Guide to Legal Issues

Concerning Internet Usage

By Jonathan Leeds

I. Introduction: The objective of this article is to provide an overview of legal issues involving the use of the Internet, with a focus on commercial users of the Internet, such as merchants and other businesses. Many of the issues discussed in this article relate to areas that are common to different nations and jurisdictions. Where applicable, reference has been made to existing Thai law and proposed draft legislation in Thailand. However, the law of the United States has been referred to liberally, because the United States is both the world leader in the technology behind the Internet and also in terms of legislation and case law relating to Internet law issues. A.

II. Email: Liability and Exposure B.

Nature of the Problem: (1)

Security and Privacy of Email: Often, persons may feel a false sense of security when using email. Many believe that email has assurances of privacy and confidentiality that it does not in fact have. Every email sent is typically copied in several places, including: (1) the sender computer, (2) the service provider's computer, (3) the recipient's computer, and (4) if one uses a commercial email provider, by that company's system computer as well. As a result of this misplaced confidence in email, persons may transmit communications that they would otherwise be more cautious about sending. (2)

Employers Concerns: Employers' concerns include: (a) preventing their employees from leaking sensitive, confidential or insider information (b) detecting employee theft and crime and (c) preventing vicarious liability based on the tortious acts of their employees. Chat groups and bulletin boards are a related problem: Chat groups and bulletin boards are areas where Internet users post messages in public forums concerning special areas of interest. Employers have challenged employees posting messages concerning their business's confidential information on Internet chat groups and bulletin boards. Legal challenges by employers have focused on breaches confidentiality or the disclosure of trade or other commercial secrets. Legal cases in the United States have involved suing chat room service providers to disclose the identities of employees posting sensitive information. A.

Legal Safeguards (1)

Confidentiality Statement: Companies and individuals using email include should include confidentiality statements warning persons who intercept the email that the communication is private, should not be used or disclosed to third parties and that they should immediately notify the sender. (2)

Sensitizing Employees : (a)

Reminders: Reminders can include a statement to employees that the email they are using is intended for business purposes only. It is also advised that there be a reminder that email system being used is not encrypted and may be subject to interception by third parties. Highly sensitive or private communications should probably not be sent by standard email, but should be encrypted instead. (b)

Case law from the United States demonstrates that email carries an expectation of privacy that can be legally protected. However, other factors can be considered, such as a "for business use only" warning to employees, that would allow such email to be disclosed to employers. Courts in the United States have also ruled that email documents may be subpoenaed for use in court.

Defendants have challenged a third party's rights to disclose or to subpoena their email based on legal defenses that include invasion of privacy and assertion of wiretapping and eavesdropping Statutes (c)

Policy regarding thailand company registration privacy: Businesses should develop specific policies concerning their email usage that requires personnel to acknowledge and agree to the business's policy before logging on: The policy acknowledgement and recognition statement can be in the forum of a "log-on screen" that requires the user to enter his password as confirmation. A.

Technological Issues Concerning (1)

Encryption: Encryption programs are used to encode email so that only the intended recipient can decipher the code. The higher degree of complexity of the encryption, the more difficult it is to decode. This is know as having a "longer key". Governments have attempted to place restrictions on the level of encryption that can be used. (2)

Firewall: Another form of protection is known as a firewall. A firewall is a computer that passes data back and forth between the Internet and one's own computer and blocks anything else. This protects the computer user from Internet criminals such as hackers and crackers. (3)

Email and document deletion: One of the methods a company or individual can protect itself is top have periodically deletions of all accumulated data and emails. This would be the equivalent of a cyber-shredder.

III. Protecting Information from Competitors A.

Legal methods of protecting proprietary information over the Internet include registration and enforcement of intellectual property rights, including the registration and enforcement of one's domain name. B.

Domain Name Registration: Domain Names are registered through the international domain name registration directory, known as "Internic". Domain are the names used as a convenient way to locate information on the Internet and they correspond to Internet protocol numbers. (1)

There are various registration agents that are authorized to submit domain name requests to Internic. (2)

Cyber Squatters: Cyber Squatters are persons who register domain names speculatively, in order to sell them at a later date. This has become a developed industry with companies that are exclusively focused on being domain name merchants. If the domain name is not currently associated with a registered business, the practice is totally legal. There is currently a domain name dispute policy that has been set up by Internet Corporation for the Registration of Assigned Name and Numbers (3)

("ICANN"). A.

