Legal Aspects of E-commerce - Essay Example

Introduction Ecommerce is a package word for a myriad series of amalgamated business concept, technologies and cultural phenomenon. Technology and business professionals alike need to command this new field of knowledge to ensure they rip profit out of it. IT is necessary that professionals get acquaints with e. commerce so as to have an upper hand evaluating opportunities it may afford, both to competitors and themselves. Legal issues: The law is catching up with the online world; the progressive migration of business to the Web is forcing reappraisal of intellectual property rights and then protector and clarifying the meaning of intellectual property in a connected world. Responsibility and privacy are issues that touch on the law, though they are perhaps best characterized as aspects of common sense conduct. The political response to ecommerce, particularly its expression in regulatory and taxation policies, is a further source of potential uncertainty for the ecommerce player. Intellectual Property. The ease of finding and copying information on the web leads many users think that the copyright is unsustainable in the wired world, though this has been a false impression. Works published on the web enjoy the same rights as other forms of publication. The world intellectual property organization (WIPO) copyright treaty and performances and Phonograms Treaty of 1996 extended the Berne convention on the copyright to include digital applications. Arguably, copyright is easier to defend online, as it is simple for a comply to run a regular search on its own content to see if it appears in unexpected place. Intellectual property unique to the ecommerce arena include domain names and business process patents On the firmer ground of patent law, ecommerce has created something of a stir. Patents are being granted for a range of business process that are, in the opinion of many, generic ecommerce techniques. However, Jay Walker, founder of Priceline.com, who pursues intellectual property break through his walker Digital Company, believes the novel modes of commercial practice in ecommerce channels can amount to legitimate innovations. "Walker Digital is about reengineering the DNA of the future of business" Walker declares. "What we hope is that a group of thoughtful people can together reinvent whole sectors of the global economy. And not only can we reinvent them, we can own those inventions." 1 Of course, reengineering is itself the bane of all attempts to protect intellectual property. Ecommerce patents currently remain unchallenged, but the generic nature of many of them may enable competitors to formulate alternatives that achieve similar ends without infringements. In any case; interest in filing business process patents certainly forces companies to spend on patent lawyers rather than on software and service development. This may help the image of a startup, however, the ability to prove early and continuos commercial use of technology is likely to be important Meanwhile the cost of defending a claim of intellectual property infringement will often be more than the cost of paying royalties to the claimant. Smaller companies have long complained that larger companies restrict their movements with walls of patents." As always, the cost of litigation is a form of social tax on business. Responsibility and Privacy. The abstract quality of the web and its apparent autonomous existence as a medium of communication and business often cause uncertainty about personal and corporate ownership of the acts committed through it. Responsibility for content and transactions is not always as clear as in the traditional commercial world, where formal and informal codes of conduct have consolidated over many generations of use. Reliance on electronic communications mediated by network and machines whose functions are mysterious to the majority of users raises suspicion about privacy and its accidental or malicious betrayal. In one sense, the internet is the ultimate bureaucracy- a faceless solicitor, aggregator and router of information. Like any bureaucracy, the internet can engender distrust. In the circumstances; allocating responsibility of outcomes is a matter of declaring rights and obligations ahead of a transaction. At this point the word "transaction" can become treacherous. At least four popular uses of the term exist in ecommerce circles, describing a scale of meaning from soft to hard. At the soft end of the spectrum, a consumer makes a decision to purchase a product or service. From the market point of view, this is the point of closure and the subsequent events are administrative details. "Agreement of terms" is the event that can cause problems if it is not addressed explicitly by the vendor. What exactly is the customer signing up for and what does each party undertake to perform as a result of the customers decision to go ahead Software vendors deal with this issue by interposing a license agreement in the download procedure for their goods. The user cannot proceed beyond the license text until they have clicked a prominent acceptance button, signaling their agreement to the terms and conditions of the license. This is the online equivalent of tearing the shrink-wrapor breaking the seal of a software product. Providers of services can learn a lot from examining software vendor's practices. First, software vendors self the right to use a piece of software, not the actual software itself. In other words, software vendors retain the intellectual property rights in their assets; while customers pay a fee to enjoy the functionality provided by the assets. Providers of other services tend to sell membership rights for similar reasons. Second, every software license declares the bounds of the vendor's liability. Bug-free software remains a fabled creation. So licenses for full-product releases, as well as beta versions, bear disclaimers to ability. The precise "cocktail effect" of a piece of software running in an unknown target environmental demands that vendors cover themselves for unforeseen clashes in functionality and especially, for the loss of data. Providers of ecommerce services need to consider the same issue. For example, how will an enhanced online version of a traditional business process interact with other processes in the target environment. A clickable statement of liability ca put bounds on such gray areas. Such statement also communicates a positive message about the supplier. Probity and insight