well as security because the messages intransit were not the complete messages. Their work ensured that the Internet was fault-tolerant and operated as a distributed computing network that was robust and able towithstand attack.

Cyclades and NPL The French government sponsored research in this field as well,and the resulting ideas contributed significantly to the present structure of the Internet.Researchers built a slightly different physical network to simplify packet switching,making it possible for the sender and receiver to have a direct (and thus end-to-end)connection. Previously some potential connections could not be made because of incom-patibility. This innovation resulted in a higher overall quality to the network. Finally,the most lasting contribution of the French Cyclades project was its emphasis on theconcept that the sender is responsible for ensuring reliability—not the network or therecipient.

Also during this time, Donald Davies of the National Physical Laboratory (NPL) inEngland began work on similar ideas, but the emphasis in this research was on commer-cial applications of a network of computers. Anticipating that there would be many busi-ness and commercial uses for this concept, the NPL’s priority was to ensure that thesystem would function smoothly and without the associated delays they experienced asthey tested their idea on the telephone lines that were based on circuit-switching technol-ogy. Data then exclusively moved along telephone networks operating on circuit-switching technology. The data moved directly to the recipient in a slow, deliberate se-quential mode, like a train along a track. Davies, who coined the term “packet,” wasworking separately but in parallel with Baran on the idea of data-switching networks, aswas Leonard Kleinrock for the ARPA group. Davies envisaged a way to move data insmaller packets, but the computers would have to communicate with each other throughmodems to make this a reality.

The three teams from ARPA, NPL, and RAND first met as a group in 1967. Thepacket-based concept became a reality and was made the standard for data networks;routers would sort the data packets and move them along the most efficient path andthen reassemble them at their destination. The teams created a plan for the architectureand in 1968 tested it; and then they sent out Requests for Proposals to build the firstnetwork, called the ARPANET. Another important specification the United States iden-tified was that it did not want to be reliant on proprietary technology nor limited to asingle network technology. This variegated system provided maximum flexibility andlessened reliance on outside commercial vendors.

By 1969, the earliest iteration of the Internet as we know it today was up and running,but its uses were more focused on academic than military purposes. Computers atU.C.L.A, U.C.–Santa Barbara, Stanford Research Institute, and the University of Utahwere the first to be connected, thus forming the original four-node Internet network.They were soon joined by M.I.T., Harvard, Systems Development Corporation, andBolt, Beranek and Newman. Another challenge that researchers met was how to createa robust protocol for ensuring the messages got to the correct destination. This was es-pecially important for a network of computers that was growing beyond the originalfour-node computer network. The resulting Transmission Control Protocol (TCP) andInternet Protocol (IP) addressing systems are still in use today. This critically importantinvention was made in 1973 by Vinton Cerf as part of the ARPA project and directed byProject Manager Robert Kahn.



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To coordinate this effort across so many researchers, participants developed a Net-work Working Group and submitted Requests for Comments (RFCs) on ideas, problems,suggestions, and solutions. This collaborative process is remarkable for the way in whichthese terrifically talented individuals kept their egos in check and were steadfast in theirfocus on the outcome. Starting with RFC 1 in 1969 (describing experiments in creatinghost-to-host software, and identifying questions that remain open) there are now nearlysix thousand comments on standards for Internet functionality.

By the early 1970s, ARPA was renamed Defense Advanced Research Projects Agency(DARPA) and refined its mission to concentrate on information processing, artificial in-telligence, speech recognition, signal processing, and tactical technologies. The Internetdebuted at an international conference in 1972, and that same year, the first email messagewas sent. The only connection available then between computers was through the tele-phone lines, and then in 1973 Bob Metcalfe, an M.I.T. researcher charged with connectingtheir computers to the ARPANET, co-invented the Ethernet connection while working atXerox PARC, a private R&D facility. Ethernet became the standard for data transmissionbetween computers.

Worldwide, there were a number of different closed proprietary networks, but finallyin 1983, all networks adopted the TCP/IP protocols and joined together to create oneglobal Internet. Government support at this stage came from the National ScienceFoundation (NSF). In 1981, the NSF provided grants for networking services for all uni-versity computer scientists. By 1985, with the advent of a few elite supercomputer cen-ters, the NSF considered how it could promote access to these facilities, and by 1986, atno cost to the schools, the NSF connected the supercomputer centers with research uni-versities. There were two thousand computers networked into the Internet. This was thefirst large-scale implementation of the Internet, and it was a complex task at the time, aseach institution was an independently operating organization. This implementation

EXHIBIT 1.2 Original Four-Member Network, 1969

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shows the importance of agreeing upon open and common standards and protocols. TheNSF Internet backbone supported over 2 million computers by 1993.

The Legacy The idea of an open architecture for the Internet is attributed to VintonCerf and Bob Kahn. They set out operational principles and goals, as well as articulatedwhat was lacking, namely the need for standards on a global addressing protocol, trans-mitting data, and interfacing with different systems. Most critically, they thought thatthere should be no global control at the operations level. Standards today are developedby the Internet Society (ISOC), which ensures overall quality, compatibility, and interop-erability, in coordination with other operating committees and groups including: the In-ternet Engineering Task Force, Internet Engineering Steering Group, Internet ResearchTask Force, Internet Architecture Board, and Internet Assigned Numbers Authority.Key to this growth is the fact that the Internet is patent-free and that none of its compo-nent parts are proprietary. Its academic pedigree promotes a culture of open publicationof ideas and results as a means for collaboration of ideas and technologies.

