E-Commerce - Law Seminar Course Outline - Spring 2006

Class 1               January 10          Internet and E-commerce Introduction

                            Select writing topics ( in class). Start research logs and outlines.

A.          How Internet works

B.           Elements of e-commerce


              Delivery system for digital goods

              Delivery system for services

              Billing system

              Revenue collection system

C.          UNIFORM ELECTRONIC TRANSACTIONS ACT, - National Conference of Commissioners  of Uniform State Laws, Uniform Electronic Transactions Act Sec. 2, § 2 - DEFINITIONS --- Materials 1

D.          Self-help

E.           Insurance


Errors and omissions coverage (''E & O'') provides insurance for damages resulting from negligence, omissions, mistakes, and errors made by the policyholder in the course of providing professional services. Internet firms deals in computers, computer equipment and software can have considerable E & O exposure. For example, Internet businesses that design and program web sites for others can be held accountable for mistakes that cause problems to their customers' computer networks. Other exposures include service outages and interruptions; faulty technical support; faulty security measures; release of confidential information without authorization; designing, constructing or maintaining an Internet site; maintenance of chat rooms or bulletin boards; and faulty software. In the context of the Internet and e-commerce, standard E & O policies could potentially generate dispute over the scope of coverage.

Please note that the numbers which follow refer to chapters in 101 Things You Need To Know About Internet Law by Jonathan Bick (Random House 2000)

1. A parent is almost never liable for a child's bad acts on the Internet

2. To make Internet contracts enforceable, simply have proof of written signed terms

3. To avoid out-of-state liability when using web ads, avoid out-of-state contacts

4. Web site advertisement publishers are almost never liable for customers' advertisements

5. What can legally be done if a person impersonates another on the Internet

6. Buying and selling medicine on the Internet is legal

7. Spamming is generally not illegal, but one California court ruled spam e-mail to be illegal trespass

8. Sweepstakes and other Internet games of chance are legal

9. An Internet site's activities can result in an out-of-state suit....

10. Internet credit card transactions will be afforded the same standard of protection as all other credit card transactions

Class 2               January 17          Internet Consumer Protection

                            Hand in a copy of the research log for review (optional).

A.          Internet Consumer Protection by the Federal Trade Commission

              In Re Beylen Telecom

                            Material 2 --- Complaint

                            Material  3 --- Decision and Order

B.           Internet Consumer Protection by other Federal Agencies 

11. Trademark names and e-linking are subject to legal scrutiny

12. Internet banking is legal

13. Unencrypted Internet communication is not usually protected by attorney-client privilege

14. Internet business methods can be patented

15. License don't sell-Internet domain names

16. Internet privacy rights are scarce

17. E-commerce data collection is subject to legal limitations

18. The Constitution limits a court's ability to make an Internet site owner subject to an out-of-state suit

19. Internet repossessions are legal

20. Internet service providers (ISPs) are protected from legal liability for certain actions of their clients

Class 3               January 24          Restricting E- Competition

                            Hand in copy of the guided research paper outline for review.

A.          Alcoholic beverages and wine sales

                            Granholm v. HealdGranholm v. Heald, 544 U.S. 161 L. Ed. 2d 796, 125 S. Ct.                                   1885 (2005).

B.           Gambling

                            People v. World Interactive Gaming Corporation, 185 Misc. 2d 852, 714                                                         N.Y.S.2d 844, 1999 N.Y. Misc. LEXIS 425, 1999 WL 591995,

C.          Prescription drugs

                            Nelson v. United States, No. 04-7490. , SUPREME COURT OF THE UNITED                                   STATES , 125 S. Ct. 935; 160 L. Ed. 2d 819; 2005 U.S. LEXIS 244; 73 U.S.L.W.                   3399, January 10, 2005, Decided

D.          Practice of law

                            Unauthorized Practice of Law Comm. v. Parsons Tech., Inc., No. 99-10388,                                     UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT, 179                                         F.3d 956; 1999 U.S. App. LEXIS 14234, June 29, 1999, Decided

E.           Cigarettes

F.           Sales of Guns

G.          Pornography 



21. Protect domain names by securing trademark rights first

22. An Internet service agreement has some standard elements. .

23. Legal notices that are properly placed on a web site will minimize or eliminate legal liability

24. Changes in trademark laws have resulted in changes in domain name dispute outcomes

25. Internet telemedicine patients have fewer rights than traditional patients

26. Applying suitability legal concept to e-stock brokers

27. Current laws do not fully protect the privacy of information in the possession of an Internet service provider

28. Workplace privacy is nearly nonexistent

29. The Internet may soon be deemed a public accommodation for the visually impaired

30. Personal jurisdiction are in flux with respect to the Internet

Class 4               January 31          E-Contracts

                            Outlines Returned with comments (not graded).

