Legal and Ethical Issues
in E-Commerce
Major Legal and Ethical Issues in
Electronic Commerce
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Privacy
Intellectual Property
Free Speech
Taxation
Computer Crimes
Consumer Protection
Miscellaneous
Legality vs. Ethics
• Illegal acts break the law while unethical acts
may not be illegal
• Ethics
– Branch of philosophy that deals with what is
considered right or wrong
– Right and wrong not always clear
– Consider
• Company sells profiles of customers with information
collected through cookies
• Company allows personal use of Web but secretly monitors
activity
• Company knowingly sells tax software with bugs
Privacy Issues
• Information privacy: claim of individuals,
groups, or organizations to determine
when and to what extent information about
them is disseminated.
• Right to privacy is not absolute
• Public’s right to know superceded
individuals right to privacy
How is private information
collected?
• Reading your newsgroup postings
• Finding you in an Internet Directory
• Making your browser collect information about
you
• Recording what your browser says about you
• Reading your email
» From Rainone, et al, 1998)
• Most common methods are cookies and site
registration
Web Site Registration
• Must fill in registration to get to site
• Sometimes sold to third parties
• User survey found (Eighth User Survey, 1998)
– 40% users falsify information
– Nearly 67% (US and Europe) don’t register because
of privacy concerns
– Nearly 57% say they don’t trust sites collecting
information
– Only 6% will always register when asked
Cookies
• Help maintain user status
• A temporary passport
• Used for
– Customizing sites (Yahoo)
– Improve online services (Amazon)
– Collect demographics and usage statistics
(Doubleclick)
• Protection
– Delete cookies
– Anti-cookie software
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PGP’s Cookie Cutter
Luckman’s Anonymous Cookie
CookieCrusher
Cookie Monster
Five Principles of Privacy
Protection
• Notice/Awareness
– Notice of collection practices prior to collecting information
• Choice/consent
– Consumers to be made aware of options and give consent
• Access/participation
– Must be able to access and challenge information
• Integrity/Security
– Must be assured data is secure
• Enforcement/Redress
– Government legislation or legal remedies
EU’s Data Privacy Directive
• Stronger protection of personal data such
as race, politics, finances, religion, health
and union membership
• Other countries following suit
– Argentina, Australia, Canada, Switzerland and
New Zealand
• Bush rejects EU laws as being unduly
burdensome
• Safe Harbor Agreement is a bridge
between the US and European positions
Principles of Safe Harbor
• Companies must tell consumers how and why personal
data is collected and who it's shared with
• Consumers must be able to request their data not be
shared
• Companies must provide notice and choice before data is
given to third parties
• Consumers must have access to data about them and
have the ability to correct mistakes
• Companies must take reasonable measures to protect
data
• Personal data must be relevant to its intended purpose
• Procedures must be in place to settle complaints and
resolve disputes
Intellectual Property
• Intangible property rights
• In E-Commerce
– Copyrights
– Patents
– Trademarks
• IP Rights are not absolute
– Perishable
– Legal exceptions to allow public use at a specific rate
Copyrighting
• Protects expression of idea – not the idea itself
– Example , pull-down menus cannot be copyrighted
• Confers owner exclusive right to
– Copy the work
– Distribute to the public
• Expires after certain number of years after death
of copyright holder
– 28 years in the US
– 50 years in UK
• Generally, contents of websites are copyrighted
Copyrights Protection
• Digital Watermarks
– Embedded invisible bits in the digital content
– Cannot prevent copying but helps identify who
is doing it
• Validation codes
• Activation or deactivation of software
Patents
• Grants holder exclusive rights on inventions for
fixed time
– 17 years in US
– 20 years in UK
• Innovation must be
– Novel
– Sufficiently inventive step (not trivial)
– Capable of industrial application
• Amazon sued Barnes and Noble for patent
infringement (1-click ordering)
• Priceline has patent on reverse-auction model –
sued Expedia
Trademarks
• Graphical sign used by business to identify their
goods and services
– Type of IP
– Must meet criteria of distinctive, original, and not
deceptive
– Domain names can be trademarked if they meet
above criteria
• WWF won first ever ruling against man who filed
for worldwrestlingfederation.com
Free Speech, Internet Decency,
Spamming, and Censorship
• Censorship – attempts to control material on the
Web
• Communications Decency Act (CDA) was
passed by Congress but later ruled
unconstitutional
• Protecting Children
– Parental control
– Governmental control
– ISP accountability
• AOL does not allow hate sites
• CompuServe was forced by Germany to shut down 200
newsgroups related to sex – CompuServe forced to shut
them down worldwide
Spamming
• Indiscriminate distribution of messages without
permission of receiver
• Spam comprised 30% of all AOL mail in 1998
– Now down to 10% with spam blockers
• Some legislation out there
– Unsolicited Commercial Electronic Mail Act
• Requires all spam to start with word “advertisement”
• Includes name and address of sender
Taxation
• Internet Tax Moratorium Act (1998-2001)
– prohibits states from taxing the fees that
Internet service providers collect for providing
Internet service and from collecting Internetspecific taxes on e-commerce transactions
• President George W. Bush signed into law
a bill from Congress proposing a new twoyear moratorium extension (starting Nov. 29,
2001)
Other Issues
• Consider on your own
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Electronic contracts
Online Gambling
Validity of electronic documents
Time and date on documents across borders
Which country has jurisdiction over E-Commerce
transaction
– Can web site link to another without permission
• Example Ticketmaster vs. Microsoft
New Frontiers in E-Commerce:
M-Commerce and L-Commerce
Mobile Vignettes
• Bus riders in San Francisco can find when the
next bus is due from their cell phone or Palm VII
– NextBus tracks in real time
• Dine One One – uses AT&T PocketNet service
to link driver cell phones to central network.
