Chapter 7 Key Concepts

Chapter 7 – Legal, Ethical and Tax Issues; This is Really Good Stuff

The legal environment of electronic commerce
-Scholars define the relationship between geographic boundaries and legal boundaries in terms of four elements: power, effects, legitimacy, and notice.
1. Power – a form of control over physical space and the people and objects that reside in that space, and is a defining characteristic of statehood.
Jurisdiction - The ability of a government to exert control over a person or corporation.
-laws in the physical world do not apply to people who are not located in or do not own assets in the geographic area that created those laws. For example, a Japanese website that offers delivery to goods in the US would however be subject to US laws.
2. Effects – the impact of a person’s/corporation’s behavior
3. Legitimacy – those subject to laws should have some role in formulating them
4. Notice – the expression of a change in rules (usually legal or cultural rules) typically represented by a physical boundary

Jurisdiction on the Internet
-more difficult to establish on the Internet than in the real world because geographic boundaries do not exist
Contract – a promise or set of promises between two or more legal entities that provides for an exchange of value (goods or services) between them. A failure to comply with a contract is called a breach of contract.
Subject-matter jurisdiction – a courts authority to decide a particular type of dispute; state courts have subject matter jurisdiction over issues governed by state laws, and federal courts have subject-matter jurisdiction over issues governed by federal laws.
Personal jurisdiction – a court’s authority to hear a case based on the residency of the defendant (when the defendant is a resident of the state in which the court is located)
-an out of state person can voluntarily submit to the jurisdiction or a particular state court by agreeing to do so and signing a forum selection clause, making them subject to their own jurisdiction’s laws as well as the laws of the selected jurisdiction.

Jurisdiction in International Commerce
-is more complex
-generally governed by treaties between the countries engaged in the dispute
-most courts are reluctant to serve as forums for international disputes

Conflict of Laws takes place when business is governed by state, local and federal laws that address the issues in different ways

Contracting and enforcement in E-commerce
-Any contract includes 3 essential elements:
1. An offer
2. An acceptance
3. Consideration
Offer – a commitment with certain terms made to another party. Offer can be revoked as long as no payment, delivery of service, or other consideration has been accepted
Acceptance – the expression of willingness to take an offer, including all of its stated terms
Consideration – the agreed upon exchange of something of value, such as money, property or future services
-an implied contract can also be formed when two or more parties that act as if a contract exists, even if no contract has been written and signed
-when a seller advertises goods for sale on a web site, that seller is not making an offer, but is inviting offers from potential buyers

Warranties on the Web & Authority to form contracts
Warranty disclaimer – is a statement declaring that the seller will not honor some or all implied warranties. These should be in large type, bold font or a contrasting color, as they must be noticeable to the buyer.
Authority to bind – determining whether an individual has the authority to commit a company to a contract

Terms of Service Agreements
TOS (Terms of Service)- a page full of detailed rules and regulations, most of which are intended to limit the Web site owner’s liability for what you might do with the information you obtain from the site

Use and Protection of Intellectual Property
Intellectual Property – a general term that includes all products of the human mind, tangible or intangible
Copyright – the right granted by a government to the author or creator of a literary or artistic work, for a specific length of time provided in the copyright law and gives the creator sole and exclusive right to print, publish, or sell the work.
-can include books, music, recordings, architectural drawings, computer software, etc.
-Fair Use of a copyrighted work includes copying it for use in criticism, comment, news reporting, research, etc.
Patent - an exclusive right granted by the government to an individual to make, use, and sell an invention.
-Business Process Patent – protects a specific set of procedures for conducting a particular business activity.
Trademark – a distinctive mark, device, motto, or implement that a company affixes to the goods it produces for identification purposes.
-Service Mark – similar to a trade mark, but used to identify services provided
Common Law – part of British and US law established by the history of court decisions that has accumulated over many years (precedent?)
Statutory Law – also part of British and US law, arises when the elected legislative bodies pass laws, which are also statutes.

Domain names, Cyberaquatting, and Name stealing
Cybersquatting – registering a domain name that is the trademark of another person or company in the hopes that the owner will pay huge sums of money to acquire the URL
Name Changing – when someone registers purposely misspelled variations of well-known domain names, to lure consumers who make typographical errors
Name Stealing – when someone posing as a site’s administrator changes the ownership of the site’s assigned domain name to another site and owner.

Defamation – a defamatory statement is false and injures the reputation of another person or company. If it injures the reputation of a product of service instead of a person, it is called product disparagement
Trademark dilution – the reduction of the distinctive quality of a trademark by alternative uses

Online Crime, etc.
-includes stalking, distribution of pornography, and gambling

Taxation and Ecommerce
-An online business can be subject to several types of taxes: income tax, property tax, and transaction tax.
Income tax: levied by national, state and local governments on the net income generated by business activities
Transaction tax: include sales tax, use taxes, excise tax, etc.
Property tax: on the personal property and real estate used in the business