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Chapter 18
Internet Law and Ethics
Chapter Objectives
The nature of this subject matter makes it an ideal topic with which to conclude the investigation of the
interrelationships among business, law, and society, as well as the consideration of the change
mechanisms of market forces, law, and ethics. Particularly appropriate is the fact that in the Internet
world, all of these issues become global issues, which will ultimately require global solutions and a
fundamental respect for diversity. With the continuing expansion of the Internet, it seems even more
pressing for the whole world to come to agreement on certain fundamental organizational principles, not
just leaving the effort of consensus at the national level. Of course, some of this has been going on for
quite a while, such as in the environmental law area. But the internet has the potential for vastly
expanding global relationships and, therefore, the need for consensus.
Learning Objectives
After completing this chapter, students will be able to:
1. Explain the ethical dilemmas referred to as the digital divide and net neutrality.
2. Apply the requirements of personal jurisdiction to a dispute arising in cyberspace, both where the
parties are residents of different states and where they are residents of different countries.
3. Identify free speech issues that arise in the context of the Internet and present the competing
interests that make each particular issue difficult to resolve.
4. Provide examples of online activities that raise privacy concerns.
5. Explain the differences in online privacy protection between the United States and the European
Union.
6. Describe several Internet-related crimes, including cyberstalking and cyberbullying.
7. Explain the impact of the Electronic Signatures in Global and National Commerce Act (E-SIGN).
8. Discuss the legal effect of click-wrap agreements.
9. Discuss standard-essential patents and give an example.
10. Explain the copyright doctrines of fair use and first sale.
11. Explain the trademarks issues described in the text affecting Google and eBay.
12. Identify and discuss the basic tax issue that arises from cyberspace transactions
Chapter Outline
Introduction: The Internet and Globalization
Over 2.4 billion of the world’s 7 billion inhabitants have Internet access. That number has been made
possible, in part because of the relatively cheap access offered by cell phones in comparison with the
cost of computers. This global communication system raises yet another opportunity to consider such
fundamental issues as what substantive law we want to govern the world’s Internet activities and what
process we should use to establish global standards for this global medium.
The most interesting question raised by our now pervasive Internet relationships may be what process will
evolve to determine and implement substantive laws governing the Internet. Can national governments
legitimately impose standards and sanctions? Will international forums, such as the U.N. Internet
Governance Forum, be necessary to resolve issues that have global ramifications?
Part One—The Market, Law, and Ethics
By the end of the 1980s, a backbone system of networked computers had been created and e-mail use
reached the general public. In the mid-1990s the first browser was released and the World Wide Web was
born. Policy makers, users, and posters are all concerned about the degree to which they should impose
the force of law on the Internet. Originally, it was an open-access forum only lightly touched by regulation.
The combination of volume and diversity brings conflict with it. Peaceful and dependable conflict solutions
require the existence of an established dispute resolution mechanism. But some conflicts will end up in
courts because they are our established structural mechanism for peaceful dispute resolution. To be
accepted by the disputants, judicial decisions need to be based on shared principles
I. Market Forces and Government Regulation
A discussion of regulating business conducted through the Internet must begin with the impact the market
has in developing (or, put another way, “regulating”) appropriate business behavior. In regulating the
functioning of the Internet itself or its component parts, global norms are required. At present many
norms, such as the assignment of top-level domain names (.com, .org, and so forth) and the system for
routing digital traffic, are set by the United States. The European Union and Brazil in particular have
argued matters of Internet governance should be globalized, instead of continuing to rest with the United
States.
One function of the Internet is as a mass communications system. The Internet also delivers private
communications between particular users, much as a phone system. In general, Western governments do
not censor private communications, but they do at times seek information from carriers about the
existence of participants in private communications.
A. Internet Access
Market forces and legal regulation will blend in some uncertain, emerging formula to provide the
security and confidence necessary for effective e-commerce. Ethics will play a part. The speed, the
traffic volume, the surface anonymity, and the global reach of the Internet suggest very difficult, and
new, ethical issues, as well as old problems in a new venue.
