ELC 200 Day 18
ELECTRONIC COMMERCE
From Vision to Fulfillment
Third Edition
Elias M. Awad
© 2007 Prentice-Hall, Inc
12-1
Agenda
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Questions from Chapter 11?
Forum points assigned, will be added to assignment total
upon final grade calculation
• Assignment 5 Corrected
– 7 A’s, 1 B, 1 C, 3 D’s, 4 F’s & 1 non-submit
– 3 partial question 1 and 2 partial question 2
• Assignment 6 Due
• Assignment 7 Posted
– 1 more 2 go
– Due April 10
• Quiz 3 will be on April 7
– Chap 7, 8, 9, 10 & 11
• ECommerce Initiative Frameworks
– Guidelines
– Due MAY 7 @ 10 AM
• Discussion on E-Core Values: Ethical, Legal,
Taxation, and International Issues
© 2007 Prentice-Hall, Inc
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End of days? (subject to change)
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•
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Today
– Chap 12 ECore Values
– Assignment 6 due
– Assignment 7 posted
April 3
– Chap 16 Going on line
April 7
– Quiz 3
– Chaps 7, 8, 9, 10 & 11
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•
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– 20 M/C and 4 short essay
•
April 10 & 14
– Chap 13 eSecurity and the
USA Patriot Act
– Assignment 7 due April 10
– Assignment 8 Posted
April 17 & 21
– Chap 14 Encryption
– Assignment 8 Due April 21
April 24 & 28
– Chap 15 getting the money
– Optional Assignment 9??
May 1
– Quiz 4
– Chapters 12  16
– 20 M/C and 4 short essay
•
© 2007 Prentice-Hall, Inc
May 7 @ 10 AM
– eCommerce frameworks
due
– Student presentations
• 5 Mins!
12-3
E-Core Values: Ethical, Legal,
Taxation, and International Issues
ELECTRONIC COMMERCE
From Vision to Fulfillment
Third Edition
Elias M. Awad
© 2007 Prentice-Hall, Inc
12-4
The focus of this chapter is on
several learning objectives
• Ethical issues and how to improve the ethical
climate in e-commerce
• Legal issues in terms of liability, warranties,
copyrights, trademarks, and trade names
• Taxation issues, legal disputes, and domain name
disputes
• Encryption laws and what they mean
• International issues, especially with regard to
intellectual property and developing countries
© 2007 Prentice-Hall, Inc
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Issues
• Corruption is virtually everywhere
• The computer does not need ethics (Computers are too
stupid to be unethical); it is the user who needs ethics
• The legal, moral, and ethical implications of the Internet are
attracting a lot of attention among industries and
governments around the world
• There is no doubt the Internet has promoted tax evasion and
privacy issues that are causing a nightmare for the law
• No single place owns the Internet, but every state and
country tries to control it
© 2007 Prentice-Hall, Inc
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Issues (Cont’d)
• Today an e-business can easily break the law
anywhere
• E-commerce operates in a legal environment
• The issues of legal, moral, and ethical
environments become truly daunting
• So what is the difference between
– Legal
– Moral
– Ethical
© 2007 Prentice-Hall, Inc
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Ethics
• Justice, equity, honesty, trustworthiness, equality,
fairness
• Subjective feeling of being innately right
• An unethical act is not the same as an immoral or
an illegal act, although one may lead to the other
• Several factors influence ethical judgment
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Individual (family, associates)
Community, societal (social norms)
Professional (code of ethics)
Belief system (religious or personal)
Legal
© 2007 Prentice-Hall, Inc
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Factors Influencing Ethical
Decision Making
© 2007 Prentice-Hall, Inc
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Code of Ethics
• A declaration of the principles and beliefs that
govern how employees of a corporation or an
association are expected to behave
• Examples
– http://www.marketingpower.com/content435.ph
p
– http://www.cirp.org/library/ethics/intlcode/
– http://ethics.navy.mil/corevaluescharter.asp
© 2007 Prentice-Hall, Inc
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What Is Computer Ethics?
• Computer ethics is that branch of applied ethics that
looks at the social and ethical impact of information
technology
• One source suggests that ethics means acceptance
that the Internet is not a value-free zone or something
apart from civil society
• How do we apply up to 170 separate and different legal
systems to the Internet?
• Topics in computer ethics:
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Computer crime
Privacy
Intellectual property
Globalization
Computers in the workplace
Security
© 2007 Prentice-Hall, Inc
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Major Threats to Ethics
• Faster computers and more advanced networks
• Sophisticated global telecommunications
• Massive distributed databases
• Ease of access to information and knowledge
bases
• Transparency of software
• The idea that captured information can be used as
a competitive weapon
– Business is war!
