E-Core Values: Ethical, Legal, Taxation, and International Issues

The focus of this chapter is on several learning objectives Ethical issues and how to improve the ethical climate in e-commerce Legal issues in terms of liability, warranties, copyrights, trademarks, and trade names Taxation issues, legal disputes, and domain name disputes Encryption laws and what they mean International issues, especially with regard to intellectual property and developing countries

Issues People don’t operate by the Golden Rule The computer does not need ethics; it is the user who needs ethics The legal, moral, and ethical implications raised by the Internet are attracting a lot of attention among industries and governments around the world There is no doubt the Internet has promoted tax evasion and privacy issues that are causing a nightmare for the law No single jurisdiction “owns” the Internet, but every state and country wants to control it Today, any e-business can move beyond the jurisdiction of any given authority E-commerce often operates in a legal vacuum The bottom line: legal, moral, and ethical issues raised by the Internet are dynamic and duanting

Ethics Ethics involves systematizing, defending, and recommending concepts of right and wrong behavior. Ethical theories often are classified into one of three categories: Metaethics: Where do our ethical principles come from and what do they mean?” Are they merely social inventions? Questions include are there universal truths, do they come from God, and what is the role of reason? Normative ethics: Derived from social norms of behavior. We do the right thing because society has certain constructed rules about how we should behave Applied ethics: involves examining specific controversial issues where people are evenly divided. Source:: http://www.iep.utm.edu/e/ethics.htm#H3

Ethics Justice, equity, honesty, trustworthiness, equality, fairness An unethical act is not the same as an immoral or an illegal act, although one may lead to the other Several factors influence ethical judgement Individual (family, associates) Community, societal (social norms) Professional (code of ethics) Belief system (religious or personal) Legal

Factors Influencing Ethical Decision Making

Code of Ethics A declaration of the principles and beliefs that govern how employees of a corporation or an association are expected to behave ACM Code of Ethics and Professional Conduct

What Is Computer Ethics? Computer ethics is that branch of applied ethics that looks at the social and ethical impact of information technology One view suggests that ethics means acceptance that the Internet is not a value-free zone or something apart from civil society Topics in computer ethics: Computer crime Privacy Intellectual property Globalization Computers in the workplace Security

Major Threats to Ethics Faster computers and more advanced networks Sophisticated global telecommunications Massive distributed databases Ease of access to information and knowledge bases Transparency of software The idea that captured information can be used as a competitive weapon

Improving the Ethical Climate Top managers should act as role models Firms should establish a code of ethics Unethical behavior should be dealt with promptly according to criteria and procedures set in advance Set up and support a strong ethics training program for all new employees and reinforce training on a regular basis Motivate employees to focus on honesty, integrity, fairness, and justice as goals

10 Commandments of Internet Conduct Thou shall not use a computer to harm other people Thou shall not interfere with other people’s computer work Thou shall not snoop around in other people’s files Thou shall not use a computer to steal Thou shall not use a computer to bear false witness Thou shall not use or copy software for which you have not paid Thou shall not use other people’s computer resources without authorization Thou shall not appropriate other people’s intellectual output Thou shall think about the social consequences of the program you write Thou shall use a computer in ways that show consideration and respect

Issues and Ethics Implementation Top corporate officer sets the tone for the kind of image the company will have What to do about employees who spend much of their time on non-productive or non-business-related Internet browsing Is it ethical for a company to track employee e-mail? Managers can have problems in controlling unproductive Internet surfing Business ethics is closely tied to corporate culture and values Self-assessment is a question-and-answer procedure that allows individuals to appraise and understand their personal knowledge about a particular topic

The Privacy Factor Privacy is a basic American value Inadequately addressed in e-commerce The Online Personal Privacy Act The Patriot Act Personalization in online services creates privacy conundrums

Five Principles of Privacy Protection Notice Choice Access Security/Integrity Enforcement

Categories of Information Privacy Concern Who owns electronic data that businesses store about consumers? Security of electronic data transmissions Unauthorized reading of personal data files

Chief Privacy Officer? Privacy regulations HIPAA Sarbanes-Oxley Act Gramm-Leach-Billey Act Legal compliance is the number one priority in running an online business The Chief Privacy Officer (CPO) is a compliance job http://www.privacyassociation.org

The Legal Question of Liability Product liability - tort that makes a manufacturer liable if its product has a defective condition that makes it unreasonably dangerous to the user or consumer Strict liability - a seller is liable for any defective or hazardous products that unduly threaten a user’s safety Companies may be liable if employees using mobile tools are involved in accidents The application of the negligence doctrine to today’s technological society