The Digital Divide
The divide in the United States is not just along economic lines, but also along race, age, and
geographic lines. Availability of service is not the problem; the cost of connecting and digital literacy
are. But presumptions about availability exacerbate the disadvantages of the unconnected, as job
announcements and job applications, public school homework assignments, government services
information and applications, among many other things, migrate to the web. An even greater
access imbalance exists at the global level.
Net Neutrality
Net neutrality refers to uniform access to the Internet for individuals and businesses via contracts
with an Internet service provider (ISP)—paying a fee for the type and level of service to gain access
to any content provider. It implies that ISPs will not discriminate against the traffic of any legal
content provider. Some ISPs wish to change that by charging content providers. The consequence
of nonpayment would be either blocked access at certain times or degraded speed at which access
is provided. In December 2010, the Federal Communications Commission (FCC) issued new rules
on net neutrality to address these issues. For wired broadband services, the rules prohibited
blocking of “lawful content, applications, services, or non-harmful devices” and compelled
disclosure regarding network performance and the principles that would be used to manage
network congestion.
Part Two—Jurisdiction to Adjudicate
The Internet is borderless. People can and do communicate and engage in transactions around the world.
When a dispute arises from one of those billions of communications and transactions, the question of
where that dispute will be litigated arises. For instance, if an American website provides child pornography
viewed by a resident of Germany, which nation will have the authority to prosecute the offense? These
are jurisdictional questions. The party filing suit must take its claim to a court that has both
subject-matter jurisdiction (the authority to address the particular kind of legal problem raised) and
personal jurisdiction (the power to compel the defendant to respond).
In the United States, where the plaintiff and defendant are both residents of the forum state, personal
jurisdiction ordinarily is not an issue. However, personal jurisdiction over non-residence dependent on the
constitutional requirement of due process. In practice, the test is one of minimum contacts: Did the
defendant have sufficient contact with the forum state that being sued there would be fair and just? Was
the defendant’s contact with the forum state of such a nature that it should expect to be subject to the
state’s courts? Thus, the more business a defendant does in a state, the more likely persona jurisdiction
will be found.
A. Jurisdiction in International Suits
Similar jurisdictional issues arise across national boundaries. Under EU law, mere hosting of
user generated content does not make the hosting service responsible for the content. In international
contexts it may be useful to distinguish among three types of jurisdiction: jurisdiction to prescribe
(legislate), jurisdiction to adjudicate (judicial personal jurisdiction), and jurisdiction to enforce. It
enumerates, among other circumstances:
When a person is present in the territory, other than transitorily
When a person is domiciled, a resident, or a national of that country
When a person regularly carries on business in that country
When a person has carried on an activity in the country and that activity is the subject of the
dispute
When a person has done something outside the country that has a “substantial, direct, and
foreseeable effect within” the country and that effect forms the subject of the suit
Legal Briefcase: Yahoo! v. La Ligue Contre Le Racisme Et L’Antisemitisme, 169 F.Supp.2d 1181
(N.D. Cal. 2001)
Part Three—Constitutional Law: Speech and Privacy
I. Speech
Internet content has also raised free speech issues in the United States. The Internet’s seeming
anonymity, ease of use, relatively low costs, and global reach make it a natural vehicle for transporting
speech messages. The First Amendment protects citizens from government restraints on the content of
speech, although reasonable restraints on the context (time, place, and manner) of that speech are
sometimes constitutionally permissible. Thus, a court will not restrain free speech by enjoining the posting
of defamatory or copyrighted material, but the damaged party may, of course, sue for defamation or
copyright infringement after the posting.