Intellectual Property rights Overview: (1)

Thailand is a member of the World Trade Organization (WTO). Pursuant to the WTO, Thailand entered into the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement. Pursuant to ther TRIPs agreement Thailand has enacted laws to protect intellectual property rights. The most important of these laws for the current topic are: (a)

The Trademark Act B.E. 2534 (1991) (b)

The Copyright Act B.E. 2537 (1994)

(2) Remedies Available (inter alia) for Enforcing Intellectual Property Rights: (a)

Monetary Damages (b)

Seizure (c)

Criminal Prosecution (d)

Injunction A.

Tradename and Trademark Infringement: If the domain name registration involves a commercial use, it may be an infringement of a tradename of an existing tradename. Commercial use must be involved. Generally, mere registration is not sufficient grounds for infringement. (1)

Trade Name Infringement Factors include: 1 (a)

degree of similarity between the marks in appearance and suggestion (b)

similarity of products or services being offered (c)

area and manner of current use (d)

degree of care likely to be exercised by consumers (e)

strength of complainants mark (f)

actual confusion (1)

Case Example: In Intermatic v Toeppen, a United States case, the intent on the part of alleged infringer was to palm off his products as those of another, the Court stated that the issue is not whether mark will be confused but whether use of similar mark will cause consumers to confuse source of goods or services with those of the senior mark owner. Intermatic v Toeppen 947 F. Supp. 1227 (N.D. Ill. 1996) at 1235 (3)

Dilution Statutes: Dilution Statutes protect the value of a trademark and can be used in addition and in concurrence with infringement actions. Statutes allow for Injunction against another's use in commerce of a mark or trade name if such use begins after the original owner's mark has become famous and the new mark or tradename causes dilution of the distinctive quality of the mark: Factors used in determining whether dilution has occurred:

(a) Inherent distinctiveness of the mark

(b) Duration or extent of use of mark in connection with goods

(c) Geographical extent of trading area

(d) Channels of trade where used

(e) Degree of recognition of mark in channels of trade

(f) Nature and extent of use of same or similar marks by third parties.

(g) Was mark registered?

E. Copyright Act and Infringement: (1)

General Principles: A copyright is a statutory right that gives the owner of original artistic works the exclusive right to publish and reproduce the work, and prepare other works from the original work.

In Thailand the author of a work is automatically entitled to copyright upon the creation of a work without filing a registration. However, to come under the Thai Copyright Act of BE 2537 (1994) the work must be advertised, unless the person is a Thai National or the national of a nation that is a signatory to International Copyright Convention to which Thailand is a party.

If a person adapts, distributes, copies, prepares a derivative work, displays, records or publishes another's copyrighted work without a license to do so, that may be an infringement of that person's copyright. (2)

Doctrine of Fair Use: The doctrine of fair use provides various exceptions that allow for the fair use of another's copyrighted work. Generally stated, these exception include:

(a) research

(b) criticism (a)

news reporting (b)

teaching plus four-part test: (1)

Case Law Examples: (a)

Marobie FL v. National Association of Fire Equipment distributors No. 96 C 2966 (N.D. Ill. Nov 13, 1997) National Assoc. of Fire Equipment Distributors has a web page. Operator of web page received off for Clip Art and sent some blank disks and received images of firefighter related art. Which he placed o the organization's web page. The images were copyrighted property of the plaintiff. Plaintiff sued after sales fell at Marobie's website. The court found that even though the organization was non-profit m and did not sell clip art its use could still be considered a commercial one because it promoting the organization and raised advertising revenue. Not use d for traditional fair use uses.

(b) Tasini V New York Times 93 Civ 8678 (SS), SDNY Aug 13 1997. A person may be liable for copyright infringement even with no intent to infringe. A number of freelance writers sued various electronic distributors claiming that, when the authors sold the right to their articles the rights conveyed did not include the "reuse" in electronic databases.

The Tasini case demonstrates and elementary principle of copyright law: that the only rights a licensee is entitled to are those acquired from the copyright holder. The publishers had only the initial rights obtained. However, publishing a compilation of works which is comprised of elements of separate works may, under certain circumstances, be allowed.

