Legal final

Legal Issues

Kelly Logue
Kathryn Sutton
Topics in E-Commerce

Legal Issues
 Jurisdiction  Encryption
 Linking, Framing,  Privacy
Metatags  Domain Names
 Copyright  Electronic
 Libel Agreements
 Trademarks  Digital Signature

Jurisdiction
 Issue: Which court has power to render a verdict?
 In order for a verdict to be enforceable, the court
must have authority over the subject matter and the
person involved
 Subject matter - the nature of the case

 Personal involved needs to be either
physically present or the offense need to have
occurred within the boundaries of the court

Ragothaman, Davies, Dykstra 2000

Jurisdiction Case
 CompuServe vs. Patterson
 Patterson, software developer, and CompuServe
entered into an agreement where CompuServe
would distribute his shareware
 Patterson brought suit against CompuServe for
trademark infringement
 CompuServe sought no infringement in a Federal
District Court in Ohio

Satterlee Stephens Burke & Burke LLP, 1998

Jurisdiction Case
 Court dismissed the case claiming the court
did not have jurisdiction over the case
 The argument did not come from Patterson’s
agreement with CompuServe
 Patterson did not have adequate contact with Ohio

• Court of Appeals for the 6th Circuit reversed
the courts decision to dismiss

Jurisdiction Case
 Court of Appeals found that Ohio had
jurisdiction because:
 Patterson agree to the contract terms with
CompuServe in Ohio
 Patterson’s sharewares where put into Ohio’s
position
• http://www.ssbb.com/yesjuris.html


Linking, Framing, Metatags
 Issue with Linking: A third party links to another site
creating a false impression in the mind of the viewer
that the two sites are related.
 Safeguard against Linking: preemptive action
 Issue with Framing: can cause audience confusion
 Issues with Metatags: Arguments over a third party
using the trademark of another as a metatag
 Violation: Unfair competition, copyright, and
trademark infringement

and Springer, Randel 2000

Linking, Framing, Metatags Case
 Ticketmaster Corp. vs. Microsoft Corp.
 Microsoft created a city guide web site for
Seattle
 City guide web site used Ticketmaster’s
name and services without Ticketmaster’s
consent

“Cyberspace” 2002

Linking, Framing, Metatags Case
 Ticketmaster claims damages to its name
and business opportunities
 Court Ruled:
 Microsoft had damaged Ticketmaster’s name and
web site

• http://www.jmls.edu/cyber/cases/ticket1.html

“Cyberspace” 2002

Copyright
 Issue: The unauthorized reproduction or
posting of protected material through the
Internet
 Material: Text, Pictures, or Sound


Copyright Case
 A&M Records, Inc vs. Napster
 Napster allowed Internet users to download,
duplicate, and distribute copyrighted music without
consent
 A&M Records Complaint: Contributory & vicarious
copyright infringement and unfair competition
 Court ruled in favor of A&M Records
 http://www.gigalaw.com/library/am-napster-2000-08-11.html
Isenberg, Douglas M. 2000

Libel
 Issue: By using the web to post false
information about a person that causes harm
to the person’s reputation
 Cyber-smearing: Communication of false
information about a company that harms the
value of it
 Safeguard against cyber-smearing:
implement corporate policies and damage
control procedures

Libel Case
 Cubby Inc. vs. CompuServe
 CompuServe entered into an agreement with
a third party to perform a special interest
forum, called “Rumorville” for CompuServe
 Defamatory material regarding Cubby Inc.
was displayed by the third party and
CompuServe
Godwin, Mike 1993

Libel Case
 Court did not find CompuServe liable
 Issues:
1. First issue
 Difference between the “publisher” and the
“bookstore owner”
 “publisher” – third party
 “bookstore owner” – CompuServe
 First Amendment calls attention to the “publisher”
as being liable for defamation, but the “bookstore
owner” should not be held accountable
Godwin, Mike 1993

Libel Case
1. Second issue
 CompuServe had an agreement with the third
party; therefore limiting its liability
• http://www.eff.org/Publications/Mike_Godwin/ne

Godwin, Mike 1993

Trademarks
 There are 3 types of Trademark Legal Issues:
 Trademark Infringement: the unauthorized use of a
trademark as a domain name
 Trademark Dilution: when a third party harms the
reputation of a trademark
 Trademark Dress Infringement: the illegal replication
of a certain look a company owns (via the look of a
product or website)

Springer, Randel 2000

Trademark Case
 Saturn Corp. vs. Saturn Service Inc.
 Saturn Service Inc. has no agreement with Saturn
Corp. to use its trademark for business opportunities
 Saturn Corp. is suing Saturn Service Inc. for
“trademark infringement, dilution, false designation
of origin, false advertising, and cybersquatting”
 Cypersquatting – refers to bad faith registration of
someone else’s trademark or trade name as a
domain name.

