ISMT 520 Lecture #4:
Kira Davis v. WJN Case and
E-Commerce Legal Issues
Dr. Theodore H. K. Clark
Associate Professor and Academic Director of
MSc Programs in IS Management and E-Commerce Management
Department of Information & Systems Management
Hong Kong University of Science & Technology
and Visiting Associate Professor of Operations & Information Management
(Information Economics and Strategy Group) 1998 - 2001
The Wharton School of the University of Pennsylvania
Individual Assignment: Due NOW
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Any assignment handed in after start of class will be
LATE with “significant” discount for late assignments
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Internet email attachments accepted or in class now
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Exact percent reduction not yet determined, and may be
based partly on justification for late submission, but it will be
sufficient for you to have been better off submitting on time
After class, or during break is too late, so do it now
If you have not already turned in during class or emailed
your individual assignment submission, leave now and do it.
This assignment is important for grading if you will
not be taking the final exam, as only individual grade
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Review and Discussion of Cases
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Sony Betamax case – what did we learn?
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VCR claimed to be contributory infringement
End user non-profit “fair use” accepted by court
Taping of shows available for free on TV only
No reduction in TV watching shown (but, bias?)
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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Kalem case (within Sony) – what learned?
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Book copyright extends to rights for movies, etc.
Supplying “means” of infringement & encouraging
infringement sufficient for contributory liability
Authorized versus non-authorized usage in mix
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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Campbell case – what did we learn?
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Pretty Woman song parody gets fair use exception
Goal of Copyright furthered by use of Parody
Issue becomes one balancing various interests
and issues and of “where to draw the line”
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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Harper & Row case – what did we learn?
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Quote of unpublished manuscript may be fair use
“Time” cancelled contract, so economic harm
Free speech issues – importance of news / politics
Excessive copying, and harm, overcomes fair use
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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New Era Publications case – what learned?
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Criticism typically allowed as fair use exception
However, excessive use of copying a concern
Fair use as mixed question of law and fact
Balancing test for all four factors applied
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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Hustler case – what did we learn?
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Copied 100% of the parody “ad” from Hustler
Motivation was profit (contributions)
Criticism and political commentary as fair use
Defendants profiting from activity Hustler can’t do
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Review and Discussion of Cases
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Columbia Law Review Article
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Proposes fair use exception for “market failure”
Good review of fair use legal issues and decisions
Law Review Articles ARE NOT LAW OR POLICY
… but MIGHT suggest some policy considerations
General questions to also ask or consider
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What jurisdiction? To whom does this apply?
Minority or dissenting opinions? Other cases?
Unresolved issues left open in this case?
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Fair Use Balancing Tests
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Determination of whether or not Fair Use
exception to copyright should apply requires
a “balancing test” of the interests of society
(e.g., public policy) versus need to protect
individual rights of the copyright holder.
No single test dominates, but any one of
these tests may be determinative, and any
one could be sufficient to show fair use.
However, most cases consider multiple factors
and balance tradeoffs across all.
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Fair Use: Summary
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Balancing Act Weighing Multiple Factors
Difficult to Clearly Determine Outcome in
Advance for Fair Use Exception Claims
Copyright Law is simple, other than Fair Use
Different courts MIGHT reach different
opinions on the same fact pattern and laws
Presenting facts effectively using prior case
examples and persuading Judge is critical
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Contract Law and the Internet
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Terms of use important for eCommerce
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Warrantees trump disclaimers
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Make choice of law and venue clear in contract
Require action to affirm customer has read terms
Inconsistent or unclear terms favor customers
Be careful about express or implied warrantees
Make terms clear of any intended guarantees
Make disclaimers clear and consistent everywhere
Puffing allowed, but be careful about bounds
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E-commerce and Contract Law
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Offer, acceptance, and consideration
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When we have a contract?
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Does website make an offer, or invitation for offers?
Advertisement, or commitment?
Is electronic acceptance valid? (It depends …)
Meeting of minds requirement of acceptance?
Confirmation of receipt of order not acceptance
Void and voidable contracts – big difference
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You could be locked in but partner not!
Look to contract terms and details
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Contract created by Offer,
Acceptance, and Consideration?
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Offer – when is an offer not legally an offer?
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Revocation of offers?
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Advertisements?
Website?
B2B E-Commerce and EDI?
Unilateral offers and contracts
Bilateral offers
Acceptance
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What is required for acceptance?
What if acceptance is partial?
Can acceptance be by actions instead?
Can acceptance be revoked?
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E-Commerce and Jurisdiction
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Where is the contract enforceable?
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Contract is only a right to sue for legal
enforcement in civil action
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Contract also is a way to clarify agreement
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Police will not make sure the contract is honored
Threat of legal action encourages compliance
Honor and relationship may be all that is needed
EDI and contracts – no cases ever get to court. Why?
Relationship and the basis for long-term contracts
Dispute resolution outside court under contracts
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Battle of the Forms
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Purchase order states some terms
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Confirmation of order states other terms
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E.g., sold as-is, where-is, with no warrantee
Goods shipped by producer and accepted
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E.g., warrantee for 5 years against all defects
What terms are in the contract?
Is there a contract at all? (Meeting of minds?)
Payment made on invoice and accepted
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Invoice reiterates no warrantee condition
Payment reiterates requirement for warrantee
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License Agreements and Related
Contract Law Rights and Issues
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Many things can be included in a license agreement,
including many restrictions
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Not the same as sale, so some fair use exceptions or FIRST
SALE DOCTRINE rights need not apply
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Right to modify code is First Sale Doctrine right, so may not be
included in rights of licensee, but always available with sale
Some terms MIGHT be excluded and the contract “reformed”
by the court as matter of public policy
Contracts may not include terms which are illegal,
impossible, unconscionable, or against public policy
Unless reformed, license contract sets the terms
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Computer Crimes
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Most computer crimes involve insiders
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More than 30% and possibly more than 50%
of major firms experience computer crime
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Hacking happens, but generally with inside help
Increasing computer crime and associated costs
Why are reported statistics much lower?
Computer crime analogy to sexual assault
Cost of prevention versus cost of recovery
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Hackers, Crackers, and Phrackers
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Hackers are intentional criminals
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Crackers are motivated by fun & challenge
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Breaking in systems with intent to steal or harm
Beating the system to prove it can be done
However, harm often results unintentionally
Regardless of intent, unauthorized intrusion is
criminal in most jurisdiction, but penalties vary
Phraker is hacker or cracker of phone
networks, often for free calling access
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Group Project: Start NOW!!!
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Group assignments made for those who have
not yet selected groups for their project
Individual assignment helps to prepare you
for group project, as questions overlap some
Start working on Group project soon, as time
will fly fast and be gone before you realize it!
Bonus incentive: Turn in DRAFT of Group
project before December 2, and free review
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