Ethical and Legal Issues in E-commerce

E-commerce refers to that form of business where the internet has supplanted the traditional physical business processes (marketing, distribution, procurement, etc.) (O’Brien, 2008). The growth of global e-commerce has taken place largely without a framework to deal with the legal and ethical challenges which arise from application of the internet to business processes. Governments around the world should protect consumers and other internet users from unethical business practices that the internet has facilitated. Equally vital is the need to safeguard owners of internet-related intellectual property from infringement of their rights on ownership of such properties.

Legal vs. Ethical issues

Legal issues are the matters related to the law. Ethical issues, however, relate to what is right or wrong. In addition, illegal acts are a breach of the law, while unethical acts are not necessarily illegal (Stewart, 2008). The major legal and ethical matters facing electronic commerce today include: user privacy, infringement of claims on intellectual property, taxation, computer crimes and consumer protection (Green, Alster & Borrus, 2007).

Privacy Issues

Privacy matters in e-commerce involve informational privacy, that is, the right of individuals, groups and firms to decide the degree to which businesses can distribute information about them to the third parties. Traditionally, the claim to privacy has never been absolute and the public’s claim to information has always surpassed individuals’ right to privacy. The government enforces the public’s right to know and it has the mandate of the people to exercise such powers (Stewart, 2008). Thus, government infringement on individual privacy is to some extent deemed acceptable as long as it is legitimate and done in the public interest and not for the sake of individuals or groups in the government. Private businesses, however, are the major violators of individuals’ right to privacy in e-commerce as they have access to information about the users who visit their web sites. Users could have provided such information willingly based on their trust that the firm they are dealing with is ethical enough as not to give third parties this information. This trust can arise from users’ presumption or privacy agreements which most online firms post on their websites. Regardless of the basis of the trust, it has emerged that many online companies share information about their users with third parties for goodwill or economic purposes, thus violating individuals’ right to privacy (Slade, 2006). Due to the rapid growth and globalization of e-commerce, there is a lack of comprehensive laws to deal with informational privacy among other issues. Such developments are, however, very likely to occur in the future when all stakeholders including governments, businesses, customers, etc. embrace internet technology in place of the traditional business processes.

How Businesses Collect Private Information

There are various ways employed by businesses to gather private information on internet users, either on their web sites or from public domain sites. Some firms visit web sites where users make blogs or have joined a news group. By analyzing the blogs or the news groups’ postings, these companies are able to extract important information which they can apply to their own ends which could be business or non-business related. Other businesses use internet directories and web browsers to collect information about internet users. However, the most common tools for gathering private information are cookies and web site registration (Seglin, 2007).

Use of Cookies

Cookies software plays the role of a temporary passport enabling an internet user to visit private web sites. In so doing, cookies have to share private information on the user as a form of identification. Most internet users are oblivious of this information exchange between their personal computer and online sites while they browse the internet (Sen, 2009). Some common sites that have employed cookies to collect personal information include Yahoo for customizing its sites, Amazon for enhancing its online services and Doubleclick in gathering demographic and internet usage data.

Site Registration

Many online companies need new visitors to their sites to register to access the content in their web sites.A new user is registered mostly by submitting an e-mail address and other personal information and choosing a password. Most of these companies then sell this information to other firms usually for commercial purposes (Sen, 2009).

Personal Account of Information Privacy Violation

I am a heavy internet user and in a normal day, I usually visit hundreds of web sites most of which need registration to access them. In the course of this registration, I often end up providing a lot of personal information including my full names, address, phone numbers, age and date of birth. Since I need to use the content in these sites, I have no other option but to give the information required for the registration. As a result of my multiple registrations, I end up receiving hundreds of spam e-mails some advertising products while others are outright scams attempting to get credit card information or soliciting upfront payments to send me prizes for winning in fake online games that I did not take part. Of course, I do not register or visit these sites but they get my personal information from other legitimate sites that I visit in such of valuable content. These valid sites then pass this information to their peers and that is how I end up having unsolicited e-mails jamming my inbox. Some of these emails are mild but others are utterly risky and even dangerous and could lead to loss of economic resources, especially scam e-mails, in the very least.

This experience demonstrates how online sites can violate individuals’ right to privacy by sharing their private information with third parties without the individuals’ involved consent. Business ethics call for a company to do a completely honest business not only for the sake of morality, but also for the future good of the firm. Sharing personal information on users, for instance, whether for commercial purposes or otherwise, bears only short-term benefits for the company but will be harmful in the long-term due to the legal and social implications of this unethical practice.

Principles of Privacy Protection

Since incursion into individuals’ claim to privacy is unethical, how can this critical right be protected? This is the question nagging the minds of many policy-makers the world over and although policy-makers have made several strides in this realm, there are a lot of loopholes which should be fixed. There are five key principles that have been identified to encourage businesses to uphold protection of individuals’ right to privacy. To start with, online sites must make sure that internet users are aware of their information capturing practices before they collect such information. In this way, users will have a choice of whether to show such information or not. The sites should also tell users of any options available on whether or not to give private information (Sen, 2009). Secondly, the users who offer information to a given site should be allowed to alter or even expunge this information as necessary. Online companies also need to guarantee users that they will protect private information on their sites and not only this, but they must also honour such a promise. Finally and most importantly, governments should enact and enforce appropriate legislation to curb violation of information privacy and provide fair remedies to victims of these unethical acts by businesses (Slade, 2006).