(c) Playboy Enterprises Inc. v. Webworld Inc. 968 F. Supp. 1171 (N.D. Texas 1997) ("Weworld case") Sexually explicit pictures found on Usenet groups many form Playboy a magazine Pictures were illegally scanned from Playboy's magazines and distributed via Usenet News. Webworld therefore acquired no rights from the copyright holder.

(d) Religious Technology Center v Netcom On-Line Communications Services Inc., 907 F. Supp. 1361 (N.D. Cal 1995) ("Netcom case") The court refused to hold an internet service provider liable for the distributing of copyrighted material over the Internet via Usenet News. The Court reasoned that the provider did not engage in any volitional acts but only set up a machine to provide access to Usenet news with regard to the infringing material.

The difference between the Webworld case and the Netcom case would therefore seem to be that because Websold archived the material it made the material part of its website, whereas Netcom merely provided access to the materials. Also, Netcom was in the business of providing Internet connections whereas Webworld earned fees only from its web site.

IV. On line Fraud and Protective Countermeasures A.

Online Fraud General Background: Internet Fraud is becoming an increasingly serious problem due to the following factors:

(1) Internet provides easy access to new players with relatively low start up costs. This imparts the ability to create a significant Internet presence and the appearance of being an established company without the traditional costs associated with such a task.

(2) Multi-jurisdictional Nature: Fraudulent Operators may feel protected because they operate outside of the jurisdiction where their victims are located.

(3) Anonymity: Fraudulent operators may feel protected by the sense of anonymity (although this might be a misplaced feeling) that the Internet provides.

B. Thailand Laws: Thailand has no special laws concerning Internet fraud. There are current draft laws being considered concerning electronic signatures and electronic commerce. However, existing laws in Thailand may govern fraudulent transactions on the Internet, for example:

(1) The Thailand Penal Code Section 341: This section proscribes fraudulent conduct against another through deception or through not revealing material facts for the purpose of taking property or causing to damage to another person or causing another person to renounce a document.

(2) The Consumer Protection Act: The intent of this Act is to provide consumers protection against deceptive trade practices. C.

US Law Enforcement Efforts on the Internet: The U.S. Federal trade Commissions and various State Attorney generals have "surf days". These are periods where the agents of these governmental regulatory agencies peruse the Internet, concentrating on particular consumer areas in order to locate fraud and deceptive practices. In the past, frequently investigated areas have included:

(1) Pyramid schemes

(2) Business opportunity schemes

(3) Health claim schemes.

D. Example of Online Fraud (The Inter-nic incident): Inter-nic is listed at www.internic.net and was formerly run by Network Solutions under the auspices of (the U.S.) National Science Foundation. At the time of the dispute, Inter-nic charged 100 USD for domain name registration. In contrast, www.internic.com was an Australian company that charged 250 USD for the service of registering domain names, whose web site was designed to appear similar to the official Internic site. The United States Federal Trade Commission ("FTC") stated that the Australian company is likely to be in violation of the FTC Act. Aggravating factors included that the Australian company had not actually paid for all domains it had registered, further misleading consumers.

A. International Domain Registration System: Internic is the current agency charged with the registration of domain names

B. The Internet domain name system (DNS) consists of a directory of domains. Persons must register a formal domain name with registered agents. The system permits enforcement of trademark, consumer protection and other laws. There is a new agency responsible for accrediting the registrars of domain names. This is a new non profit corporation that is assuming responsibility from the U.S. government, and is called the Internet Corporation for the Registration of Assigned Names and Numbers ("ICANN"). All ICANN accredited users follow a uniform policy dispute resolution policy. Pursuant to that policy, disputes over domain registration are ordinarily resolved by court litigation between the parties claiming rights over the domain name the entitlement to the domain name. In disputes arising from registration illegally or abusively made such as "cyber-squatting and cyber-piracy", the uniform policy provides an expedited administrative procedure to allow the dispute to be resolved with lower costs and delays than encountered in traditional court litigation. The process begins with a petition being filed with one of the dispute resolution service providers.

C. Model Law on Electronic Commerce of UNICTRAL ( United Nations Commission on International Trade Law): This is a model law and therefore has no effect in itself but is used as model for nations to follow in drafting their own laws. Model laws are considered necessary in order to assure some uniformity in e-commerce, which, by its nature, is multi-jurisdictional and international.