The Internet in the United States began as a government-funded research project andis essentially a mass of networked computers able to communicate because of compatiblehardware and software developed through collaboration, work, and imagination. It isowned by no one and belongs to everyone. At the same time that the Internet defiescontrol by any single entity, it empowers individuals and democratizes access to informa-tion and resources. It has become much more than Licklider’s vision of an interactivelibrary. Starting in 1988, the Internet was opened to commercial uses, with the first In-ternet dial-up access becoming available to consumers in 1989. The array of applicationsdeveloped since then for the Internet is staggering: consider email; the World WideWeb; the ability to remotely access data, share files, collaborate, interact with media;even voice and video chat through VoIP (voice over Internet protocol). The Internet her-alded the Information Age.

History of the World Wide WebThe World Wide Web developed independently of the Internet, though the two are oftenreferred to synonymously. The Web is an application, that is, one of the services thatuses the Internet platform. In its essence it is a global collection of interconnected andaccessible resources.

The Web was conceived and invented by Sir Tim Berners-Lee (TBL), then a re-searcher working at the European Organization for Nuclear Research (CERN), therenowned particle physics lab in Geneva (now known as the European Particle PhysicsLaboratory). He recognized that the advent of Internet led to too much information todeal with and that there was no rational way of accessing it. The idea behind his work isthat accessing information over computers ought to be a two-way medium, that thereshould be an effective way to organize documents and retrieve them, and that whileusing one document you should be able to instantly access another document, or returnto the original—or go in another direction altogether. Other rudimentary systems existedat the time, but they had limited capacity and were privately owned. Under such propri-etary regimes, each time a document was accessed there would be an associated fee forthis use. Such a system would clearly not be appropriate for a large-scale nonprofit re-search institution.

TBL’s genius was to conceive of a way to join hypertext with the Internet in a waythat made it simple and therefore effective to use. At its most basic, TBL’s invention re-presents an organization and access system for data—consisting of a browser (originallycalled the WorldWideWeb) to find content and a server (originally called CERN httpd)



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to deliver content. He wrote this software in 1990. There are five essential components toTBL’s World Wide Web invention:

1. The HyperText Transfer Protocol (http)—the request-response computer code sentto servers from users’ computers

2. The HyperText Mark-up Language (html)—the software coding viewed by users inthe form of the bidirectional link

3. Uniform Resource Locators (URLs) (formerly known as Uniform Resource Identi-fiers)—a unique address for each linked resource

4. The web browser—the application used to navigate5. The web server—the application that processes the request and response actions

Through collaborating with colleagues, he refined these initial specifications, and theyremain today as global standards.

TBL chose to use the hypertext format for the documents. This, too, was a product ofacademic research. Invented by Ted Nelson of Brown University and Douglas Engelbartof the Stanford Research Institute, hypertext was one of the different document-accessingtools available, and it was selected for its ease of use. Like the Internet, the Web was

EXHIBIT 1.5 Information Management: A Proposal

for example

includes

includesdescribes

HyperCard

ENQUIRE

Linkedinformation

Computerconferencing

Hierarchicalsystems

“Hypertext”This

document

Hypermedia

VAX/NOTES

UUCONews

AProposal

X

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etc

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describes

describes

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wrote

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describes

for example

CommsACM

Source: From Tim Berners-Lee, Information Management: A Proposal, March 1989. http://info.cern.ch/Proposal.html.Reprinted by permission.



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invented as a response to a need for sharing—in this case, to find a more efficient infor-mation management and retrieval system for the dispersed international community ofhigh-energy physics researchers. Before the Web, a few rudimentary programs existed fororganizing and distributing data, but due to the lack of standards and interoperability, allwere of limited utility.

TBL had first built a personal database in 1980 and called it ENQUIRE. It differedfrom other existing database models in that TBL’s method pointed users directly to thenext document instead of going back into a centralized directory. By 1984, TBL created arudimentary model for an information management system that could be used by dis-tributed researchers around the world.

In 1989, TBL wrote a proposal, considered at the time to be “vague, but exciting,” tobuild a large database. This generated no interest, so he undertook developing it himselfalong with colleague Robert Cailliau, and this later project was funded by CERN. Thefirst project they undertook was to put the CERN directory on the Web. It became ahuge success within the organization.

By 1990, CERN was connected to the ARPANET. TBL posted a notice there aboutconnecting to his browser and server, and use of the Web quickly spread. His key inno-vation was his method of arranging for the hypertext to work with the Internet as theunderlying platform. Before this time, such operations were clumsy and too cumbersomefor all but the most technologically savvy users. By 1991, the World Wide Web wasmade available to the public. The first website ever was http://info.cern.ch. Consistentwith its vision as an academic and research institution, in 1993 TBL and CERN releasedthe source code for the Web into the public domain. The Web’s foundations and proto-cols are patent-free and were made publicly available on a royalty-free basis and withoutany licensing restrictions.