Intellectual Property

Intellectual property relates to intangible property rights. The most common intellectual properties in e-commerce include copyrights, trademarks and patents. These claims are perishable and they are not absolute (Stewart, 2008). The law permits the public to use such rights at a specified rate.

Copyright

A copyright protects an idea’s expression as opposed to the idea itself. This form of intellectual property gives the owner an exclusive claim to copy the work and disseminate it to the public. A copyright expires after several years since the death of the copyright holder. In the U.S. it persists for twenty-eight years after the death of the holder while the same period is fifty years in the U.K. All the contents of a website are, in general, copyrighted (Stewart, 2008). There are various modes employed in e-commerce to combat copyright infringement including the use of digital watermark-bits implanted in software to show anyone who attempts to copy the digital content, use of validation codes, and activation or deactivation of programs. Copyright infringement is a major issue in e-commerce and the software industry in general and is a major contributor to loss of revenues for the owners of these intellectual properties. A major cause of widespread copying of software content is the easy sharing nature of software products.

Patents

A patent confers to the holder exclusive rights on an invention for a fixed time. This period is seventeen years in the U.S. and twenty years in the U.K. For an innovation to qualify for patenting, it is a must that it satisfies three key conditions. Firstly, the innovation novel and not an imitation. Secondly, it must be a sufficient invention and not a trivial one (Stewart, 2008). Lastly, the invention must be capable of industrial application. Examples of patents are Amazon’s one-click ordering Priceline’s reverse-auction model.

Trademarks

A trademark is a graphical design used by businesses for identifying their products and services (Stewart, 2008). It is another type of intellectual property and is required to meet three important criteria. To start with, it must be distinctive so as not to be confused with other trademarks. Secondly, the trademark should be original and, finally, it should not be deceptive. It is possible to use domain names as trademarks also as long as they meet the above mentioned criteria.

Unethical Issues Relating to Intellectual Property in E-commerce

E-commerce being internet based faces a host of challenges with regard to violation of intellectual property rights. Some of the issues relate to infringement on patents. For example, Amazon.com had filed a case against Barnes and Noble for violating its patent on 1-click ordering (Sen, 2009). Similarly, Priceline sued Expedia for stealing its reverse auction model. Other matters concern the copying of trademarks of popular online sites by other companies in a bid to build their popularity. This amounts to stealing another company’s brand. Example of an online trademark dispute is the case where WWF had been sued for using the trademark worldwrestlingfederation.com for its website (Sen, 2009). However, most disputes on intellectual property in e-commerce relate to copyrighting other persons materials without their consent. This has caused developers of digital content worldwide to lose billions of dollars in revenue every year. Despite the heavy and illegal loss in revenue, an effective solution to copyright infringement in the e-commerce industry is yet to be found.

Personal Account of Intellectual Property Infringement in E-commerce

Digital technology enables the transfer and use of copyrighted material over the internet. Digitization entails transformation of the relevant content into binary form which is transferable over the internet. Once the transfer has taken place, the material then becomes available to other internet users and it could be copied and stored in digital form. The exchange of text, sound, videos and computer software is a common phenomenon on the internet. The internet, in fact, has been described before as ‘‘the world’s greatest copying machine’’. Most of the material shared by users over the internet is copyrighted content on information and entertainment products especially audio-visual properties such as films and music. Nowadays, thanks to internet technology and e-commerce, it is possible for me to download audio and video music at almost no cost from sites such as MP3.com and Waptrick.com. Other sites contain copied literary works such as books, journals, magazines and periodicals which are available to internet users for free or upon paying a small fee to these sites. Due to the lack of coordinated international laws to regulate copyright violations perpetrated through the internet, such online sites are able to run freely causing loss of billions of dollars in revenue to both the copyright owners as well as the government through taxation. 

As a matter of fact, the internet technology and e-commerce have undermined the copyright industry. By using the internet it is possible to produce innumerable copies of an artistic or literary work almost at an instant and then distribute the same around the globe within some few minutes.

The copyright industry is one of the key industries in the global economy. In the U.S., for example, the industry is estimated to contribute about 91.2 billion dollars to that country’s economy. This represents around five percent of the country’s Gross Domestic Product. With the impact of the internet on this industry such revenues will continue to dwindle unless measures are taken to control intellectual property violations facilitated by the internet.

Measures that Should Be Taken to Prevent Violation of Intellectual Property (IP) in E-commerce

Infringement of IP has negative implications to the IP owners through lost proceeds, to the government through lost tax revenue and to the society since producers of the involved products will not be willing to supply them in the future (Seglin, 2007). Some major steps that could be taken to protect IP owners include: enhancing technology to produce copy-proof material which cannot be shared over the internet, coordinating international laws and establishing effective international treaties to protect IP owners and imposing heavy fines on IP violators as well as providing adequate remedies to IP owners.

Conclusion

The rapid growth of e-commerce has presented a host of legal and ethical challenges most of which are associated with informational privacy and intellectual property rights. The advent of the internet made it possible for organizations to capture private information about internet users who are oblivious of this act by firms. It also made it possible to steal intellectual property without legal consequences easily. The solutions to these problems lie in passing and enforcing national and international legislations to safeguard persons’ claim to informational privacy and intellectual property.