Introduction to IT and E- Commerce Law and Policy Dr. Theodore H. K. Clark Associate Professor and Academic Director of MSc Program in IS Management Department of Information & Systems Management Hong Kong University of Science & Technology and Visiting Associate Professor of Operations & Information Management (Information Economics and Strategy Group) The Wharton School of the University of Pennsylvania

HKUST Business School 2 What is CyberLaw? Intellectual Property Laws Internet Laws and Regulations Telecommunications Laws and Regulations Software Laws (including encryption) Copyright Law Patent Law Trademark Law International Trade Laws and Treaties

HKUST Business School 3 Law, Regulation, and Policy What do we mean by the “rule of law”? Who makes laws? How are they made? What is the relationship between laws and regulations or policy? Which of these are most applicable to the different areas of Cyberlaw? Why?

HKUST Business School 4 CyberLaw is a MYTH! There is no CyberLaw. There are many CyberLaws. Noone can make laws in Cyberspace. Everyone makes laws in Cyberspace. Cyberspace is unregulated. Cyberspace is excessively regulated by every jurisdiction applying conflicting laws.

HKUST Business School 5 Internet Governance Internet Law and Telecom Law No laws, many laws, both at once! Evolving slowly for Telecom Law Developing slowly for Internet Law Role of ITU in Telecom and Internet Role of USA in Telecom and Internet Law Law, Regulation, and Policy Why do we need an Internet law at all? Network Solutions, Inc. as Cyberspace Landlord

HKUST Business School 6 CyberLaw: Mice and Elephants There are many laws that apply to Cyberspace, but these laws can be difficult to enforce against small, entrepreneurial firms. Large firms are like elephants, they are easy to see and find and they will crush anything in their way, but they can’t hind for long. Small firms, like mice, might be crushed or killed, but 3 more will rise when one is killed; governments can not effectively stop them.

HKUST Business School 7 Intellectual Property Law Copyright Laws Patent Laws Trademark Laws Trade Secrets Laws Software Law as special application Encryption different from Software Laws Military or Government Security Issues Freedom of Speech Issues

HKUST Business School 8 Software Law Protected by copyright law, not by patent laws Stronger that patents in some ways, but weaker in others Longer protected life than patent Immediate copyright protection upon creation Fair use doctrine as defense Does not protect idea, only expression Stops exact copying, not functional duplication

HKUST Business School Patent Law Protects FUNCTION, not expression Amazon patented its one-click function, as copyright would not have protected this function Replicating code for one-click function easy to do Lengthy application and approval process Significant legal costs may be required Patents may be required in multiple jurisdictions Patent limited to exact terms of application Be careful to limit patent claims narrowly

HKUST Business School 10 Trademark Law Protects brands, corporate names or slogans “It’s the real thing: Coke” Significant source of litigation in Cyberspace Same name of firm in different states, who has right to use the name in Cyberspace? Domain name squaters? Legalized blackmail? New cyberspace domains created – confusion? Can not be generic or functional (Xerox) Strongest defense for fabricated names

HKUST Business School 11 Trade Secret Information must be kept confidential Sharing with any outside party voids rights Must inform employees information is secret Software can be trade secret if compiled Incompatible with copyright – not published Misappropriation illegal, replication legal May include elements of public domain in system, but must have unique secrets

HKUST Business School 12 Software as Expression Justification for applying copyright to software is that it is an expression like that of an artist’s novel or a painting This raises question regarding applicability of freedom of speech for software and code US constitution protects freedom of speech US government tried to stop publishing of encryption code as security law violations Academics claimed code was protected speech

HKUST Business School 13 Copyright, Software, and the Applications to the Internet Any copying in print or electronic form of any expression without author’s consent is violation of copyright protections, even if only for an instant Copyright always exists immediately upon publication Rights can be waived, but need not be asserted to be valid Any copying of expression is violation, unless exception Fair use doctrine not adequate defense for Internet Limited to copying small percentage only for non-profit use Internet copies the entire site many, many times Special exceptions to copyright laws created for ISPs Be careful about copying others’ website code!

HKUST Business School 14 Jurisdiction and Choice of Law Most businesses have the right to choose the laws they will operate under and be subject to Cyberspace firms may be held liable for violations of laws in ANY JURSIDICTION from which citizens of that nation can view their websites! France and eBay auctions for USA – strict liability. German and Compuserve pro-Nazi sites in USA. Italian site subject to US law in New York. State laws in USA – community standards applied Firms responsible for preventing local law violation No automatic membership, check address, age, etc. Alternatively, be small and hard to sue! (e.g., porn sites)

HKUST Business School 15 Contract Law and the Internet Terms of use important for eCommerce Make choice of law and venue clear in contract Require action to affirm customer has read terms Inconsistent or unclear terms favor customers Warrantees trump disclaimers Be careful about express or implied warantees Make terms clear of any intended guarantees Make disclaimers clear and consistent everywhere Puffing allowed, but be careful about bounds

HKUST Business School 16 Computer Crimes Most computer crimes involve insiders Hacking happens, but generally with inside help Increasing computer crime and associated costs More than 30% and possibly more than 50% of major firms experience computer crime Why are reported statistics much lower? Computer crime analogy to sexual assault Cost of prevention versus cost of recovery