Chapter 8
CYBER LAW
CHAPTER OUTLINE
I. An Overview of Law in Cyberspace
A. Pervasive Use of the Computer in Business Transactions and by Employees
B. Should Really Be the Law in Cyberspace - Application of Legal Principles to the Activities of Cyber
C. Not a Whole New Body of Law
D. Chapter Presents Areas of Focus in Cyber Law and Framework for Analyzing Cyberspace Legal Issues
E. Questions to Be Answered:
1. What are the legal issues in cyberspace?
2. How are businesses affected by these legal issues?
F. Cyber Breaks Down in Six Categories
1. Tort issues
2. Contract issues
3. Intellectual property issues
4. Criminal violations
5. Constitutional restraints and protections
6. Securities law issues
G. Jurisdiction in Cyberspace Crosses All Areas
II. Jurisdiction Issues in Cyberspace
A. A Function of the In Personam Issues
B. Internet Tax Freedom Act (ITFA)
1. Passed in 1998
2. Renewed until mid-2005
3. Local government don’t tax Internet access
4. Taxation of sales issues are the same as in other similar sales (catalogs)
a. Presence in the state
b. Employee who works in the state
c. Owning or leasing real property
d. Delivering merchandise in the state
e. Having independent contractors present in the state for two or more days each year
f. Apportionment requirements apply
C. Employee Rights (Working From Home; Cyberspace Employees)
III. Tort Issues in Cyber Law
A. Privacy Issues in Cyber Law
1. E-Mail and worker privacy
a. Ninety million American workers send 2.8 billion e-mail messages per day or an average of 190 e-mail per worker per day
b. Are we entitled to a right to privacy in our e-mail communications?
c. Can the messages themselves be protected from disclosure on the basis of a right to privacy?
d. Do sender and receiver have the same right to privacy?
e. Is reading the e-mail messages of others the intrusion into private affairs?
f. Is the right to privacy waived then the message is forwarded to someone else?
g. The answers to these questions depend on the expectation of privacy
h. Tort of invasion of privacy, or intrusion into private affairs, is applicable privacy in e-mail and Internet account information
i. Employers have a right of access to their employees’ e-mail
j. Courts have been consistent in their rulings that employees do not have an expectation of privacy in their employers’ e-mail systems
61
Cyber Law 65
(1) employees should understand this limitation on privacy
(2) most employers provide their employees with notice about the e-mail system and that all e-mail is subject to review
(3) most courts hold that the lack of notice does not mean that the employee has an expectation of privacy
(4) any messages sent or received on an employer’s e-mail system can be retrieved and read by the employer, even those messages of a personal nature
(5) nearly 70 percent of all mid- to large-size firms do monitor employees e-mail and 84 percent of those firms tell their employees they will be monitoring their e-mails
k. E-mail is not private for the company
(1) completely discoverable if the company is a party to litigation
(2) all jokes, correspondence and other information employees put in their e-mail can be reviewed by opponents in litigation
2. E-Mail and statutory protections
a. The Electronic Communications Privacy Act of 1986 (ECPA)
b. Prohibits the interception of “live” communications such as using a listening device to intercept a telephone conversation
c. Issue is whether e-mail is “live” communication or stored information and whether the act is applicable
d. Second statutory protection is use of information that businesses and web sites glean from their users
e. Internet makes collection of information easier, but issue of customer privacy is old
f. Credit card companies are already restricted in the use and sale of information they can gather through the spending habits of their customers; same rules are applicable to Internet
g. Can obtain permission by a “point and click” technology over the Internet, but users have the same rights as credit card holders
3. Third-party access to e-mails and identity disclosure
a. Third-parties (shareholders, private parties, government) seek access to e-mails
b. Courts determine on a case-by-case basis
4. Identifying users who use servers for infringement - criminal copyright infringement requires server to reveal identity
B. The Tort of Appropriation in Cyberspace
1. Taking of an image, likeness or name and using it, without permission, for commercial advantage
2. Example of using a picture of someone for a screen saver program without their permission
