chapter5F.ppt

E-Marketing, 3rd edition
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 5: Ethical and Legal
Issues
© Prentice Hall 2003

Overview
Ethics and Legal Issues
Ethics & Ethical Codes
The Problem of Self-Regulation
Privacy
Privacy within Digital Contexts
International Privacy Issues
Digital Property
Copyright
Trademarks
Patents
Licenses
Trade Secrets
Data Ownership
Online Expression
Emerging Issues
Online Governance & ICANN
Jurisdiction
Fraud
Conclusion

Overview of Ethics and Legal Issues
 Ethics:
 The values and practices of professionals,
 The concerns and values of society as a whole,
 Directed toward individual or group endeavors,
 Important contributions to legal developments
= The experiences and practices of those who work in the
field are helpful to those who are charged with
regulation and legal decision-making.

Overview of Ethics and Legal Issues
 Law:
 Also an expression of values,
 Created for broader purposes = national or sometimes
international populations,
 It is a public endeavor = made by legislatures such as
Congress or Parliament, enforced by executives or
agencies, and interpreted by the courts,
 Progress in the law can be slow, and particularly within
the new context of digital communication.

 The study of ethics:
 Central focus = analysis and description of basic concepts as what is right
and wrong,
 The examination of responsibilities, rights, and obligations,
 Not limited to purely theoretical boundaries but study all levels of human
interaction,
 Important aspect: the study of professional activities,
 Groups of individuals possessing special skills or knowledge have
established codes and systems of fair practice,
 E.g. The American Marketing Association’s (AMA) Code of Ethics =
Professional codes provide members with guidelines which are specific to
their pursuits.

 Digital processes and potentialities are so new that ethics is only
beginning to adapt itself to the Computer Revolution.
 Critical issues:
 The ownership of intangible data (intellectual property),
 The role of privacy in a virtual world without walls,
 The extent to which freedom of expression should be allowed,
 The uses of data.

 Difficulties:
 Lack of comparative historical situations,
 The inability to analogize computers to objects or institutions with
which society has had greater experience,
 Electronic spaces are global in nature. What is accepted in Europe
may be rejected in Asia or America,
 Each participant in electronic marketing has to adhere to
professional codes, but also to contribute to them.

Overview
The Problem of Self-
Regulation
Privacy
Digital Property
Copyright
Trademarks
Patents
Licenses
Trade Secrets
Data Ownership
Online Expression
Emerging Issues
Jurisdiction
Fraud
Conclusion

 Emerging area of conflict: the role of formal law in the
regulation of online conduct.
 The Administration answer: the development of the
Internet should be largely left to the free operation of the
market.
 The proper behaviors of participants are typically set forth
in ethical codes developed by trade associations,
commercial standards groups and the professions.

 Supporters of the self-regulation:
 The private sector’s is able to rapidly identify and
resolve problems specific to its areas of competence,
 Once consensus is reached, uniformity is achieved
through members’ compliance with ethical codes as
well as by ongoing education of providers and
consumers,
 The law cannot force participation in these codes, but
improved consumer confidence and enhanced economic
opportunities will ensure voluntary compliance.

 Critics of self-regulation:
 These incentives are insufficiently compelling,
 Perpetrators of fraud benefit from schemes of short duration and
are rarely interested in the long-term gains offered by adherence
to ethical codes,
 Commercial self-interest and pressures to maximize profits
compromise the private sphere’s ability to police itself and only the
sanctions the law can provide will make a difference.
 This debate is far from over but governments are asserting themselves
at least in the area of fraud prevention and in issues involving
children’s privacy.

Consumer Protection at the FTC Source: www.ftc.gov

Privacy
 The concept of privacy:
 Both ethical and legal aspects and is relatively new to both
disciplines,
 Privacy is a product of the twentieth century: reactions to the
phenomena of a maturing industrial and technological age, including
the mass distribution of newspapers, the development of listening
devices and the widespread use of photography,
 Privacy has always been about information and the means of its
delivery.
 BUT lack of definition within the Constitution.

