Business Law Chapter 9 Homework Unit Two Torts And Crimes Case Synopsis

Chapter 9

Internet Law, Social Media, and Privacy

INTRODUCTION

A start-up software company finds that there are others who have similar business and domain names. What

options do they have for resolving the conflict? The protection of intellectual property relating to computers posed

difficulties for courts because the legislators who drafted patent, trademark, and copyright laws did not envision digital

technology. Previous laws have also had to be amended, or new laws created, to protect these rights in the online

world.

CHAPTER OUTLINE

I. Internet Law

Unsolicited e-mail, domain names, and cybersquatting are among issues that arise only on the Internet.

A. SPAM

Spam is junk e-mail.

2 UNIT TWO: TORTS AND CRIMES

1. State Regulation of Spam

2. The Federal CAN-SPAM Act

The Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act

preempts state anti-spam statutes, except for those that prohibit deceptive e-mailing practices, and

permits the use of unsolicited commercial e-mail but prohibits certain spamming activities,

including—

ADDITIONAL BACKGROUND—

Spam

Congress enacted the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM)

Act in 2003 to take effect in 2004. The act applies to “commercial electronic mail messages” that are sent to

promote a product or service. Unsolicited commercial e-mail is allowed under the act, but its use is regulated

to prohibit false, deceptive, or misleading information and to limit the spread of unwanted spam. Following is

part of the text of the CAN-SPAM Act.

18 U.S.C. Section 1037

Fraud and related activity in connection with electronic mail

(a) In general.—Whoever, in or affecting interstate or foreign commerce, knowingly—

(2) uses a protected computer to relay or retransmit multiple commercial electronic mail messages, with the

intent to deceive or mislead recipients, or any Internet access service, as to the origin of such messages,

(3) materially falsifies header information in multiple commercial electronic mail messages and intentionally

initiates the transmission of such messages,

domain names, or

(4) registers, using information that materially falsifies the identity of the actual registrant, for five or more

(5) falsely represents oneself to be the registrant or the legitimate successor in interest to the registrant of 5 or

more Internet Protocol addresses, and intentionally initiates the transmission of multiple commercial electronic

(b) Penalties.—The punishment for an offense under subsection (a) is—

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(1) a fine under this title, imprisonment for not more than 5 years, or both, if—

(A) the offense is committed in furtherance of any felony under the laws of the United States or of any State;

or

State for conduct involving the transmission of multiple commercial electronic mail messages or unauthorized

access to a computer system;

(2) a fine under this title, imprisonment for not more than 3 years, or both, if—

(A) the offense is an offense under subsection (a)(1);

(B) the offense is an offense under subsection (a)(4) and involved 20 or more falsified electronic mail or

online user account registrations, or 10 or more falsified domain name registrations;

(C) the volume of electronic mail messages transmitted in furtherance of the offense exceeded 2,500 during

any 24-hour period, 25,000 during any 30-day period, or 250,000 during any 1-year period;

(D) the offense caused loss to one or more persons aggregating $5,000 or more in value during any 1-year

(E) as a result of the offense any individual committing the offense obtained anything of value aggregating

$5,000 or more during any 1-year period; or

(F) the offense was undertaken by the defendant in concert with three or more other persons with respect to

whom the defendant occupied a position of organizer or leader; and

(3) a fine under this title or imprisonment for not more than 1 year, or both, in any other case.

(c) Forfeiture.—

(1) In general.—The court, in imposing sentence on a person who is convicted of an offense under this

section, shall order that the defendant forfeit to the United States—

(A) any property, real or personal, constituting or traceable to gross proceeds obtained from such offense;

and

(B) any equipment, software, or other technology used or intended to be used to commit or to facilitate the

commission of such offense.

(2) Procedures.—The procedures set forth in section 413 of the Controlled Substances Act (21 U.S.C. 853),

other than subsection (d) of that section, and in Rule 32.2 or the Federal Rules of Criminal Procedure, shall

apply to all stages of a criminal forfeiture proceeding under this section.

(d) Definitions.—In this section:

(1) Loss.—The term “loss” has the meaning given that term in section 1030(e) of this title.

person who initiated the electronic mail message or to investigate the alleged violation.

(2) Materially.—For purposes of paragraphs (3) and (4) of subsection (a), header information or registration

4 UNIT TWO: TORTS AND CRIMES

section is applicable, or payment or reimbursement made on behalf of such agency, for expenses incurred

by the Commission, its members, and employees in carrying out such arrangements.

(3) Multiple.—The term “multiple” means more than 100 electronic mail messages during a 24-hour period,

(4) Other terms.—Any other term has the meaning given that term by section 3 of the CAN-SPAM Act of

2003 [15 U.S.C. Section 7701].

