Business Law and the Regulation of Business Chapter 48: CyberLaw By Richard A. Mann & Barry S. Roberts

Topics Covered in this Chapter A.Defamation B.Intellectual Property C.Contracts and Sales D.Privacy and the Internet E.Securities Regulation F.Cyber Crime

Defamation n Definition of Defamation - a false communication that injures a person’s reputation. n Communications Decency Act of grants Internet service providers immunity from liability for defamation when publishing information originating from a third party.

Copyrights n Copyrights are the exclusive right to original works of authorship -- including computer programs. No Electronic Theft Act (NET Act) amended Federal copyright law to prohibit willful infringement even if not for personal profit.No Electronic Theft Act (NET Act) amended Federal copyright law to prohibit willful infringement even if not for personal profit. Digital Millennium Copyright Act (DMCA) prohibits circumventing, as well as creating or trafficking in devices that circumvent, a technological protection measure put in place by a copyright owner to control access to or copying of a copyrighted work.Digital Millennium Copyright Act (DMCA) prohibits circumventing, as well as creating or trafficking in devices that circumvent, a technological protection measure put in place by a copyright owner to control access to or copying of a copyrighted work.

Trademarks n Trademarks or trade symbols include trademarks, service marks, certification marks, and collective marks. Lanham Act protects marks that are distinctive and not immoral, deceptive, or scandalous.Lanham Act protects marks that are distinctive and not immoral, deceptive, or scandalous. Anticybersquatting Consumer Protection Act protects the owner of a mark against any person who, with a bad faith intent to profit from that mark, registers or uses a domain name which, at the time of its registration (1) is identical or confusingly similar to a distinctive mark, (2) dilutes a famous mark, or (3) is a protected trademark, word, or name.Anticybersquatting Consumer Protection Act protects the owner of a mark against any person who, with a bad faith intent to profit from that mark, registers or uses a domain name which, at the time of its registration (1) is identical or confusingly similar to a distinctive mark, (2) dilutes a famous mark, or (3) is a protected trademark, word, or name.

Patents n Patents - utility patents protect the exclusive right to an invention for twenty years from the date of application if the invention is novel, useful, and not obvious; patent protection has been granted for some Internet business methods.

Trade Secrets n Trade Secrets - commercially valuable, secret information; the Federal Economic Espionage Act prohibits the theft of trade secrets (including downloading or uploading such information) and provides criminal penalties for violations.

Governing Law n Contracts are primarily governed by State common law; Article 2 of the Uniform Commercial Code (UCC) governs the sale of goods. n Uniform Computer Information Transaction Act (UCITA) - applies to agreements to create, modify, transfer, or license computer information or informational rights in computer information.

Uniform Computer Information Transaction Act n Transfer Contracts - UCITA applies to transfers of computer programs or multimedia products, software, and multimedia development contracts. n Access Contracts - UCITA applies to contracts to enter the information system of another to obtain information or use that information system for specific purposes.

Electronic Records n Electronic Records include contracts or transactions entered into online or by . The Uniform Electronic Transactions Act (UETA) - State law that gives full effect to electronic contracts and signatures.The Uniform Electronic Transactions Act (UETA) - State law that gives full effect to electronic contracts and signatures. The Electronic Signatures in Global and National Commerce (E-Sign) - Federal law that makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce.The Electronic Signatures in Global and National Commerce (E-Sign) - Federal law that makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce.

Noncompete Agreements n Noncompete Agreements by employees are enforceable if: –(1) the purpose of the restraint is to protect a property interest of the employer and –(2) the restraint is no more extensive than is reasonably necessary to protect that interest. (In determining the reasonableness of restraint, courts considers the rapid evolution of business practices in the Internet industry.)

Personal Identifiable Information n Protection of Personal Identifiable Information on the Internet - almost all Internet sites collect personal identifiable information on their users. Privacy and Intrusion by Private Parties - currently an individual is accorded very limited rights with regard to online privacy invasions. Privacy and Intrusion by Private Parties - currently an individual is accorded very limited rights with regard to online privacy invasions. Protecting Children COPPA - protects children under thirteen from commercial Websites that collect, store, and distribute their personal data.Protecting Children COPPA - protects children under thirteen from commercial Websites that collect, store, and distribute their personal data.

Unwanted Intrusion n Freedom from Unwanted Government Intrusion - the U.S. Constitution protects an individual’s privacy from intrusion by the government. n Intrusions by Employers - the actions of private employers are not governed by the U.S. Constitution with regard to the individual’s privacy.

Regulation of Securities Issuances n The Securities Act of 1933 requires disclosure of accurate material information in all public offerings of nonexempt securities unless the offering is an exempt transaction and prohibits fraud in all issuances of securities.

Regulation of Secondary Distributions n The Securities Exchange Act of 1934 requires regulated, publicly held companies to register their securities and subjects them to the Act’s periodic reporting requirements, short-swing profits provision, tender offer provisions, and proxy solicitation provisions; issuers of securities, whether registered under the 1934 Act or not, must comply with the antifraud and antibribery provisions of the Act.

Electronic Media n The SEC permits the use of electronic media for the delivery of information required by the Federal securities laws if the media provide notice, access, and evidence of delivery comparable to that provided by paper delivery. n EDGAR (Electronic Data Gathering, Analysis, and Retrieval) - SEC’s computer system that performs automated collection, validation, indexing, acceptance, and dissemination of reports required to be filed with the SEC.

Permitted Securities Activities over the Internet n Registered Public Offerings - disclosure of certain documents required by the 1933 Act may be made over the Internet so long as electronic delivery to provide notice, access, and evidence of delivery comparable to that provided by paper delivery.

Permitted Securities Activities over the Internet n Regulation A permits an issuer to offer up to $5 million of securities in any twelve month period without registering them if the issuer files an offering statement with the SEC’s regional office prior to the sale of the securities and provides an offering circular to offerees and purchasers; Regulation A has been used to issue securities over the Internet.

Permitted Securities Activities over the Internet n Private Offerings under Regulation D are exempt from registration under the 1933 Act but general advertising or solicitation is not permitted and the securities may be purchased by an unlimited number of accredited investors and by no more than thirty-five other purchasers; the SEC has approved posting notice of an Internet-based, private offering in a password-protected page of a Website accessible only to members who had previously qualified as accredited investors.

Fraudulent Use of the Internet n The Internet has expanded the possibilities for securities fraud and created additional challenges for recovery of money defrauded; the SEC is responding through an evolving program of education, surveillance, and litigation.

Cybercrime n Definition - any crime committed or facilitated by a computer including crimes using computers as instruments of the crime and crimes with computers as targets of the crime. n Laws - every State as well as the Federal government has enacted laws targeting cybercriminals.