Even as the Web went live, browsing software was in its infancy, so the experience forthe public at that time was less than ideal. Information was rapidly being deployed onthe Internet, but it became difficult to navigate. This changed in 1992 with the releaseof the innovative Mosaic browsing software program, capable of handling both text andgraphics. (This, too, was a research project funded by the National Science Foundationunder the High-Performance Computing and Communications Act of 1991 and com-pleted at the University of Illinois National Center for Supercomputing Applications.)Again, with an academic environment as the backdrop for this research and develop-ment work, this browsing software was released to the public for free with no licensingrestrictions on noncommercial uses and with very few restrictions for commercialdevelopers.

TBL’s work and CERN’s support of what was then applied research and experimentaldevelopment had an inestimable impact. Moreover, beyond the genius of his invention,he had an ideal that this invention should be an open design platform, thus able to runon any computer and network for free and without restrictions. He also believed itshould operate with global network distribution, meaning that access to the Web shouldbe available on every computer rather than through purchase of a computer program.These ideals stand in stark contrast to the world of proprietary control of property. Thefact that this work was not patented has stunning ramifications, the most obvious beingthat TBL does not claim ownership, and the benefit to the public has been a phenome-non as never before. What if TBL had decided to patent his invention? What if CERNhad instead claimed his work as its property and then patented it? Consider for a mo-ment and ask what that would have meant for the progress of the Internet, the access toinformation, the diffusion of information, the development of other search technologies,and so forth.



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Convergence: How the Systems Work Together Along withOther TechnologiesFor home users, Internet connections are accomplished with two pieces of hardware: acomputer and a modem. Internet accessibility, either wireless or with a wired connection,is based on access to a network provided by an Internet service provider (ISP). Theconnection is made possible because each device that connects to the Internet is auto-matically assigned a numerical Internet protocol (IP) address. The packet-based datagoes from the source to the destination and passes through routers that determine thepath. The TCP/IP protocol originally defined the address as a 32-bit number, but withthe impending exhaustion of IP addresses, the Internet Engineering Task Force (IETF)has initiated an upgrade of IP addressing technology to a 128-bit numbering system.This is especially important as whole new classes of devices will be connecting to theInternet, including toasters, refrigerators, TVs, and so forth.

Users access the Web through browser interfaces that point to URLs, and thereby ac-cess resources such as songs, articles, and video. Created by TBL, Web URLs have acommon syntax that typically consists of four parts.

Take, for example, the URL http://www.google.com. The first part of the syntax isthe hypertext protocol “http,” which is the user-initiated request to the client server toretrieve some resource. The next part of this URL, “www,” stands for World WideWeb, so named by TBL after considering and rejecting others. Following this isthe host name, which represents the Internet protocol or IP address of a domainname. The host name in this example, “Google,” is more branded and easier to re-member than any of the company’s numeric IP addresses, such as 216.239.51.99.The last part of the address, “.com” in this example, is known as a top-level domain(TLD) of the Domain Name System. In the URL http://online.wsj.com/public/page/news-tech-technology.html (a link to the Technology Page on the Wall Street Journalwebsite), the address content following the TLD is known as the post-domain pathor sub-file directory. The HTML extension shows that the page is coded using aformatting language that allows sites to feature embedded images, text, audio, andvideo in their web pages. It is through the URL system that we can target uniqueonline resources.

With an Internet connection, users can access the Web, provided they have the TCP/IP software and browsing software. Users’ online experiences are impacted by a range offactors including computer memory, processing speed, modem speed, and the type ofInternet connection. Each influences the speed and ease of use. In the early Internetdays connections were over telephone lines, and each user dialed up to get online; thedata release was painfully slow, so early on in commercial Internet use it was a liabilityto feature graphic-rich websites because they could not load in a reasonable amount oftime. Data transfer is measured by net bit rate, and to the extent the transfer rate grewhigher it became feasible for the Internet to be used as a medium for more complex anddata-rich uses, including audio and video. This too was made possible by advances inanother aspect—the development of compression technology that makes possible higherqualities of content (i.e., resolution, or fidelity) from the smallest amount of data. Com-pression technology dramatically reduces file size, and therefore data transfer rates overthe Internet are no longer unacceptably slow for users.

Content itself has undergone a dramatic transformation. Material, whether it is an im-age or movie, must be in digital format (in contrast to analog or celluloid or other for-mat) in order to be accessed over the Web. This innovation, moving content to digitalformat, began in earnest in the 1980s. For example, music was at one time etched ontoa vinyl record, that is, in analog format. The compact disk (CD) contains that same



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music, only stored in digital format. (The CD technology was developed out of a jointventure between Philips and Sony.) The digital recording process converts analogsound waves into a series of ones and zeros, and then when the user wants to playback the music, the device converts the data back into the analog wave format. Thismigration to digital format occurred with other media, for example, in the book andfilm industries. And as it is stunningly easy to make clones of digital content, all ofthese factors have converged to make the perfect digital storm for owners of copyrightedworks.