One of the most troublesome Internet free speech issues is whether and how children can be protected
from online pornography while maintaining adult access to constitutionally protected content. Congress
has been unsuccessful in its repeated attempts to enact constitutional legislation that would still effectively
eliminate access by minors. In 1997, the Supreme Court held critical provisions of the Communications
Decency Act of 1996 were overbroad and therefore violated the First Amendment. Then in 2007, a federal
district court found the Child Online Privacy Protection Act of 1998 unconstitutional and permanently
enjoined its enforcement. In refusing to hear the government’s appeal in 2009, the Supreme Court
effectively left the permanent injunction in place.
Congress has also addressed a slightly different problem—the exploitation of children in the making of
child pornography and its online accessibility to predators of children. Its first attempt was held
unconstitutional by the Supreme Court. But in 2008 the Court upheld the PROTECT Act of 2003.
Nevertheless, child pornography remains one of the Internet’s most intractable challenges, “too large for
law enforcement, policy makers and child protection groups to handle on their own.”
A. Anonymous Speech
A unique characteristic of the Internet and electronic communication through the Internet is the ease
with which a poster or sender can be anonymous and remain so without “fear of economic or official
retaliation... [or] social ostracism.” The victim of such a post can request the hosting site remove the
material. But it is largely up to the hosting site whether the content will actually be removed. The
Communications Decency Act makes it very unlikely that the hosting website will be held liable for
such postings, particularly if it removes the material when requested to do so. The law rests liability on
the “information content provider,” and courts have generally held that website owners are not content
providers on these facts. With regard to the original poster, there is very little state law that would
criminalize the posting of such material. Victims occasionally have brought civil suits for damages,
depending on the facts based on harassment, invasion of privacy, copyright infringement, or child
pornography claims.
Legal Briefcase: Immunomedics v. Jean Doe, 775 A.2d 773 (N.J. Super. 2001)
B. Commercial Speech
Commercial speech has been accorded reduced but significant First Amendment protection. Thus
online advertising is be subject to some government oversight as that in print and on television. One
form of online commercial message receiving special attention is so-called spam (mass e-mails). This
electronic junk mail may be a legitimate form of commercial message at times, but it may also be an
annoyance or a threat to the efficiency of the Internet because of its volume. The federal CAN-SPAM
Act of 2003, establishes both civil and criminal penalties for violations of its provisions.
II. Privacy
Most individuals probably do not fully appreciate the amount of their personal information that is available
online, how it may be used, or the degree to which it may be misused. The Internet has brought with it an
explosion of accessible data, including personal data. Governmental agencies responsible for
professional and occupational licensing may now have websites with membership lists, complaints filed,
and disciplinary actions taken. A simple browser search can turn up much more information from the
public pages of social media sites, both self-disclosed and posted by friends, family, and acquaintances.
III. Data Mining
Data mining is the process of building individual profiles of individuals by organizing all the disparate
pieces of information collected in the normal course of business. Significant efficiencies can be achieved
from the use of mined data, but there are downsides as well. Personalized responses can also permit
price discrimination. If the algorithm concludes a user is likely to be a shopaholic or financially
overextended, payday lender ads may start appearing on the screen. Not only are many users not aware
of the extent of personalization occurring, but even if they are, there is no process for correcting these
hidden profiles that influence one’s online experience nor right to delete them.
A. Cross-Device Tracking
Instead of one vendor, consider for a moment the source of the user-specific data available to certain
iconic Internet businesses, such as Facebook, Google, Apple, and Microsoft. When they have finished,
they leave the site. If the users also own a smartphone, they may also use it to access Facebook and
have it running as they travel through their day. Google, Apple, and Microsoft can also do cross-device
tracking—Google by connecting its users through Google Plus, whether they are on its Chrome
browser, Google search, Gmail, Google maps, or its phones; Apple among its phones, its iPads, and
laptops running its Safari browser, and its app stores; and Microsoft through its browsers, MSN,
Hotmail, Outlook.com, Xbox, phones, and Bing. These companies are not only tracking across
devices, but also across many different platforms.
