 October 1999
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Internet
Legal Problems Require Consensus  By Adam Creed Legal jurisdictional issues thrown up by the transnational nature of the Internet will get much worse as more companies conduct international trade via the Web, according to a lawyer with Australian law firm Allen Allen & Hemsley. "Jurisdictional and transnational legal problems are the single most important legal issue facing the Internet today," said Niranjan Arasaratnam, senior associate at Allen Allen & Hemsley, speaking at the E-Business Symposium in Melbourne today. The question of how to deal with unacceptable content provided on the Internet, like pornography or gambling, in one nation is compounded by its availability because of different (or no) regulations in other nations. Not only a problem with the "dark" side of Internet trade, jurisdictional issues arise for every company selling overseas because of variations in taxation, consumer protection and privacy standards and the regulation of financial services. "Trade depends on legal certainty," said Arasaratnam. "Where no rules exist e-commerce is retarded. Potentially a business would have to analyze the rules in all the markets it operates in, leading to huge, prohibitive costs." Without globally accepted standards, online business could also end up gravitating toward countries which have the lowest regulatory standards for online trading. This is exemplified by US gambling firms setting up in the Caribbean where the regulatory environment is less harsh. The same could apply for any one country deciding to impose any sort of content controls. "In Australia the content legislation will drive businesses offshore when it comes into force," he said. In fact, in countries like the US and Australia where the states can pass separate laws the problem can be internal as well as international. In the case of People versus World Interactive Gaming Corp., a New York Judge ruled that a Caribbean online gambling site breached New York law prohibiting the provision of gambling to the people. This landmark case established an interesting precedent that says that jurisdiction is attached to the location of the user's personal computer. In addition to the problems this could cause internally between states in the US, this trend could hurt companies trying to sell or trade with US customers or partners. "It signals a move toward US legal hegemony which is detrimental to other nation's e-businesses," said Arasaratnam. "They would have to hire US lawyers to work out their obligations to trade there and would not be able to meet the requirements of US licensing authorities (often requiring a US-based director)." Clearly one country cannot extend legal jurisdiction over all Websites that a user in that country can access - if every country claimed jurisdiction in this way it can be seen how eventually trade over the Internet may become impossibly restrictive. The European privacy laws that place strict controls on the sending of customer data to nations with weaker privacy laws are another example of the problems thrown up by jurisdiction. Court decisions on Internet jurisdiction issues have ranged from these extraordinarily restrictive judgments, to a "complete abdication of judicial responsibility." An Australian man published defamatory comments about Macquarie Bank executives on a Website hosted in the US. The court refused to grant an injunction against the man because, although defamation is a criminal offense in Australia, it may not be in all the other jurisdictions the Internet reaches. It is clear that courts cannot treat Internet trade like this in every case or anything would go. These extreme examples and lack of international standards will lead to a hotchpotch of laws with no certainty, says Arasaratnam. On the one hand we have online retailers (like Barnes and Noble) saying a consumer is subject to the law in its home country when coming into the online store, and on the other hand we have groups saying that when a company starts selling online to consumers in other countries they must be subject to their consumer laws. "There needs to be global cooperation and standards which countries will stick to," he said, adding that most tried by the OECD, the UN and the EU have so far fallen short. "The EU's Internet charter laid out general rules (Bill Gates voiced his support for them) ... but it has been languishing in the Commission for months." Arasaratnam is part of the American Bar Association's Internet Transnational Jurisdiction project which is attempting to draft minimum standards on consumer protections. "It is an ambitious project, but one that is necessary to gain consensus on minimum standards," he said, adding that there was no way there would be consensus in the form of an international trade treaty sealing these issues. For now, we will have bilateral cooperation where countries join forces to deal with certain problems. Australia and the US, for example, have made a number of prosecutions. CALEA Doesn't Rule On Wireless E-Mail - FCC By Grant Buckler and Robert MacMillan The Federal Communications Commission's (FCC) allowances for six of nine points on the FBI's CALEA wish list still do not answer the question of whether e-mail sent via wireless modems can be tapped in the same manner as telephone calls. Instead, an FCC spokesperson has said, wireless carriers must comply with CALEA whether they are transmitting voice or data services. The FCC last Friday officially allowed the implementation of six out of nine FBI proposals for wiretaps under the Communications Assistance for Law Enforcement Act (CALEA), and also affirmed portions of an interim standard for the Act that were formulated by the Telecommunications Industry Association. The question still remains as to whether e-mail sent under accounts run by common carriers are subject to the same wiretapping permission, as well as whether e-mail sent by standard information service providers via wireless modems would be subject to the same wiretapping abilities. "...CALEA has nothing to do with whether or not a law enforcement agency can surveillance a wireless carrier," said FCC Spokeswoman Meribeth McCarrick. "Instead, CALEA specifies under what circumstances carriers have to include in their facilities the ability to respond quickly to court-authorized surveillance orders." All the