eCommerce Legal Environment
45-848
45-848 ECOMMERCE LEGAL ENVIRONMENT
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COPYRIGHT © 2004 MICHAEL I. SHAMOS
45-848 ECOMMERCE LEGAL ENVIRONMENT
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Lecture 1:
Legal Issues in eCommerce
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Course Administration
• This is a Tepper course
– not an SCS course
– not a law school course
• Based on U.S. law, some international
• 12 lectures (Format: Legal introduction +
eCommerce issues)
• Follows the textbook closely
• Grading
– Two homeworks (60%)
– Final exam (30%)
– Class participation (10%)
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Course Outline
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Legal systems & Jurisdiction
Electronic Speech
Privacy
Copyrights
Patents
Trademarks, domain names
Advertising
Electronic contracts
ePayments
Tax & Antitrust
Crime
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INDIVIDUAL RIGHTS
INTELLECTUAL
PROPERTY
COMMERCIAL LAW
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Example: European Union
Distance Selling Directive (U.K. Version)
• Selling goods or service to consumers via Internet
• Vendor must
– give clear information about the goods or services offered
– send consumer a confirmation
– consumer has 7 working days to cancel for any reason
(exceptions for certain items, such as time-value services)
• Suppose
– The vendor is in the U.S. (e.g. Office Depot)
– Consumer is in the U.K. What’s a consumer?
• Can the consumer cancel?
• Suppose he does. Can the vendor enforce the sale?
Where?
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The Legal Process
• Function of law: prevent and resolve disputes
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Provide predictability in human affairs
Express the will of the legislature
Promote “fairness,” “justice,” “equality”
Prevent “self-help,” violence
Promote confidence in the judicial process
• The structure and functioning of courts is VERY
COMPLICATED
• Legal reasoning is NOT OBVIOUS
• Many smart people don’t understand it
• Many of them are lawyers and judges
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Major World Legal Systems
• Common Law (Anglo-American)
– Rights-based, concern for individuals
– Courts follow the reasoning of other courts (precedent)
– Courts interpret (and effectively modify) the law
– US, UK, Canada, Australia, Hong Kong, former British colonies
• Civil Law
– Duty-based, concern for the will of the legislature
– Judge applies elaborate written codes to factual situations, little
judicial discretion
– Europe, Japan
– Korea: civil law + Japanese + American
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Major World Legal Systems
• Socialist Law
– Concern for acts as they affect the state
– Russia, PRC
– Teaching function
• Islamic Law
– Church = state
• “Islam” means “submission to Allah’s will”
• Judges answerable to God
– Creative resolution of disputes (= unpredictability)
– Iran, Iraq, Saudi Arabia, Pakistan
– “Modern” Middle East countries mix Islamic + Civil, e.g. Egypt
– Pakistan: common law + Islamic
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U.S. Balance of Powers
U.S. Constitution + Treaties
EXECUTIVE:
ENFORCES LAWS
LEGISLATURE:
MAKES LAWS
JUDICIARY:
INTERPRETS LAWS
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U.S. COURT SYSTEM
ORIGINAL
JURISDICTION
CIVIL APPEALS
U.S. SUPREME
COURT
CRIMINAL APPEALS
AGENCY APPEALS
FEDERAL
COURTS
CIRCUIT
COURTS OF
APPEALS (12)
APPEAL AS
OF RIGHT
SPECIAL
(e.g. PATENT
OFFICE)
APPEALS
STATE SUPREME
COURTS
APPEAL BY
PETITION
“SPECIAL”
COURTS OF
APPEALS
CONSTITUTIONAL
APPEALS ONLY
ORIGINAL
JURISDICTION
STATE
COURTS
APPEAL BY
PETITION
COURT OF
APPEALS
(SEVERAL
DIFFERENT
TYPES)
COURT OF
APPEALS
APPEAL AS
OF RIGHT
SOME
FEDERAL
AGENCY
APPEALS
REMOVAL
U.S. DISTRICT
COURTS (91)
TRIAL
COURTS
(CIVIL)
TRIAL
COURTS
(CRIMINAL)
CASES
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The 11 U.S. Judicial Circuits
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Precedent
• Courts rely on “precedent” (decide same question the
same way each time)
– Anglo-American concept; promotes predictability
• Courts must follow decisions of higher courts in their
appellate chain
• Court almost always follow their own prior decisions
• Courts usually follow decisions of courts at the same
level on the same facts and law
• Courts sometimes follow the reasoning of courts in
other countries having the same legal tradition
• Courts consider the reasoning used by lower courts
• For a decision to have any value as precedent, there
must be a written opinion
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Enforcement
• Courts issue orders and judgments