B. Aggregators
An aggregator in this context is any person who takes data that are discrete at the level of the
individual and aggregates them with individual-level data from one or more other sources. By itself, a
data file containing the browsing history of 200 discrete individuals (each person’s browsing history
separately presented but with no information identifying whose history it is) may not seriously threaten
the anonymity of those individuals.
Where does an aggregator obtain the data sets that it combines? One major source is to develop
profiles of users’ Web browsing habits by placing cookies, tiny pieces of code, on thousands of
websites to track users’ online movements. Aggregators generally are in the business of selling this
data.
Privacy Policies: Did Someone Say Privacy?
These days an online merchant is likely to have a privacy policy posted on its site that describes,
among other things, what data it collects and how they are used. Internet vendors, social media sites,
and aggregators, but also phone companies and such traditional institutions such as banks and
employers now consider the ramifications of the fact that anything stored can likely be stolen.
IV. Privacy of Employees
Whether and when employers can legally access e-mails sent from or received on office computers
continues to be uncertain. A U.S. Supreme Court case held that a city’s review of a police officer’s text
messages was a reasonable search under the Fourth Amendment when the texts were sent from a
wireless pager provided to the officer by the city, even if the officer had had a reasonable expectation of
privacy. In recent years, a number of states have passed laws prohibiting employers from requiring log-on
information to employee social media accounts, such as Facebook and Twitter, as a condition for the
employee to get or keep a job. Today’s software can be customized to look for such things as company
officers’ and competitors’ names, as well as inappropriate language. Software is also available today that
can “track every keystroke, file download, and Internet page that appears on an employee’s computer
screen.”
V. Regulation
The United States has no comprehensive privacy law addressing the Internet environment. Instead, the
privacy of users has largely been left to the “self-regulation” of service and content providers, buffered
primarily only by periodic public outcries over.
Child Privacy Online
The 1998 Children’s Online Privacy Protection Act (COPPA) prohibits websites from collecting
personal information from children under 13 without parental permission and requires that parents
be allowed to review and correct any information collected about their children.
Privacy in Europe
The European Union has taken quite a different tack than America’s market-driven approach to
online privacy. The European Union’s 1998 Data Protection Directive basically allows individuals to
decide how collected data on them can be used. If a European consumer provides personal
information such as an address when buying from an online store, that store cannot legally send an
ad to the purchaser without first seeking permission. The directive also prohibits the transfer of data
to any country outside the EU that does not have “adequate” privacy rules.
Part Four—Crime
Crimes facilitated by the Internet include both truly new types and some old, familiar crimes in somewhat
new clothing. The internet is proving a fertile ground for criminals. Some statutes previously discussed,
such as the CANSPAM and PROTECT acts, provide criminal penalties. Other laws criminalize specific
online behavior, such as the Computer Pornography and Child Exploitation Prevention Act of 1999, which
makes it unlawful to use a computer to solicit, lure, or entice a child or otherwise engage in sexual
offenses with a child.
Many of the long-standing, pre-Internet criminal laws can be applied to both online and offline behavior.
Yet some existing criminal laws describe the prohibited behavior in terms that often prevent their
application to cyber-versions of what is, at its essence, the same bad act, such as between physical
stalking and cyberstalking. Cyberstalking is the repeated use of electronic media (such as e-mail or chat
rooms) to harass or threaten another person. Most of these laws require that the perpetrator make a
credible threat of violence for the action to be a violation; many do not expressly include cyberstalking,
although under appropriate facts it might be covered.
In recent years, the biggest stories in cybercrime have not been crimes targeted at specific individuals or
even major crimes such as the New York City bank heist. Instead what has dominated the news is
organized, widespread criminal activity directed at major institutions, both commercial and governmental,
which raises an issue unique to our newly digital world—cybersecurity.
I. Cybersecurity
With the near complete infiltration of digital technology into the basic fabric of our lives, much of our most
valuation information is stored on computers, with vast quantities of information available even on single
computer systems, enticing a whole new category of thieves—hackers. On the other hand, the goal of
some hacks is the theft of personal data from, at times, millions of individuals simultaneously. As
devastating as identity theft can be for the individual whose identity has been stolen, from a societal point
of view it gets worse. Of considerable concern has been the rise of cyber-espionage—both industrial and
military espionage for the purpose of stealing military and economic secrets and intellectual property.