This extremely brief outline of the inner workings of sites and access by users shouldgive you the sense of how many pieces fit together to make the Internet and the Webfunction as they do today. Enhancements are constant due to more research and devel-opment of new technology, which probably was considered just a dream a generationago. The first phase of web development gave way to Web 2.0 concepts and innovations,for example, in social networking. There is now a fair amount of attention being paid todeveloping a “semantic web” in which computers will be able to carry out much of theinformation search, retrieval, and analysis that humans currently do. It is envisioned thatcomputers will also be able to create an action plan based on those findings. How theInternet and the Web will further develop is intriguing to consider. Each resulted froma confluence of events; each was a product of its time, a sort of challenge response be-tween problems and solutions. Incremental innovation or invention makes possible andcontributes directly to our current online experience.

It is particularly notable that each invention was created over a period of timeand was the product of an open and transparent deliberation and collaboration. Eachinvention has an academic pedigree in which the values of open collaboration, function-ality, and accessibility trumped the values of profit taking, privacy, security, or control.This resulted in inventions that were, from their inception, available to the publicin the form of unfettered access, unfiltered content, unlicensed, and on a neutralplatform usable with any computer, operating system, software, or browser. (Considerthe wide-open platforms of the Internet and the Web in stark contrast to the closed,proprietary environments of Amazon’s Kindle or Apple’s iPhone or Microsoft’sOffice software.) This was mainly due to the legacy of the people and institutionsinvolved in these projects: The work was initiated and undertaken by academic research-ers working at different labs on sub-sets of larger problems, all of whom shared theirdata, their insights, and their comments, in an effort to achieve common goals. Thiswork was supported in part by government incentives and funding. This consensus-driven collective effort was more important to these individuals and agencies than anyindividual credit.

Both the Internet and the Web are intentionally open network architectures; theInternet is built on open standards and interoperability due to the TCP/IP protocols.The brilliance of this protocol is that communications are enabled end-to-end regardlessof location, hardware, or software. Connections are now global and made through un-derwater cables, satellite links, and wireless networks. The Web is likewise constructedfor maximum openness and ease of use. These qualities maximize innovation and en-abled the Internet and the Web to grow to global scale in a stunningly short amount oftime. The Internet connections are not linear as with telephones and circuits; rather theconnections are geometric as Baran envisaged, routed in packets in infinite directions sothat even if one part of the Internet fails, there are routers and capacity, as well as redun-dancy to work around any network failures. This strength also relates to another of theInternet’s qualities: the noteworthy lack of built-in centralization mechanism or controlpoint. Nobody owns the Internet; there is no central management; nobody can disable it,filter it, or control it completely.



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Business Adoption of Internet as an Enterprise Platform;Business Creation Due to the Internet PlatformThe Internet and the Web stand for free and unrestricted universal access to communi-cation, collaboration and sharing, borderless contacts, and personalization. It has madepossible new ways of interacting, organizing, and doing business. It means advances inproductivity, speed, and knowledge. It is the fastest, most cost-efficient way to reach thewidest possible audience. The phenomenon of collaboration is also seen in the form ofsuch sites as Wikipedia. We share online in many ways such as inviting friends to Flickrto share photos. It makes it possible for businesses to deliver targeted ads to users basedon their searches. The net effect of these technologies is nothing short of an informationrevolution where there is now almost universal access to both free information and freetools to disseminate information. Every one of us is involved in this process; no longer isthere a hierarchy or a monopoly or any obstacles to generating or receiving information.

The first phase of these technologies from the 1960s through the early 1990s is clearlycharacterized by their academic pedigree. These were simply considered research tools.With the release of the Mosaic browser, new business applications became availableover the Internet, and soon there was considerable competition. Entrepreneurial ideasand models emerged for these new platforms. By the late 1990s, Amazon was foundedand the Internet as an economic engine was launched.

Most (perhaps by now, all) businesses have established their presence on the Internetwith websites as an additional and complementary (or perhaps the exclusive) way ofcommunicating with customers and offering services. Examples of this are companieslike Sears or British Airways that feature their products for sale online, as well as a wayto interact with customers and offer features such as scheduling services and flights. TheWeb has also made possible new and different business models—businesses that existonly in, and because of, the Internet. These include such companies as Craigslist, Face-book, Google, and Hulu.

During the early stages in business adoption of the Internet as a medium for deliver-ing goods and services, many sites experimented with subscription-based content forusers, but users favored and gravitated to free sites supported by a third-party advertisingrevenue model. The Internet and Web ecosystems have grown enormously since theirinception and widespread adoption, and they collectively produce many benefits andhave substantial impacts on our economy.

The Internet and Web are of such crucial importance to individuals, businesses, andgovernments, and this text considers those practice areas concerning the intersection ofInternet technology, law, and business. The Internet’s effect on our economy is staggering.Consider these figures for just the United States: Consumers make at least 10 percent oftheir purchases online; ecommerce companies account for over 1.2 million high-techjobs (plus due to the multiplier effect, these jobs support 1.5 million other jobs in theeconomy); there are over twenty thousand Internet-related small businesses; online adspending exceeds $20 billion per year; people spend an average of 30 hours a week onlineseeking information, paying bills, checking the news, connecting with friends, watchingfilm clips, and so forth.1 The Internet is increasingly integrated into our jobs, our leisure,our homes, our phones, our cars, our clothes, and even our appliances.