Finnegan, Henderson, Farabow, Garrett & Dunner 2001

Trademark Case
 Court ruled Saturn Service Inc. was in violation of:
 Trademark Infringement – allowing consumers to assume
the shop was associated with Saturn Corp.
 Intent to confuse consumers by using the same script and
copying Saturn’s mark
 Unauthorized use of the Saturn mark in the defendant’s
web site “saturnusedparts.com”
 The defendant’s use of the name Saturn, diluted the value
of the business
• http://www.finnegan.com/summ/cases/Saturn.htm

Finnegan, Henderson, Farabow, Garrett & Dunner 2001

Encryption Regulation
 Description of the issue: The encryption
regulation debate involves disputes between
the needs of business for integrity and privacy,
the First Amendment’s right to free speech, and
the need of law enforcement to track criminal
behavior, such as espionage, terrorism, money
laundering, and other crimes.


How to Safeguard:
 President Clinton issued Direction 63 calling for a
detailed plan to protect Americans against cyber
disruptions.

 He stated “each sector must decide for itself what
practices, procedures, and standards are necessary
for it to protect its key systems”. The critical sectors
to which President Clinton referred were the
economy, national security, public health and safety.

In the Law or in Business:
 December 5th, 2001 - Secretary of Commerce
Donald Evans officially finalized the federal
government's approval of the Advanced Encryption
Standard (AES), a data encryption technique that
will be used to protect sensitive information and
which is widely expected to be adopted by the
private sector as well.

Olavsrud 2001

Privacy Rights
 Description of the issue: Privacy Issues
relate to obtaining , using, and distributing
personal data such as names, addresses,
phone numbers, income, medical conditions,
and characteristics of race, sex, age, ethnicity
and political affiliation.


10 RULES OF PRIVACY POLICY

1. Make sure you have an explicit and formal
company privacy policy in place, highlight it in all
customer interactions, and make it easy to
understand.
2. Don’t ask for more private information than you
need.
3. Make customers feel safe in their relationship with
your company, regardless of formal and often
contradictory – legal requirements.
4. Handle the security basics well: SET and SSL are
your best friends. They don’t guarantee privacy by
themselves, but they sure show that your firm is
responsible in its e-commerce.

5. Associate your site with an organization, such as
TrustE, BBBOnLine (Better Business Bureau) or
CPA Web Trust, that certifies Web sites and the
business and audit processes behind them.
6. Let customers easily opt out of allowing you to
share information with other parties, but inform
them that they’ll probably lose convenience,
service, and personalization if they do so..
7. Don’t be tempted by easy technology tricks that
deceive your customers.


8. Invite the person in you firm’s audit department
who handles financial control of online services out
to lunch. Most breaches of privacy happen far, far
away from your Web site. Access control audit
logs, and formal rules of information use are the
process essentials that support or undermine what
you build into Web site.
9. Don’t put all your faith in firewalls.
10.Look on the bright side. Privacy is generally
discussed in negative terms: Everyone’s for it, and
violating it is A Bad Thing. But in practice, it’s very
much a matter of common sense and ensuring
informed consent
Keen, Peter 2000

Privacy Rights
 Two primary areas of concerns arise under the privacy concept.
1. Privacy of Internal Workplace data
2. Privacy of External Workplace data

 Company to company or company to customer data – internal
memos and e-mail generated from the company’s computers are
owned by the company.

 Employees also need to be aware that companies can monitor
employee use of e-mail and the Internet. (This includes personal
messages sent via e-mail)


Privacy Rights

 e-Bay Takes Some Heat on Privacy Policy
 Unfair or deceptive trade practices
 Conflict of Terms
 Changes to its privacy policy and user
agreement

Cox, Beth 2002

Domain Name Disputes
 Description of the issue: Disputes arise
over ownership of domain names and
because of similarities between similar
domain names. This practice of adopting
similar or identical domain names is often
referred to as “cybersquatting”.


How to Safeguard:
 Internet Corporation for Assigned Names and
Numbers (ICANN) new rules and procedures for
resolving domain names disputes provide for an
exclusionary process which allow an owner of a
domain name to exclude others from obtaining
registration of a domain name identical or
confusingly similar to theirs.


How to Safeguard:
 A related domain name issue that e-
business must consider revolves around
ownership. Businesses need to carefully
review their contracts to be sure they, and
not the service providers or developer, own
their registered domain name.


