Articles Posted in Internet Law

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The United States Census Bureau releases statistics for e-commerce activities on a regular basis.  These statistics compare the percentages from previous years in order to show the growth of the e-commerce industry.  So far, the reports have indicated that the rates are rising, and this trend will most likely continue with the widespread use of the Internet.

Dangers of Online Counterfeiting

Although, e-commerce can be viewed as a great addition to the Internet, but it can create problems for commercial entities.  For example, businesses that engage in the online sale of products, are subject to counterfeiting and unauthorized sales by unlicensed sellers.  Auction sites, such as eBay, have come under fire for the sale of counterfeit goods and product diversion. These websites provide a medium that allows users to sell products to other users. Most of eBay’s sellers are consumers, and not businesses, so there is a danger of buying a designer item that is a counterfeit, i.e., fake.   There is also a danger that the seller is selling a product it obtained from the gray market. In general, eBay and similar websites, do not monitor every single item, so it creates a breeding ground for the sale of counterfeit items and unlicensed sales.

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If you have ever been involved in a federal civil lawsuit, you may be familiar with the Federal Rules of Civil Procedure (FRCP).  The FRCP are a set of rules that regulate federal civil lawsuits. The rules address issues from court and party obligations to enforcement of remedies. The FRCP was first adopted by order of the Supreme Court in 1937 and placed into effect in 1938.

On December 1, 2015, these rules were amended. Many of the changes affect electronic discovery (e-discovery). Prior to the internet age, discovery and discoverable evidence were primarily based upon paper transactions.  With the rapid rise of the web, many started to turn to electronic storage of information.  As the data and information-storage landscapes began to change, the rules had to change.

The amendments brought changes to Rules 1, 4, 16, 26, 30, 31, 33, 34, 37, and 55.  The amendments also brought on the abrogation of Rule 85 and the Appendix of Forms. The changes that affect e-discovery are as follows:

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On August 24, 2015, the United States Court of Appeals for the Third Circuit handed down its decision in favor of the Federal Trade Commission (FTC) against Wyndham Worldwide Corporation.  This lawsuit was against the defendant and its subsidiaries for their failure to implement proper cybersecurity measures and protect consumers’ personal information against hackers.  The FTC alleged that defendants did not use encryption, firewalls, and other commercially reasonable methods for protecting personal information.

What was the basis of the lawsuit?

In general, the FTC has the responsibility to protect consumers against unfair and deceptive business practices. These illegal practices could range from false advertising to antitrust issues. The FTC has started to prosecute companies with inadequate cybersecurity to protect consumer data. The companies that made false statements about their level of security in their terms of service also had lawsuits filed against them.  In this case, between 2008 and 2009, hackers breached Wyndham Worldwide Corporation’s network and computer systems three separate times. One incident occurred in 2008 and two occurred in 2009.   The hackers were allegedly able to breach the network due to the use of weak and obvious passwords, lack of response to the first incident, and inadequate monitoring systems.  In one of the instances, it took approximately two months for Wyndham Worldwide Corporation to discover its systems had been accessed without authorization. The hackers successfully accessed personal information of approximately 619,000 consumers and managed to cause $10.6 million in fraudulent charges. Therefore, on June 26, 2012, the FTC brought the lawsuit against defendants.  Their motion to dismiss was denied by the district court and their appeal was heard on two issues in order to determine whether there was a valid claim.  The issues that were raised included: (1) whether the FTC had authority to regulate cybersecurity under 15 U.S.C. § 45; and (2) if so, whether defendants received fair notice that their cybersecurity practices were inadequate under the guidelines.

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The term RFID is everywhere these days. Consumers are seeing RFID blocking wallets, credit card holders, and passport covers as the holidays approach. However, many still do not know what it is and how it is used in their every day life.

What is RFID?

RFID stands for “Radio Frequency Identification” and is a term used to describe technology that makes identifications via radio waves. It is usually discussed in conversations and articles about the Internet of Things because it is a form of automatic identification. The term automatic identification covers a broad range of identification technologies, from bar codes to retinal scans, used by machines to make identifications. The identification of people or objects occurs through the use of microchips that store electronic information. The microchip has an antenna and the information is picked up through a reader using radio waves. The microchip can be as small as a grain of sand and made out of silicone. Although, this technology has been in use since World War II, it has only become widely used in the past two decades as costs have decreased. RFID technology is now used in certain products and businesses. Walmart and other stores use RFID technology to keep track of products and consumer activities. They use RFID to do anything from detecting an item about to be stolen as it exits the door, or trigger cameras when an item is removed from the shelf. Anyone who has ever used the EZ-Pass toll roads has experienced the use of RFID technology as it is used to identify cars with EZ-Pass. Nonetheless, this is just a limited representation of the use of RFID technology to track consumers and products.

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This year saw the data breaches of Sony Pictures, Ashley Madison, and Experian Credit Bureau. The increasing commonality of data breaches has prompted the federal and state legislatures to review their data breach notification laws.

What is a data breach?

A data breach occurs when an unauthorized user (i.e., hacker) accesses sensitive personal identifiable information. The hacker then copies the confidential information and uses it as he or she sees fit.  Often times, the personally identifiable information is used to commit identity theft and fraud.  This information can include, names, telephone numbers, email addresses, credit card numbers, or social security numbers. The target of these breaches can be businesses, financial institutions, and health care institutions.

