Chapter 17: Digital Law and E-Commerce

Introduction to Digital Law and E-Commerce

• Electronic commerce (e-commerce) is the sale of goods and services or the licensing of intellectual property by computer over the internet

  • Electronic commerce accounts for approximately 15% of the sale, lease, or licensing of goods and services

• Federal and state laws that existed before the advent of the information age have been applied to new digital technologies

• In addition, federal and state governments have enacted new laws that apply directly to information technology

Email and Text Contracts

• Electronic mail (e-mail) and text messaging (texting) two of the most widely used methods of communication

  • Electronic mail (e-mail) is electronic written communication between individuals and businesses using computers connected to the internet

  • Text messaging (texting) is composing and sending electronic messages between users of mobile devices

• E-mail and text message contracts

  • Email and text contracts are enforceable so long as they meet the requirements necessary to form a traditional contract

  • These contracts meet the requirements of the Statute of Frauds which requires certain contracts to be in writing

• Use of e-mail communication is somewhat informal

  • May not have the comprehensive formality of a paper contract that includes the final terms and conditions of the parties’ agreement

  • The terms of the parties’ agreement may have to be gleaned from several e-mails or texts that have been communicated between the parties

E-Commerce and Web Contracts

• Internet sellers, lessors, and licensors use websites to sell and lease goods and services and to license software and other intellectual property

• An web contract is a contract entered into by purchasing, leasing, or licensing goods, services, software, or other intellectual property from websites operated by sellers, lessors, and licensors

  • Assuming the elements to establish a traditional contract are present, web contracts are valid and enforceable

Case 17.1 Web Contract

• Case

  • Hubbert v. Dell Corporation – Appellate Ct. of Illinois, 835 N.E.2d 113 (2005)

• Facts

  • Plaintiffs purchased computers through Dell’s website

  • Plaintiffs alleged that Dell misrepresented the speed of the microprocessors

  • Dell’s hidden terms and conditions required arbitration for disputes

• Issue

  • Were the terms and conditions of sale adequately communicated to the plaintiffs?

• Decision

  • The appellate court held that Dell’s terms and conditions of sale, which were accessible by clicking on a blue hyperlink and which included the arbitration clause, were part of the web contract between the plaintiffs and Dell

  • The appellate court reversed the decision of the trial court and held in favor of Dell

Counteroffers Ineffectual Against an Electronic Agent

• In today’s e-commerce, many internet sellers have websites that use electronic agents to sell goods and services

• An electronic agent is any computer system that has been established by a seller to accept orders

  • Web page order systems are examples of electronic agents

• Most web pages use electronic ordering systems that do not have the ability to evaluate and accept counteroffers or to make counteroffers

• Thus, counteroffers are not effective against these electronic agents

E-SIGN Act

• Electronic Signatures in Global and National Commerce Act (E-SIGN Act) is a federal statute that:

  1. Recognizes electronic contracts as meeting the writing requirement of the statute of frauds

  2. Recognizes and gives electronic signatures the same force and effect as pen inscribed signatures on paper

• E-Sign Act protects consumers:

  • Consumers must consent to receiving electronic records and contracts

  • Consumers must have access to their electronic records and contracts

  • Businesses must tell consumers that they have the right to receive hard copy of documents

E-Signatures

• The E-SIGN act gives an e-signature the same force and effect as a handwritten, pen-inscribed signature on paper

• Provides that a digital signature can be verified in one of three ways:

  1. By something the signatory knows, such as a secret password or pet’s name

  2. By something a person has, such as a smart card, which looks like a credit card and stores personal information

  3. By biometrics, which uses a device that digitally recognizes fingerprints or the retina or iris of the eye

E-Licensing of Software & Info Rights

• Much of the cyber-economy is based on electronic contracts and the licensing of computer software and information

• E-commerce created problems for forming contracts over the internet, enforcing e-commerce contracts, and providing consumer protection

License

• A license is a contract that transfers limited rights in intellectual property and informational rights

  • A license grants the contractual rights expressly described in the license and the right to use information rights within the licensor’s control that are necessary to perform the expressly described rights

  • A license can grant the licensee the exclusive rights to use the information

• A licensor is the owner of intellectual property or informational rights who transfers rights in the property or information to the licensee

• A licensee is the party who is granted limited rights in or access to intellectual property or informational rights owned by the licensor

• An exclusive license is license in which, for the specified duration of the license, the licensor will not grant to any other person rights to the same information

E-License

• An electronic license (e-license) is a contract whereby the owner of software or a digital application grants limited rights to the owner of a computer or digital device to use the software or digital application for a limited period and under specified conditions

  • E-licensor and e-licensee

Licensing Agreement

• A licensing agreement is a detailed and comprehensive written agreement between a licensor and a licensee that sets forth the express terms of their agreement

• The parties to a contract for the licensing of information owe a duty to perform the obligations stated in the contract

  • If a party fails to perform as required, there is a breach of the contract and remedy may be sought

Unfair Business Practices in the Information Age

• Telephone Consumer Protection Act (TCPA)

  • Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act)

• Do-Not-Call Registry

• Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act)

  • Internet Service Providers (ISPs)

• Communications Decency Act

Telephone Consumer Protection Act (TCPA)