Privacy
 The common law has established a series of privacy
violations:
 Unreasonable intrusion into the seclusion of another,
 Unreasonable publicity of another’s private life,
 The appropriation of another’s name or likeness,
 The publication of another’s personal information in a
false light.

Privacy
 Disagreement remains:
 The seclusion theory = the ability to remain isolated from society.
 This model encourages laws and ethical standards which are oriented
toward maintaining personal distance and punishing those who cross
the limits set by individuals.
 The access-control:
 Places its emphasis upon laws and standards which enable persons
to reasonably regulate the information which they are giving up.
 The autonomy model:
 Define what constitutes private data = those which are necessary for
a person to make life decisions.

Privacy
 Within society, privacy interests compete against
concerns of personal and public safety, economics and
even the social and psychological need for association
with others.
 People are willing to give up personal information to get
certain benefits - credit cards or frequent flyer mileage.
 Ethics and law attempt to provide guidelines in the final
decision.

Overview
Privacy
Privacy within Digital
Contexts
Digital Property
Copyright
Trademarks
Patents
Licenses
Trade Secrets
Data Ownership
Online Expression
Emerging Issues
Jurisdiction
Fraud
Conclusion

 Information plays a pivotal role in the concept of privacy.
 Conflicts about how data should be collected and used.
 AMA Code of Ethics for Marketing on the Internet:
“information collected from customers should be
confidential and used only for expressed purposes.”

 DoubleClick:
 An online advertising firm,
 Collects and compiles large amounts of personal consumer
information,
 Developed a system of over 11,000 Web sites that carry
advertising which, when clicked, enables users to visit product
sites,
 The system records the responses (clickstreams) to form a user
profile and transmit individually-targeted advertising,
 Active consent of the users is not required,
 100,000 online profiles have been filed.

 DoubleClick acquired Abacus-Direct:
Specialized in the acquisition of off-line consumer data
(names, addresses and buying histories of a large
percentage of American households).
 Plans to integrate this data linking real life identities to
DoubleClick’s online personalities.
 Complain was filed by a coalition of privacy, civil rights
and consumer groups for obtaining consent from each
subject.

 How does it work?
 With cookies:
 Packets of data created within the hard-drive of a user
in response to instructions received from a Web page,
 Once stored, they can be re-transmitted from a user’s
computer to a pertinent Web site.

 Many purposes:
 Handle online information, creating such features as shopping
baskets to hold purchases.
 Recall stored sales information to remind users of items already
ordered or to suggest new products.
 Store data = full name, email and postal addresses, phone
numbers, a computer’s geographic location and time logged
online.
 Normally automatically executed without any user action.
 Cookie packets may be combined with other digital information
and may be transferred between servers or sold to anyone with
the capacity to read computer-generated data.
 User tracking: when cookies are examined to determine an
individual’s online behavior.

 This controversy reflects the unsettled nature of privacy
itself:
 A closely-guarded right = the ability to remain secluded
from unwelcome intrusion + the capability to control the
disclosure of personal data.
 Advocates the implementation of policies which allow
individuals to be explicitly informed of any data collection
event and to have collection take place only if there is an
affirmative decision to participate or opt-in.
 Supporters of DoubleClick: argue that most users wish to
receive the benefits of targeted advertising.

 The preliminary terms of an agreement include:
 The obligation to provide clear notice of data collection,
 A ban on combining existing data with personal
information unless explicit permission,
 Data obtained from cookies will be routinely deleted,
 DoubleClick will initiate an extensive program of
consumer privacy education.
 There is a trend toward the reduction of the use of
cookies:
 Prominence of privacy policies,
 Use of opt-in routines.

 Some cutting edge applications are raising additional issues:
JAVA
 A Web-friendly programming language allowing the
downloading and running of programs or applets on
individual computers,
 Increasingly used to provide enhancements = dynamic
animation, Web-based simulations,
 Used to design programs = hostile applets used to
surreptitiously access and transmit data on hard-drives,
including email addresses, credit card records and other
account information.

