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

Page Count
9 pages
Word Count
5623 words
Book Title
Business Law: Text and Cases 14th Edition
Authors
Frank B. Cross, Kenneth W. Clarkson, Roger LeRoy Miller
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.
This chapter provides an overview of the principles that guide these amended laws and new legislation, as
well as developments in the world of social media and the sphere of privacy. These topics concern all businesses
every employer and employee, chief executive officer and shareholder, customer and supplier, and consumer and
critic. Part of doing business is being aware of the changes in these fields.
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.
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,
(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
(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
(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;
(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
(2) Procedures.The procedures set forth in section 413 of the Controlled Substances Act (21 U.S.C. 853),
(1) Loss.—The term “loss” has the meaning given that term in section 1030(e) of this title.
(2) Materially.For purposes of paragraphs (3) and (4) of subsection (a), header information or registration
information is materially falsified if it is altered or concealed in a manner that would impair the ability of a
4 UNIT TWO: TORTS AND CRIMES
(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
share information with foreign agencies investigating and prosecuting Internet fraud,
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
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;
(2) Limitations
Nothing in this subsection shall be construed to exempt any such entity from liability
(A) for the underlying conduct reported; or
(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
(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
CHAPTER 9: INTERNET LAW, SOCIAL MEDIA, AND PRIVACY 9
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
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
4. Applicability and Sanctions of the ACPA
The ACPA applies to all domain-name registrations. Damages and profits can be awarded.
Statutory damages range from $1,000 to $100,000. Difficulties include the costs of litigation and
obtaining the identity of the owner of an infringing Web site.
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
domains would expand to accommodate the demands of legitimate and illegitimate businesses and
individuals to change their names. Companies, individuals, and governments might find themselves embroiled
in considerable amounts of litigation over the same issues noted in the case. Settlements could be expensive.
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.
Criminal piracy includes persons who exchange unauthorized copies of copyrighted works, even for no
profit.
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
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
a blog, one worker posts a proposal, and other team members quickly post comments in response. The blog
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
employee posts racist or sexually explicit comments. At the same time, if a company monitors its employees’
blogs and podcasts, it may find itself facing claims of invasion of privacy (see Chapter 33 for a discussion of
similar issues involving employees’ e-mail).
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.
This can extend to blog posts and comments as well as to e-mail. Thus, a company should be aware that
anything posted on its blogs can be used as evidence during litigation. A company will therefore need to
preserve and retain blog postings related to any dispute likely to go to trial.
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
Securities and Exchange Commission (SEC) has regulations establishing the information a company must
disclose to potential investors and the public in connection with its stock. A company regulated by the SEC
will find that these rules apply to blogs. The same is true for companies regulated under the Sarbanes-Oxley
Act, which will be discussed in Chapters 7, 30, and 35.
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
Web sites cannot be posted without prior permission. Note, also, that copyright infringement can occur even if
the blog was created without any pecuniary motivation. Typically, though, a blogger can claim “fair use” if she
or he posts a passage from someone else’s work with an electronic link to the complete version
External blogs carry most of the same risks as internal blogs and others as well. Not only can external
blogs lead to charges of invasion of privacy, defamation, or copyright infringement related to what the
company and its employees post, but they can also expose the company to liability for what visitors post. If a
company’s blog allows visitors to post comments and a visitor makes a defamatory statement, the company
that created the blog could be held liable for publishing it. Thus, any company considering establishing blogs
and podcasts, whether internal or external, should be aware of the risks and take steps to guard against
them.
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
Digital Millennium Copyright Act of 1998
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.
(B) The prohibition contained in subparagraph (A) shall not apply to persons who are users of a copyrighted
work which is in a particular class of works, if such persons are, or are likely to be in the succeeding 3-year
period, adversely affected by virtue of such prohibition in their ability to make noninfringing uses of that
particular class of works under this title, as determined under subparagraph (C).
(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
Assistant Secretary for Communications and Information of the Department of Commerce and report and
(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.
(D) The Librarian shall publish any class of copyrighted works for which the Librarian has determined,
pursuant to the rulemaking conducted under subparagraph (C), that noninfringing uses by persons who are
users of a copyrighted work are, or are likely to be, adversely affected, and the prohibition contained in
subparagraph (A) shall not apply to such users with respect to such class of works for the ensuing 3-year
period.
(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.
(2) 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 a technological measure that
effectively controls access to a work protected under this title;
(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
(B) a technological measure `effectively controls access to a work’ if the measure, in the ordinary course of its
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) 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;
(B) has only limited commercially significant purpose or use other than to circumvent 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; or
(C) is marketed by that person or another acting in concert with that person with that person’s knowledge for
use in 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.
(2) As used in this subsection
(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
(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.
(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
(3) A nonprofit library, archives, or educational institution that willfully for the purpose of commercial
advantage or financial gain violates paragraph (1)
(A) shall, for the first offense, be subject to the civil remedies under section 1203; and
(B) shall, for repeated or subsequent offenses, in addition to the civil remedies under section 1203, forfeit the
exemption provided under paragraph (1).
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.

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