 New Jersey teenager sues Black Entertainment
Television over a URL
 Rapcity.com
 Alleged Trademark Violations: Teenager is seeking $10
million in damages
 Big companies are challenging domain names that they
believe encroach on their trademarks. Federal spending
bill imposes up to $100,000 in penalties for
“cybersquatters”
Quittner 2000

Electronic Agreements
 Description of the issue: Ensuring enforceability
of electronic agreements in the courts critical to
increasing their usefulness. A major issue with
electronic agreements is whether they meet writing
requirement of the Statue of Frauds. Most Statue of
Frauds issues have and will continue to involve the
acceptability of a digital signature as sufficient to
meet signature requirements.



How to Safeguard:
 Safeguards for ensuring enforceability of electronic
commercial agreements arising through the Internet include:
 ensuring that all terms and conditions are stated in clear,
simple and straightforward language;
 stating that the online display is the sole, exclusive and
final agreement;
 establishment of a storage system for agreements;
 offering the opportunity for telephone discussion and
clarification of terms;
 inclusion of a statement that the person accepting the
contract has the authority to do so;
 requiring a ‘signature’ either handwritten or facsimile,
where needed.

 Electronic Filing of Complex Legal Cases Mandated in D.C.
 Beginning May 1st,2001 will no longer accept paper filings,
except for initial complaints, in its most complex and lengthy civil
cases.
 D.C. Superior Court will become one of the first courts in the
Northeast to mandate electronic filing of documents.
 Pilot Project with CourtLink Corporation - all parties in over 600
cases will be required to file electronically with the Superior
Court using the CourtLink eFile service.

Estock 2001

Digital Signature
 Description of the issue: The major
problem associated with digital signatures
are whether the recipient has the specific
number code added by the computer and
whether the signatures meet the Statue of
Frauds requirement that contracts be
‘signed’ by the party to be charged.


Digital Signature
How to Safeguard:
 The Uniform Commercial Code (UCC) does
not specifically recognize digital signatures,
but the UCC does define ‘signed’ as any
symbol executed or adopted by a third party
with the present intention to authenticate a
writing.


Digital Signature

Grotta 2000

Digital Signature
 President Bill Clinton signed the Electronic Signature
Act, E-Sign Law, which officially granting e-mail the
same status as paper in court.
 The new law is part of Capitol Hill’s “eContract 2000,” a
program aimed at modernizing the nation’s laws to be in-step
with advancing technologies.
 Mutual Fund Example
 Financial Institutions, insurance companies,
brokerages, and utility companies will experience
dramatic cost-cutting reductions because of the E-
SIGN law.
Fusco 2000

Legal Issues Summary
 While both business-to-business e-commerce and
business-to-consumer e-commerce are expanding
at a brisk pace, laws dealing with e-commerce are
lagging behind. We have provided an overview of
several legal issues that have emerged in the
arena of e-commerce.

References
• Cox, Beth (2002). “eBay Takes Some Heat on Privacy Policy,”
Internet News, February 2002.
• Estock, Debra A. (2001). “Electronic Filing of Complex Legal Cases
Mandated in D.C.,” Application Planet, May 1st, 2001.
• Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P (2001).
“Saturn Corp. v. Saturn Service, Inc.”
• Fusco, Patricia (2000). “President Gives Nod to Digital Signature,”
Internet World, June 30, 2000.
• Godwin, Mike (1993). “Internet Libel: Is the Provider Responsible,”
Internet World, Nov./Dec.
• Grotta, Sally (2000). “Cyber-Sign,” PC Magazine, May 2001.
• Keen, Peter (2000). “Designing Privacy for Your E-business,” PC
Magazine, June 6, 2000.
• Isenberg, Douglas M. (2000). “A&M Records, Inc. v. Napster, Inc.
U.S. District Court, Northern District of California." Legal
Information for Internet Professional, May 12, 2000.

References
• Olavsrud, Thor (2001). “Infrastructure News,” Internet News,
December 15, 2001.
• Quittner, Jeremy (2000). “The Lemonade Stand Circa 2000: A Boy,
a Site, a $10 Million Lawsuit,” Business Week Online.
• Ragotarnan, Srinivasan, Davies, Thomas, and Dykstra, DeVee
(2000). “Legal Aspects of Electronic Commerce and Their
Implications for the Accounting Profession,” Human System
Management.
• Springer, Randel (2000). “BusinessPowerLaw.com-Internet,”
Business and Law
• “Cyberspace Law,” John Marshall Law School, 2002
• “Cases Finding Jurisdiction on the Basis of Internet Contracts,”

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