3. The U.S. Safe Web Act

• The Undertaking Spam, Spyware, and Fraud Enforcement with Enforcers Beyond the Borders

(U.S. Safe Web) Act of 2006 allows the Federal Trade Commission (FTC) to cooperate and

ADDITIONAL BACKGROUND—

Investigating and Prosecuting Cyber Crime

To cooperate and share information with foreign agencies investigating and prosecuting Internet fraud,

Congress enacted the Undertaking Spam, Spyware, and Fraud Enforcement with Enforcers Beyond the

Borders (U.S. Safe Web) Act of 2006. Among other things, the act also provides Internet service providers

with immunity from liability (a “safe harbor”) for supplying information to the Federal Trade Commission

concerning unfair or deceptive conduct in foreign jurisdictions. Following is some of the text of the U.S. Safe

Web Act.

15 U.S.C. Section 57c-1

Staff exchanges

(a) In general

The Commission may—

and

(2) detail officers or employees of the Commission to work on a temporary basis for appropriate foreign

government agencies.

(b) Reciprocity and reimbursement

The staff arrangements described in subsection (a) of this section need not be reciprocal. The Commission

6 UNIT TWO: TORTS AND CRIMES

CHAPTER 9: INTERNET LAW, SOCIAL MEDIA, AND PRIVACY 7

(c) Standards of conduct

A person appointed under subsection (a)(1) of this section shall be subject to the provisions of law relating to

15 U.S.C. Section 57b-2b

Protection for voluntary provision of information

(a) In general

(1) No liability for providing certain material

An entity described in paragraphs (2) or (3) of subsection (d) of this section that voluntarily provides material

to the Commission that such entity reasonably believes is relevant to—

(A) a possible unfair or deceptive act or practice, as defined in section 45(a) of this title; or

(B) assets subject to recovery by the Commission, including assets located in foreign jurisdictions;

material or of intention to so provide material.

(2) Limitations

Nothing in this subsection shall be construed to exempt any such entity from liability—

(A) for the underlying conduct reported; or

(B) to any Federal agency for providing such material or for any failure to comply with any obligation the

(b) Certain financial institutions

An entity described in paragraph (1) of subsection (d) of this section shall, in accordance with section

5318(g)(3) of Title 31, be exempt from liability for making a voluntary disclosure to the Commission of any

possible violation of law or regulation, including—

(1) a disclosure regarding assets, including assets located in foreign jurisdictions—

(A) related to possibly fraudulent or deceptive commercial practices;

(B) related to persons involved in such practices; or

(C) otherwise subject to recovery by the Commission; or

(2) a disclosure regarding suspicious chargeback rates related to possibly fraudulent or deceptive

commercial practices.

(c) Consumer complaints

Any entity described in subsection (d) of this section that voluntarily provides consumer complaints sent to it,

8 UNIT TWO: TORTS AND CRIMES

(d) Application

This section applies to the following entities, whether foreign or domestic:

(1) A financial institution as defined in section 5312 of Title 31.

(2) To the extent not included in paragraph (1), a bank or thrift institution, a commercial bank or trust

(3) A courier service, a commercial mail receiving agency, an industry membership organization, a payment

(4) An Internet service provider or provider of telephone services.

ENHANCING YOUR LECTURE—

  CROSS-BORDER SPAM

 

Spam is a serious problem in the United States, but enforcing antispam laws has been complicated by

the fact that many spammers are located outside U.S. borders. After the CAN SPAM Act of 2003 prohibited

false and deceptive e-mails originating in the United States, spamming from other nations increased, and the

wrongdoers generally were able to escape detection and legal sanctions.

Before 2006, the Federal Trade Commission (FTC) lacked the authority to investigate cross-border

spamming activities and to communicate with foreign nations concerning spam and other deceptive practices

FOR CRITICAL ANALYSIS

A provision in the U.S. Safe Web Act provides Internet service providers (ISPs) with a “safe

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harbor” (immunity from liability) for supplying information to the FTC concerning possible unfair or

deceptive conduct in foreign jurisdictions. Is this provision fair? Why or why not?

B. DOMAIN NAMES

A domain name is part of an Internet address.

1. Structure of Domain Names

Competition for domain names among firms with similar names and products has led to disputes.

2. Distribution System

The Internet Corporation for Assigned Names and Numbers (ICANN) oversees the Internet domain

C. CYBERSQUATTING

This occurs when a person registers a domain name that is the same as, or confusingly similar to,

another’s mark and offers to sell it to the authentic mark’s owner.

