Legal and Ethical Issues Internet Taxation Risanuri Hidayat

Legal and Ethical Issues; Internet Taxation Risanuri Hidayat, Ir. , M. Sc.

Chapter 6 Outline 6. 1 Introduction 6. 2 Legal Issues: Privacy on the Internet 6. 2. 1 Right to Privacy 6. 2. 2 Internet and the Right to Privacy 6. 2. 3 Tracking Devices 6. 2. 4 Cookies 6. 2. 5 Employer and Employees 6. 2. 6 Protecting Yourself as a User 6. 2. 7 Protecting your Business: Privacy Issues 6. 3 Legal Issues: Other Areas of Concern 6. 3. 1 Defamation 6. 3. 2 Sexually Explicit Speech 6. 3. 3 Children and the Internet 6. 3. 5 Intellectual Property: Patents and Copyright 6. 3. 6 Trademark and Domain Name Registration 6. 3. 7 Unsolicited Commercial E-mail (Spam) 6. 3. 8 Online Auctions 6. 3. 9 Online Contracts

Chapter 6 6. 4 6. 5 6. 6 Social Issues: Online Communities 6. 4. 1 Online Communities: Defining the Difference 6. 4. 2 Online Activism 6. 4. 3 Disabilities and the Web Global Issues Internet Taxation

6. 1 Introduction Real space n Our physical environment consisting of temporal and geographic boundaries Cyberspace n the realm of digital transmission not limited by geography

6. 2 Legal Issues: Privacy on the Internet Difficulty of applying traditional law to the Internet Technology and the issue of privacy

6. 2. 1 Right to Privacy Implicit in the First, Fourth, Ninth and Fourteenth Amendment Olmstead vs. United States n n Telecommunication of alcohol sales during Prohibition era New application of the Fourth Amendment Translation n Interpreting the Constitution to protect the greater good

6. 2. 2 Internet and the Right to Privacy Self-regulated medium n The Internet industry essentially governs itself Many Internet companies collect users’ personal information n n Privacy advocates argue that these efforts violate individuals’ privacy rights Online marketers and advertisers suggest that online companies can better serve their users by recording the likes and dislikes of online consumers,

6. 2. 3 Tracking Devices Tracking devices n Identifies what activities and products are most popular among consumers ID card n Enables information to be sent to computer from a Web site Click-through advertisements n Consumers can view the service or product by "clicking" on the advertisement Web Bugs or clear GIFs

6. 2. 4 Cookies Cookie n n A text file stored by a Web site on an individual’s personal computer that allows a site to track the actions of its visitors Record passwords for returning visitors Keeps track of shopping-cart materials and register preferences Helps businesses by allowing them to address their target market with greater accuracy Consumer Profile

Double. Click: Marketing with Personal Information Regulation of the Internet could limit a company’s efforts to buy and sell advertising Double. Click n Advertising network of over 1, 500 sites where banner advertisements for 11, 000 of their clients appear Abacus Direct Corp n Names, addresses, telephone numbers, age, gender, income levels and a history of

6. 2. 5 Employer and Employee Keystroke cops n Registers each keystroke before it appears on the screen Company time and company equipment versus the rights of employees Determining factors n n Reasonable expectation of privacy Legitimate business interests Reasons for surveillance n Slower transmission times

Michael A. Smyth v. The Pillsbury Company Dismissed as regional operations manager Questionable material in e-mail Pennsylvania law n “an employer may discharge an employee with or without cause, at pleasure, unless restrained by some contract" Public policy n n Reprimanding an employee called for jury duty Denial of employment as a result of previous convictions

6. 2. 6 Protecting Yourself as a User Anonimity and pseudonimity n Privacy. X. com Platform for Privacy Preferences Project (P 3 P) n Browser complies in accordance with users’ privacy preferences by allowing them to interact in specific ways Privacy services and software n n Junkbusters. com Privacy. Choices. org

6. 2. 7 Protecting Your Business: Privacy Issues Privacy policy n The stated policy regarding the collection and use of visitor’s personal information Privacy policy services and software n n Privacy. Bot. com TRUSTe Core Fair Information Practices n n n Consumers should be made aware that personal information will be collected The consumer should have a say in how this information will be used The consumer should have the ability to check the information collected to ensure that it is complete