 Intelligent agents:
 Programs which, once released by a user, can function
autonomously within the Web to make electronic
decisions,
 Tasks: the searching of sites or the buying of products
which conform to an individual’s tastes or interests,
 Critics worry that the preferences which they hold may be
chosen or controlled by entities other than their “owner.”

 Cookies, Java applets and intelligent agents are ubiquitous
applications
= Able to function in any online session, without a user’s
knowledge or control.
 Online forms and electronic mail are used to gather information
in exchange for browsing privileges or other benefits.
 BUT most average users are uncertain of the ultimate value of
the data they provide.
 Solution: Consumer education about all uses of revealed data
to increase the ability to make informed judgments.

 The collection of material from children:
Congress passed the Children’s Online Protection Act (COPPA), it
requires that Web sites and other online media which knowingly
collect information from children 12 years of age or under:
 Provide notice to parents,
 Obtain verifiable parental consent prior to the collection, use or
disclosure of most information,
 Allow parents to view and correct this information,
 Enable parents to prevent further use or collection of data,
 Limit personal information collection for a child’s participation in
games, prize offers or related activities,
 Establish procedures which protect the “confidentiality, security,
and integrity of the personal information collected.”

 The problem of privacy within electronic mail
= Unsettled aspect of online interaction.
 U.S. Law
= Users who operate email accounts on private services
are assured of their legal privacy through service
agreements with their ISP.

 1998: The European Union’s Data Protection Directive
= Requires its member states to enact national laws to
protect “fundamental rights + freedoms of natural
persons, and in particular their right to privacy with
respect to the processing of personal data.”
 Subjects:
 Are informed on how their data is used,
 Are given opportunities to review and correct
information.

 Data:
 Use is restricted to the announced purpose,
 Origin is disclosed.
 Procedures to punish illegal activities are established.
 Consumer collection contains opt-out capabilities.
 Sensitive data collection cannot be accomplished without
explicit permission.
 Any international transfer of data is executed only with
countries possessing adequate privacy protection laws.

 2000: The U.S. Department of Commerce and the
European Commission agreement = U.S. organizations
would submit to a series of safe harbor provisions for
the protection of EU citizen data:
 Notice about collection, purpose and use,
 Choice in ability to opt-out of disclosure and third-party
dissemination,
 Third-party transfer, protection, and provisions for
security, data integrity, redress and enforcement.

 Norms representing the present consensus for the minimum requirements
essential to the ethical use of consumer information:
 Notice: Users should be aware of a site’s information policy before data is
collected,
 Consent: Users should be allowed to choose participation or exclusion from
the collection,
 Access: Users should have the ability to access their data and correct it if
erroneous,
 Security: Policies to ensure the integrity of data and the prevention of
misuse should be in place,
 Enforcement: Users should have effective means to hold data collectors to
their policies.

FTC Monitors Online Privacy Source: www.ftc.gov

Digital Property
 Traditionally, the law has protected intangible or intellectual
property through three basic mechanisms:
 Copyright = the right to publish or duplicate the
expressions of ideas,
 Patent law = the ability to reproduce or manufacture
an inventor’s product,
 Trademark = images, symbols, words or other
indicators which are registered with the government and
have become positively associated with a product’s
identity in the market.

Digital Property
 Computer-based communication has posed particularly
difficult problems for intellectual property:
 The electronic medium by which messages are carried
= inventions,
 The messages
= expressions of ideas,
 Graphical and animation objects
= creations
= associated with a commercial entity.

Copyright
 Copyright = the primary means of protecting most on the
Internet, including text and other data.
 Limitations created for the public’s benefit:
 The doctrine of Fair Use: ability to copy without cost,
reasonable portions of protected material for purposes
relating to such public activities as education, news reporting
and editorial comment,
 The doctrine of First Sale: limits the ability of a copyright
holder to obtain profit from the sale of her work after the
initial time at which the material is sold. Purchasers are
subsequently given the ability to transfer or otherwise dispose
of their copy.

