Legal and Ethical Issues in E-Commerce

Major Legal and Ethical Issues in Electronic Commerce

• Privacy

• Intellectual Property

• Free Speech

• Taxation

• Computer Crimes

• Consumer Protection

• Miscellaneous

Legality vs. Ethics

• Illegal acts break the law while unethical acts may not be illegal

• Ethics– Branch of philosophy that deals with what is

considered right or wrong– Right and wrong not always clear– Consider

• Company sells profiles of customers with information collected through cookies

• Company allows personal use of Web but secretly monitors activity

• Company knowingly sells tax software with bugs

Privacy Issues

• Information privacy: claim of individuals, groups, or organizations to determine when and to what extent information about them is disseminated.

• Right to privacy is not absolute

• Public’s right to know superceded individuals right to privacy

How is private information collected?

• Reading your newsgroup postings• Finding you in an Internet Directory• Making your browser collect information about

you• Recording what your browser says about you• Reading your email

» From Rainone, et al, 1998)

• Most common methods are cookies and site registration

Web Site Registration

• Must fill in registration to get to site• Sometimes sold to third parties• User survey found (Eighth User Survey, 1998)

– 40% users falsify information– Nearly 67% (US and Europe) don’t register because

of privacy concerns– Nearly 57% say they don’t trust sites collecting

information– Only 6% will always register when asked

Cookies• Help maintain user status• A temporary passport• Used for

– Customizing sites (Yahoo)– Improve online services (Amazon)– Collect demographics and usage statistics (Doubleclick)

• Protection– Delete cookies– Anti-cookie software

• PGP’s Cookie Cutter• Luckman’s Anonymous Cookie• CookieCrusher• Cookie Monster

Five Principles of Privacy Protection

• Notice/Awareness– Notice of collection practices prior to collecting information

• Choice/consent– Consumers to be made aware of options and give consent

• Access/participation– Must be able to access and challenge information

• Integrity/Security– Must be assured data is secure

• Enforcement/Redress– Government legislation or legal remedies

EU’s Data Privacy Directive

• Stronger protection of personal data such as race, politics, finances, religion, health and union membership

• Other countries following suit– Argentina, Australia, Canada, Switzerland and

New Zealand

• Bush rejects EU laws as being unduly burdensome

• Safe Harbor Agreement is a bridge between the US and European positions

Principles of Safe Harbor

• Companies must tell consumers how and why personal data is collected and who it's shared with

• Consumers must be able to request their data not be shared

• Companies must provide notice and choice before data is given to third parties

• Consumers must have access to data about them and have the ability to correct mistakes

• Companies must take reasonable measures to protect data

• Personal data must be relevant to its intended purpose• Procedures must be in place to settle complaints and

resolve disputes

Intellectual Property

• Intangible property rights• In E-Commerce

– Copyrights– Patents– Trademarks

• IP Rights are not absolute– Perishable– Legal exceptions to allow public use at a specific rate

Copyrighting

• Protects expression of idea – not the idea itself– Example , pull-down menus cannot be copyrighted

• Confers owner exclusive right to– Copy the work– Distribute to the public

• Expires after certain number of years after death of copyright holder– 28 years in the US– 50 years in UK

• Generally, contents of websites are copyrighted

Copyrights Protection

• Digital Watermarks– Embedded invisible bits in the digital content– Cannot prevent copying but helps identify who

is doing it

• Validation codes

• Activation or deactivation of software

Patents

• Grants holder exclusive rights on inventions for fixed time– 17 years in US– 20 years in UK

• Innovation must be– Novel– Sufficiently inventive step (not trivial)– Capable of industrial application

• Amazon sued Barnes and Noble for patent infringement (1-click ordering)

• Priceline has patent on reverse-auction model – sued Expedia

Trademarks

• Graphical sign used by business to identify their goods and services– Type of IP– Must meet criteria of distinctive, original, and not

deceptive– Domain names can be trademarked if they meet

above criteria

• WWF won first ever ruling against man who filed for worldwrestlingfederation.com

Free Speech, Internet Decency, Spamming, and Censorship

• Censorship – attempts to control material on the Web• Communications Decency Act (CDA) was passed by

Congress but later ruled unconstitutional• Protecting Children

– Parental control– Governmental control– ISP accountability

• AOL does not allow hate sites • CompuServe was forced by Germany to shut down 200 newsgroups

related to sex – CompuServe forced to shut them down worldwide

Spamming

• Indiscriminate distribution of messages without permission of receiver

• Spam comprised 30% of all AOL mail in 1998– Now down to 10% with spam blockers

• Some legislation out there– Unsolicited Commercial Electronic Mail Act

• Requires all spam to start with word “advertisement”• Includes name and address of sender

Taxation

• Internet Tax Moratorium Act (1998-2001)– prohibits states from taxing the fees that

Internet service providers collect for providing Internet service and from collecting Internet-specific taxes on e-commerce transactions

• President George W. Bush signed into law a bill from Congress proposing a new two-year moratorium extension (starting Nov. 29, 2001)

Other Issues

• Consider on your own– Electronic contracts– Online Gambling– Validity of electronic documents– Time and date on documents across borders– Which country has jurisdiction over E-Commerce

transaction– Can web site link to another without permission

• Example Ticketmaster vs. Microsoft

New Frontiers in E-Commerce: M-Commerce and L-Commerce

Mobile Vignettes

• Bus riders in San Francisco can find when the next bus is due from their cell phone or Palm VII – NextBus tracks in real time

• Dine One One – uses AT&T PocketNet service to link driver cell phones to central network.– System locates and notifies driver to get to restaurant – Emails order to restaurant– Food ready to be delivered

• DoCoMo I-Mode in Japan offers wireless services that include shopping guides, maps, ticketing, news, gambling, dining and reservations

What is M-Commerce?