• The Telephone Consumer Protection Act (TCPA) is a federal statute that curbs abusive telemarketing calls, texts, and faxes

  • The Federal Communications Commission (FCC), an administrative agency, is empowered to enforce the TCPA and to adopt rules and regulations to implement the law

• In 2012, the FCC revised its TCPA rules to require telemarketers to (1) obtain prior written consent from consumers before robocalling them, (2) no longer use an “established business relationship” to avoid getting specific consent from consumers, and (3) provide an automated, interactive opt-out mechanism during each robocall so consumers can immediately tell the telemarketer to stop calling

• In 2020, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) became effective

  • The act amends the TCPA by providing additional protections against illegal robocalls, spam calls and texts, and malicious caller ID spoofing

Do-Not-Call Registry

• Pursuant to the Do-Not-Call Implementation Act, the Federal Trade Commission (FTC) created and administers a National Do-Not-Call Registry

• The National Do-Not-Call Registry is a federal registry on which consumers can place their telephone numbers on the registry and free themselves from most unsolicited telemarketing and commercial telephone calls and texts

  • Both wireless phones and land lines can be registered

  • The registry applies only to residential phones and not to business phones

  • The Do-Not-Call Registry also allows consumers to designate specific companies to not call or text them

  • The act does not limit calls by non-profit organizations, political organizations, and parties conducting surveys

    • However, the act does apply to telemarketers calling on behalf of these organizations

Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act)

• Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act) is a federal statute that

  1. Prohibits spammers from using falsified headers in e-mail messages, including the originating domain name and e-mail address;

  2. Prohibits deceptive subject lines that mislead a recipient about the contents or subject matter of the message; and

  3. Requires recipients of spam be given the opportunity to opt out and not have the spammer send e-mail to the recipient’s address

• In effect, the CAN-SPAM Act does not necessarily end spam, but instead approves of the business use of spam so long as businesses do not lie

Internet Service Providers (ISPs)

• Internet service providers (ISPs) are companies that provide consumers and businesses with access to the internet

  • ISPs provide e-mail accounts, internet access, and storage on the internet to subscribers

Case 17.2 E-Mail Spam

• Case

  • Facebook, Inc. v. Porembski

  • U.S. Dist. Ct. for the Northern Dist. Of California, 2011

  • U.S. Dist. Lexis 9668 (2011)

• Facts

  • Defendants spammed Facebook 116,000 users 7.2 million times

• Issue

  • Did the defendants violate the CAN-SPAM Act?

• Decision

  • The U.S. district court held that the defendants had violated the CAN-SPAM Act, awarded Facebook $360 million in damages, and issued a permanent injunction against the defendants

Communications Decency Act

• The Communications Decency Act is a federal statute stating that internet service providers are not liable for the content transmitted over their networks by e-mail users and websites

Domain Names

• A domain name is a unique name that identifies an individual’s or a company’s website

• The Internet Corporation for Assigned Names and Numbers (ICANN) is a private nonprofit organization that oversees the registration and regulation of domain names

  • Example The domain name for Microsoft Corporation is www.microsoft.com.

• Domain names can be registered

  • Register by filing the appropriate form with a domain name registration service and paying the required fee

Domain Name Extensions

• A top-level domain (TLD) is the highest level in the domain name system hierarchy (e.g., .com, .org, .net)

• Generic top-level domains (gTLD) are domains that are not restricted to any geographic or country designation (e.g., .name, .pro, .coop)

• Specific domain names identify types of business, service, profession, or activity (e.g., .shop, .food, .cocacola, .Microsoft)

• Country code top-level domains (CCTLD) are a top-level domain assigned to a country, territory, or sovereign state (e.g., .us, .ca)

Anticybersquatting Consumer Protection Act

• Cybersquatting is a situation that occurs when a party registers a domain name of another party’s trademarked name or a famous person’s name

• The Anticybersquatting Consumer Protection Act: (ACPA) is a federal statute that permits trademark owners and famous persons to recover domain names that use their names where the domain name has been registered by another person or business in bad faith

  • Two fundamental requirements:

    1. The name must be famous

    2. The domain name was registered in bad faith

       • In determining bad faith, a court may consider the extent to which the domain name resembles the trademark owner’s name or the famous person’s name, whether goods or services are sold under the name, the holder’s offer to sell or transfer the name, whether the holder has acquired multiple internet domain names of famous companies and persons, and other factors

• The act provides for the issuance of cease-and-desist orders and injunctions against the domain name registrant

  • The court may order the domain name registrant to turn over the domain name to the trademark owner or famous person

  • The law also provides for monetary penalties

• The ACPA gives owners of trademarks and persons with famous names the right to prevent the kidnapping of internet domain names by cyberpirates

Case 17.3b National Arbitration Forum Domain Name

• Case

  • The New York Yankees Baseball Club

  • National Arbitration Forum, Claim Number FA0609000803277 (2006)

• Facts

  • Defendant owned nyyankees.com

  • Plaintiff alleged that defendant registered the domain in bad faith and in violation of the ICANN Uniform Domain Dispute Resolution Policy (Policy)?

• Issue

  • Did the defendant violate the Policy?

• Decision

  • The arbitrator held that Moniker violated the ICANN Policy and ordered that the <nyyankees.com> domain name be transferred from Moniker to the Yankees