The Internet has created a demand for different skill sets, and our academic institu-tions and market economy responded to this structural change; now we have jobs in in-dustries like Internet service providers, web-hosting services, hardware and softwareproducers, search engines, content developers, IT consulting, ad networks, and web

1John Quelch, “Quantifying the Economic Impact of the Internet,” Harvard Business School Faculty Newslet-ter, August 17, 2009.



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design. Preexisting, legacy businesses even benefit from the Internet-driven commerce; forexample, Amazon needs UPS to deliver the physical goods to its customers who placedorders online. The Internet provides innovations in business that translate into cost, time,and value efficiencies along with a greater ability to communicate with customers.

The Interaction of Technology, Business, andLaw in Our Networked EnvironmentStandards and protocols for the Internet and the Web are conceived and regulatedthrough quasi-governmental societies and committees in a sort of federation-style opera-tions system. They were developed as collaborative, open academic research andinformation-gathering platforms. The Internet and the Web are “on” all the time, wideopen, insecure, easy to penetrate or disrupt, and because of their relatively anonymousnature, deception is a relatively simple matter. Increased connectivity means more possi-bilities for both good and bad outcomes. Current areas of research for the Internet andthe Web are focusing on web design and applications and new linking languages such asXML (extensible mark-up language) for large-scale electronic publishing, trusted com-puting, secure communications, and so forth.

This text focuses on the business applications of technology in this networked worldalong with the associated legal ramifications. Technology and business practices have faroutpaced legal responses and developments. For example, technology allows users to sharemusic; businesses are formed to leverage the technology, and then only later on, legal ques-tions arise with respect to possible copyright infringement and liability based on, amongother things: who uploaded the song to the Internet; whether the site is responsible to thecopyright owner if it received a notice and takedown request; who downloaded it; whethersuch use is a fair use. What this means for businesses, then, is that typically there is no legalguidance initially for many of their ideas and that they are operating in a legal vacuum.

Consider behavioral advertising, which is generally defined as a marketing strategy fordelivering tailored personalized ads to users based on the practices of surveillance andanalysis of individual online activities. That amounts to every single click they can watch,measure, and analyze. No laws regulate behavioral advertising in the United States; thefederal government has taken a wait-and-see attitude, relying instead on industry self-regulation. So how should businesses make decisions? What if their decisions are chal-lenged in court? How do businesses manage this internationally in places such as theEuropean Union, which has different standards from the U.S.? In many ways, the legalenvironment is not yet fully developed with regard to the Internet or the Web.

The importance of the U.S. system of laws on business and technology applications madepossible by the Internet and the Web may be overstated, however, in that the Internet is atits essence just a global collection of interconnected computers. The Internet is truly a peer-to-peer (p2p) system with many distributed nodes and no central point of control architec-ture. Its structure is anathema to any one government’s or organization’s desires to control,direct, manage, or supervise. Even as sovereign governments decry content on the Internetand attempt to control it, the Internet is perhaps equal to such pressures. In the realm ofbusiness, consider the music labels’ attempts to control dissemination of their copyright-protected music or the film industry’s attempts with regard to the release of films. ConsiderChina’s attempts to regulate political content, the U.S. attempt to regulate Internet gambling,or Australia’s attempt to regulate certain speech. The Internet and Web resist such control.These are just a few examples of the changes brought about by these inventions.

The Internet and the Web for the most part are technologies that empower individualusers at the expense of large organizational entities and governments. Significantly, the



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tools and skills needed for working on the Internet or Web for writing code, buildingideas, or making sites are widely and freely available to everyone.

The Internet’s loose regulatory arrangement again is a direct result of its academicresearch pedigree. The mechanics and protocols necessary for interoperability are openstandards, meaning generally that the computer coding necessary for Internet participa-tion is: developed by consensus, available to all, royalty-free, with no conditions. The al-phabet soup of organizations that currently oversee Internet and web standards andoperations are as follows:

ISOC – The Internet Society is an international, nonprofit nongovernmental organi-zation founded to promote the development of the Internet as a common enterprise.With offices in the United States and Switzerland, it is comprised of a worldwide ad-visory board “dedicated to ensuring the open development, evolution and use of theInternet for the benefit of people throughout the world.” It acts as the global clearing-house for all matters that affect Internet operations and initiatives. The Internet Soci-ety also directly oversees the work of the IETF and the IAB.

IETF – The Internet Engineering Task Force is the premier standards-setting organi-zation. Its mission is to produce “high quality, relevant technical and engineeringdocuments that influence the way people design, use, and manage the Internet insuch a way as to make the Internet work better … including protocol standards, bestcurrent practices, and informational documents.”

IAB – The Internet Architecture Board is a committee of the IETF and is responsible formanagement of IETF protocol registries, standards oversight, and the appeal process.

IANA – The Internet Assigned Numbers Authority is responsible for global coordina-tion of the domain name system roots (country code domains and top-level domains),IP addressing, and IP resources. Its responsibilities include oversight of the Autono-mous System Numbers used for routing Internet traffic. It is the central repository forInternet name and number registries. This agency handles the most publicly chargedaspects of the Internet: the domain name routes. One especially vexing area has to dowith domains fashioned from non-Roman character alphabets; to the extent that thepresent system fails to absorb these, parallel and separate Internets may develop.

