Transcript Document

Legal and Ethical Issues;
Internet Taxation
Risanuri Hidayat, Ir., M.Sc.
Chapter 6
Outline
6.1
Introduction
6.2
Legal Issues: Privacy on the Internet
6.2.1 Right to Privacy
6.2.2 Internet and the Right to Privacy
6.2.3 Tracking Devices
6.2.4 Cookies
6.2.5 Employer and Employees
6.2.6 Protecting Yourself as a User
6.2.7 Protecting your Business: Privacy Issues
6.3
Legal Issues: Other Areas of Concern
6.3.1 Defamation
6.3.2 Sexually Explicit Speech
6.3.3 Children and the Internet
6.3.5 Intellectual Property: Patents and Copyright
6.3.6 Trademark and Domain Name Registration
6.3.7 Unsolicited Commercial E-mail (Spam)
6.3.8 Online Auctions
6.3.9 Online Contracts
Chapter 6
6.4
6.5
6.6
Social Issues: Online Communities
6.4.1 Online Communities: Defining the Difference
6.4.2 Online Activism
6.4.3 Disabilities and the Web
Global Issues
Internet Taxation
6.1 Introduction
Real space

Our physical environment consisting of temporal
and geographic boundaries
Cyberspace

the realm of digital transmission not limited by
geography
6.2 Legal Issues: Privacy on the
Internet
Difficulty of applying traditional law to the
Internet
Technology and the issue of privacy
6.2.1 Right to Privacy
Implicit in the First, Fourth, Ninth and
Fourteenth Amendment
Olmstead vs. United States


Telecommunication of alcohol sales during
Prohibition era
New application of the Fourth Amendment
Translation

Interpreting the Constitution to protect the
greater good
6.2.2 Internet and the Right to
Privacy
Self-regulated medium

The Internet industry essentially governs itself
Many Internet companies
personal information


collect
users’
Privacy advocates argue that these efforts violate
individuals’ privacy rights
Online marketers and advertisers suggest that
online companies can better serve their users by
recording the likes and dislikes of online
consumers,
6.2.3 Tracking Devices
Tracking devices

Identifies what activities and products are most
popular among consumers
ID card

Enables information to be sent to computer from a
Web site
Click-through advertisements

Consumers can view the service or product by
"clicking" on the advertisement
Web Bugs or clear GIFs
6.2.4 Cookies
Cookie

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

A text file stored by a Web site on an individual’s
personal computer that allows a site to track the
actions of its visitors
Record passwords for returning visitors
Keeps track of shopping-cart materials and register
preferences
Helps businesses by allowing them to address their
target market with greater accuracy
Consumer Profile
DoubleClick: Marketing with
Personal Information
Regulation of the Internet could limit a
company’s efforts to buy and sell
advertising
DoubleClick

Advertising network of over 1,500 sites where
banner advertisements for 11,000 of their
clients appear
Abacus Direct Corp

Names, addresses, telephone numbers, age,
gender, income levels and a history of
6.2.5 Employer and Employee
Keystroke cops

Registers each keystroke before it appears on
the screen
Company time and company equipment
versus the rights of employees
Determining factors


Reasonable expectation of privacy
Legitimate business interests
Reasons for surveillance

Slower transmission times
Michael A. Smyth v. The
Pillsbury Company
Dismissed as regional operations manager
Questionable material in e-mail
Pennsylvania law

“an employer may discharge an employee
with or without cause, at pleasure, unless
restrained by some contract"
Public policy


Reprimanding an employee called for jury
duty
Denial of employment as a result of previous
6.2.6 Protecting Yourself as a
User
Anonimity and pseudonimity

PrivacyX.com
Platform for Privacy Preferences Project
(P3P)

Browser complies in accordance with users’
privacy preferences by allowing them to interact in
specific ways
Privacy services and software


Junkbusters.com
PrivacyChoices.org
6.2.7 Protecting Your Business:
Privacy Issues
Privacy policy

The stated policy regarding the collection and use
of visitor’s personal information
Privacy policy services and software


PrivacyBot.com
TRUSTe
Core Fair Information Practices



Consumers should be made aware that personal
information will be collected
The consumer should have a say in how this
information will be used
The consumer should have the ability to check the
information collected to ensure that it is complete
6.3 Legal Issues: Other Areas of
Concern
Defamation
Sexually explicit speech
Copyright and patents
Trademarks
Unsolicited e-mail
First Amendment