6. 3 Legal Issues: Other Areas of Concern Defamation Sexually explicit speech Copyright and patents Trademarks Unsolicited e-mail First Amendment n "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people

6. 3. 1 Defamation The act of injuring another’s reputation, honor or good name through false written or oral communication Libel n Written or are spoken in a context in which they have longevity and pervasiveness that exceed slander Slander n Spoken defamation Proving defamation n The statement must have been published, spoken or broadcast

6. 3. 1 Defamation Good Samaritan provision, Section 230 of the Telecommunications Act n n Protects ISPs from defamation lawsuits in the ISPs’ attempts to control potentially damaging postings “obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable"

Cubby vs. Compuserve and Stratton Oakmont vs. Prodigy Cubby vs. Compuserve n Anonymous individual used a news service hosted by Compuserve to post an allegedly defamatory statement Distributor vs. publisher n n A distributor cannot be held liable for a defamatory statement unless the distributor has knowledge of the content Compuserve was a distributor of content Stratton Oakmont vs. Prodigy

6. 3. 2 Sexually Explicit Speech Miller v. California (1973) n n n The Miller Test identifies the criteria used to distinguish between obscenity and pornography Appeal to the prurient interest, according to contemporary community standards When taken as a whole, lack serious literary, artistic, political or scientific value Challenge of community standards in cyberspace

United States vs. Thomas n n Internet business owner in California, owner of pornographic Web site from which merchandise could be ordered Accessible by password Acceptable by California community standards Sold pornographic material to Tennessee resident (opposing community standards) Thomas found guilty Non-content related means

6. 3. 3 Children and the Internet Accessibility to information Communications Decency Act of 1996 (CDA) and Children’s Online Protection Act of 1998 (COPA) n n n Designed to restrict pornography on the Internet, particularly in the interest of children Overbroad “Patently offensive, ” “indecent” and “harmful to minors” Chilling effect n Limiting speech to avoid a lawsuit

6. 3. 4 Alternatives Methods of Regulation Blocking and filtering n Allows users to select what kinds of information can and cannot be received through their browsers Blocking and filtering software and services n n n Surfwatch. com Cybersitter. com Net. Nanny. com Infringement of First Amendment rights

6. 3. 5 Intellectual Property: Patents and Copyright n n n The protection given to the author of an original piece, including “literary, dramatic, musical, artistic and certain other intellectual works” Whether the work has been published or not Protects only the expression or form of an idea and not the idea itself Provides incentive to the creators of original material Guaranteed for the life of the author plus seventy

MP 3: Raising Copyright Issues MPEG-1 Audio Layer 3 (MP 3) n n A compression method used to substantially reduce the size of audio files with no significant reduction in sound quality Facilitates the exchange of audio files over the Internet Napster n n Uses central servers to help users locate MP 3 files stored on other Napster users’ hard drives Napster members are then able to download

MP 3: Raising Copyright Issues MP 3. com n n n Instant Listening. TM service allows users to immediately begin listening to music from CDs they have purchased online When a user purchases a CD from a select online retailer, all of the songs from the purchased CDs are added to the user’s account on My. MP 3. com did not have the rights to the music

United States vs. Lamacchia Changed the face of copyright protection (1994) Posting of copyrighted material Not guilty under the Copyright Act of 1976 n The violation must have been conducted "willfully and for purposes of commercial advantage or private financial gain” La. Machhia did not profit from the copyright violations La. Macchia was not convicted for his

6. 3. 5 Intellectual Property: Patents and Copyrights Digital Millennium Copyright Act of 1998 (DMCA) n n n Represents the rights of creative bodies to protect their work as well as the rights of educators and resource providers to receive access to this work Makes it illegal to delete or otherwise alter the identifying information of the copyright owner. Prevents the circumvention of protection mechanisms and/or the sale of such circumvention mechanisms

6. 3. 5 Intellectual Property: Patents and Copyright Fair use n n n The use of a copyrighted work for education, research, criticism, etc. The purpose of the copyrighted work is examined The nature of the copyrighted work is taken into account The amount of the material that has been reproduced is reviewed The effect is taken into consideration