requirements apply to wireless telephone users who are under surveillance by a law enforcement agency. A carrier must be able to identify the location of the wireless cell handling a call when it begins and when it ends, but the FCC stopped short of requiring them to pinpoint the caller's location. Carriers must also provide access to packet-mode communications by Sept. 30, 2001. These items were covered by the TIA's interim standard. Seiffert said that this is "one issue that we're going to be looking at closely when the order actually comes out in print." The FBI already has demonstrated a marked interest in such CALEA gray areas, especially through a notice of inquiry that it released this past spring. "It's really gotten their interest but they don't know how to handle it," Seiffert said. According to an agency statement, data service providers are exempted from the ruling, but there is no answer to the question of whether e- mail sent through wireless modems would be subject to wiretapping, regardless of whether the ISP for the e-mail account is a common carrier. The overall CALEA ruling dismayed some privacy advocates, but the Cellular Telecommunications Industry Association (CTIA) reacted positively. The FCC also ruled that carriers must provide access to the content of conference calls initiated by a person under surveillance, and notify law enforcers when parties join or drop off such conference calls. They must make dialing and signaling information available, as well as in-band and out-of-band signaling information. This would tell authorities when a person under surveillance uses features such as call waiting and call forwarding. They must provide information that will let law enforcement agencies correlate call-timing information with content. Finally they must be able to provide any digits dialed by the subject. The Center for Democracy and Technology in Washington expressed concern about the provision of cell-site information, which it said turns wireless phones into tracking devices, and about a lack of steps to protect the privacy of packet-mode communications that the government is not authorized to intercept. "A statute that was intended to ensure that the FBI did not lose ground in the face of new technology is being used to enhance its surveillance powers," said Jim Dempsey, spokesman for the Center for Democracy and Technology. The FCC turned down the FBI's requests that carriers be able to send law enforcers a message verifying that a wiretap has been established, that it provide a continuous electronic tone to alert agencies if a wiretap failed or lost continuity, and that it notify authorities about the addition or deletion of calling features. Jeffrey Nelson, a spokesman for the CTIA, said the wireless carriers' group was pleased the FCC did not give the FBI everything it sought, and will work with law enforcement authorities to implement the features regulators have required. Engineer Gets Detention, Probation for PairGain Hoax By Laura Randall In what prosecutors call the largest case yet of Internet securities fraud, a federal judge sentenced PairGain Technologies Inc. 's [NASDAQ:PAIR] Gary Dale Hoke to five months of home detention and five years' probation for posting a false news report about his company on the Internet. US District Judge Terry Hatter also ordered the 26-year-old Hoke to pay $93,000 to investors who bought PairGain stock and sold it at a loss after the company denied Hoke's report that it was being acquired by an Israeli company. Hoke's sentencing was far less severe than it could have been. After FBI agents arrested Hoke at his home in Raleigh, North Carolina, he was charged with five counts of securities fraud and faced a maximum sentence of 10 years in prison and up to $5 million in fines. Prosecutors in the US Attorney's office recommended that Hoke be sentenced to a prison term of 12 to 13 months. Hoke's story about PairGain, which aped a Bloomberg News Web page, claimed that the company was about to be purchased by an Israeli firm for $1.35 billion in cash. PairGain's stock surged about six times its normal rate, then dropped after the report was deemed bogus. A few days later, the FBI tracked Hoke down by gaining access to his Internet protocol addresses. PairGain is a Tustin, Calif.-based company that makes high-speed Internet connection products. Hoke still faces charges stemming from a related lawsuit filed against him by Bloomberg LP in federal court in New York. Sony Preliminary Injunction On PlayStation Emulator Denied A US unit of Sony Corp. [TOKYO:6758] [NYSE:SNE] has been denied a preliminary injunction that would have prevented a San Diego software company from selling an emulator that allows PlayStation games to be played on a personal computer. On Friday the US District Court for the Northern District of California denied a motion for the injunction which Sony Computer Entertainment America Inc. had been seeking to impose on Bleem Inc. while it pursued action against the company for its emulator. "This decision is huge for Bleem," said David Herpolsheimer, president and chief executive officer of Bleem in a statement. "We hope today's ruling will finally put to rest any lingering concerns on the part of retailers and users alike - Bleem is here to stay." A Sony spokesman in Tokyo declined to comment on the ruling. It means Bleem will be able to continue developing, marketing and selling its emulator software in the run up to a trial that has been set for April 24, 2000. Bleem says it has already sold 80,000 copies of the software which is designed for use on Windows-based personal computers. Sony is alleging copyright infringement and violation of trade secrets against Bleem in developing the device, similar charges that were brought against Connectix Corp. for its Virtual Game Station system for Apple computers earlier this year. In that case, Sony succeeded in winning a temporary restraining order and Connectix is now appealing the order. At the heart of Sony's complaints - customers don't have to buy a PlayStation console to play the games and it is this console where Sony makes the most money. On games sold for the system, it makes a smaller amount of money. The emulators also have the potential to loosen Sony's tight grip on the console system. Reported by Newsbytes News Network, http://www.newsbytes.com |
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