"Congress shall make no law respecting an
establishment of religion, or prohibiting the free
exercise thereof; or abridging the freedom of
speech, or of the press; or the right of the people
6.3.1 Defamation
Defamation
The act of injuring another’s reputation, honor or
good name through false written or oral
communication
Libel

Written or are spoken in a context in which they have
longevity and pervasiveness that exceed slander
Slander

Spoken defamation
Proving defamation

The statement must have been published, spoken or
broadcast
6.3.1 Defamation
Good Samaritan provision, Section 230 of the
Telecommunications Act

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Protects ISPs from defamation lawsuits in the
ISPs’ attempts to control potentially damaging
postings
“obscene, lewd, lascivious, filthy, excessively
violent, harassing or otherwise objectionable"
Cubby vs. Compuserve and
Stratton Oakmont vs. Prodigy
Cubby vs. Compuserve

Anonymous individual used a news service
hosted by Compuserve to post an allegedly
defamatory statement
Distributor vs. publisher


A distributor cannot be held liable for a
defamatory statement unless the distributor
has knowledge of the content
Compuserve was a distributor of content
Stratton Oakmont vs. Prodigy
6.3.2 Sexually Explicit Speech
Miller v. California (1973)

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
The Miller Test identifies the criteria used to
distinguish between obscenity and
pornography
Appeal to the prurient interest, according to
contemporary community standards
When taken as a whole, lack serious literary,
artistic, political or scientific value
Challenge of community standards in
cyberspace
United States vs. Thomas
Thomas

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Internet business owner in California, owner
of pornographic Web site from which
merchandise could be ordered
Accessible by password
Acceptable by California community
standards
Sold pornographic material to Tennessee
resident (opposing community standards)
Thomas found guilty
6.3.3 Children and the Internet
Accessibility to information
Communications Decency Act of 1996 (CDA)
and Children’s Online Protection Act of 1998
(COPA)



Designed to restrict pornography on the Internet,
particularly in the interest of children
Overbroad
“Patently offensive,” “indecent” and “harmful to
minors”
Chilling effect

Limiting speech to avoid a lawsuit
6.3.4 Alternatives Methods of
Regulation
Blocking and filtering

Allows users to select what kinds of
information can and cannot be received
through their browsers
Blocking and filtering software and
services

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Surfwatch.com
Cybersitter.com
NetNanny.com
Infringement of First Amendment rights
6.3.5 Intellectual Property:
Patents and Copyright
Copyright



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
The protection given to the author of an
original piece, including “literary, dramatic,
musical, artistic and certain other intellectual
works”
Whether the work has been published or not
Protects only the expression or form of an idea and
not the idea itself
Provides incentive to the creators of original
material
Guaranteed for the life of the author plus seventy
MP3: Raising Copyright Issues
MPEG-1 Audio Layer 3 (MP3)


A compression method used to substantially
reduce the size of audio files with no
significant reduction in sound quality
Facilitates the exchange of audio files over
the Internet
Napster


Uses central servers to help users locate MP3
files stored on other Napster users’ hard
drives
Napster members are then able to download
MP3: Raising Copyright Issues
MP3.com



Instant ListeningTM service allows users to
immediately begin listening to music from
CDs they have purchased online
When a user purchases a CD from a select
online retailer, all of the songs from the
purchased CDs are added to the user’s
account on MyMP3.com
MP3.com did not have the rights to the music
United States vs. Lamacchia
Changed the face of copyright protection
(1994)
Posting of copyrighted material
Not guilty under the Copyright Act of 1976

The violation must have been conducted
"willfully and for purposes of commercial
advantage or private financial gain”
LaMachhia did not profit from the copyright
violations
LaMacchia was not convicted for his
6.3.5 Intellectual Property:
Patents and Copyrights
Digital Millennium Copyright Act of 1998
(DMCA)



Represents the rights of creative bodies to
protect their work as well as the rights of
educators and resource providers to receive
access to this work
Makes it illegal to delete or otherwise alter the
identifying information of the copyright owner.
Prevents the circumvention of protection
mechanisms and/or the sale of such
circumvention mechanisms
6.3.5 Intellectual Property:
Patents and Copyright
Fair use