Copyright
 1997: The No Electronic Theft Act = The NET Act
= copyright protection for computer content + sanctions
when infringement is committed for commercial or private
financial gain or by the reproduction or distribution of one
or more copies of copyrighted works having $1000 or more
in retail value.
 Proponents believe that it will encourage innovation by
protecting material placed on the Internet.
 Critics believe that the definition of infringement has
been made problematically broad = electronic
distribution without reproduction.

Copyright
 1998: The Digital Millennium Copyright Act:
 The DMCA grant ISP’s protection from acts of user
infringement as long as certain procedures are followed,
including the prompt reporting and disabling of
infringing material.
 Supporters claim that it will free ISP’s from liability for its
users’ illegal actions and encourage industry growth.
 Critics believe that the reporting and disabling
requirements may cause innocent behavior to be presumed
infringing and wrongfully censored.

Copyright
 1998: The Digital Millennium Copyright Act:
 The DMCA criminalizes the circumvention of software
protections and the development or distribution of
circumvention products.
 Supporters believe that this law will increase commercial
willingness to place material on the Internet by deterring
online piracy.

Trademarks
 Trademark law is concerned with the ownership of intellectual
property which identifies goods or services.
 The federal Lanham Act:
 Trademarks may be registered and protected with the government,
 In order to pursue, claimants must prove that the mark is
protectable,
 The Act also prohibits dilution - the diminishment of the ability to
identify or distinguish a good or service.
 Trademark law has recently been applied to the Internet naming
system:
 Domains are unique configurations of letters or numbers which are
used to route data,
 The most familiar www.someplace.com.

Trademarks
 Trademark violations:
 Similarities in names,
 Cybersquatting: Registration of domains which resemble or
duplicate the names of existing corporations
+ Offer the domain for sale at a price set significantly higher
than that originally paid,
 1999: the Anticybersquatting Consumer Protection Act
= A person is liable to suit if he registers, traffics or sells a
domain bearing a name which is identical or confusingly
similar to a protected mark or would dilute the worth of the
mark.

Trademarks
 Trademark violations:
 Metatags = HTML statements which describe a Web site’s
contents:
 Allow search engines to identify sites relevant to topics of their
inquiries,
 It is possible to insert words or phrases which are calculated to
provide optimal attractiveness, including material protected by
trademark.
 Keywords assigned within search engines. Trademark-protected
keywords are raising issues when the result of the search is not
directed to the trademark holder.
 Hyperlinks which take users to areas other than their
introductory page may cause confusion or deprive the target sites
of revenue obtained through the selling of advertising.

Patents
 Patents are granted, by the United States government, for inventive
processes or steps.
 Tailored toward industrial or mechanical concerns.
 Creators of software are attempting to make use of its protections:
 Material is not subject to acquisition through the doctrines of Fair Use or
First Sale,
 Patent powers are derived from constitutional concerns, public access to
patented material is assured after the term of the patent has expired +
the patent itself is always on file with the government.
 The use of business patents = activities such as marketing approaches
and methods for conducting commerce.
 Patent protection claimed for reverse online auctions, secure credit
card processing, and incentive-based methods for reading Web site
advertising.

Licenses
 Licenses = contractual agreements made between
consumers and software vendors which allow the buyer to
use the product, but restrict duplication or distribution.
 Within the computer environment, two license format:
 Shrinkwrap or break-the-seal licenses,
 Clickwrap licenses when a user is required to click a
button within a program to demonstrate acceptance of
terms.

Licenses
 Effort to enforce the terms of software licenses
= The Uniform Computer Information Transactions Act.
 If adopted by the states, this model would govern all legal agreements
pertaining to software transactions, including sales.
 Supporters: the majority of software manufacturers and publishers.
 Critics: they argue that UCITA will enforce license provisions
including those restricting copying and resale of material, liability for
damages incurred from defective software, and, it has been
suggested, the ability to criticize software performance.