into the customers situation. Third, software licenses declare the legal jurisdiction that will be used in the event of any dispute relating to the engagement. This is usually the home jurisdiction of the supplier, but it need'nt be. Every agreement must specify a jurisdiction, as not accepted default court of law exists for online transactions. Agreements are often regarded as magic spells that ward off the evils of litigation. Of course, writing a poor agreement and leaving oneself open to subsequent challenge is possible. More important, potential customers have the usual right to negotiate a different agreement to the one preferred by a supplier. Mass market consumers rarely do challenge such texts but, in the business-to- business space, the negotiation of online contracts is as significant as it is in the traditional world. A business-to-business agreement may be arrived at after a lengthy exchange of emails involving the principal contracts at each party, their colleagues and legal advisors. What is important is to capture all this correspondence and to control the proliferation of agreement versions. Digital acceptance of the final text by actors within a member of one company whose acquiescence does not appear on a final text can leave a leverage point for subsequent disputes. An agreement text with an acceptance button can be used to implement asset of disclaimer relating to a product or service. Disclaimers play other roles in the product service. Disclaimers play other roles in the determination of responsibility. Email sent from corporate accounts should always contain a statement reflecting the company's association with the text of the message from personal accounts. Corporate websites may also choose to deny responsibility for sites to which it links or that links to it. In the case of linking out, no company can ensure the target site always presents the material it expects or that it will maintain similar disclaimer about the sites to which it in turn, links. No site owner can control who links to it, but it is worth denying any business connection to a referring site that has not obtained permission to so link. While agreements deal with making a business arrangement explicit,, the privacy issue revolves around the fear of exposure. But privacy is a relative quantity just as security is. The ultimate privacy is none participating. The party that engages in ecommerce can protect its privacy by encrypting the information it exchanges and by taking core not to disclose anything it wishes to be kept secret. When a business suffers invasion of its privacy, this is usually due to a failure of policy rather than any to ingenuity on the part of an attacking party. Consider in the first place the huge amount of information companies now make available on their corporate websites. Companies that in the past jealously guarded details of their employees and their research projects now routinely issue personal lists, resumes, and research projects goals and status via their Web presence. This is also partly a cultural effect. Whereby corporate websites have tended to mimic the early examples set by academic institutions and non-profit organization. Users intent on privacy can, of course, simply exercise judgment about what they share. Deja.com (formerly Dejanews) effectively preserves for eternity every statement made to a newsgroup or discussion site. Some commentators advise student in such a group that might reflect badly on them a few years down the line when they start looking for a job. Whether employers take the trouble to conduct such searches is a moot point if one employer becomes known as a newsgroup trawler, ten this is likely to cause prospective candidates to post self-serving statements to the target group. On the other hand, web research is not a precise science. Unless you have a truly distinctive name, it is hard for a researcher to be absolutely certain any statement attributed to you actually made by you. Information associated by your name at a website can be disowned. You may even be able to sue for deformation if such information is presented to you. Search engines also vary widely in the representatations of the web they offer. Many of them are concentrating on currency, having formerly suited up with withdrawn resources dating to 994, the heyday of the early spiders. In short, assembling a profile of individuals from their utterances in cyberspace is a lot an automatic matter. If an organization decides to target an individual, then it will benefit from using the web, but it would be well advised to reserve, much of its budget for old- fashioned trash can sifting. The efforts required by a single company to create a lifelike profile of a loyal customer provide some perspective on the ease with which anyone could be captured a likeness from a distributed mass of state merits. Finally, comes the matter of hygiene. A use may store something private on a machine, but she cannot be compelled to send it to another party she could, however, inadvertently reveal private information by installing and executing a virus. Many users consider viruses an affliction of their local environment and associate program that sends data from the infected machine to another host is potentially more harmful. Regulation and Taxation The internet is sensitive to geography, yet geography determines many of our commercial actions in the real world. Restrictions on business practices and taxation regimes vary through the world. "Governments do have a role to play in supporting the creation of a predictable legal environment globally for airing business on the internet, but must exercise this role in a non- bureaucratic fashion. There should be no discriminatory taxation against internet commerce. The internet should function as a seamless global marketplace with no artificial barriers erected by government."2 The legal framework supporting commercial transactions on the internet should be governed by consistent principles across state, national and international borders that lead to predictable results regardless of the jurisdiction in which a particular buyer or seller resides. In other words, the ecommerce universe should not contain any strange, local physics that makes of normal practices, European Union policy has to unify two apparently conflicting viewpoints. The European initiative in electronic commerce notes that the internet is a global phenomenon that has no respect for geographical boundaries. At the same time, the document is concerned