A.          Application of traditional law to Internet agreements

B.           Authentication of signatures

C.          Electronic signature statutes

              Electronic Signatures in Global  and National Commerce Act

              Uniform Electronic Transaction Act

D.          Elements of an electronic agreement

F.           Clickwrap

                            Vault Corp. v. Quaid Software Ltd. 655 F. Supp. 750 (E.D. La. 1987), aff'd, 847                                 F.2d 255 (5th Cir. 1988).

                            Step-Saver Data Systems, Inc. v. Wyse Technology    939 F.2d 91 (3d Cir. 1991).

                            Arizona Retail Systems, Inc. v. Software Link, Inc. 831 F. Supp. 759 (D. Ariz.                                    1993).

                            ProCD v. Zeidenberg  86 F.3d 1447 (7th Cir. 1996).

                            Hill v. Gateway 2000, Inc  105 F.3d 1147 (7th Cir. 1997), cert. denied, 522 U.S.                                   808 (1997).

                            M.A. Mortenson Co. v. Timberline Software Corp.  M.A. Mortenson Co. v.                                         Timberline Software Corp., 93 Wash. Ct. App. 819, 970 P.2d 803 (Wash. Ct.                                          App. 1999), aff'd, 140 Wash.2d 568, 998 P.2d 305 (Wash. 2000).

31. The Internet can provide legal notice

32. Consider European comparative advertising legal limitations when preparing Internet advertisements

33. Commercial Internet web site content is protected by the First Amendment

34. Internet auctions result in legal contracts

35. Internet transactions can result in "choice-of-law" difficulties.

36. U.S. legal limitations apply to international Internet services

37. International law limits use of Internet digital signatures

38. State laws limit physicians' use of the Internet

39. European Internet signature legal limitations differ among countries

40. International laws extend Internet service providers' content liability

Class 5               February 7         Internet Service Providers

                            Submit guided research paper draft

A.          Identifying Internet Service Providers

B.           Limiting liability for Internet Service Providers

C.          Internet Service Providers' agreements

D.          Southwestern Bell Tel. Co. v. Delaney, 809 S.W.2d 493 (Tex. 1991)

E.           Hagen v. America Online, Inc., No. 971047 (Cal. App. Dep't. Super. Ct., settled June 20,    1996).


In addition to standard terms of service, online service providers often include other agreements associated with computer software and services provided to their subscribers. Among these agreements are: Software License Agreements, Service Agreements and Web Site Agreements.


License Agreements -- generally relate to computer software communications programs provided by the online service provider for use by the subscriber. These documents usually limit the hardware configuration on which the software may be operated. Many of these agreements provide that copies of the software may be used at a ''site,'' defined as all personal computers,  (including networked systems) with the same operating system platform at a single location or at different locations that are connected by a single networked system.


Service Agreements -- set forth the rules and regulations for users accessing the online system. Often a subscriber may authorize more persons to access the network, as long as these persons reside with the member. The terms of service should state whether its online service is only for personal use by members and may not be resold. 


Web Site Agreements -- Service providers should inform users, subscribers, and persons accessing your network or web site of the fact that your company monitors email and other communications and other access to your computer networks

41. Most proposed Internet legislation is not likely to be implemented

42. Digital certificates do not usually provide significant legal rights

43. Internet loans are lawful

44. Internet insurance addresses new risk

45. Internet wagering is generally illegal

46. Some Internet content is legally free to use

47. Internet nondisclosure agreements have unique features

48. Internet investment advisers require special legal precautions

49. Taxation of European e-commerce differs among countries

50. Using Internet materials may increase legal risk

Class 6               February 14                     Internet Commerce Bad Acts

                            Feedback given on guided research paper draft (not mandatory)

A.          Economic Espionage Act 1996

B.           Identity theft

                            Stern v. Delphi the Internet Services Corp. 165 Misc. 2d 21, 626 N.Y.S.2d 694                                  (N.Y. Sup. Ct. 1995)

                            Molina v. Phoenix Sound, Inc. Molina v. Phoenix Sound, Inc., 297 A.D.2d 595,                             747 N.Y.S.2d 227 (N.Y. Sup. Ct. 2002).

