Presentation on theme: "The Legal Environment of Electronic Commerce"— Presentation transcript:
1 Chapter 7: The Environment of Electronic Commerce: Legal, Ethical, and Tax Issues
2 The Legal Environment of Electronic Commerce Online businesses:Must comply with the same laws and regulations that govern the operations of all businessesFace complicating factorsThe Web extends a company’s reach beyond traditional boundariesThe Web increases the speed and efficiency of business communicationsThe Web creates a network of customers
3 Borders and Jurisdiction Territorial borders in the physical world mark the range of culture and reach of applicable laws very clearlyPowerA form of control over physical space and the people and objects that reside in that spaceA defining characteristic of statehoodJurisdictionAbility of a government to exert control over a person or corporationLegitimacyIdea that those subject to laws should have some role in formulating themNoticeThe expression of a change in rulesConstructive noticeIndividuals become subject to new laws and cultural norms when they cross an international borderImpact of a person’s behavior
5 Jurisdiction on the Internet A court has sufficient jurisdiction in a matter if:it has both subject matter jurisdictiona court’s authority to decide a type of disputepersonal jurisdictionDetermined by the residence of the partiesForum selection clauseStates that a contract will be enforced according to the laws of a particular stateLong-arm statutesCreate personal jurisdiction over nonresidents who transact business in the statePower, effects, legitimacy, and notice do not translate well to the virtual e-commerce worldTo enforce laws governments must establish jurisdiction over business conductContractPromise or set of promises between two or more legal entitiesTortIntentional or negligent action taken by a legal entity that causes harm to another legal entity
7 Use and Protection of Intellectual Property in Online Business Includes all products of the human mindProducts can be tangible or intangibleIntellectual property rightsInclude protections by governments through:Granting of copyrights and patentsRegistration of trademarks and service marks
8 Web Site Content Issues CopyrightRight granted by a government to an author or creator of a literary or artistic workCreations that can be copyrighted include all forms of artistic or intellectual expressionWorks copyrighted by corporations or not-for-profit organizations are protected for 95 yearsFair use of a copyrighted workIncludes copying it for use in criticism, comment, news reporting, teaching, or researchYouTube Deletes 30,000 Files After a Copyright ComplaintTOKYO, Oct. 20 (AP) — The popular video-sharing site YouTube deleted nearly 30,000 files after a Japanese entertainment group complained of copyright infringement. (NY Times 10/23/06)
9 Patent Infringement Patent Exclusive right granted by a government to an individual to make, use, and sell an inventionTo be patentable the invention must be genuine, novel, useful, and not obvious, given the current state of technologyBusiness process patentProtects a specific set of procedures for conducting a particular business activityBusiness methods must be:UsefulNewNon-obvious
10 Trademark Infringement Distinctive mark, device, motto, or implement that a company affixes to goods it producesService markUsed to identify services providedTrade nameName that a business uses to identify itselfCommon lawPart of British and U.S. law established by the history of court decisions
11 Domain Names, Cybersquatting, and Name Stealing Registering a domain name that is the trademark of a person or company and hoping to sell it to that person or company for moneyName changingRegistering misspelled variations of well-known domain namesName stealingOwnership of a site’s assigned domain name is changed to another site and ownerActProtects trademarked names from being registered as domain names by other partiesParties found guilty of cybersquatting can be held liable for damages of up to $100,000 per trademark
12 Defamation Defamatory statement Statement that is false and injures the reputation of another person or companyProduct disparagementIf a defamatory statement injures the reputation of a product or service instead of a personPer se defamationCourt deems some types of statements to be so negative that injury is assumedSee:
13 Advertising Regulation Federal Trade CommissionRegulates advertising in the United StatesPublishes regulations and investigates claims of false advertisingProvides policy statementsPolicies cover specific areas such as:Bait advertisingConsumer lending and leasingEndorsements and testimonials
14 Online Crime, Terrorism, and Warfare Obstacles faced by law enforcement:JurisdictionDifficulty applying laws written before the Internet became prone to criminal actionsOnline warfare and terrorismSustained effort by a well-financed terrorist group could slow down operation of major transaction-processing centers
15 Ethical Issues Principles for handling customer data: Web businesses find ethical issues are important to consider when making policy decisionsElectronic Communications Privacy Act of 1986Main law governing privacy on the Internet todayDifferences in cultures throughout the world have resulted in different expectations about privacy in electronic commercePrinciples for handling customer data:Use data collected to provide improved customer serviceDo not share customer data with others outside your company without the customer’s permissionTell customers what data you are collecting and what you are doing with itGive customers the right to have you delete any of the data you have collected about them
16 Some Examples of Ethical Issues Under what conditions should the privacy of others be invaded?What legitimizes intruding into others’ lives through unobtrusive surveillance, through market research, or by whatever means?Do we have to inform people that we are eavesdropping?Do we have to inform people that we are using credit history information for employment screening purposes?