IRTF – The Internet Research Task Force works on long-term research relevant towhat the future Internet will be and how it will function. Their focus is on protocols,applications, architecture, and technology.

IESG – The Internet Engineering Steering Group represents the coalition of a number ofdifferent working groups who comment on proposals relating to design, formatting, andcoding, and its members vote on whether to recommend adoption of any standards.

IEEE – The Institute of Electrical and Electronics Engineers was responsible for devel-oping air interface standards for wireless connectivity to the Internet and the develop-ment of an infrastructure for a wireless Internet. Popularly known as wifi, thiswireless standard led to explosive growth in connectivity and applications and madepossible all of those neat features on our 3G smartphones.

W3C – The World Wide Web Consortium is the premier standards-setting organiza-tion for the Web. It is composed of a variety of member organizations working coop-eratively. It is focused on accessibility to the Web and full participation in itsdevelopment, and accomplishes this by ensuring that the most fundamental technolo-gies are widely available and open and compatible. Examples of W3C’s work include:developing standards for mobile web data, adding new web languages, and writingprovisions for digital signatures.



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With the Internet and the Web effectively out of the direct control of individual coun-tries, these are uniquely global resources, regulated only peripherally and to different de-grees by each regulatory jurisdiction.

Text SurveyDescription of the Focus of the TextThere are a number of legal issues with which businesses gain familiarity with whenusing the Internet and the Web. The outline of the text is meant to reflect the businesscycle of technology and Internet companies as they begin with ideas, innovations, andinventions and move forward to creating business models with them. Employment issuesare covered, as there are unique concerns with employees in the high-tech and Internetindustries. This text covers in-depth strategies for securing rights to technology as well asmaintaining control of it while exploiting its value and potential. The text also coversissues of government regulation, liability, security, and crime—all topics of high priorityfor networked technology businesses.

The text materials represent a comprehensive survey of issues encountered by networkedand high-tech businesses. The chapters are arranged so as to replicate the order in whichthese questions and issues present themselves to managers. Each chapter includes an intro-duction to the relevant problem and how it presents in a business, as well as the legalconstructs that are used or borrowed to resolve these issues. Emphasis is on understandingthe interaction of the technology, the business strategy, and the legal environment.

Summary of a Representative Case, Eolas v. MicrosoftTo introduce readers to the substantive content of the text and to share how dynamicand changeable this area is and how businesses often resort to operating with high levelsof legal uncertainty, what follows is a short presentation and case summary of Eolas v.Microsoft Corporation, the most important patent case in the history of the Web, alongwith associated observations and questions.

Dr. Michael Doyle, head of University of California–San Francisco’s (UCSF) academiccomputing center, developed and finished a project in 1993 while working at the univer-sity. The technology covers the ability of web browsers to access programs embedded inweb pages. In 1994, UCSF filed an application for a patent on Doyle’s technology; Doyleis the named inventor, and all rights are assigned to the Regents of the University ofCalifornia, which is listed as the assignee/owner of the technology. In the meantimeDoyle left UCSF and formed a company, Eolas Technologies. Doyle negotiated with hisformer employer for the exclusive rights to this pending patent. The following timelinerepresents what happened after this point in time:

• In 1994, Eolas reached out to Microsoft and a number of other companies in thebrowser market, and sought to license the technology to them. Microsoft declinedthis offer.

• In November 1998, the Patent Office awarded Eolas a patent on this technology(U.S. Patent 5,838,906).

• In February 1999, Eolas and UCSF filed suit against Microsoft for patent infringement.The complaint claimed that the Internet Explorer (IE) browser infringed this patentedtechnology. During trial Microsoft attempted to demonstrate to the jury the Violabrowser, which used the same technology and was created a year earlier than Eolas’s.Microsoft was attempting to show that Eolas should not have been awarded a patentbecause the technology was already invented and in use. The trial judge would not allowthis into evidence, a decision that was eventually ruled an error by the appeals court.



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• In August 2003, Eolas prevailed in this lawsuit, resulting in a $521 million judgmentagainst Microsoft. Microsoft immediately appealed the ruling.

• In October 2003, Microsoft publicized its proposal to change its IE browser so as toavoid paying licensing fees to Eolas. Privately it was concerned that this would bemassively disruptive to millions of web pages and plug-ins and cause numerousripple effects with developers. (It implemented these changes to sidestep the Eolaspatent by February 2006.)

• Also in October 2003, TBL, under the auspices of the World Wide Web Consor-tium, wrote a letter to the U.S. Patent and Trademark Office (PTO) Director urginga re-examination of the Eolas patent. Specifically he cited another embedding tech-nology that pre-dated Eolas’s. (If there is a record of a prior invention, then a patentis invalidated on grounds that the invention was not new because it already existed.)

• In March 2004, the PTO began a re-examination, and concluded in a nonfinalrejection that certain claims in Eolas’s patent were not patentable.

• In May 2004, Eolas issued a rebuttal to this finding.• In June 2004, Microsoft appealed the trial court’s rulings. The appeals court re-

manded the case, finding that the jury should have been shown the Viola browserexhibits showing that there was other embedding technology that predated Eolas’s.

