E-Marketing

Dr. Karim Kobeissi

Chapter 5
Ethical
&
Legal
Issues

Keywords: Web site & Web

page
webpage is what you see through your
browser by scrolling the window up and down.
A Web site is a collection of Web pages
which may link to other pages that are not
part of that site. For example, Amazon.com is
a Web site, but there are millions of Web
pages that make up the Amazon.com site.

Keywords: Personally Identifiable

Information
Personally
identifiable
information
(PII): Data that can be used to
identify,
individual.

locate,

or

contact

an

Software Infringement
Copyright infringementis the use of works protected
bycopyrightlaw without permission, violatingcertain
exclusive rights granted to the copyrightholder, such
as the right to reproduce, distribute, display or perform
the protected work, or to make derivative works.
Counterfeiting occurs when illegally copied software is
duplicated and distributed on a large scale.
Countries with weak software copyright enforcement
cost software owners billions of dollars in lost revenue.

Software Infringement (con)

Globally, over a third of the software
sold is an infringing version.
Microsoft

uses

the

following

intellectual

property

remedies:
Proposes
legislation.
Files civil lawsuits.
Creates non infringement technologies.

Overview of Ethics and Legal Issues

Although ethics and law are closely related, they differ in
that ethics are social guidelines based on moral
principles and values while laws are rules and
regulations

that

have

specific

penalties

and

consequences when violated.Ethics do not have

punishments, fines or associated penalties when people
fail to abide by them while laws do. Both set standards of
expected societal behaviours, but ethics express social
guidelines while laws impose actions.
In some instances, laws are established based on ethics,
principles or morals.

Overview of Ethics and Legal Issues (con)

Modern

technology

presents

challenges

marketing ethics and laws. Critical issues include:

I.

The role of privacy in a virtual world

II. Ownership of intellectual property

III. Freedom of expression
IV. Use of data and its collection
V. Public Safety and Welfare
VI. Governance
VII. Taxation

to

I- The Role of Privacy in a Virtual World

Privacy: The moral right of individuals to be left

alone, free from surveillance or interference
from other individuals or organizations.
Information privacy: Includes both the claim
that

certain

information

should

not

be

collected at all, as well as the claim of

individuals to control the use of whatever
information is collected about them.

The Role of Privacy in a Virtual World (con)

With

widely usage of the Internet , the

right to individual privacy moved beyond

private property. The Internet industry
essentially governs itself. This condition
enables the Internet to grow without the
constraints of legislation, but it also
creates problems because there are few
specific guidelines to follow.

The Role of Privacy in a Virtual World (con)

Almost all e-commerce companies collect Personally identifiable

information and use cookies to track clickstream behavior.

While online marketers and

advertisers suggest that, by

recording the likes and dislikes of online consumers, online

companies can better serve their users, privacy advocates argue
that these efforts violate individuals' privacy rights . For
example, online advertising firms such as DoubleClick have
traditionally recorded users clickstreams to form user profiles for
marketing

purposes.

Controversy

arose

in

2000

when

DoubleClick acquired consumer names, addresses, and buying

histories

and

planned

clickstream data.

to

combine

the

offline

data

with

The Role of Privacy in a Virtual World (con)

The American Marketing Association (AMA)

Code of Ethics for Marketing on the internet:
information collected from customers should
be confidential and used only for expressed
purposes.

Cookies and Online Data Collection

Technologies such as cookies, Java applets, and intelligent
agents are everywhere applications that can function without
the users knowledge or control.
Cookies serve many purposes:
1) Create shopping baskets to hold purchases
2) Recall stored sales information
3) Collect user data

They allow marketers to pinpoint an individuals

online behavior.

Regulatory Protections of Online Privacy

In the U.S. the Federal Trade Commission (FTC) has
identified the Fair Information Practice Principles (FIPP,
1998) for the ethical use of consumer information in
an electronic marketplace:
1)

Notice/AwarenessConsumers should be given

notice of an entity's information practices before any
personal information is collected from them.

2)

Choice/ConsentChoice and consent in an on-line

information-gathering sense means giving consumers
options to control how their data is used. Specifically,
choice relates to secondary uses of information
beyond the immediate needs of the information
collector to complete the consumer's transaction.

Regulatory Protections of Online Privacy (con)

3) Access/ParticipationAccess includes not only a

consumer's ability to view the data collected, but
also to verify and contest its accuracy. This access
must be inexpensive and timely in order to be
useful to the consumer.
4) Integrity/SecurityInformation collectors should
ensure that the data they collect is accurate and
secure. They can improve the integrity of data by
cross-referencing it with only reputable databases
and by providing access for the consumer to verify
it.
5) Enforcement/RedressIn order to ensure that
companies follow the FIPP, the FTC identified some
enforcement measures that include civil and
criminal penalties.

