1. E-MARKETING 5/E JUDY STRAUSS AND RAYMOND FROST Chapter 5: Ethical and Legal Issues ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-1

2. Chapter 5 Objectives  After reading Chapter 5, you will be able to:  Compare and contrast ethics and law.  Discuss the implications of ethical codes and self-regulation.  Identify some of the main privacy concerns within traditional and digital contexts.  Explain some of the important patent, copyright, trademark, and data ownership issues related to the internet.  Highlight key ethical and legal concerns related to online expression. 5-2 ©2009 Pearson Education, Inc. Publishing as Prentice Hall

3. Software Infringement ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-3  Copyright infringement occurs when people or companies loan software to others for which they have no licenses.  Counterfeiting occurs when illegally copied software is duplicated and distributed on a large scale.  Countries with weak software copyright enforcement cost software owners billions of dollars in lost revenue.

4. Software Infringement, cont. ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-4  Globally, over a third of the software sold is an infringing version.  Microsoft uses the following remedies:  Proposes intellectual property legislation.  Files civil lawsuits.  Creates noninfringement technologies.  Microsoft believes that education is the best weapon against piracy. Do you agree?

5. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Ethics and law are closely related.  Ethics takes into account the concerns and values of society as a whole.  Modern technology presents challenges to marketing ethics. Critical issues include:  Ownership of intellectual property  The role of privacy in a virtual world  Freedom of expression  Use of data and its collection  Status of children and digital networks Overview of Ethics and Legal Issues 5-5

6. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Recent U.S. administrations have left the development of the internet to the free operation of the market.  Supporters of self-regulation stress the private sector’s ability to identify and resolve problems.  Critics argue that incentives for self-regulation are insufficiently compelling and true deterrence will not be achieved.  Recent policy-making activities indicate that governments are asserting themselves in areas such as fraud prevention and children’s issues. The Problem of Self-Regulation 5-6

7. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  The concept of privacy encompasses both ethical and legal aspects.  There is constant debate regarding privacy and it has proved to be an elusive concept, both ethically and legally.  Within society, privacy interests compete with concerns for safety, economics, and need for association with others. Privacy 5-7

8. ©2009 Pearson Education, Inc. Publishing as Prentice Hall Privacy Within Digital Contexts  Information plays a pivotal role in the concept of privacy.  AMA Code of Ethics for Marketing on the internet: “information collected from customers should be confidential and used only for expressed purposes.”  Online advertising firms such as DoubleClick have traditionally recorded users’ clickstreams to form user profiles for marketing purposes.  Controversy arose in 2000 when DoubleClick acquired consumer names, addresses, and buying histories and planned to combine the offline data with clickstream data. 5-8

9. ©2009 Pearson Education, Inc. Publishing as Prentice Hall Cookies and Online Data Collection  Cookies are packets of data created and stored on the user’s hard drive in response to instructions received from a Web page.  Cookies serve many purposes:  Create shopping baskets to hold purchases  Recall stored sales information  Collect user data  Cookies are normally executed without any user action.  They allow marketers to pinpoint an individual’s online behavior. 5-9

10. ©2009 Pearson Education, Inc. Publishing as Prentice Hall Privacy Debates and Policy  Privacy supporters advocate policies to inform consumers of data collection and allow them to participate (opt-in) or decline (opt-out).  Critics point out that many users do not understand how computers operate and question whether consumers have the expertise necessary to successfully opt-out.  Others argue that users wish to receive the benefits of targeted advertising.  Access to personal data is another important online privacy issue.  Although several Congressional bills are pending, no law exists to resolve the privacy debate. 5-10

11. Other Privacy Issues ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-11  Technologies such as cookies, Java applets, and intelligent agents are ubiquitous applications that can function without the user’s knowledge or control.  The Children’s Online Privacy Protection Act (COPPA) established policies for ethical collection of information from children 12 or under.  Privacy within electronic mail remains an unsettled aspect of online interaction.

12. International Privacy Issues ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-12  The European Union (EU) and the U.S. reached agreement in 2000 to protect EU citizen data.  The FTC has identified the following norms for the ethical use of consumer information:  Notice  Consent  Access  Security  Enforcement

13. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  The law protects intangible or intellectual property through 3 basic mechanisms:  Patent law is centered on inventions.  Copyright addresses issues of expression.  Trademark is concerned with words or images used in the market. Digital Property 5-13

14. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Applying patent law to computing is an uncertain but developing field.  Creators of software are attempting to make use of patent law protection.  Advocates argue that granting of patents for software will encourage innovation.  Critics argue that patents will have stifling and monopolistic effects.  The U.S. Patent Office recently decided to increase the rigor of reviewing applications for software-related protection. Patents 5-14

15. U.S. Patent Office Reviews Applications ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-15  Ex.5.3

16. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Copyright is the primary means of protecting most expression on the Internet.  Chief protections include:  Doctrine of Fair Use Ability to copy protected material for education and news reporting.  Doctrine of First Sale Limit the ability of copyright holder to obtain profit after the initial time at which the material is sold. Copyright 5-16

17. Copyright, cont. ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-17  The No Electronic Theft (NET) Act was signed into law in 1997.  Confers copyright protection for computer content and imposes sanctions for infringement.  The 1998 Digital Millennium Copyright Act (DMCA) contains several provisions.  Protects ISPs from acts of user infringement.  Criminalizes the circumvention of software protections.  Complies with international standards for copyrighted material.

18. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Trademark law concerns the ownership of intellectual property that identifies goods or services.  Trademark law as been applied to the internet naming system of domain names.  Similarities in names may result in trademark infringement claims.  A trademark violation, cybersquatting, involves the registration of domains that resemble or duplicate existing ones. Trademarks 5-18

19. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Licenses are an increasingly popular method of intellectual property protection.  Licenses allow the buyer to use the product but restrict duplication or distribution.  Licenses may be two basic types:  Shrinkwrap or break-the-seal licenses  Clickwrap licenses where the user is required to click a button to accept the terms  Legal trend favors enforcement of software licenses. Licenses 5-19

20. Data Ownership ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-20  Legal and ethical debates about data access and ownership questions abound.  Online technologies such as click data and spidering raise concerns about data ownership.  A movement is growing to protect specially compiled or sui generis data.  U.S. copyright law does not protect facts, so database vendors are seeking legal protection.

21. ©2009 Pearson Education, Inc. Publishing as Prentice Hall Online Expression  Freedom of expression is protected by the First Amendment.  Internet technology has resulted in what many consider inappropriate or untargeted types of consumer contact.  Spam is the mass distribution of unsolicited electronic mail.  CAN-SPAM Act creates a framework for ethical email marketing.  Expression directed to children remains a highly visible issue within online law and ethics. 5-21

22. ©2009 Pearson Education, Inc. Publishing as Prentice Hall Emerging Issues  Online governance  The Internet Corporation for Assigned Names and Numbers (ICANN) was formed in 1998.  Jurisdiction is the ability of a court or other authority to gain control over a party.  Traditionally based on physical presence.  Treaties may provide for international resolution and enforcement. 5-22

23. ©2009 Pearson Education, Inc. Publishing as Prentice Hall  Fraud is the use of deception and false claims to obtain profit.  The internet provides opportunities for novel deceptions.  Spoofing is the use of e-mail or Web sites to impersonate individuals or corporations.  The FTC, FBI, and state agencies have increased their efforts to track and prosecute fraudulent conduct. Emerging Issues, cont. 5-23

24. ©2009 Pearson Education, Inc. Publishing as Prentice Hall FBI Investigates Online Fraud Ex.5.4 5-24

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