1. Anticybersquatting Legislation

The Anticybersquatting Consumer Protection Act (ACPA) of 1999 amended the Lanham Act to

make cybersquatting clearly illegal when—

• The name is identical or confusingly similar to the trademark of another.

2. Frequent Changes in Domain Name Ownership Facilitate Cybersquatting

3. Typosquatting

This occurs when a person registers a misspelling of a mark that he or she does not own. To

4. Applicability and Sanctions of the ACPA

The ACPA applies to all domain-name registrations. Damages and profits can be awarded.

D. META TAGS

Meta tags are words in a Web site’s key-word field that determine when the site is listed in response to a

search engine query. Using others’ marks as tags without permission may constitute trademark

infringement.

10 UNIT TWO: TORTS AND CRIMES

CASE SYNOPSIS—

Case 9.1: Hasbro, Inc. v. Internet Entertainment Group, Ltd.

Hasbro, Inc., the maker of Candyland, owns the Candyland trademark. Brian Cartmell and the Internet

Entertainment Group (IEG), Ltd., used “candyland.com” as a domain name for a sexually explicit Internet site.

Any person who performed an online search for “candyland” was directed to this adult Web site. Hasbro filed

a trademark dilution claim in a federal court against Cartmell and IEG.

……………………….……………………..……………………….…………………………….…………………………

Notes and Questions

If the court had ordered both parties to change their domains, what, if any, complications would

this present? Most likely, there would be an increase in the number of trademark disputes as the variety of

E. TRADEMARK DILUTION IN THE ONLINE WORLD

Dilution occurs when a mark is used, without permission, in a way that diminishes its distinctive quality.

Proof that consumers are likely to be confused between the two marks is not required.

F. LICENSING

Licensing (permitting the use of a file for certain purposes) is one way around many virtual property

II. Copyrights in Digital Information

• Copyright law is important in cyberspace in part because the nature of the Internet means that data is

“copied” before being transferred online. Loading a file or program into a computer’s random access

memory (RAM) is the making of a “copy.” If it is done without authorization, it is infringement.

ENHANCING YOUR LECTURE—

CHAPTER 9: INTERNET LAW, SOCIAL MEDIA, AND PRIVACY 11

  LEGAL ISSUES FACING

BLOGGERS AND PODCASTERS

 

Companies increasingly are using blogs (Web logs) and podcasts (essentially an audio blog, sometimes

with video clips) internally to encourage communication among employees and externally to communicate

with customers. Blogs offer many advantages, not the least of which is that setting up a blog and keep it

current (making “posts”) costs next to nothing because so much easy–to-use free software is available.

Podcasts, even those including video, require only a little more sophistication. Nonetheless, both blogs and

podcasts also carry some legal risks for the companies that sponsor them.

BENEFITS OF BLOGS AND PODCASTS

Boeing, and Hewlett-Packard have started blogs.

Internal blogs used by a company’s employees can offer a number of benefits. Blogs provide an open

communications platform, potentially allowing new ways of coordinating activities among employees. For

example, a team of production workers might use a blog to move a new product idea forward: the team starts

POTENTIAL LEGAL RISKS

Despite their many advantages, blogs and podcasts can also expose a company to a number of legal

risks, including the following.

Tort Liability Internal blogs and podcasts can lead to claims of defamation or sexual harassment if an

Security of Information Blogs may also be susceptible to security breaches. If an outsider obtains

access to an internal blog, a company’s trade secrets could be lost. Outsiders could also potentially gain

access to blogs containing financial information and other financial data.

Discovery Issues As explained in Chapter 3, litigation today frequently involves electronic discovery.

Compliance Issues Many corporations are regulated by one or more agencies and required to comply

with various statutes. Laws that require compliance may also apply to blog postings. For example, the

12 UNIT TWO: TORTS AND CRIMES

Copyright Infringement Blogs can also expose a company to charges of copyright infringement.

Suppose, for example, that an employee posts a long passage from a magazine article on the company’s

blog, either internal or external, without the author’s permission. Similarly, photos taken from other blogs or

FOR CRITICAL ANALYSIS

Do individuals who create blogs face the same risks as companies that use blogs? Explain.

A. DIGITAL MILLENNIUM COPYRIGHT ACT

The Digital Millennium Copyright Act of 1998 imposes penalties on anyone who circumvents encryption

software or other anti-piracy protection. It also prohibits the manufacture, import, sale, or distribution of

devices or services for circumvention. Exceptions include—

1. Allows Fair Use

Exceptions include the “fair use” of circumvention methods for educational and other

noncommercial purposes.