3. Digital Millennium Copyright Act
a. Limits liability of server for infringement
b. Must run checks to see activity and stop illegal activity
c. Applies to colleges and universities and their supervision of students
C. Spamming – Trespass in Cyberspace
1. Courts have begun to protect web sites and servers as a form of property
2. Those using these “cyberspace facilities” can be held liable for trespass, just as if they had used a company’s headquarters without permission for a meeting of soliciting business on the property
D. Defamation in Cyberspace
1. Elements of defamation are the same
2. Defamation in cyber space may reach more people quicker and increase the level of damages
3. Chat rooms increase the likelihood that someone read and understood the defamatory remarks
4. Can be used for pump-and-dump - defaming a company in order to take advantage of puts and calls situations in the market
5. Litigation can require those operating servers to reveal the identity of those who are sending the messages, even when sent anonymously
III. Contract Law in Cyberspace
Cyber Law 65
A. Formation Issues
1. Evolutionary quality to formation of contracts in cyber space
2. Technology has moved business from complicated supply chain distribution systems of manufacturers, wholesalers, distributors and eventually customers to business-to-business (B2B) transactions where there is direct contact between manufacturers and customers
3. From drafts of agreements sent back and forth through the mails to overnight delivery service, to the fax machine, or telefax, to paperless EDI (Electronic Digital Interchange)
4. Formation of contracts in cyber space is governed by the same laws that apply when a contract is formed in a business office
a. Was there an offer and acceptance and when did those two requirements come together?
b. Issues include whether a contract is formed when someone downloads a program from the Internet
c. Does the click of the mouse accepting the program mean that they have accepted all the terms of the contract?
d. How does the seller of the program make sure that the buyer is aware of all the terms in the contract that governs the sale of the program?
e. Can the click of the mouse constitute a signature for purposes of contracting?
B. New Laws on Contract Formation
1. The Electronic Signatures in Global and National Commerce Act (called E-sign) - Federal law that recognizes digital signatures as authentic for purposes of contract formation
2. The Uniform Electronic Transactions Act (UETA) - adopted in 18 states
3. Uniform Computer Information Transaction Act (UCITA) - adopted in two states
C. Misrepresentation and Fraud in Cyberspace
1. No face-to-face contact and rapid transactions make fraud easier
2. Non-delivery and not delivered as depicted are the most common complaints about Internet transactions
3. Federal Trade Commission has applied existing catalog merchant rules to Internet merchants with regard to disclosure, notification, etc.
4. Enforcement action taken against toy retailers who failed to deliver on time and did not notify customers
5. FBI reported that for the year 2000 its number one source of fraud complaints was the Internet
6. Search engine misrepresentation on capabilities and links
7. Identity theft as a form of Internet fraud
a. Tremendous amount of personal and financial information available over the Internet
b. Hackers collect information on individuals and then piece together sufficient personal information on someone else in order to obtain credit, make purchases and secure even government benefits, such as Social Security, using that individual’s identity via their Social Security number, credit card numbers and even bank accounts
c. In 1999, the Social Security Administration received 30,000 identity theft complaints
IV. Intellectual Property Issues in Cyberspace
A. No Changes in Intellectual Property Rights and Protections
Cyber Law 65
B. Internet Facilitates Copying and Statutory Changes Address These Changes in Technology, Not Changes in the Law
1. What is protectable?
2. Napster and the downloading of copyrighted music
C. Copyright Infringement and Technology
1. The Digital Millennium Copyright Act
2. Amendment to federal copyright laws
3. Linking to a copyrighted site can constitute an infringement
D. Domain Names and Their Protection in Cyberspace
1. The common law notion of squatter’s rights prevails
2. Internet Corporation for Assigned Names and Numbers (ICAAN) approved the Uniform Domain Name Dispute Resolution Policy (UDRP)
