Chapter 1

Ethical and Legal Issues

By Hanniya AbidAssistant ProfessorCOMSATS Institute of Information Technology

E-MarketingLecture 6ObjectivesAfter this lecture, you will be able to:Compare and contrast ethics and law.Discuss the implications of ethical codes and self-regulation.Identify some of the main privacy concerns within traditional and digital contexts.Explain some of the important patent, copyright, trademark, and data ownership issues related to the Internet.Highlight key ethical and legal concerns related to online expression.

Software InfringementCopyright infringement occurs when people download copyrighted software without a license, loan software to others for which they have no licenses, or install software on more computers than allowed.Counterfeiting occurs when illegally copied software is duplicated and distributed on a large scale.Globally, over a third of the software sold is an infringing version.

Software Infringement, cont.Microsoft uses the following remedies:Proposes intellectual property legislation.Files civil lawsuits.Creates noninfringement technologies such as digital rights management (DRM) security programs embedded in software CDs.Microsoft believes that education is the best weapon against piracy. Do you agree?

Legal challenges in e-MarketingOnline businesses:Must comply with the same laws and regulations that govern the operations of all businessesFace complicating factorsThe Web extends a companys reach beyond traditional boundariesThe Web increases the speed and efficiency of business communicationsThe Web creates a network of customers

Borders and JurisdictionTerritorial borders in the physical world mark the range of culture and reach of applicable laws very clearlyPower A form of control over physical space and the people and objects that reside in that spaceA defining characteristic of statehoodJurisdictionAbility of a government to exert control over a person or corporationLegitimacyIdea that those subject to laws should have some role in formulating them

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7Jurisdiction on the InternetPower, effects, legitimacy, and notice do not translate well to the virtual e-commerce worldTo enforce laws governments must establish jurisdiction over business conductContract Promise or set of promises between two or more legal entities

8Ethics and Legal IssuesEthics and law are integrally related.Modern technology presents challenges to marketing ethics. Critical issues include:Ownership of intellectual propertyThe role of privacy in a virtual worldFreedom of expressionUse of data and its collectionStatus of children and digital networksThe Problem of Self-RegulationThe development of the Internet has been left to the free operation of the market.Supporters of self-regulation stress the private sectors ability to identify and resolve problems.Critics argue that incentives for self-regulation are insufficient and true deterrence will not be achieved.Policy-making activities indicate that governments are asserting themselves in areas such as fraud prevention and childrens privacy.PrivacyThe concept of privacy encompasses both ethical and legal aspects.There is constant debate regarding privacy and it has proved to be an elusive concept, both ethically and legally. Within society, privacy interests compete with concerns for safety, economics, and need for association with others.

Privacy Within Digital ContextsConflicts about how data should be collected and used have developed.AMA Code of Ethics for marketing on the Internet: information collected from customers should be confidential and used only for expressed purposes.Online advertising firms such as DoubleClick have traditionally recorded users clickstreams to form user profiles for marketing purposes.Controversy arose in 2000 when DoubleClick acquired consumer names, addresses, and buying histories and planned to combine the offline data with clickstream data.Online Data Collection Data are obtained through the use of digital cookies, packets of data created and stored on the users hard drive in response to instructions received from a web page.Cookies serve many purposes:Create shopping baskets to hold purchasesRecall stored sales informationCollect user data Cookies allow marketers to pinpoint an individuals online behavior.Privacy Debates And PolicyAccess to personal data is another important online privacy issue. Cutting-edge applications also raise additional issues.Hostile appletsIntelligent agentsWhile laws relating to Internet privacy remain in debate, many offenses can be addressed by conventional statutes.

Other Privacy IssuesEthical collection of information from children 12 or under.Privacy within electronic mail remains an unsettled aspect of online interaction.International Privacy IssuesThe European Union (EU) and the U.S. reached agreement in 2000 to protect EU citizen data.The Federal Trade Corporation has identified the following norms for the ethical use of consumer information:NoticeConsentAccessSecurityEnforcement

Google blurs images of street viewMEG VAN HUYGEN,ATLAS OBSCURAMAR. 28, 2014, 10:56 AMhttp://www.businessinsider.com/google-earth-blurred-locations-2014-3#

Amazon has a Privacy policy

Intellectual PropertyIntellectual property(IP) are the legally recognized exclusive rights to creations of the mind. wikipediaIntellectual property Includes all products of the human mindProducts can be tangible or intangibleIntellectual property rights Include protections by governments through: Granting of copyrights and patentsRegistration of trademarks and service marks

Digital PropertyThe law protects intangible or intellectual property through 3 basic mechanisms:Patent law is centered on inventions.Copyright addresses issues of expression.Trademark is concerned with words or images used in the market.

