e-marketing, 3rd edition judy strauss, adel i. el-ansary, and

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.






Conclusion

Ethics & Ethical Codes 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.

Ethics & Ethical Codes 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.

Ethics & Ethical Codes

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.






Conclusion

The Problem of Self-Regulation

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

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/






Conclusion

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.






Conclusion

Privacy within Digital Contexts

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.

Privacy within Digital Contexts 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.

Privacy within Digital Contexts 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.”

Privacy within Digital Contexts 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.

Privacy within Digital Contexts 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.






Conclusion

International Privacy Issues 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.

International Privacy Issues 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.

International Privacy Issues 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.

International Privacy Issues

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

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/

http://www.ftc.gov/






Conclusion

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.






Conclusion

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.






Conclusion

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.

http://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.






Conclusion

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.






Conclusion

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

http://www.uspto.gov/









Conclusion

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.






Conclusion

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.






Conclusion

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.






Conclusion

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.






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.






Conclusion

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.






Conclusion

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

http://www.fbi.gov/






Conclusion

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 Questions1. 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 Questions1. 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?

e-marketing, 3rd edition judy strauss, adel i. el-ansary, and

Documents

overview ethics

legal issues law

critical issues

role of privacy

legal developments

legal decisionmaking

professional codes

expression of values