• In September 2005, after eighteen months, the PTO upheld the patent.• In October 2005, the Supreme Court refused to hear Microsoft’s appeal.• In July 2007, Microsoft and Eolas agreed to delay a pending retrial in order to try

to negotiate a private settlement. By August, the two companies reached aconfidential settlement.

• In October 2009, Eolas filed patent infringement lawsuits against twenty-two com-panies, including Apple, Adobe, Amazon, Citigroup, eBay, Staples, Sun Microsys-tems, and Texas Instruments, on the same legal theory. These lawsuits are ongoing.

Postscript: There were sixteen legal rulings in the Eolas-Microsoft case, spanning fouryears: eleven from the United States District Court for the Northern District of Illinois,four from the Court of Appeals for the Federal Circuit, and one from the United StatesSupreme Court. See, e.g., Eolas Tech., Inc. v. Microsoft Corp., 2005 U.S. Dist. LEXIS25076 (N.D. Ill. 2005); 457 F.3d 1279 (Fed. Cir. 2006) (reversing the district court); 546U.S. 998 (2005) (denying certiorari). In the end the parties settled their dispute privatelyin 2007, ending a decade of litigation. In a letter from Eolas COO Mark Swords to Eolasshareholders, August 27, 2007, he wrote, “The litigation with Microsoft has taken a greatdeal of management time and effort and significant financial resources. We are verypleased that we now can focus our resources on commercializing our existing intellectualproperty portfolio and developing new fundamental technologies.”

Thoughts and questions to consider:

• How can there be patents on web standards?• What if Doyle knew of the Viola browser but hid this information from the Patent

Office (as was asserted)?• Note how long it takes to review a patent. Note how long it takes for courts to

resolve disputes. What are businesses to do in the interim?• What is the process for defining rights of ownership in technology?• Can patent owners keep some rights and license others?• As technology moves quickly—here, browser technology changes—what are the

effects of these decisions?• Note how Microsoft used a two-prong strategy: it implemented both technical and

business tactics, while it pursued a legal defense of the infringement claims.• Think about the many varied expenses involved in this litigation: is it money well

spent (i.e., does it create value?)?



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Postscript: Some Notes and Quotes from TBL’s Letter In his letter to the PatentOffice in 2003, TBL referred to the original patent examination and noted that, despitetaking more than three years, it failed to sufficiently consider earlier software. He asksthe Patent Office to take a look at messages on a listserv that mention this technology.These messages pre-date the Eolas technology, yet Eolas asserts that it invented this sametechnology. TBL speaks to the importance of keeping the Web a patent-free, royalty-free,open and interoperable environment:

The practical impact of withholding unrestricted access to the … technology from useby the Web community will be to substantially impair the usability of the Web forhundreds of millions of individuals.

Without the ability to call external code from within a browser window … the cycle ofinnovation on the Web would be substantially retarded.

In the history of the Web, low legal and financial barriers to use of Web standards havebeen as important as ease of deployment. …

The Web standards design process depends on the implementation experience of a largenumber of developers to assure that each component of the Web is well designed andsatisfies the needs of the increasingly diverse communities of Web users. What’s more,the diversity of content … is only possible because the creators of each of those pages areable to use key Web standards such as HTML … without paying a royalty.

Just as the trial court failed to consider the merits of the [prior] art … it also failed toconsider the large impact of its ruling on the Web. It should be clear now that the rulingand particularly its failure to consider relevant prior art will likely have a highly detri-mental impact on the entire Web community unless you initiate reexamination of thepatent … [This] patent will cause cascades of incompatibility to ripple through the Web.

Description of the Chapter ContentChapter content consists of background text and history, the legal framework, and casereadings abstracted from the original decisions to highlight relevant legal points. Casepresentations conclude with targeted questions meant to emphasize managerial decisionmaking and leadership. Each chapter, moreover, features a reference to Google, used as a“thread” submission. This aids readers in gaining a more in-depth grasp of how theseissues are playing out real-time in an Internet business today. This provides many bene-fits, including continuity to the topic presentation and a solid background in these prac-tice areas, and it enhances readers’ understanding of how these topics fit together in thebusiness environment. Exhibits are presented to aid readers in comparisons, compre-hending data sets, and condensing voluminous information. The text contains questionsand observations on ethical considerations—an especially relevant and important elementbecause of the gap between technology business practices and legal or other regulatoryoversight. Operating a business without guidance is problematic at best. End-of-chapterquestions are meant to gauge mastery of the topic. Each chapter concludes with resourcematerial for further inquiry into its topic. There are four parts to the text materials,arranged by operational and business cycle topics common to these business entities.

SummaryThis chapter provides readers with a historical back-ground on the development of both the Internet andthe Web. Emphasis is on presenting readers with this

history as a process and mission-driven; the develop-ment of these technologies as a long and purposefulprogression borne of frustration, of seeing challenges



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and devising solutions. At each stage it should becomeclear to readers that these inventions represent a pro-cess, comprised of many developments, and workcould go forward only as fast as the technological in-novations of that time allowed. These technologies fun-damentally changed our existence: the way we work,play, think, read, and interact. It is important to under-stand how the Internet and the Web are currently

based on open, royalty-free standards that are in es-sence neutral platforms, but that there are laws, stan-dards, and regulations of these technologies that arelayered on by cities, states, nations, and countries.The Internet and the Web have changed everything;this transformation and its impact on other technolo-gies, ways of doing business, and our legal environmentare detailed in this text.