• Orders (commands that must be obeyed)
– Injunctions (enforced by contempt power or marshal)
– Seizure (enforced by sheriff or (federal) marshal)
• Judgments (declaration of rights)
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A owes B money
C, not D, is the rightful owner of piece of property P
D’s lease has expired and D must vacate the land
Enforced by the sheriff
• A doesn’t pay: sheriff takes his assets
• D doesn’t leave: sheriff puts D in jail
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Volume 121
Federal Supplement, Second Series (District Courts)
Page 156
Who brought the case
Court
Abstract
(Summary)
Who opposes the case
Case #
Date of Decision
Result
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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 peaceably to assemble,
– and to petition the Government for a redress of
grievances.” (1791)
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Regulation
• Administrative agencies of the government have
“rulemaking” (regulatory) power
• Examples:
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SEC regulates securities offerings and markets
Dept. of Agriculture inspects meat
FAA issues airline safety regulations
Comptroller of the Currency regulates certain banks
Patent & Trademark Office issues patents
• Where do these powers fit into the legislative
scheme?
• Rules have the force of law (unless they are
inconsistent with statute)
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Example: Federal Trade Commission
• [Primary U.S. eCommerce enforcement agency]
• Established by Federal Trade Commission Act, 15
U.S.C. §41ff (1914).
– “Unfair methods of competition in or affecting commerce,
and unfair or deceptive acts or practices in or affecting
commerce, are hereby declared unlawful.” 15 U.S.C.
§45(a)(1)
– “The Commission is hereby empowered and directed to
prevent persons, partnerships, or corporations, [exceptions]
from using unfair methods of competition in or affecting
commerce and unfair or deceptive acts or practices in or
affecting commerce.” 15 U.S.C. §45(a)(2)
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What’s Commerce”?
• For purposes of the Federal Trade Commission:
– ''Commerce'' means commerce among [the several States or
with foreign nations, or in any Territory of the United States
or in the District of Columbia, or between any such Territory
and another, or between any such Territory and any State or
foreign nation, or between the District of Columbia and any
State or Territory or foreign nation]. 15 U.S.C. §44
• The definition of “commerce” is different for different
purposes
– “The term ‘commerce’ means trade, traffic, commerce,
transportation, or communication among [. . .] 29 U.S.C.
§152 (National Labor Relations Act)
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Example: Federal Trade Commission
• Enforces 37 different acts of Congress relating to
antitrust and unfair trade practices
• Powers:
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Rulemaking
Investigation (“investigative demand” equiv. to subpoena)
Inspection
Enforcement
• Issue cease-and-desist orders
– Refer criminal cases to the Attorney General
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Federal Rulemaking
• In general, government agencies may prescribe rules
and regulations “not inconsistent with law” in
furtherance of their mission
• Example: setting time limits, fees, fines, procedures
– Must publish “notice of proposed rulemaking” in the Federal
Register
– Provide a period of public comment
– Possibly hold hearings
– Notify Congress
– “Interested persons” may petition for “issuance, amendment
or repeal” of a rule
– The rule becomes a “regulation having the effect of law”
without further approval
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Appeals From Agency Decisions
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Agencies are bound by their own rules
Must appeal within agency before going to court
Administrative Procedure Act, 5 U.S.C. §500ff:
Court shall “hold unlawful and set aside” actions that are:
 arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;
 contrary to constitutional right, power, privilege, or
immunity;
 in excess of statutory jurisdiction or authority;
 without observance of procedure required by law;
 unsupported by substantial evidence; or
 unwarranted by the facts
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Example: Federal Trade Commission
• Standard for issuing cease-and-desist orders
– “causes or is likely to cause substantial injury to consumers
which is
not reasonably avoidable by consumers themselves and
not outweighed by countervailing benefits to consumers or to
competition”
• Review
– Administrative Procedure Act: District Court for D.C.