t ensure that a coherent regulatory framework for electronic commerce is created at European level" in accordance with the single market project. Ecommerce is, therefore, seen as an evolutionary step in the development of the European market, rather than challenge to its logic. The European union is here acting to preserve or enhance the competitiveness of the bloc, just as a single sovereign entity might. New taxes for internet transactions are rejected but Value Added Tax (VAT) is identified as relevant to electronic traders. US policy implies that a new global legal framework could emerge to replace the current situation, where contacting parties choose a jurisdiction to govern their agreement given the history of global trade development and regulation; this seems likely, but not too soon. On taxation side, government will be frustrated from taxing internet transactions at source because no overarching world tax autority exists.3 Intellectual Property The most notable area in which intellectual property has been changed by the internet is through copyright. While trademarks and patents have also been affected, copyright law has provided to be the biggest and most immediate challenge for internet business and consumers today. Opt-Out VS Opt-In Opt-in is the standard European policy that requires consumers to ask to be involved in data collection and marketing, while opt-out companies automatically include customers in data collection practices unless a customer specifically asks to not be included. Proponents of opt-in content that users should be able to choose whether or not they want to participate before any data is collected. Opt-in forces companies to be more up-front about what information they are collecting and how they will use it since they have to get the consumer's approval first. Furthermore, companies that are opt-out rarely make their data-gathering process obvious; if consumers do not realize that they can opt-out or if they are unaware that any data is being gathered then the option to opt-out does not help them.4 Copyright is not intended to give the creator or her work. Rather, it is meant to strike a balance between protecting a creator's work and letting the public use it so that both can prosper.. 5The primary objective of copyright is not to reward the labor of authors, but to promote the progress of science and useful Arts' to this and copyright assures authors the right to their original expressions, but encourages others to build freely upon the ideas and information conveyed by a work. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art. While it can be debated whether or not pirating a copy of the latest pop single is infringing on "useful arts". There is no doubt that, without copyright laws, many business and industries would both be able to survive. So far it is mostly the music industry that has grappled with the copyright issues raised by new technology. "however, all companies that create intellectual property- whether it be film, books, software, or sewing patterns- will sooner or later confront the copyright issue. Current status. There are three main aspects to copyright laws that affect the internet; the copyright Act of 1976, fair use doctrine (part of the copyright Act of 1976) and the Digital millennium copy right Act (DMCA) The copyright Act of 1976 projects literary musical, dramatic, motion picture, and architectural works as well as sound recordings. It gives the owner of copyright the ability to work, distribute copies of the work if he or she creates a new work of value, only uses a small amount so that it does to constitute most of the work or does not have an impact on the market for the original. The Digital millennium copyright Act signed into law in 1998 by President Clinton. While the law is complicated and has many provisions, there are two main parts of interest for most business. The first is the implementation of provision in the world intellectual property organization (WIPO) treaties that prohibit the circumvention of copyright protection systems. This part makes it a crime for someone to go around a technological protection measure that was created by the copyright owner to keep people from stealing the work. The second part states that a copyright owner cannot hold an online service provider liable if one of its subscribers infringes on the owner's copyright. In order to protect though the online service provider must agree to remove the infringing materials and or terminate the subscriber, as soon as it becomes aware of the infringement. The most easily downloadable files are mp3 sound files that are smaller that conventional sound files. These files have caused problems for the record industry. With the advent of Napster's music-sharing application, it has become easier not only for users to download music, but to find files from strangers and download tem while before it would have taken time for someone to make a copy on a cassette tape, digital music, mp3 files and files swapping applications all converged to make it easy for millions of internet users to swap pirated music with one another. With mp3 and Napster one copy had the potential to become millions of copies at digital or near-digital quality. This threat has caused the recording industry to go on the offensive, filling suits against my.mp3.com and Napster. It is has also created alliances between record companies and internet companies, as the offline music industry tries to evaluate the optimal way to access the millions of music lovers n the internet6. Challenges of Internet regulation. The new technology and lack of physical borders associated with the internet are changing the way societies look at existing laws. Where new technology allows business and consumers new freedom, it also poses problems to regulation. The internet's lack of physical borders raises the question of whose laws should be applied to certain transactions. If a consumer is sitting at a computer in California, connected to a server in Massachusetts, buying something from a business in Iowa, where does the transaction in take place whose sales tax, should that person pay Which state laws govern the transaction Physical Internet Access. In the united states, two regulatory acts of the federal communication's Commission (FCC) were particularly import; the carter one decision in 1968, which rejected an attempt by AT & T to prevent customers from connecting their own equipment to AT & Ts network (thus allowing the development and use of