Tort Law on the Internet Tort: a wrongful act subject to civil action Tort Law: a special area of law focused on remedying wrongs between parties Fraud: the intent to deceive Negligence: failing to take a certain action, which in turn causes injury or material loss to another False Advertising: advertising the availability of a product or a service when no such thing is available Misrepresentation: claiming a product will perform certain functions when in fact it cannot

Warranties Uniform Commercial Code (UCC): a law drafted by the National Conference of Commissioners on Uniform State Laws, which governs commercial transactions Warranty: an assurance made by the seller about the goods sold Express Warranty: a warranty offered orally or in writing by the maker of the product

Warranties (Cont’d) Implied Warranty: a warranty that arises automatically from the fact that a sale has been made and the assumption that the product will do what it is supposed to do Disclaimer: evidence of the seller’s intention to protect the business from unwanted liability

Liability Designer’s Liability Out-of-bounds error: an error that occurs because either the software did not have the expertise to address the particular problem or the designer improperly condensed the technology Nontrivial error: an error that triggers other areas in the software to malfunction and is difficult to correct Doctrine of respondent superior User’s Liability Passive negligence: negligent by omission Affirmative duty

Copyrights, Trademarks, and Trade Names Intellectual property: includes software, books, music, videos, trademarks, copyrights, and Web pages Copyright: ownership of an original work created by an author Copyright law is a law that gives the author or creator of a tangible product the right to exclude others from using the finished work Protected works include: Graphic works Web sites Good for the life of its author plus an additional 70 years after the author’s death The Digital Millennium Copyright Act (DMCA) Trademark: registration of a company’s trade name so that others cannot use it; a word or a symbol that distinguishes a good from other goods in the market

Taxation Issues Sales tax is a very controversial issue On the Internet, tax collection is not easy The rules for taxation differ by country All indicators suggest that sales-tax revenue loss is projected to increase exponentially unless something is done to collect the tax Internet Tax Freedom Act

Taxation Issues (Cont’d) Internet Tax Freedom Act A three-year moratorium on special, multiple, or discriminatory taxes on the Internet that would be imposed by any state or local governments An advisory committee to explore different issues relating to Internet taxes, government Internet policy, and its effects on e-commerce The federal government is barred from taxing the Internet or any transaction that takes place through it

Jurisdiction The legitimate scope of government power Whose laws apply? State and federal laws limit a court’s jurisdiction over a defendant from another state International jurisdiction is especially complex and controversial In an international dispute over e-commerce, whose laws apply? Violations of IP

Guidelines Regarding Domain Names and Trademarks Find out whether the proposed domain name infringes on any trademarks Secure federal trademark registration of the proposed name Register the proposed domain name with InterNIC, http://www.internic.net In the event of a poached domain name, bring a lawsuit to force InterNIC to reassign the name to the original owner Get permission before linking to other Web sites

International Issues What right does any one country have to determine the materials that should be available on the Internet? Can a country regulate an entity in cyberspace, but not on the soil of that country? World Intellectual Property Organization (WIPO) succeeded in two treaties to adapt copyright rules for e-commerce EU’s Electronic Commerce Directive gave online business firms assurance, in 2000, that the firms would have to comply with laws only where the firms are based, not in any other country in the union

International Issues (Cont’d) Digital Millennium Copyright Act of 1998 EU’s Rome II Directive hopes to allow consumers to sue e-businesses in their home country Hague Convention drafted a treaty in 1992 designed to set global standards for defamation, copyright, and libel on the Internet

Intellectual Property Intellectual property describes the ideas, inventions, technologies, music, and literature that are intangible when created and are converted into tangible products for market consumption IP laws and cultural norms vary from country to country

Management Implications Legal rules that define the Internet are yet to be clarified Long-range effect of Internet patents, especially those held by e-companies like Amazon.com that cover fundamental online business practices Ultimate goal in doing business on the Internet is to promote standards that everyone can accept or adopt Management must focus on legal and consumer protection issues surrounding B2C e-commerce

Chapter Summary Legal and ethical implications of the Internet are attracting attention in industries and governments around the world Question of ethics in e-commerce is the current challenge confronting U.S. organizations Several threats to ethics Privacy is a basic American value Many of the legal questions that arise in e- commerce are not settled due to lack of specific laws or legal guidelines

Chapter Summary (Cont’d) Internet copyright and trademark violations fall under intellectual property laws The question of whether a Web site is a product or a service elicits varied opinions One the Internet, tax collection is not easy The ultimate goal of doing business on the Internet is to promote ethics through standards that everyone can accept or adopt