C.          Phishing

D.          Denial of service attacks

E.           Commercial viruses

F.           Trespass to Chattel

                            eBay, Inc. v. Bidder's Edge 100 F. Supp. 2d 1058 (N.D. Cal. 2000)

                            Register.com v. Verio, Inc. 126 F. Supp. 2d 238 (S.D.N.Y. 2000)

G.          Unauthorized Entry 

H.          Copyright Infringement 

I.            Pyramid Schemes


51. E-business is particularly susceptible to nine legal perils

52. International program license agreements are important for e-commerce outside of the U.S

53. The responsibility for content control by Internet service providers varies in Europe

54. Some countries legally protect personal data stored on the Internet

55. Worldwide Internet e-data legal protection varies

56. Internet signatures can be legally acceptable

57. Internet patents are subject to legal testing

58. Internet proxies are lawful

59. Internet intellectual property transfers must apply state law ...

60. Internet message encryption laws diverge

Class 7               February 21       Internet web sites

                            Schedule feedback meetings

A.          Web site development agreements

B.           Web site maintenance agreements

C.          Intellectual property ownership

              third parties

              contracting parties

D.          Digital Millennium Copyright Act

                            RealNetworks, Inc. v. Streambox, Inc. No. C99-2070P, 2000 U.S. Dist. LEXIS                                   1889 (W.D. Wash. Jan. 18, 2000).

                            Kelly v. Arriba 77 F. Supp. 2d 1116 (S.D. Cal. 1999), aff'd in part and rev'd in                                        part, 280 F.3d 934 (9th Cir. 2002)

                            Universal City Studios, Inc. et al. v. Reimerdes 111 F. Supp. 2d 294 (S.D.N.Y.                                  Aug. 17, 2000)

                            ALS Scan, Incorporated v. RemarQ Communities, Incorporated 239 F.3d 619                                  (4th Cir. 2001)

                            A & M Records, Inc. v. Napster, Inc.  54 U.S.P.Q.2D (BNA) 1746 (N.D. Cal.                                      May 5, 2000).


61. Internet chemical purchases are subject to recipients' jurisdictional rules

62. International e-privacy laws are primarily voluntary

63. International e-copyright laws are in flux

64. Clicking "I agree" has different meanings around the world ...

65. Global e-buyers beware

66. International e-broadcasting legal rules are country specific..

67. Special legal liability is associated with e-promotions

68. Typical domain name cease-and-desist letter and an appropriate reply

69. Reply to domain name cease-and-desist letter

70. FCC has begun to regulate the Internet

77. Internet legal evidence results in new legal difficulties

78. Promotion agency agreements for Internet services are advisable

79. e-mail is legally discoverable

80. Internet crimes and violations are emerging

Class 8               February 28                     Internet Commercial Communications


A.          SPAM

                            Cyber Promotions, Inc. v America Online, Inc. 948 F. Supp. 436 (E.D. Pa.                                         1996).

                            Hotmail Corp. v. Van$ Money Pie, Inc.  1998 U.S. Dist. LEXIS 10729, (N.D.                                      Cal. Apr. 16, 1998).

                            Intel Corp. v. Hamidi   30 Cal. 4th 1342 (2003).

B.           Pop-Ups

                            1-800 Contacts, Inc. v. WhenU.com, Inc. and Vision Direct, Inc. 309 F. Supp.                                  2d 467 (S.D.N.Y. 2003)

                            U-Haul Int'l, Inc. v. WhenU.com, Inc. 279 F. Supp. 2d 723 (E.D. Va. 2003)

C.          Broadcast advertisements

                            Playboy Enterprises, Inc. v. Netscape Communications Corp. 354 F.3d 1020                                     (9th Cir. 2004).