• Also known as pervasive computing– E-commerce done in a wireless environment– Any transaction with a monetary value that is

conducted via a mobile telecommunications network.

Attributes of M-Commerce

M-Commerce

Mobility

Reachability

Product personalization

Product and service localization

Ubiquity

Instant connectivity

Convenience

Characteristics

Value-Added Attributes

Other Drivers of E-Commerce

• Widespread availability of devices• No need for PC• Cell phone culture• Vendors push• Declining prices• Improvement in bandwidth• E-commerce growth in general• Digital divide (more cell phones in developing

countries)

Generations of Mobile networks• First Generation (1G)

– 1979-1992– Analog cell communications

• Second Generation (2G)– Digital Technology in place today– Mostly text

• 2.5G– Interim technology based on standards (GPRS and EDGE) that can accommodate

graphics

• Third Generation (3G)– Non-IP based interface – Supports rich multimedia– 2001 – introduced in Japan– 2002 – introduced in Europe– 2003 – Verizon introduces 3G in US

3G Communications

• Global wireless communication technology that makes possible packet-based transmission of digitized voice, data and video

• ITU Guidelines from 2000– 2Mbits/s for fixed position– 144Kbits/sec in moving vehicles– Allow global roaming

• Race for spectrum– 1710 to 1855 MHz and 2520 to 2670 MHz – 1.7GHz currently used by military for satellite control– Billions of $ plus a decade to change

Where are we today?

• The first 3G network released in Japan, Oct. 1, 2001.

• This new service will allow users to receive data at six to 40 times faster than current speeds, making fast mobile Internet access and video downloads possible.

How about 3G in the US?

• On January 28, 2002, Verizon Wireless rolled out its 3G “Express Network” along the nation’s east coast, thus making it the first US carrier to offer such services to the public (Computerworld, Jan 29, 2002).

• The same day, Cingular Wireless and AT&T Wireless announced a joint-venture project to make wireless web access available along 3000 miles of interstate highways in Arizona, Colorado, Kansas, Minnesota, New Mexico, Nebraska, Oklahoma, Texas and Utah (AT&T Wireless News Release, Jan 28, 2002).

A quote from the 3G Forum

• The Promise of 3G technologies is a combination of high-speed wireless access w/ internet protocol(IP) Based services will bring the world to your fingertips. It is a world in which we will be able to check emails, book holidays, organize share portfolios, hold video conferences or download video clips of the latest film, instantly & simply from our mobiles. The capability of mobile networks to pinpoint a mobile user’s location opens opportunities for the creation of new situational information on, and directions to, the nearest restaurant or hotel.”

10 Key Trends in M-Commerce

• M-Commerce hype will peak– Over 1 billion phone worldwide capable of Internet

access in 2003

• Enterprise Applications Will Become the White Hot Center of Mobile eBusiness

– Wireless CRM

• Consumer Use of Mobile Will Revolve Around Information, Not Transactions

• Embedded Barcode Readers in Phones – Sidesteps problem of data entry

Key trends

• Smart Handheld Displays Will Show Some Improvement

• Mobile Security Will Become a Hot Issue• Voice Navigation Will Remain a Work in Progress• Convergence Will Continue, but It Will Still Be a

Multiple-Device World • Advertising Will Continue to Expand to Wireless

Devices • Carriers Must Shift Their Distribution Strategies

• Shift from end users to enterprise

L-Commerce

• “location, location, location”• Satellite-based location technology that is

capable of finding people on foot or in vehicles• General Motors Corp. in Detroit has installed over

1 million of its OnStar GPS-enabled systems in vehicles

• FCC sets 2005 deadline for E911• Location-tracking technology also creates

potential Big Brother issues

Global Positioning System

• GPS-enabled devices allow exact identification of location

• Supported by 24 US government satellites – Orbits earth every 12 hours– 10,900 miles altitude– Satellite transmits position and time signal from

onboard atomic clock– Receivers have synchronized clock– Using speed of signals (~186,000 mps), possible to

pinpoint location to within 50 feet.– See www.trimble.com/gps for a tutorial

Obstacles to M-Commerce and L-Commerce

• Usability issues– Effectiveness, efficiency, satisfaction

• Lack of standardized security protocol• Insufficient bandwidth• 3G licenses• Transmission limitations

– GPS does not work in cities with skyscrapers

• Power consumption• Wireless and Health hazards