II. International Computer-Facilitated Crime
The Council of Europe has proffered the Convention on Cybercrime, which as of this writing 44 member
states, although only 40 of those states have ratified it. The convention went into force July 1, 2004, for
the original ratifying states. It has criminalized a long list of activities — everything from breaking into a
computer to the ‘deterioration’ of computer data. It also requires countries to make sure they can snoop
through Internet data in real time. And it obliges nations to assist each other’s investigations by monitoring
Net communications.”
Part Five—Commercial Law
I. Contracts and Uniform Laws
Internet sales have grown significantly, but for the Internet to reach its commercial potential a routine,
well-settled contracts structure is essential. The basic ingredients of a binding contract also apply to
Internet transactions. Thus, an e-mail exchange fulfilling the traditional contract requirements should
result in an enforceable agreement.
E-Signature
Electronic signatures, can take a variety of forms (voice prints, distinctive marks, mathematical
codes), but they share a common purpose—to have the same effect as a signature affixed by
hand. President Clinton signed into law the Electronic Signatures in Global and National
Commerce Act (E-sign).
UCITA
In 1999, the National Conference of Commissioners on Uniform State Laws (NCCUSL)
approved a model law designed to achieve uniformity across the United States in the law
governing dealing with software generally and internet transactions. The Uniform Computer
Information Transactions Act (UCITA) addresses the substance of computer information
transactions, rather than procedural aspects such as electronic signatures. To this point, UCITA
has been amended twice (2000 and 2002), as yet adopted by only Maryland and Virginia.
Click-Wrap Agreements
Today, software is typically downloaded with license terms provided onscreen during the
installation process. Those terms often say that by using the software the buyer agrees to the
terms. Whether all of those terms are enforceable in court is the subject of dispute. Critics are
increasingly concerned, however, about just how voluntary some provisions in such
standard-form contracts are. That is, has the purchaser genuinely consented to the contract
terms? It can appear that retailers are, perhaps deliberately, obscuring one-sided terms.
II. Intellectual Property
Intellectual property is composed of creative ideas that are the products of the human mind. Songs,
computer programs, new medicines, a novel, and so on are forms of intellectual property. Intellectual
property laws have been developed to provide a measure of protection from theft and exploitation to
creators of such properties. Inclusion of the Trade-Related Aspects of Intellectual Property Rights as one
of the WTO’s foundation agreements supports this projection.
http://www.ipmall.fplc.edu
Patents
Exactly what role patents will play in the future development of the Internet is still somewhat
uncertain. The grant of some early patents associated with basic methods of doing business
online raised considerable, resulting in the announcement by the U.S. Patent and Trademark
Office in 2000 that it was overhauling the way it proceeds and awards patents for many online
processes.
The Patent wars
In recent years, the most prominent Internet-related patent issues have arisen in disputes involving
the thousands of patents associated with mobile devices such as smartphones and tablets, referred
to as “a tsunami of patent-related lawsuits” in courts all over the world, including Australia, Britain,
Germany, Japan, South Korea, the Netherlands, and the United States. The disputes have focused
on acceptable license fees for standard-essential patents and on patent infringement allegations
with regard to design and functionality characteristics.
Standard-essential patents are those that address matters of basic communication and data
handling which support and permit industrywide standards. Within the industry, companies that own
standard-essential patents have generally agreed to license the technology to other companies and
to charge rates that are fair, reasonable, and nondiscriminatory (FRAND).