FTC Recommendations for Online Profiling

II- Ownership of Intellectual

Property

Intellectual property: Encompasses all tangible and intangible

products of human mind.
Major social issue: Is there continued value in protecting
intellectual property in the Internet age?
Major political issue: If so, how, should Internet and ecommerce

be

regulated/governed

to

protect

intellectual

property ?
The law protects intellectual property through five basic
mechanisms:
Patents
Trademarks
Licenses
Copyrights

Sui generis Database Rights

Pa t e n t s
Patent:

the

exclusive

right

granted

by

government to an inventor to manufacture, use,

or sell an invention for a certain number of years
(usually 20 years).
Creators of software are attempting to make use
of patent law protection.
Advocates argue that granting of patents for software
will encourage innovation.
Critics argue that patents will have overpowering and
monopolistic effects.

Internet and E-Commerce Business Method

Patents

SOURCE: Based on data from United States Patent and Trademark Office, 2005

Tr a d e m a r k s
A trademark is a mark used to identify and distinguish
products, and indicate their sources.
Trademarks protect public by ensuring it gets what it
pays for/expects to receive; protects trademark owner
against piracy and fraud.
Trademark law has been applied to the internet naming
system of domain names.
Similarities in names may result in trademark infringement
claims.
A trademark violation (cyber-squatting) involves the registration
of domains that resemble or duplicate existing ones.

Licenses
Licenses

are

an

increasingly

popular

method of intellectual property protection.

Licenses allow the buyer to use the product
but restrict duplication or distribution.

Licenses may be two basic types:

Shrink-wrap or break-the-seal licenses
Click wrap licenses where the user is required
to click a button to accept the terms

Copyrights

The copyright law protects original forms of expression (e.g.,

e-books) but not ideas from being copied by others for an
initial period of time at which the material is sold.
The No Electronic Theft Act (NET, 1997) presents copyright
protection for computer content and imposes penalties for
infringement.
The 1998 Digital Millennium Copyright Act (DMCA, 1998)
contains several stipulations:
- Protects InternetServiceProvider(ISP) from acts of user
infringement.
- Criminalizes the circumvention (getting around) of
software protections.
- Complies with international standards for copyrighted
material.

Sui generis Database Rights

Asui generis database rightis considered to be
aproperty right, comparable to but distinct
fromcopyright, that exists to recognise the
investment

that

is

made

in

compiling

database, even when this does not involve the

'creative' aspect that is reflected by copyright.
Contrary to E.U. laws, U.S. copyright law does not
protect facts, so database vendors are seeking
legal protection.

III- Freedom of Expression

Freedom

of

expression

is

protected

by

the

First

Amendment.
Internet technology has resulted in what many consider
inappropriate or untargeted types of consumer contact.
Spam is the mass distribution of unsolicited electronic mail.
Many internet users believe that spam steals their resources (spam
costs companies around $22 billion a year in anti-spam filters, new
equipment and lost productivity).

CAN-SPAM Act creates a framework for ethical email

marketing.
Expression directed to children remains a highly visible
issue within online law and ethics.

IV- Use of Data & Its Collection

The internet provides opportunities for

falseappearanceorstatement:
Spoofing is the use of e-mail or Web sites to
mimic individuals or corporations.

Fraud is the use of trickery and false

claims/data to obtain profit.

Use of Data & Its Collection (con)

Another issue is phishing which is the practice of
sending fraudulent that appear to come from
a trusted, legitimate source and request
personal

information

for

the

purpose

of

committing identity theft. Phishing messages

will often come from financial firms, like Citibank
and may direct viewers to an authentic-looking
website

to

information
passwords.

trick

them

including

into

account

giving

personal

numbers

and

V- Public Safety and Welfare

Protection of children and strong sentiments against pornography
Passing legislation that will survive court challenges has proved
difficult:

Communications Decency Act struck down ( unenforceable)

Childrens Online Protection Act struck down (but still be

considered by lower courts)

Childrens Internet Protection Act sustained by Supreme Court

(requires schools and libraries to install technology protection
measures).

Efforts to control gambling and restrict sales of drugs and cigarettes.

Currently mostly regulated by state law.

VI- Governance
Primary questions:
Who will control Internet and e-commerce
What elements will be controlled and how

Stages of governance and e-commerce

Government Control Period (19701994)
Privatization (19951998)
Self-Regulation (1995present)
Government Regulation (1998present)

Governance (con)
Who Governs E-commerce and the Internet?
Currently we are in a mixed mode policy
environment where self-regulation, through a
variety of internet policy and technical bodies,
co-exists with limited government regulation.
Not true that Internet cannot be controlled. In
fact, Internet can be very easily controlled,
monitored, and regulated from a central location
(such as done by China, Singapore, etc.).

V I I -

T a x a t i o n

The Internet has created a world without borders. Consumers can

purchase goods and services from around the world. As a
consumer, I can go online, comparison shop for whatever I want
a computer, a car, a book, or whatever and make my
purchases, all tax-free (unless the vendor has a physical presence
in my state). Trying to establish a tax system that takes into
account the different jurisdictions, tax rates, the different product
definitions, and which products are subject to taxation is a great
challenge that could significantly impair the ability of large and
small dotcoms to make money or even to operate.
It is unlikely that the issue of Internet taxation will have
been resolved by the time you read this presentation.