United States Patent Office Reviews Patent Applications Source: www.uspto.gov

Trade Secrets
 The federal Economic Espionage Act of 1996
= Address digital advances + makes it a criminal offense to divulge
trade secrets.
 Trade secrets:
 Can include, but are not restricted to, formulas, plans, market data,
algorithms, programs, codes and models,
 May be stored online or in tangible formats,
 Computer-based disclosures such as emails, downloads, Web
publication and similar means are within the ambit of the Act.
 Employees possessing trade secrets may be prohibited from engaging in
similar businesses for a period of time.

Data Ownership
 Increased competition on the electronic market
 Measures to obtain the advantages that control of
information can provide.
 Data relating to such technical issues as Web site usage:
 Have been easy to access and under informal practices,
 Have often been shared among site owners, marketing
professionals, advertisers and consumers.
 Click data: make information collected from banner
advertisements invisible to site owners and their clients.
 Protective technologies raise new issues concerning the
ownership of information.

Data Ownership
 Spidering: Use of software applications = robots to enter
targeted Web sites and obtain data for the use of its owner.
 This activity constitutes a trespass to property.
 The special protection of data relating to facts:
 American copyright law protects expressions of ideas, but not the
ideas themselves.
 Electronic databases often contain arrangements of facts, there is a
movement within the law to offer protection for specially compiled
data.
 The Trade Related Intellectual Property Rights (TRIPs)
Agreement of 1995: Provisions exist within this Agreement
to afford this kind of protection.

Online Expression
 The mass distribution of unsolicited electronic mail = Spam
 Users complain of unwanted intrusion into their affairs,
 Information given to individuals or entities for one purpose may be
collected and sold for mass distribution.
 Regulation needs to be approached with caution: It
implicates freedom of expression.
 Disagreement between:
 Those who believe that participation in mass emails should be
restricted to those who voluntarily agree to receive mailing,
 Those who advocate an opt-out only approach.

Online Expression
 ISP:
 Questions about the liability of network owners for defamatory
messages posted on its bulletin boards or other public areas,
 For most courts like publishers, ISP’s are not normally susceptible to
suit.
 Regulations for children’s content: use of filtering models
have been considered.
 The Platform for Internet Content Selection Rules (PICS):
allows the filtering of sites which are deemed to be
inappropriate for minors placing control into the hands of
parents and schools.

Emerging Issues
 A number of issues have arisen which are particularly
unique to the Internet at its current stage of its
development.
 The responses are requiring imagination & creativity.

Overview
Privacy
Digital Property
Copyright
Trademarks
Patents
Licenses
Trade Secrets
Data Ownership
Online Expression
Emerging Issues
Online Governance &
ICANN
Jurisdiction
Fraud
Conclusion

Online Governance and ICANN
 Need: A private, non-profit regulatory body which would be responsible
for the administration of the Internet name and address system.
 Answer: The Internet Corporation for Assigned Names and
Numbers (ICANN).
 Purpose: The resolution of conflicts which surround the assignment and
possession of domains.
 Today, ICANN is comprised of a governing board which currently faces
substantial criticism for operating under secrecy and for failing to
represent the broad range of online users.
 Many questions remain concerning the ability of any private regulatory
organization to enforce its decisions within the online community.

Jurisdiction
 Jurisdiction is the legal term which describes the ability of
a court or other authority to gain control over a party.
 Jurisdiction is traditionally based upon physical presence,
but within the online world, commonality of physical
location is never assured.
 The majority of cases decided within the United States
have focused upon the character and quality of contacts
with the forum state, generally, the more active the
involvement, the more likely that jurisdiction will be
conferred.

Jurisdiction
 Virtual Magistrate, mediation-oriented programs, have
been developed to resolve online disputes.
= Attempt to tailor their procedures toward the special
circumstances of the Internet:
 Advocates argue that their online orientation will
encourage users to work out difficulties within a non-
confrontational framework,
 Critics voice concerns that online arbitration cannot
adequately ensure enforcement or recognition of their
judgments.