Copyrights
In America and much of the world, anyone who creates an “original works of authorship” whether in
print or digital form, is in most cases automatically protected by copyright laws if the “works” are
original and are “fixed in a tangible form” (written down on paper, for example). The copyright
holder possesses the exclusive right to
Reproduce the copyrighted work
Prepare adaptations based on the copyrighted material
Distribute the material by sale or otherwise
Perform or display
Another exception is the first sale doctrine, which provides that someone who owns a copy of a
copyrighted work is free to resell it without infringing on the author’s rights. One of the most visible
Internet copyright disputes has been the ongoing battle of the music recording industry to protect its
copyrights.
Legal Briefcase: Metro-Goldwyn-Mayer Studios v. Grokster, 125 S.Ct. 2764 (2005)
Market Response
While record labels were pursuing copyright infringers, some of the largest online music stores
changed policies to remove usage restrictions from downloaded files. In mid-2007, both Apple and
Amazon.com announced that their music would no longer be locked to certain players or programs.
In 2013, Amazon and Apple once more seemed to be positioning themselves to lead the market.
Both companies seem to be exploring the possibility of having the first sale doctrine apply to digital
copies or perhaps lobbying for a statutory change to the DMCA.
Grokster Redux?
The DMCA provides a safe harbor against copyright infringement claims for ISPs and host websites
if the host site responds expeditiously to remove, or disable access to, the copyrighted material
when notified of violations. What should be clear at this point is that copyright infringement is
rampant, and the Internet has caused its exponential growth. What is not at all clear is what can or
should be done about it. On the other side, seeking to impose the cost of protection on payment
processors, advertising services, and domain name registries, as the Stop Online Piracy Act
(SOPA) and the PROTECT IP Act (both introduced in Congress in 2012) would have done, may be
costly to those middlemen and, in the end, not much more effective.
A. Trademarks and Domain Names
Trademarks
Words, names, symbols, devises, or combinations thereof that are used to distinguish one seller’s
goods or services from another are called trademarks when associated with products and service
marks when associated with service businesses. The mark also protects mark owners by
preventing loss of reputation and value. Mark owners are also protected from an increase in supply
that dilutes the product’s value.
Domain Names
The Domain Name System (DNS) for the whole of the Internet is overseen by the Internet
Corporation for Assigned Names and Numbers (ICANN), a non-profit organization with its
headquarters in California. Rights to a domain name are secured simply by being the first to
request a name and pay the registration fee. Further, in 1999 Congress passed the
Anticybersquatting Consumer Protection Act, prohibiting infringement of trademarks by the
registration of a domain name. Third Circuit has also held that registration of deliberate
misspellings of famous marks is a violation of the act.
Practicing Ethics: Top-Level Domain Name Sale
III. Taxes
Tax is a policy issue that crosses traditional jurisdictional lines—both state boundaries in the United
States and national boundaries around the world. In pre-Internet days the Supreme Court had ruled that
an out-of-state vendor cannot be required to collect sales taxes for any state in which that vendor does
not have some significant presence, including a physical presence. Participation on the part of vendors is
voluntary, but many have registered and are now remitting taxes to member states. The primary incentive
for voluntary participation is a grant of amnesty for any prior unpaid taxes that might have been owed.
A. Reprise: Who Governs Cyberspace?
So this chapter ends with the questions it began with: How much government do people need in their
lives? To what extent should government restrain the explosive and stupendously successful
cyberspace industry? Is the Internet a bit too much of a “Wild West” environment for the general good?
Bitcoin: The Rise and Fall of a Virtual Currency
A paper published anonymously in 2008 outlined a method for creating a digital currency that could be
exchanged on a peer-to-peer basis, but which would not be susceptible to unauthorized duplication.
As a currency, a digital currency may have some advantages over other mediums of exchange. For
example, merchants may prefer payment in Bitcoins because there is little or no transaction cost, in
contrast to the 2 to 3 percent charged on most credit card transactions. But the global nature of Bitcoin
makes such exchanges less necessary—or at least will make them less necessary if its fluctuation in
value ultimately settles down. At present, however, its value can fluctuate tremendously. Another cause
of its fluctuating price is that the currency has largely gone unregulated by the world’s governments.