• Corporate Espionage
© 2007 Prentice-Hall, Inc
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Improving the Ethical Climate
• Top managers should act as role models
• Establish a code of ethics
• Unethical behavior should be dealt with promptly according
to criteria and procedures set in advance
• Set up and support a strong ethics training program for all
new employees and reinforce training on a regular basis
• Motivate employees to focus on honesty, integrity, fairness,
and justice as goals
© 2007 Prentice-Hall, Inc
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10 Commandments of Internet Conduct
1.
2.
3.
4.
5.
6.
Thou shall not use a computer to harm other people
Thou shall not interfere with other people’s computer work
Thou shall not snoop around in other people’s files
Thou shall not use a computer to steal
Thou shall not use a computer to bear false witness
Thou shall not use or copy software for which you have
not paid
7. Thou shall not use other people’s computer resources
without authorization
8. Thou shall not appropriate other people’s intellectual
output
9. Thou shall think about the social consequences of the
program you write
10. Thou shall use a computer in ways that show
consideration and respect
© 2007 Prentice-Hall, Inc
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Issues and Ethics
Implementation
• Top corporate officer sets the tone for the kind of image the
company will have
– http://jurist.law.pitt.edu/paperchase/2006/05/ex-enronexecutive-found-guilty.php
• What to do about employees who spend much of their time
on non-productive or non-business-related Internet
browsing
• Is it ethical for a company to track employee e-mail?
• Managers can have problems in controlling unproductive
Internet surfing
• Business ethics is closely tied to corporate culture and
values
• Self-assessment is a question-and-answer procedure that
allows individuals to appraise and understand their personal
knowledge about a particular topic
© 2007 Prentice-Hall, Inc
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The Privacy Factor
• Privacy is a basic American value
• Inadequately addressed in e-commerce
• The Online Personal Privacy Act
– http://thomas.loc.gov/cgibin/bdquery/z?d107:s.2201:
• The Patriot Act
– http://thomas.loc.gov/cgibin/bdquery/z?d107:h.r.03162:
• Personalization in online services creates privacy
conundrums
© 2007 Prentice-Hall, Inc
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Five Principles of Privacy
Protection
• Notice
• Choice
• Access
• Security/Integrity
• Enforcement
© 2007 Prentice-Hall, Inc
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Categories of Information Privacy
Concern
• Who owns electronic data that businesses store
about consumers?
• Security of electronic data transmissions
• Unauthorized reading of personal data files
© 2007 Prentice-Hall, Inc
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Chief Privacy Officer?
• Privacy regulations
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HIPAA
Sarbanes-Oxley Act
Gramm-Leach-Billey Act
FERPA
• Legal compliance is the number one priority in running an
online business
• The Chief Privacy Officer (CPO) is a compliance job
• http://www.privacyassociation.org
© 2007 Prentice-Hall, Inc
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The Legal Question of Liability
• Product liability - tort that makes a manufacturer liable if its
product has a defective condition that makes it
unreasonably dangerous to the user or consumer
• Strict liability - a seller is liable for any defective or
hazardous products that unduly threaten a user’s safety
• Companies may be liable if employees using mobile tools
are involved in accidents
• The application of the negligence doctrine to today’s
technological society
© 2007 Prentice-Hall, Inc
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Tort Law on the Internet
• Tort: a wrongful act subject to civil action
• Tort Law: a special area of law focused on
remedying wrongs between parties
• Fraud: the intent to deceive
• Negligence: failing to take a certain action, which
in turn causes injury or material loss to another
• False Advertising: advertising the availability of a
product or a service when no such thing is
available
• Misrepresentation: claiming a product will
perform certain functions when in fact it cannot
© 2007 Prentice-Hall, Inc
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Warranties
• Uniform Commercial Code (UCC): a law
drafted by the National Conference of
Commissioners on Uniform State Laws,
which governs commercial transactions
• Warranty: an assurance made by the
seller about the goods sold
• Express Warranty: a warranty offered
orally or in writing by the maker of the
product
© 2007 Prentice-Hall, Inc
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Warranties (Cont’d)
• Implied Warranty: a warranty that arises
automatically from the fact that a sale has been
made and the assumption that the product will do
what it is supposed to do
– http://www.maine.gov/tools/whatsnew/index.php?topic=
AGOffice_Consumer_Law_Guide&v=article&id=27922
– Maine is only 1 of 10 states that have an
“implied warranty” law
• Disclaimer: evidence of the seller’s intention to
protect the business from unwanted liability
© 2007 Prentice-Hall, Inc
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Liability
• Designer’s Liability
– Out-of-bounds error: an error that occurs because
either the software did not have the expertise to address
the particular problem or the designer improperly
condensed the technology
– Nontrivial error: an error that triggers other areas in
the software to malfunction and is difficult to correct
– Doctrine of respondent superior
• User’s Liability
– Passive negligence: negligent by omission
– Affirmative duty
© 2007 Prentice-Hall, Inc
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Copyrights, Trademarks, and Trade
Names