Key TermsInternet, p. 3Advanced Research Projects

Agency (ARPA), p. 4Research and Development

organization (RAND), p. 5National Physical Laboratory

(NPL), p. 6ARPANET, p. 6Transmission Control Protocol

(TCP), p. 6

Internet Protocol (IP), p. 6Defense Advanced Research

Projects Agency (DARPA), p. 7National Science Foundation

(NSF), p. 7World Wide Web, p. 10European Particle Physics

Laboratory (CERN), p. 10HyperText Transfer Protocol

(HTTP), p. 11

HyperText Mark-up Language(HTML), p. 11

Uniform Resource Locator (URL),p. 11

browsers, p. 11servers, p. 11Internet Service

Provider (ISP), p. 13Domain Name System, p. 13

Manager’s Checklist• Understand that the Internet and the Web are de-

signed to maximize communications and data flow,and therefore they are inherently insecure environ-ments not innately suitable for valuable digital assets.

• Managers must be cognizant of how difficult it is tocontrol any content, even site design, on the Internet.

• Managers should understand that their online pres-ence is accessible globally and may not be in com-pliance with other countries’ legal systems,particularly in the areas of data security and privacy,and be prepared to respond to this.

• Managers should consider making country-specificsites as a way to engage more users and create moreof a presence in other countries.

• Managers are responsible for developing strategies toensure web traffic is handled expeditiously andsecurely through a network of servers.

• Managers should know that the Internet and theWeb are constantly evolving technologies and thatthis will greatly impact internal IT standards andcosts.

• Managers should engage a government relationsspecialist to keep apprised of legal developmentsimpacting the Internet, the Web, and ecommercegenerally.

Ethical ConsiderationsIt is possible to exert some control over the Internet;for example, governments in some countries requireISPs to apply for and receive a government license

before they can do business and sign up subscribersfor Internet service. Consider how this licensing ar-rangement can be abused.

Questions and Case ProblemsNote: Due to the nature of this introductory chapter,the following answers to the end-of-chapter assign-ments are broad. These questions are intended to sparkclassroom discussion and lively debate as well as gen-erate interest in the course material.

1. Say you created a new programming languagethat was ideal for a certain application, and youknew that it could revolutionize reporting ofcertain data on the Web (like the HTML createdby Berners-Lee, but in this case you invented



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something new and entirely different yourself).Describe the different impacts of adoption if youpatented this invention, or if you opened it up forwidespread free and unrestricted adoption.

2. Currently, there are questions over whether it ispermissible for ISPs (major U.S. providers in-clude Comcast, Verizon, and AT&T) to controlaspects of speed and delivery of content on theirnetworks to their subscribers. Many subscribersand sites have complained about these practices,asserting that the ISPs should handle all contentthe same. What organization or governmentalentity should handle this? How should it beresolved?

3. In Sweden a court sentenced the founders of ThePirate Bay site to one year in jail and levied ahuge fine on the site founders and operators afterconcluding they were responsible for their users’conduct by profiting from the many ads on thesite. If you operate eBay or Google, for example,describe how this decision might possibly concernyou.

4. Recently a number of websites were knockedoffline by an Internet attack that lasted five days.

Months later, authorities are still unclear who orwhat group is responsible for the attacks. Com-puters implicated in the attacks were identifiedand found in several different countries. Manyexperts caution that the Internet is effectively a“wilderness of mirrors.” Independent researchersare investigating the attacks, as are some gov-ernments. Identify any control points to accessinformation about such attacks, and how youmight prevent others in the future.

5. Privacy is a concept that is rapidly evolving inrelation to the most public of mediums, the In-ternet, which became even more super-chargedwith social networking websites. In a recentCalifornia election, one ballot measure, Proposi-tion 8, asked voters a question on marriage.Donors to the Prop 8 campaign found that theirnames, addresses, and amount of contributionwere mashed up with Google Maps and thusrendered into a format showing the world a mapimage of donors’ names, street addresses, anddollar contributions. All this data is public recordinformation already, but still quite inconvenientto access. What are the effects of this?

Additional Resources• World Wide Web Consortium, http://www.w3.org/• Stanford Center for Internet and Society, http://

cyberlaw.stanford.edu/• Berkman Center for Internet & Society, http://cyber.

law.harvard.edu/• Bentley Global Cyberlaw Center, http://www.

bentley.edu/cyberlaw/• Tech LawForum, http://www.techlawforum.net/

• ISOC, http://www.isoc.org/• Every comment about the development of the

Internet, http://www.rfc-editor.org/index.html• IANA, http://www.iana.org/• IESG, http://www.ietf.org/iesg/• IRTF, http://www.irtf.org/• IETF, http://www.ietf.org/index.html



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CyberLaw: Text and Cases, 3rd ed. - Weebly...CyberLaw: Text and Cases, Third Edition Gerald R. Ferrera, Margo E. K. Reder, Robert C. Bird, Jonathan J. Darrow, Jeffrey M. Aresty, Jacqueline