PatentsApplying patent law to computing is an uncertain but developing field.Patents prevent competitors from doing the same thing a different way.Patent protection has been claimed for reverse online auctions and secure credit card processing.The U.S. Patent Office has decided to increase the rigor of reviewing applications for software-related protection.Patent InfringementPatent Exclusive right granted by a government to an individual to make, use, and sell an inventionTo be patentable the invention must be genuine, novel, useful, and not obvious, given the current state of technologyBusiness process patentProtects a specific set of procedures for conducting a particular business activityBusiness methods must be:UsefulNewNon-obvious http://www.gigalaw.com/articles/22

Example:U.S. Patent Office Reviews Applications

Copyright Copyright is the primary means of protecting most expression on the Internet. Doctrine of Fair Use Ability to copy protected material for education and news reporting. Doctrine of First Sale Limit the ability of copyright holder to obtain profit after the initial time at which the material is sold.Web Site Content IssuesCopyrightRight granted by a government to an author or creator of a literary or artistic workCreations that can be copyrighted include all forms of artistic or intellectual expressionWorks copyrighted by corporations or not-for-profit organizations are protected for 95 years

25Web Site Content IssuesFair use of a copyrighted work Includes copying it for use in criticism, comment, news reporting, teaching, or research

YouTube Deletes thousand of Files After a Copyright Complaint TOKYO, Oct. 20 (AP) The popular video-sharing site YouTube deleted nearly 30,000 files after a Japanese entertainment group complained of copyright infringement. (NY Times 10/23/06)Copyright, cont.Examples of copyright laws:Confer copyright protection for computer content and imposes sanctions for infringement. Protects ISPs from acts of user infringement.Criminalizes the circumvention of software protections.Complies with international standards for copyrighted material.

TrademarksTrademark law concerns the ownership of intellectual property that identifies goods or services.Trademark law has been applied to the Internet naming system of domain names.Similarities in names may result in trademark infringement claims.A trademark violation, cybersquatting, involves the registration of domains that resemble or duplicate existing ones.Trademark InfringementTrademarkDistinctive mark, device, motto, or implement that a company affixes to goods it produces Service markUsed to identify services providedTrade nameName that a business uses to identify itself Common law Part of British and U.S. law established by the history of court decisions30 Advertising RegulationRegulates advertising.Publishes regulations and investigates claims of false advertisingProvides policy statements Policies cover specific areas such as:Bait advertisingConsumer lending and leasingEndorsements and testimonials31Domain Names, Cyber squatting, Name StealingCyber squatting Registering a domain name that is the trademark of a person or company and hoping to sell it to that person or company for moneyName changingRegistering misspelled variations of well-known domain namesName stealingOwnership of a sites assigned domain name is changed to another site and owner32DefamationDefamatory statementStatement that is false and injures the reputation of another person or companyProduct disparagementIf a defamatory statement injures the reputation of a product or service instead of a personPer se defamationCourt deems some types of statements to be so negative that injury is assumedSee: http://www.efl-law.com/internet-libel.php

33Online Crime, Terrorism, and WarfareOnline crime Obstacles faced by law enforcement:JurisdictionDifficulty applying laws written before the Internet became prone to criminal actions Online warfare and terrorismSustained effort by a well-financed terrorist group could slow down operation of major transaction-processing centers34Ethical IssuesWeb businesses find ethical issues are important to consider when making policy decisionsElectronic Communications Privacy Differences in cultures throughout the world have resulted in different expectations about privacy in electronic commerce.

35Principles for handling customer dataUse data collected to provide improved customer serviceDo not share customer data with others outside your company without the customers permission Tell customers what data you are collecting and what you are doing with it Give customers the right to have you delete any of the data you have collected about them

Under what conditions should the privacy of others be invaded? What legitimizes intruding into others lives through unobtrusive surveillance, through market research, or by whatever means? Do we have to inform people that we are eavesdropping? Do we have to inform people that we are using credit history information for employment screening purposes?

Some Examples of Ethical IssuesAnalyzing Ethical DilemmasDilemmaa situation is which there are at least two diametrically opposed actions, each of which supports a desirable outcomeCan use a five-step process to analyze a dilemma Analyzing Ethical Dilemmas1.Identify and describe clearly the factsFind out who did what to whom, and where, when, and how.2.Define the conflict or dilemma and identify the higher-order valuesEthical, social, and political issues always reference higher valuesIdentify the stakeholdersParties with an interest in the outcome, who have invested in the situation, and have vocal opinions

Analyzing Ethical DilemmasIdentify the options that you can reasonably takeNone of the options may satisfy all interests involved

Identify the potential consequences of your options -- and chooseSome options may be ethically correct but disastrous from other points of viewSome options might work once but not over time

Candidate Ethical PrinciplesThe Golden RuleDo unto others as you would have them do unto youUniversalismIf an action is not right for all situations, then it is not right for any specific situation

Slippery SlopesIf an action cannot be taken repeatedly, then it is not right to take at allCollective Utilitarian PrincipleTake the action that achieves the greater value for all of societyCandidate Ethical PrinciplesRisk AversionTake the action that produces the least harm, or the least potential cost.choose actions whose consequences would not be catastrophic, even if there were a failureNo Free LunchAssume that virtually all tangible and intangible objects are owned by someone else unless there is a specific declaration otherwise

SummaryEthical vs legal issuesIntellectual Property in the internetPrivacyUnderstanding of legal and ethical issues is of prime importanceUse the above rules for analysis and principles to analyze (choose one or two and discuss):Downloading musicAdvertising networks (like DoubleClick) who track Web surfing behaviorData mining by retail stores and credit card companiesUsing opt out vs. opt in policiesAnother issue of your choiceExercise