3. UDRP provides for arbitration to resolve disputes over domain names
4. First UDRP decision was issued in January 2000 and granted the rights to worldwidewrestlingfederation.com to the WWF.
5. 591 UDRP proceedings commenced since then with 120 decisions
6. Web site with decisions is at: www.icann.org/udrp/proceedings-list.htm and the registration site is at: www.domainmagistrate.com/faqs.html
E. Trade Marks and Cyberspace
1. Federal Trademark Dilution Act
2. Applies to Internet
3. Self-enforcing - parties can bring actions against others for the deception caused by the use of similar domain names
V. Criminal Law Issues in Cyberspace
A. Crime Is a Problem Over the Internet
1. FBI calls the levels of cybercrime “epidemic”
2. Over 25% of the Fortune 500 corporations have fallen victim to computer crime
3. Computer viruses cost companies $7.6 billion in lost productivity and repairs through August 1999 - www.computereconomics.com
4. Most Internet or computer crime is just some form of a conventional crime carried out through the use of a computer
a. Fraud using credit card by phone or Internet is still fraud
b. Stealing a credit is theft and hacking to obtain credit card numbers over Internet is likewise theft
5. Some specialized computer crime statutes do exist
a. Use of a computer in unauthorized manners or to carry out fraud and take unfair advantage
(1) computers are the tools of the crime (identity theft)
(2) computers are targets of crime
(3) computers used incidentally to commit a crime (as when they are used for money-laundering)
b. Computer crimes - all common law crimes, just committed using a computer
(1) use of computer for transporting pornography
(2) use of computer for stalking
(3) use of computer for fraud
Cyber Law 65
c. Computer Fraud and Abuse Act (Chapter 9)
d. Economic Espionage Act (EEA) (Chapter 9)
B. Criminal Procedure and Rights in Cyberspace
1. Fourth Amendment applies to searches of computers
2. Per Kyllo case, the right to privacy does not change simply because technology permits invasion with ease
VI. Constitutional Restraints and Protections in Cyberspace
A. First Amendment Rights in Cyberspace
1. Speech on the Internet enjoys the same constitutional protections of the First Amendment as other forms of business, personal and political speech
2. Cyber Promotions, Inc. v. American Online, Inc., 948 F.Supp. 436 (E.D. Pa. 1996), Internet servers are not required under the Constitution to give commercial advertisers unfettered access to their customers for purposes of distribution of e-mail to them
3. The Child Pornography Prevention Act made it a crime to knowingly sell, possess or distribute child pornography on the web but the U.S. Supreme Court struck down the statute as void for vagueness and a violation of First Amendment rights
B. The Commerce Clause in Cyberspace
1. Both states and the federal government want to tax Internet transactions
2. U.S. Constitution requires that there be some nexus between the taxing authority and the business paying the tax
3. While the nature of business has changed, the constitutional tests remain the same and courts will apply the standards of fairness and allocation that they have in other eras as businesses grew
C. Due Process in Cyberspace
1. Long-arm jurisdiction even more critical because of the Internet
2. When does a company have a sufficient presence in a state that requires them to defend a lawsuit in that state?
VII. Securities Law Issues in Cyberspace
A. Pump-and-Dump
1. Traders buy a certain stock and then post information on the web to increase interest in it to drive up the price and hence their gain on that stock
2. Rapid exchange of information makes the practice of pump-and-dump much easier
3. Still regulated under Securities Exchange Act of 1934 and the regulations on securities fraud
B. New Economy and Accounting and Fraud
1. When is revenue booked?
2. What is the value of hits to a web site and how is that reflected?
C. Insider Trading Issues
VIII. Cyberspace and International Law
A. Jurisdiction of the Courts
Cyber Law 65
B. Issues of Which Law Applies
KEY TERMS
Cyber Law 65
Appropriation
Business-to-Business (B2B)
Transactions
Child Pornography Prevention
Act
Commerce Clause
Cyber Law
Cyberspace
Cyberspace Facilities
Defamation
Digital Millennium Copyright
Act (DMCA)
Domain Name
Domain Registration
Due Process
E-Sign
Electronic Communications
Privacy Act (ECPA)
Electronic Digital Interchange
(EDI)
Electronic Signatures in Global
and National Commerce
Act
Federal Trademark Dilution
Act
Internet Corporation for
Assigned Names and
Numbers (ICANN)
Internet Tax Freedom Act (ITFA)