19 Analyzing Ethical Dilemmas a situation is which there are at least two diametrically opposed actions, each of which supports a desirable outcomeCan use a five-step process to analyze a dilemma
20 Analyzing Ethical Dilemmas 1. Identify and describe clearly the factsFind out who did what to whom, and where, when, and how.2. Define the conflict or dilemma and identify the higher-order valuesEthical, social, and political issues always reference higher valuesIdentify the stakeholdersParties with an interest in the outcome, who have invested in the situation, and have vocal opinionsIdentify the options that you can reasonably takeNone of the options may satisfy all interests involvedIdentify the potential consequences of your options -- and chooseSome options may be ethically correct but disastrous from other points of viewSome options might work once but not over time
21 Candidate Ethical Principles The Golden RuleDo unto others as you would have them do unto youUniversalismIf an action is not right for all situations, then it is not right for any specific situationSlippery SlopesIf an action cannot be taken repeatedly, then it is not right to take at allCollective Utilitarian PrincipleTake the action that achieves the greater value for all of society
22 Candidate Ethical Principles Risk AversionTake the action that produces the least harm, or the least potential cost.choose actions whose consequences would not be catastrophic, even if there were a failureNo Free LunchAssume that virtually all tangible and intangible objects are owned by someone else unless there is a specific declaration otherwiseThe New York Times Test (Perfect Information Rule)Assume that the results of you decision will be the lead article in the New York Times - will the reaction of readers be positive or negative?The Social Contract RuleWould you like to live in a society where the principle you are supporting would become an organizing principle of the entire society?
23 Exercise Downloading music Use the above rules for analysis and principles to analyze (choose one or two and discuss in your group):Downloading musicAdvertising networks (like DoubleClick) who track wWeb surfing behaviorDatamining by retail stores and credit card companiesUsing opt out vs. opt in policiesAnother issue of your choice
24 Communications with Children Children’s Online Privacy Protection Act of 1998 (COPPA)Provides restrictions on data collection that must be followed by electronic commerce sites aimed at childrenChildren’s Internet Protection Act (CIPA)Requires schools that receive federal funds to install filtering software on computers
25 Taxation and Electronic Commerce Income taxesLevied by national, state, and local governments on net income generated by business activitiesTransaction taxesLevied on products or services that a company sellsProperty taxesLevied by states and local governments on personal property and real estate used in businessNexus is the connection between a taxpaying entity and a governmentActivities that create nexus in the United States are determined by state law and thus vary from state to state
26 Taxes U. S. Sales taxes U. S. Income taxes Use tax Levied by a state on property used in that state that was not purchased in that stateIn most states use tax rates are identical to sales tax ratesPurchasers exempt from sales tax include certain charitable organizations andEuropean UnionValue Added TaxMost common transfer tax used in the EUAssessed on the amount of value added at each stage of productionCompanies based in EU countries must collect VAT on digital goodsU. S. Income taxesInternal Revenue Service (IRS)U.S. government agency charged with administering the country’s tax lawsBasic principle of the U.S. tax systemAny verifiable increase in a company’s wealth is subject to federal taxationAny company whose U.S.-based Web site generates income is subject to U.S. federal income tax
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