Jurisdiction
 International disputes:
 Goal: achieve a level of international cooperation is
through the mediation of organizations.
 The WIPO Arbitration and Mediation Center exists to
resolve commercial disputes relating to intellectual
property.
 The Model Law on Electronic Commerce by the United
Nations Commission of International Trade Law provides
global uniformity in digital commerce.

Fraud
 The use of deception and false claims to obtain profit is not
unique to the Internet.
 The technical nature of networked communication
 The average person is not in a position to understand
exactly how information is displayed, transferred or stored
and this lack of knowledge provides opportunities for novel
deceptions.
 E.g. of abuse = Spoofing:
 Use of email or Web sites to impersonate individuals or
corporations,
 Used to extract sensitive information by leading a user to believe
that a request is coming from a reputable source.

Fraud
 The psychology of digital environments. The media is full
of stories concerning technological advances and
opportunities for profit.
 Most people are unable to differentiate genuinely
worthwhile endeavors from those presented by mere
opportunists.
 Many investment opportunities make use of The Digital
Revolution, often promoting breakthrough technologies
and applications.

Fraud
 The problem of consumer fraud is being addressed on
several dimensions:
 Federal agencies (the FTC and the FBI) have increased their efforts
to track and prosecute fraudulent conduct,
 State agencies have begun to prosecute criminal activity within their
borders.
 Sanctions = stipulated lifetime bans in the conduct of
Internet commerce, civil judgments, forfeiture of property
and referrals for criminal prosecution.
 The establishment and prosecution of laws are necessary
responses to the problem of fraud.

Fraud
 The basis of fraud is usually incomplete or false information.
 Ability to evaluate online material is a primary importance.
 Solutions include:
 Promotion and adherence to codes of ethics are one
means of inspiring consumer confidence,
 Encouragement of general consumer education,
Professional associations have particular abilities to
establish sites which outline and explain minimum
standards and consumer protections.

FBI Investigates Online Fraud Source: www.fbi.gov

Conclusion
 Changes within the ethical and legal framework of
networked communication are occurring at a fast pace.
 Marketing professionals are:
 Required to remain well-informed of regulations and
accepted practices,
 Called upon to contribute to the global dialogue about
electronic spaces.

Key Terms
•Agents
•Clickstreams
•Clickwrap
•Copyright
•Cybersquatting
•Digital Millennium Copyright Act
(DMCA)
•Dilution
•Ethics
•Fraud
•Internet Corporation For
Assigned Names And Numbers
(Icann)
•Jurisdiction
•Keywords
•Lanham Act

Key Terms
•Law
•Licenses
•Metatags
•No Electronic Theft Act (NET)
•Patents
•Privacy
•Safe harbor
•Self-regulation
•Shrinkwrap
•Spam
•Spidering
•Spoofing
•Trademark
•Ubiquitous applications
•Uniform Computer
Information Transactions Act
(UCITA)
•Virtual Magistrate

Review Questions
1. Define ethics and law and show how they are
different and similar.
2. What are some of the threats to Internet user
privacy?
3. According to the FTC, what are the minimum
requirements for ethical use of consumer
information?
4. How does copyright differ from patent and
trademark law?
5. What does it mean to clickwrap a license?

Discussion Questions
1. Is it better to regulate industry via laws or let industry self-regulate? Support
your claim.
2. Which is more ethically problematic: Attacking a former employer via online
discussion or making the same attack by e-mailing current employees?
3. Deep linking takes place regularly over the Internet. Anytime you make a
Web page that links to another site and bypasses the home page of that site
you are deep linking. Should this be allowed? Explain your position.
4. Framing takes place regularly over the Internet. To see an example of
framing, look up information at AskJeeves (www.ask.com). Should framing
be allowed? Support your claim.
5. The CEO of Amazon, has publicly questioned the advisability of granting
patents for business processes such as his company’s 1-Click ordering
process. Do such patents put a chilling effect on the expansion of e-
commerce? Justify your position.
6. What court should have jurisdiction over the Internet? Why?

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