VI. Contractual Disputes on the Net

A. General Principles of Contract Formation Apply: In Thailand, these principles would be embodies in the Thailand Civil and Commercial Code.

B. Principle of offer and acceptance on the Internet. Offer and Acceptance are one of the basic concepts of common law. Generally, an acceptance must be the "mirror image" of the offer. Over the Internet, an acceptance is made on many web site by clicking a button that states agreement. However, in more extended email negotiation, the offer and acceptance may have to be inferred over the course of communication.

C. Thailand's New Draft Laws: Thailand has new draft laws concerning e-commerce that will make it easier to form contracts and enforce contacts over the Internet. These draft laws are:

(1) Draft Digital Signature Act: Pursuant to Thailand's new draft Digital Signature Act, the use of Digital Signatures using accepted encryption technology will have the same authority as a person's handwritten signature.

(2) Draft Electronic Transaction Act: Section12 of this draft law states that the offer to make a contract and the acceptance of such an offer may be made in a data message.

D. Jurisdictional Issues: Case law from the United States has repeatedly found grounds for asserting jurisdiction over persons who are physically located outside of the jurisdiction based on long arm statutes and a person's significant electronic contact over the Internet. Representative cases include the following United States case law:

(1) People v. Lipsitz New York Supreme Court 1A Part 8, June 1997. In this case the defendants were accused of fraudulent solicitation of magazine subscriptions under a variety of business names and over the Internet. The defendants tried to rely on the defense that their actions took place outside of the geographical boundaies of New York. The New York Court held that the regardless of whether the case came from out of state, the acts had an effect in New York and violated NY Law. The Court pointed out that Internet brings nothing new to world of fraud and existing fraud laws may be adequate.

(2) Compuserve v Patterson, 1996 WL 405356 (6th Cir.(Ohio)), No. 95-3452, July 22, 1996) This case used "long arm jurisdiction" to establish jurisdiction over non residents if their acts met the definition of "transacting business" The Court concluded that there was sufficient contacts to give the state jurisdiction even though those contacts were electronic contacts.

(3) Playboy Enterprises, Inc. v. Chuckleberry Publishing Inc., S.D.N.Y. No 79 Civ 3525 (SAS0, June 19, 1996.) An Italian company was accused of infringement of its Playboy's trademark rights. The issue for the Court was whether jurisdiction was established in the US based on the actions of the Italian web site. The Court determined that, although the web site was physically located in Italy, there were sufficient contacts with the USA to conclude that the Italian company was soliciting US customers through their web site. Activities on the web site included, receiving faxes and emailing passwords to US consumers.

E. Practical Considerations for Minimizing Liability for Web sites:

(1) Disclaimers:

(a) Disclaim warranty as to merchantability or fitness for particular purpose, when applicable.

(b) If the site has editorial content, disclaim any guarantee as to the accuracy of the information, when applicable.

(c) Disclaim any warranty as to the accuracy or reliability of sites to which your web site links.

(2) Indemnification: Require acknowledgement that the web site visitor agrees to indemnify the web site owner for any damages caused, when applicable.

(3) Formal Linking Agreements: Case law from the United States has held that the listing of links to other websites is in the nature of a database, and does not require formal linking agreements. However, if there is likely to be any controversy concerning said links, a formal agreement is advised.

(4) Checklist for Merchants:

(a) Ensure all terms displayed in clear simple language

(b) Use page prompts to encourage consumer to scroll through terms and conditions.

(c) State that agreement online is the sole exclusive agreement and final

(d) Offer telephone line to provide explanation of any terms the consumer does not understand.

(e) Include warranty" that the person indicating acceptance has the authority to do so.

(f) Good record keeping.

(g) For larger purchases get a fax back signature

(h) Get traditional hard copy agreement with long term trading, business partners, large contracts or when you require more assurance from the other party.

VII. Conclusion: The purpose of this article has been to provide an overview of commercial legal issues involving the use of the Internet. Internet legal issues have a particularly international character because of their multi-jurisdictional nature. Thailand is still in the process of forming its Internet legal infrastructure. Nevertheless, reference has been made to existing Thai law that may be applicable and proposed draft legislation in Thailand. Recognition has been given however to the law of the United States which is currently the world leader in Internet technology and Internet law.