D.          E-publications

71. Selling wine via the Internet is lawful

72. E-commerce infrastructure builder contracts require special elements

73. Forty-three state laws recognize digital signatures

74. The Federal Trade Commission has begun to regulate the Internet

75. The Internet is a litigation tool

76. The Internet is an evidentiary source

77. Internet legal evidence results in new legal difficulties

78. Promotion agency agreements for Internet services are advisable

79. e-mail is legally discoverable

80. Internet crimes and violations are emerging

Class 9               March  7            Domain Names


A.          Registration of Domain Names

B.           Anti-cyber Squatting Act

C.          Element of a domain name litigation

D.          Microsoft Corporation v. J. Holiday Co. Case No. D2000-1493 WIPO Arbitration and             Mediation Center  ---           Materials 4

E.           Digital Equipment Corp. v. Altavista Technology, Inc. 960 F. Supp. 456 (D. Mass.           1997)

F.           TicketMaster Corp. v. Microsoft Corp.

G.          Nissan Motor Corp v. Nissan Computer Co. 89 F. Supp. 2d 1154 (C.D. Cal. 2000), aff'd,    246 F.3d 675 (9th Cir. 2000)

H.          Typo piracy

I.            TCPIP Holding Co. v. Haar Communs. Inc., 2004 U.S. Dist. LEXIS 13543 (D.N.Y.           2004)

81. Reducing e-law risks is possible

82. Dot.com liability insurance contracts address legal risk

83. Copying, printing, and redistributing e-data are generally lawful

84. How can I protect my name on the Internet? Register it with many variations

85. Additional legal activity may be required to protect certain e-names

86. What can be done if someone links to a web site without permission?

87. Using the Internet to find Internet law is easy but may be inaccurate

88. Legally assigning Internet content usually requires a customized contract

89. Internet hijacking is unlawful without consent

90. Unauthorized framing is usually unlawful

Class 10             March 21           E-payments

                            Select presentation times

A.          Credit card law


Credit cards primarily accommodate low-value retail transactions, bill payments, cash withdrawals, and inter-account transfers.


A credit card does not result in a direct transfer of funds from the payor to the payee; however, credit cards displace payment transactions by aggregating them into single daily or weekly payments to payee-merchants and monthly payments to consumers. In any event, inasmuch as the credit card payment does not facilitate access to the cardholder's funds on the basis of electronic communication, it is not an electronic initiator of a funds transfer.


B.           Pay Pal

C.          Electronic fund transfers

D.          Wire Transfers --      The wire transfer is a credit-driven mechanism, handling the transmission of each payment order individually, to accommodate particularly large-value payments. Wire transfer systems are electronic.


There are two wire transfer systems in the United States. Fedwire, a nationwide wire system operated by Federal Reserve Banks, is a gross-settlement system providing ''immediate funds'' at each receiving institution's Federal Reserve Bank. CHIPS, a New York-based wire system operated by the New York Clearing House Association, is a net net settlement system providing ''same-day funds'' at the Federal Reserve Bank of New York.


In addition to CHIPS and Fedwire, depository institutions may transmit to each other payment orders relating to wire transfers by means of telex or SWIFT messages,11 in which case they settle bilaterally through correspondent accounts.

91. Image (IMG) links normally increase legal liability

92. Offering securities through the Internet has legal limitations

93. E-notices help protect copyrights

94. Internet publicity releases help to limit legal liability

95. E-content writer's contract may be a work-for-hire agreement

96. Internet employment services agreements usually protects one party

97. Securities brokers' obligations apply to clients' Internet trading

98. WebTrust seal providers are liable to the public

99. Obscenity and indecency e-content regulation on the Internet is in flux

100. Some public access to the Internet is legally limited

Class 11             March 28           Internet Taxation


A.          State  and local taxes

              Quill  Corporation v. North Dakota

              Tax moratorium

              Materials 5

B.           Federal taxes

C.          Foreign taxes


101.Taxes apply to Internet transactions 

Federal Tax Issues


Electronic Commerce Tax objectives :

1. Neutrality -- Ideally the tax rules applicable to electronic commerce should not place it at a disadvantage to other forms of trade;


2. Administrative Complexity -- The decentralization of the Internet makes it difficult to track, monitor and collect tax with respect to Internet transactions;


3. Disintermediation -- The loss of traditional third party intermediation (for example, the banking system) results in an increased difficulty in tracking and enforcing tax liability. The loss of withholding agents is a central issue; and


4. Auditability -- The ability to monitor the Internet challenges tax administrators at all levels.



Substantive Tax Concerns 


Frame work -- For federal tax purposes, all domestic U.S. entities and businesses are taxed on all income regardless of situs, subject only to credit or treaty limitations on income derived from foreign sources.