– Cease-and-desist orders: U.S. Courts of Appeals
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Subject-Matter Jurisdiction
• Subject matter jurisdiction
– Does the court have the power to decide this kind of case?
– Examples:
• patent cases are federal only
• contract cases between citizens of one state are state
only
• Iowa can’t try Pennsylvania crimes
• a state can’t sue another state in any state court
– Who decides? The court decides on its own jurisdiction.
– This seems circular, but how else to do it?
• Can’t have one court deciding jurisdiction for every case
• Jurisdiction can be appealed
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Venue
• Which court (of all the courts having jurisdiction)
should hear a case?
– Rules & statutes specify which courts should hear cases
• Forum non conveniens (“inconvenient place”)
– A different court is better positioned to hear a case
• Forbearance, abstention
– Court refuses to hear a case
• Writ of prohibition
– one court orders another not to hear a case
– court forbids a person to file a case elsewhere
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Statutory Interpretation
• Technology can outpace the language of statutes
• Courts must determine the meaning of statutes in
new fact situations
• Principles of statutory interpretation:
– If the statute is unambiguous, it must be applied literally
– If it is ambiguous, determine legislative intent
• Look at transcripts of hearings!
– Every word matters
– Statutory Construction Act, 1 Pa. C.S. §1921
– Particular governs over the general
– Inconsistency: later clause (by date or position) wins!
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Ejusdem Generis (“of the same kind”)
• People v. Bugaiski, 224 Mich. App. 241 (1997). Bugaiski shot a
dog he claimed was attacking his own dog. Criminal
prosecution under the dog law of 1919. Defenses:
– “Any person . . . may kill any dog which he sees in the act of
pursuing, worrying, or wounding any livestock or poultry or
attacking persons, and there shall be no liability on such person, in
damages or otherwise, for such killing.”
– “Livestock” means horses, stallions, colts, geldings, mares, sheep,
rams, lambs, bulls, bullocks, steers, cows, calves, mules, jacks,
jennets, burros, goats, kids and swine, and fur-bearing animals
being raised in captivity.
• Bugaiski claimed his own dog was livestock since it was a “furbearing animal raised in captivity.”
• No. Under ejusdem generis only animals “of the same kind” as
those listed are included. Prosecution can proceed.
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New York Times Co. v. Tasini, 533 U.S. 483
(2001)
• Times paid freelance writers for stories, then later sold copies of
the articles as part of an online database for a fee.
• The writers sued, claiming copyright infringement.
•
“In the absence of an express transfer of the copyright or of any rights
under it, the owner of copyright in the collective work is presumed to
have acquired only the privilege of reproducing and distributing the
contribution as part of [1] that particular collective work, [2] any revision
of that collective work, and [3] any later collective work in the same
series.” 17 U.S.C. 201(c) .
• The Times claimed that the Internet copy was a “revision” under
the statute.
• District court agreed. Reversed on appeal. Supreme Court
affirmed June 25, 2001
• Ejusdem generis says no. Clause 2 must be interpreted in the
context of clauses 1 and 3, which set the upper and lower limits
of the right. Use must be of the same kind, not unrestricted use.
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Major Ideas
• World legal systems are not in harmony
– Many different implementations of eCommerce law
• Predictability is crucial
– (Fairness is secondary)
• The Anglo-American system promotes predictability
• Agency regulations have the force of law
• The Federal Trade Commission is the primary U.S.
eCommerce enforcement agency
• Old statutes need to be interpreted to determine their
meaning when applied to new technology
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Q&A
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