6. 3. 5 Intellectual Property: Patents and Copyright Patent n n Grants the creator sole rights to the use of a new discovery Protection for 20 years Opposing the length of a patent n Does not foster the creation of new material Includes “methods of doing business” since 1998 n Idea must be new and not obvious to a skilled person

6. 3. 6 Trademark and Domain Name Registration Parasite n Selects a domain name based on common typos made when entering a popular domain name Cybersquatter n Buys an assortment of domain names that are obvious representations of a brick-and-mortar company Anticybersquatting Consumer Protection Act of 1999 (ACPA) n n Protects traditional trademarking in cyberspace Protects trademarks belonging to a person or entity other than the person or entity registering or using the domain name

6. 3. 7 Unsolicited Commercial Email (Spam) Cost is primarily incurred by the receiver and the ISP Organizations distributing spam n n Maintain anonymity and receivers cannot request to be taken off the organization’s mailing list Present themselves as a legitimate company and damage the legitimate companies reputation Unsolicited Electronic Mail Act

6. 3. 8 Online Auctions Question of government regulation International regulation of auctions Copyright infringement and auction aggregation services The Collections of Information Antipiracy Act (CIAA) n Makes it easier to prosecute any group which takes listings from one organization and, in doing so, harms the original business Shill bidding

6. 3. 9 Online Contracts Electronic Signatures in Global and National Commerce Act of 2000 (E-Sign bill) n n n Designed to promote online commerce by legitimizing online contractual agreements. Digital agreements will receive the same level of validity as hard-copy counterparts Allows cooperating parties to establish their own contracts

6. 4 Social Issues: Online Communities The Web allows larger and more diverse groups to communicate, share information and exchange opinions Web sites are being created to accommodate a variety of individuals with different backgrounds, interests and ideas

6. 4. 1 Online Communities: Defining the Difference Online users can move about the Web, not limited by gender, race, creed, age and sexual orientation Virtual communities n n n Oxygen. com Pleiades-net. com Planet. Out. com Youth. Pride. com Match. com Singles. com

6. 4. 2 Online Activism Social and political action on the Web Online activism groups n n Institute for Global Communications Student Environmental Action Coalition Amnesty International Peace Corps

6. 4. 3 Disabilities and the Web Enables disabled individuals to work in many new fields n Voice activation, visual enhancers and auditory aids Americans with Disabilities Act (ADA) n Protects the employment rights of Americans with disabilities Legal requirements of meeting the needs of people with disabilities n Sites that are heavily laden with graphic

6. 5 Global Issues The Internet poses challenges to a world comprised of different cultures, attitudes, languages, codes of conduct and government authorities Various reactions to privacy, personalization and copyright Felix Somm n Held accountable under German law for providing German subscribers access to sexually explicit material

6. 5 Global Issues European Union Directive on Data Protection n n Agreement among its members on the regulations that apply to information exchange Mandates that personal information be kept current and used in a lawful manner for its designated purpose Compiled list of American Web sites that meet the criteria designated by the Directive In the case of a violation of the directive, the case will be tried in the United States

6. 6 Internet Taxation The opposing arguments n n Permanent ban on Internet taxation Fair taxation of Internet sales Taxation methods n n n If both a vendor and a consumer are located in the same state If the vendor and the consumer are not located in the same state, then the sale is subject to a use tax If the vendor has a physical presence, or

6. 6 Internet Taxation Problems with Internet taxation n The definition of physical presence (location of the ISP, the location of the server or the location of the home page) States vary according to what transactions are subject to taxation Sales tax revenues are the largest single source of a state’s revenue and are used to fund government-subsidized programs, including the fire department, the police and the public education systems

6. 6 Internet Taxation Problems with Internet taxation n To appropriately meet the taxation requirements of all parties in online transactions, e-businesses would be required to know and understand all these methods Internet Tax Commission n Reviewed the issue of Internet taxation Revision of state and local taxes to make taxing a feasible process for Internet businesses Establish clearer definitions on the meaning of