Foreign entities, however, are taxed only on their U.S. source income, i.e., to the extent that the income is sourced in this country.


The source-of-income concept plays an essential role in international taxation because the country of source generally has a right to tax income whereas the country of residence generally avoids double taxation through a credit system or an exemption system. Generally, the source-of-income rules are applied similarly throughout the world. In general, the source of income is located where the economic activities creating the income occur. For example, income derived from the use of intellectual property has its source in the location where the intellectual property is utilized. Similarly, compensation for labor or personal services has its source in the location where the labor or personal services are performed. Certain residence-based source rules have been adopted for certain types of income such as capital gains because the country of residence represents the location where the economic activity occurred.


In the past, courts have considered whether or not a company or business located outside of the United States is subject to U.S. tax, based on the fact that transmissions from outside the United States reach U.S. citizens and produce business and profits for that company outside of the United States.


Consider radio station as analogy for Internet


Courts have  decided that even though a radio station had listeners and advertisers in the United States it was not subject to U.S. tax, because the capital and labor employed and the services performed were outside the United States, as was the transmitter. This case seems applicable to a situation in which a non-U.S. corporation transmits information through the Internet using servers located in another country and those transmissions over the Web result in customers and business income from U.S. residents. A foreign corporation that has no office or place of business in the United States, that broadcasts radio programs designed for and directed to listeners in the United States, and that receives compensation from citizens of the United States in accordance with contracts that were executed outside of the United States, was held not to receive compensation or income from sources within the United States and was not subject to income tax. The court found that the fact that income came from United States residents did not determine that the income was subject to United States income tax, where all of the work done to earn the money was done outside of the United States. The court points out that the source of the income was not the place, but the activity.


Tax Treaties  --- United States tax treaties generally give the resident's country an unlimited right to tax income while limiting or eliminating the source country's right to tax unless the non-resident is somehow ''present'' for tax purposes in the source country. In the tax treaties, this concept of presence takes the form of ''permanent establishment.'' A permanent establishment is a more-or-less fixed place of business or abode that permits the source-base country to exert taxation rights over income attributable to that business.


Sourcing of Electronic Commerce  --- Electronic commerce complicates the issue because the nature of electronic commerce transactions makes it difficult to identify the source or where the activity occurred. For example, does telecommunications or computer equipment owned or used by a foreign person engaged in electronic commerce create a fixed place of business of the foreign person in the United States or other tax jurisdiction? Does the fact that a foreign enterprise is using a U.S.-based Internet provider create a physical presence for tax purposes?


Shifting Income via the Internet -- One danger to the U.S. revenue system is the potential ability of controlled foreign corporations (CFCs) to use the Internet to shift offshore substantial income and other activities without being subject to U.S. tax jurisdiction.


Another profound problem is the allocation of income among a number of jurisdictions. The problem arises when a single activity is conducted in multiple jurisdictions (e.g., an Internet-based worldwide research and design process, engineering or consulting contract).




Class 12             April 4                  Telecommunication

A.          Introduction

B.           VOIP                   Voice Over Internet Protocol     

              Vonage Holding Corporation  v. Minnesota Public Utility

C.          Regulation of Internet Service Providers

              FCC 214 license

              Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., Nos. 04-277 and 04-281 ,     SUPREME COURT OF THE UNITED STATES, 125 S. Ct. 2688; 162 L. Ed. 2d 820;      2005 U.S. LEXIS 5018; 18 Fla. L. Weekly Fed. S 482, March 29, 2005

D.          Internet or not

              Level 3 Communs., LLC v. Public Utilities Comm'n of Colo., Civil Action No. 01-N-        2455 (CBS) , UNITED STATES DISTRICT COURT FOR THE DISTRICT OF       COLORADO , 300 F. Supp. 2d 1069; 2003 U.S. Dist. LEXIS 25041, December 8, 2003

              Concentric Network Corp. v. Commonwealth, No. 290 F.R. 2003 ,             COMMONWEALTH COURT OF PENNSYLVANIA , 877 A.2d 542; 2005 Pa.         Commw. LEXIS 322, April 4, 2005,


Class 13             April 11  Special Topics and Student Presentations

Class Presentations of Guided Research (10 minutes each) … peer critique

Class 14             April 18 Special Topics and Student Presentations

Class Presentations of Guided Research (10 minutes each) … peer critique