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The use of a copyrighted work for education,
research, criticism, etc.
The purpose of the copyrighted work is examined
The nature of the copyrighted work is taken into
account
The amount of the material that has been
reproduced is reviewed
The effect is taken into consideration
6.3.5 Intellectual Property:
Patents and Copyright
Patent


Grants the creator sole rights to the use of a
new discovery
Protection for 20 years
Opposing the length of a patent

Does not foster the creation of new material
Includes “methods of doing business”
since 1998

Idea must be new and not obvious to a skilled
person
6.3.6 Trademark and Domain
Name Registration
Parasite

Selects a domain name based on common typos
made when entering a popular domain name
Cybersquatter

Buys an assortment of domain names that are
obvious representations of a brick-and-mortar
company
Anticybersquatting Consumer Protection Act of
1999 (ACPA)


Protects traditional trademarking in cyberspace
Protects trademarks belonging to a person or entity
other than the person or entity registering or using
the domain name
6.3.7 Unsolicited Commercial Email (Spam)
Cost is primarily incurred by the receiver
and the ISP
Organizations distributing spam


Maintain anonymity and receivers cannot
request to be taken off the organization’s
mailing list
Present themselves as a legitimate company
and damage the legitimate companies
reputation
Unsolicited Electronic Mail Act
6.3.8 Online Auctions
Question of government regulation
International regulation of auctions
Copyright infringement and auction
aggregation services
The Collections of Information Antipiracy
Act (CIAA)

Makes it easier to prosecute any group which
takes listings from one organization and, in
doing so, harms the original business
Shill bidding
6.3.9 Online Contracts
Electronic Signatures in Global and National
Commerce Act of 2000 (E-Sign bill)



Designed to promote online commerce by
legitimizing online contractual agreements.
Digital agreements will receive the same level of
validity as hard-copy counterparts
Allows cooperating parties to establish their own
contracts
6.4 Social Issues: Online
Communities
The Web allows larger and more diverse
groups to communicate, share information and
exchange opinions
Web sites are being created to
accommodate a variety of individuals with
different backgrounds, interests and ideas
6.4.1 Online Communities:
Defining the Difference
Online users can move about the Web, not
limited by gender, race, creed, age and
sexual orientation
Virtual communities
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Oxygen.com
Pleiades-net.com
PlanetOut.com
YouthPride.com
Match.com
Singles.com
6.4.2 Online Activism
Social and political action on the Web
Online activism groups
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Institute for Global Communications
Student Environmental Action Coalition
Amnesty International
Peace Corps
6.4.3 Disabilities and the Web
Enables disabled individuals to work in
many new fields

Voice activation, visual enhancers and
auditory aids
Americans with Disabilities Act (ADA)

Protects the employment rights of Americans
with disabilities
Legal requirements of meeting the needs
of people with disabilities

Sites that are heavily laden with graphic
6.5 Global Issues
The Internet poses challenges to a world
comprised of different cultures, attitudes,
languages, codes of conduct and
government authorities
Various reactions to privacy,
personalization and copyright
Felix Somm

Held accountable under German law for
providing German subscribers access to
sexually explicit material
6.5 Global Issues
European Union Directive on Data
Protection

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Agreement among its members on the
regulations that apply to information exchange
Mandates that personal information be kept
current and used in a lawful manner for its
designated purpose
Compiled list of American Web sites that meet
the criteria designated by the Directive
In the case of a violation of the directive, the
case will be tried in the United States
6.6 Internet Taxation
The opposing arguments

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Permanent ban on Internet taxation
Fair taxation of Internet sales
Taxation methods

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
If both a vendor and a consumer are located
in the same state
If the vendor and the consumer are not
located in the same state, then the sale is
subject to a use tax
If the vendor has a physical presence, or
6.6 Internet Taxation
Problems with Internet taxation

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The definition of physical presence (location
of the ISP, the location of the server or the
location of the home page)
States vary according to what transactions
are subject to taxation
Sales tax revenues are the largest single
source of a state’s revenue and are used to
fund government-subsidized programs,
including the fire department, the police and
the public education systems
6.6 Internet Taxation
Problems with Internet taxation

To appropriately meet the taxation
requirements of all parties in online
transactions, e-businesses would be required
to know and understand all these methods
Internet Tax Commission

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
Reviewed the issue of Internet taxation
Revision of state and local taxes to make
taxing a feasible process for Internet
businesses
Establish clearer definitions on the meaning of