– System locates and notifies driver to get to restaurant
– Emails order to restaurant
– Food ready to be delivered
• DoCoMo I-Mode in Japan offers wireless
services that include shopping guides, maps,
ticketing, news, gambling, dining and
reservations
What is M-Commerce?
• Also known as pervasive computing
– E-commerce done in a wireless environment
– Any transaction with a monetary value that is
conducted via a mobile telecommunications
network.
Attributes of M-Commerce
Characteristics
Mobility
Value-Added
Attributes
Product and service
localization
Product
personalization
M-Commerce
Ubiquity
Instant connectivity
Reachability
Convenience
Other Drivers of E-Commerce
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Widespread availability of devices
No need for PC
Cell phone culture
Vendors push
Declining prices
Improvement in bandwidth
E-commerce growth in general
Digital divide (more cell phones in developing
countries)
Generations of Mobile networks
• First Generation (1G)
– 1979-1992
– Analog cell communications
• Second Generation (2G)
– Digital Technology in place today
– Mostly text
• 2.5G
– Interim technology based on standards (GPRS and EDGE) that
can accommodate graphics
• Third Generation (3G)
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Non-IP based interface
Supports rich multimedia
2001 – introduced in Japan
2002 – introduced in Europe
2003 – Verizon introduces 3G in US
3G Communications
• Global wireless communication technology that
makes possible packet-based transmission of
digitized voice, data and video
• ITU Guidelines from 2000
– 2Mbits/s for fixed position
– 144Kbits/sec in moving vehicles
– Allow global roaming
• Race for spectrum
– 1710 to 1855 MHz and 2520 to 2670 MHz
– 1.7GHz currently used by military for satellite control
– Billions of $ plus a decade to change
Where are we today?
• The first 3G network released in Japan,
Oct. 1, 2001.
• This new service will allow users to
receive data at six to 40 times faster than
current speeds, making fast mobile
Internet access and video downloads
possible.
How about 3G in the US?
• On January 28, 2002, Verizon Wireless rolled
out its 3G “Express Network” along the nation’s
east coast, thus making it the first US carrier to
offer such services to the public
(Computerworld, Jan 29, 2002).
• The same day, Cingular Wireless and AT&T
Wireless announced a joint-venture project to
make wireless web access available along 3000
miles of interstate highways in Arizona,
Colorado, Kansas, Minnesota, New Mexico,
Nebraska, Oklahoma, Texas and Utah (AT&T
Wireless News Release, Jan 28, 2002).
A quote from the 3G Forum
• The Promise of 3G technologies is a
combination of high-speed wireless access w/
internet protocol(IP) Based services will bring
the world to your fingertips. It is a world in which
we will be able to check emails, book holidays,
organize share portfolios, hold video
conferences or download video clips of the
latest film, instantly & simply from our mobiles.
The capability of mobile networks to pinpoint a
mobile user’s location opens opportunities for
the creation of new situational information on,
and directions to, the nearest restaurant or
hotel.”
10 Key Trends in M-Commerce
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M-Commerce hype will peak
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Enterprise Applications Will Become the White
Hot Center of Mobile eBusiness
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Over 1 billion phone worldwide capable of Internet
access in 2003
Wireless CRM
Consumer Use of Mobile Will Revolve Around
Information, Not Transactions
Embedded Barcode Readers in Phones
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Sidesteps problem of data entry
Key trends
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Smart Handheld Displays Will Show Some
Improvement
Mobile Security Will Become a Hot Issue
Voice Navigation Will Remain a Work in Progress
Convergence Will Continue, but It Will Still Be a
Multiple-Device World
Advertising Will Continue to Expand to Wireless
Devices
Carriers Must Shift Their Distribution Strategies
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Shift from end users to enterprise
L-Commerce
• “location, location, location”
• Satellite-based location technology that is
capable of finding people on foot or in vehicles
• General Motors Corp. in Detroit has installed over
1 million of its OnStar GPS-enabled systems in
vehicles
• FCC sets 2005 deadline for E911
• Location-tracking technology also creates
potential Big Brother issues
Global Positioning System
• GPS-enabled devices allow exact identification
of location
• Supported by 24 US government satellites
– Orbits earth every 12 hours
– 10,900 miles altitude
– Satellite transmits position and time signal from
onboard atomic clock
– Receivers have synchronized clock
– Using speed of signals (~186,000 mps), possible to
pinpoint location to within 50 feet.
– See www.trimble.com/gps for a tutorial
Obstacles to M-Commerce and LCommerce
• Usability issues
– Effectiveness, efficiency, satisfaction
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Lack of standardized security protocol
Insufficient bandwidth
3G licenses
Transmission limitations
– GPS does not work in cities with skyscrapers
• Power consumption
• Wireless and Health hazards