modems); Business Impact: From a business standpoint, the regulatory aspects of high speed internet access are still very much influx, although the trends in the United States seem to be towards some deregulation under the banner of cross platform standardization. The FCC; commitment to the minimum amount of regulation necessary to foster innovation and economic growth seems to favor large cable companies that my now enter the market, and local telephone service providers. In march 2002, the FCC ruled out requiring cable companies to provide access to third-party ISPs. The FCC has also continued to enforce a more narrow-band-focused ruling that shifts the burden of paying local incumbents providers for internet access from CLECs to ISPs. In addition, the growing alignment between the FCC and the courts toward a level playing field, created by removing regulatory advantages conferred on competitive entrants, may result in concentration similar to that taking place in the cable industry. On the wireless front, the 3G initiative of the FCC, the department of commerce, and the National Telecommunication and information administration (NTIA) has the potential to foster innovation as more of the spectrum is opened to access. What this evolving situation holds for companies that will need high speed access to reach customers deliver content, and transact business remains unclear while seemingly taking place at a distance in Washington or in a courtroom- the outcome of the access battle will have real and immediate business implications for everyday users who wish to take advantage of the opportunities of the broadband world. Free speech. The right to free speech is protected in the United States, in the European Union, and in other countries. At the same time, in interpreting this right, the needs of society must be balanced against the potential for the abuse of the right. No society recognizes the absolute right of the free-speech. Words that incite violence for example, are clearly not protected in the constitutions of most nations. On the internet, people enjoy their right to free speech as never before. They enter chat rooms put up postings on bulletin boards, and offer their opinions n everything from book to sex. The internet has created an unprecedented forum for ideas and expression, and interestingly, it has offered individuals an equally unprecedented opportunity for anonymous participation in this forum. In so doing the internet poses still another set of regulatory challenges. In the United States, the Supreme Court has come down hard against censorship. In the European Union and elsewhere, however, some topics for discussion have been declared harmful and illegal. Those surrounding the social and political activities of Neo-Nazi groups for example and governments have tried to control their expression vigorously, even outside the European unions borders Amendments to Australia broadcasting services Act ban access to websites lacking content ratings at that are X-rated. Swedish laws have banned illegal descriptions of violence and racial agitation and require the owners of electric bulletin boards to remove such content or render inaccessible to Swedish courts have levied fines against newspaper for anonymous statements to their online discussion boards.7 Security The evolution of the internet has been met with a concurrent evolution of the means to protect confidential information from the most basic encryption to the SSL (Secure Socke Layer) dual key encryption pioneered by Netscape to more recent digital signature initiatives. For business, the implications of this level of security are enormous and regulatory bodies begin the process of validating the use of e-documents for contractual purposes. In the United States, the uniform electronic transitions Act (1999), the uniform computer information transactions Act (2000) paved the way for the integration of digital activity into business transactions. In Europe a directive on a community framework for electronic signatures (Directive 1999/03 EC) and attendant legislation have played a similar role. The governmet had shadowed the development of communications security at every turn8. The Clinton administration; attempt to have computer manufacturers install a "backdoor" to all U.S made machines via the so called clipper chip in one engagement of government with this issue. When the attempt to ban alternative forms of encryption failed, the government attempted to subsidize the development of the chip. The government has simultaneously turned to other means including regulating and regardless of whatever software is used there be a "backdoor" for government agencies, accessible with a court order.9 Privacy Admittently, the internet has allowed websites to collect increasing amounts f data on their visitors at a scale unknown in making history. The process of profiling, in particular, which uses software "Cookies" to identify and track user behavior, has received considerable and increased attention from regulatory bodies. If visitors engage in trusting behavior banking, obtaining health information, using email or instant messaging, joining and participating in communities that include the exchange of personal information, websites collect even more data. With the advent of preference matching technology, sites can learn from previous visits and tailor what they offer to returning customers10. Figuring out how U.S Internet user's feel about privacy issues is difficult. Public research firms have found that 50 percent of Americans feel that they themselves, as internet users, would be the most appropriate group to set the rules in privacy; 24 percent feel that the government should be responsible for setting those rules; and only 18 percent are confident that internet companies should set them. At the same time, some of the most recent data suggest that American's are very concerned about privacy issues; 87 percent of American's worry about incurring financial loss because of disclosure of credit card information. In the face of vocal concerns by privacy and user's advocacy groups- as well as increased anxiety about the need to be vigilant in the face of criminal and security threats the government has began to involve itself more hardly with privacy issues. Such regulation has not been greeted with open arms by the business community. Many internet executives believe that if the privacy advocates get their way and strict regulations on data gathering are enforced could mean the end of internet. Read More