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The case of Eagle v. Morgan is about an employer’s access to employee’s social media account. This case highlights the importance of companies having social media policies to address the ownership of social media accounts during and after employment.

What is the case about and how does it affect your rights?

In Eagle v. Morgan, the plaintiff (i.e., Linda Eagle) had founded the company Edcomm, Inc. (“Edcomm”) and remained an employee when she sold her shares to Sawabeh Information Services Company (“SISCOM”). While employed at the company as CEO, Eagle’s coworker recommended creating a LinkedIn account for marketing purposes. Although, the business would occasionally become involved in the social media account’s content, and Eagle used her company email address, however, she was individually bound by the User Agreement and had made connections through her own efforts. Edcomm did not require its employees to have social media accounts and had only limited guidelines in place regarding employee use of LinkedIn. When Linda Eagle’s employment was terminated, the question of who owned the social media account became an issue. Edcomm changed Linda Eagle’s password by using her former company email address and replaced her name with that of her new replacement, i.e., Sandy Morgan.  Linda Eagle sued Edcomm and multiple defendants in the United States District Court for the Eastern District of Pennsylvania. She claimed that this was an infringement of the Computer Fraud and Abuse Act and Lanham Act, as well state laws against invasion of privacy by misappropriation of identity, conversion, civil conspiracy, civil aiding and abetting, tortious interference with contract, unauthorized use of name in violation of Pa. C.S. § 8316, misappropriation of publicity, and identity theft under Pa. C.S. § 8316.

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From a practical perspective, transactions that occur over the Internet can face similar issues that regular business transactions may encounter in their daily operations.  However, e-commerce transactions have the added problems associated with cyberspace laws.  It is nearly impossible for a business to be successful these days without having a website. Although, not all websites actively conduct business over the Internet, however, e-commerce related issues and disputes may arise from having an online presence.

What issues and disputes face e-commerce transactions?

E-commerce transactions have created a new environment for companies that conduct their business on the Internet.  For example, contractual and non-contractual issues, such as free speech, consumer protection, and competition laws now face businesses that ship products, provide online goods/services, and use the Internet for marketing.  Therefore, conducting business online involves unique legal concerns that is distinct from traditional business models.  In sum, the concerns are centered on privacy, security, and regulation.

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The phrase “e-commerce transactions” invokes thoughts of a complicated and technical phenomenon.  In fact, many people partake in e-commerce transactions every day.

What is an e-commerce transaction?

An electronic commerce (a/k/a “e-commerce”) transaction involves a commercial transaction that takes place over the Internet. So, any trading of products or services over any electronic network, including, but not limited to, the Internet, is considered a part of e-commerce. The e-commerce transactions covered by the term include, business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business.  There are three categories of e-commerce transactions. There are agreements with: (1) Shrinkwrap terms—when a tangible product is delivered to a physical address usually in shrinkwrap or clear packaging; (2) Clickwrap terms—in which a digital product is delivered over a network (e.g., e-book); and (3) Browsewrap terms—when terms are agreed to in order for a consumer to access and use a website.  However, e-commerce does not always involve actual money.   The transaction can involve e-cash, digital currencies (e.g., Bitcoin), or services.

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The Internet of Things (“IoT”) is the network of electronic devices that communicate with each other via the Internet without human intervention.  It has caused concerns regarding security since vast amounts of unsecure electronic devices are being used to send and receive information. Furthermore, the data breaches that lead to the loss of privacy have become more common as the Internet is used to connect electronic devices via private and public networks.

What is the proper security level for electronic devices?

Electronic devices that connect to each other over the Internet were created to transfer information, but were not originally designed with proper security features. What is the proper security level when electronic devices are interconnected? In order to avoid unauthorized access, security precautions should be implemented within the electronic devices and computer networks. For example, firewalls, encryptions, intrusion detection systems, and multi-factor authentications should be implemented as preventive and reactive measures. The electronic devices—which are accessed via the Internet—should be segmented into their own network and include network access restrictions.  Also, consumers should change the default passwords on smart devices and implement strong passwords.

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A quantum computer is a highly-advanced computer system that works exponentially faster than today’s conventional computers. Quantum computing is the practice of studying quantum computers and their potential. This practice is growing and has caused the rapid decrease in the size of computers at the same time as these systems are rapidly increasing in their capability. However, quantum computers are still being developed and have not yet become accessible.

What is a quantum computer?

A quantum computer is an advanced computer system. Quantum computing studies theoretical computation systems which use quantum-mechanical phenomena (e.g., superposition, entanglement) to perform data operations.  While the average computer’s memory is made up of bits, a quantum computer’s memory is made up of qubits.  A regular computer saves information in binary form using zeroes and ones, which are called bits. These strings of numbers, which are comprised of 0s and 1s, create codes that instruct the computer on how to proceed. However, a qubit in a quantum computer is a particle (e.g., atom, electron, photon) which is manipulated to store information. It is a two-state quantum-mechanical system, such as the polarization of a single photon, which can be vertical and horizontal polarization.  So, the particle is manipulated in its quantum properties, like its spin or polarization, and can have multiple properties. Because of the flexibility and variation of qubits, more information can be stored on a quantum computer. Most importantly, information can be processed at an exponentially faster rate. For example, a problem that would take a conventional computer several minutes to solve due it its complexity, could be solved in less than a second by a quantum computer. This is because today’s conventional computers must go through each problem one step at a time, where a quantum computer has the ability to solve multiple problems instantaneously.

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