2. Limits the Liability of Internet Service Providers

Internet service providers (ISPs) are not liable for copyright infringement by customers unless the

ISP is aware of the violation.

ADDITIONAL BACKGROUND—

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Sec. 1201. Circumvention of copyright protection systems

(a) VIOLATIONS REGARDING CIRCUMVENTION OF TECHNOLOGICAL MEASURES—

(1)(A) No person shall circumvent a technological measure that effectively controls access to a work

protected under this title. The prohibition contained in the preceding sentence shall take effect at the end of

the 2-year period beginning on the date of the enactment of this chapter.

particular class of works under this title, as determined under subparagraph (C).

(B) The prohibition contained in subparagraph (A) shall not apply to persons who are users of a copyrighted

under subparagraph (A) in their ability to make noninfringing uses under this title of a particular class of

copyrighted works. In conducting such rulemaking, the Librarian shall examine—

(C) During the 2-year period described in subparagraph (A), and during each succeeding 3-year period, the

Librarian of Congress, upon the recommendation of the Register of Copyrights, who shall consult with the

(i) the availability for use of copyrighted works;

(ii) the availability for use of works for nonprofit archival, preservation, and educational purposes;

(iii) the impact that the prohibition on the circumvention of technological measures applied to copyrighted

works has on criticism, comment, news reporting, teaching, scholarship, or research;

(iv) the effect of circumvention of technological measures on the market for or value of copyrighted works; and

(v) such other factors as the Librarian considers appropriate.

(E) Neither the exception under subparagraph (B) from the applicability of the prohibition contained in

subparagraph (A), nor any determination made in a rulemaking conducted under subparagraph (C), may be

used as a defense in any action to enforce any provision of this title other than this paragraph.

14 UNIT TWO: TORTS AND CRIMES

(C) is marketed by that person or another acting in concert with that person with that person’s knowledge for

use in circumventing a technological measure that effectively controls access to a work protected under this

(3) As used in this subsection—

(A) to `circumvent a technological measure’ means to descramble a scrambled work, to decrypt an encrypted

work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the

authority of the copyright owner; and

operation, requires the application of information, or a process or a treatment, with the authority of the

copyright owner, to gain access to the work.

(B) a technological measure `effectively controls access to a work’ if the measure, in the ordinary course of its

(b) ADDITIONAL VIOLATIONS—

(1) No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology,

product, service, device, component, or part thereof, that—

(A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological

measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof;

portion thereof; or

copyright owner under this title in a work or a portion thereof.

(C) is marketed by that person or another acting in concert with that person with that person’s knowledge for

(2) As used in this subsection—

deactivating, or otherwise impairing a technological measure; and

(B) a technological measure `effectively protects a right of a copyright owner under this title’ if the measure, in

the ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a right of a copyright

owner under this title.

(c) OTHER RIGHTS, ETC., NOT AFFECTED—

(1) Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement,

including fair use, under this title.

(2) Nothing in this section shall enlarge or diminish vicarious or contributory liability for copyright infringement

in connection with any technology, product, service, device, component, or part thereof.

CHAPTER 9: INTERNET LAW, SOCIAL MEDIA, AND PRIVACY 15

component is integrated, does not otherwise fall within the prohibitions of subsection (a)(2) or (b)(1).

(3) Nothing in this section shall require that the design of, or design and selection of parts and components

(4) Nothing in this section shall enlarge or diminish any rights of free speech or the press for activities using

consumer electronics, telecommunications, or computing products.

(d) EXEMPTION FOR NONPROFIT LIBRARIES, ARCHIVES, AND EDUCATIONAL INSTITUTIONS—

(1) A nonprofit library, archives, or educational institution which gains access to a commercially exploited

copyrighted work solely in order to make a good faith determination of whether to acquire a copy of that work

(2) The exemption made available under paragraph (1) shall only apply with respect to a work when an

identical copy of that work is not reasonably available in another form.

advantage or financial gain violates paragraph (1)—

(3) A nonprofit library, archives, or educational institution that willfully for the purpose of commercial

ENHANCING YOUR LECTURE—

  COPYRIGHT LAW VERSUS FREE SPEECH

 

Since the ratification of the First Amendment to the U.S. Constitution in 1791, Congress has been

prohibited from making any law “abridging the freedom of speech.” Clearly, at that time the framers did not

anticipate radio, television, the movies, computers, computer programs, or the Internet. As radio, television,

and the movies became important at the beginning and middle of the twentieth century, they gave rise to free

speech issues. As the Internet moves into virtually everyone’s home and place of work in the twenty-first

century, First Amendment issues have arisen and will continue to arise.