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Intellectual property: includes software, books, music, videos,
trademarks, copyrights, and Web pages
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Copyright: ownership of an original work created by an author
– Copyright law is a law that gives the author or creator of a
tangible product the right to exclude others from using the
finished work
– Protected works include:
• Graphic works
• Web sites
– Good for the life of its author plus an additional 70 years after
the author’s death
•
The Digital Millennium Copyright Act (DMCA)
• Trademark: registration of a company’s trade name so that
others cannot use it; a word or a symbol that distinguishes a good
from other goods in the market (registered with Patent Office)
© 2007 Prentice-Hall, Inc
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Taxation Issues
• Sales tax is a very controversial issue
• On the Internet, tax collection is not easy
• The rules for taxation differ by country
• All indicators suggest that sales-tax revenue loss is
projected to increase exponentially unless something is
done to collect the tax
• Internet Tax Freedom Act
© 2007 Prentice-Hall, Inc
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Taxation Issues (Cont’d)
• Internet Tax Freedom Act
– A three-year moratorium on special, multiple,
or discriminatory taxes on the Internet that
would be imposed by any state or local
governments
– An advisory committee to explore different
issues relating to Internet taxes, government
Internet policy, and its effects on e-commerce
– The federal government is barred from taxing
the Internet or any transaction that takes place
through it
© 2007 Prentice-Hall, Inc
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Internet Taxation Today
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US
– ITFA extended on October 30, 2007 for 7 more years
– Sales Tax Fairness and Simplification Act (H.R. 3396) in hearings
• http://www.ncsl.org/programs/fiscal/tctelcom.htm
EU VAT still in place
– https://secure.hmce.gov.uk/ecom/voes/welcome.do;jsessionid=
26E449F8278200994D04BD766AEC3432
WTO – no internet taxes
More Info
– http://www.cob.sjsu.edu/nellen_a/e-links.html
More information on Internet taxation
– Internet_taxation.ppt
© 2007 Prentice-Hall, Inc
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Jurisdiction
• The legitimate scope of government power
• Whose laws apply?
• State and federal laws limit a court’s jurisdiction
over a defendant from another state
• International jurisdiction is especially complex
and controversial
– In an international dispute over e-commerce,
whose laws apply?
– Violations of IP
© 2007 Prentice-Hall, Inc
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Guidelines Regarding Domain
Names and Trademarks
• Find out whether the proposed domain name infringes on
any trademarks
• Secure federal trademark registration of the proposed name
• Register the proposed domain name with InterNIC,
http://www.internic.net
• In the event of a poached domain name, bring a lawsuit to
force InterNIC to reassign the name to the original owner
• Get permission before linking to other Web sites
© 2007 Prentice-Hall, Inc
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International Issues
• What right does any one country have to determine the
materials that should be available on the Internet?
• Can a country regulate an entity in cyberspace, but not on
the soil of that country?
• World Intellectual Property Organization (WIPO) succeeded
in two treaties to adapt copyright rules for e-commerce
• EU’s Electronic Commerce Directive gave online business
firms assurance, in 2000, that the firms would have to
comply with laws only where the firms are based, not in any
other country in the union
© 2007 Prentice-Hall, Inc
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International Issues (Cont’d)
• Digital Millennium Copyright Act of 1998
• EU’s Rome II Directive hopes to allow consumers
to sue e-businesses in their home country
• Hague Convention drafted a treaty in 1992
designed to set global standards for defamation,
copyright, and libel on the Internet
© 2007 Prentice-Hall, Inc
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Intellectual Property
• Intellectual property describes the ideas,
inventions, technologies, music, and literature
that are intangible when created and are
converted into tangible products for market
consumption
• IP laws and cultural norms vary from country to
country
© 2007 Prentice-Hall, Inc
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Management Implications
• Legal rules that define the Internet are yet to be clarified
• Long-range effect of Internet patents, especially those held
by e-companies like Amazon.com that cover fundamental
online business practices
• Ultimate goal in doing business on the Internet is to
promote standards that everyone can accept or adopt
• Management must focus on legal and consumer protection
issues surrounding B2C e-commerce
© 2007 Prentice-Hall, Inc
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Chapter Summary
• Legal and ethical implications of the Internet are
attracting attention in industries and governments
around the world
• Question of ethics in e-commerce is the current
challenge confronting U.S. organizations
• Several threats to ethics
• Privacy is a basic American value
• Many of the legal questions that arise in ecommerce are not settled due to lack of specific
laws or legal guidelines
© 2007 Prentice-Hall, Inc
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Chapter Summary (Cont’d)
• Internet copyright and trademark violations fall
under intellectual property laws
• The question of whether a Web site is a product or
a service elicits varied opinions
• On the Internet, tax collection is not easy
• The ultimate goal of doing business on the
Internet is to promote ethics through standards
that everyone can accept or adopt
© 2007 Prentice-Hall, Inc
12-36