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November 2001 Volume 2, Issue 11
Editors: Cherie W. Blackburn Robert W. Pearce, Jr. John C. McElwaine For more
information contact Nelson Mullins Riley & Scarborough, L.L.P. 1-800-237-2000 Nelson Mullins has more
than 250 attorneys firm-wide, with over 25 attorneys having
significant representation of e-commerce clients in areas including
patent, copyright and trademark protection; business planning,
securities and venture capital; and licensing, distribution and
contract preparation. Atlanta
Office Contacts: Neil Grayson Cherie
Blackburn Robert
Pearce John
McElwaine Charlotte
Contact: Jason
Sprenkle Myrtle
Beach Contact: Franklin
Daniels Columbia
Contact: Mark Dukes Greenville
Contact: Marvin
Quattlebaum William
Herlong Munich
Contact: Stefan Lode CyberWatch is an Internet Law Group news digest published as a service to Nelson Mullins’ clients and friends. The articles are summaries of particular developments in the law and are not intended to be a solicitation or to render legal advice. This publication can be considered advertising under applicable laws.
CyberWatch
is a trademark of Nelson Mullins Riley & Scarborough, L.L.P.
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Experts
Warn that Internet is Vulnerable to Terrorists Industry
authorities warn that with minimal expertise, and without nearing U.S.
soil, terrorists could cripple the Internet, damaging critical avenues
of commerce and sensitive government communications and public services.
According to an expert at AT&T Labs, “there is a
substantial risk of someone ‘taking out’ the Internet.”
Others agree that the Internet is not nearly as robust and secure
as most people think, and fairly simple cyber-terrorist acts could
cripple the Internet for weeks or months.
The Internet is made up of 13 root servers scattered across the
world, and experts believe that these 13 computers represent a pretty
clear target for attack.
The failure of five or more of these root servers at any one time
could potentially cause all servers to fail, with disastrous results for
the corporate, government, and military worlds.
Efforts to reduce the Internet’s vulnerability have been
largely ineffective, hampered by bureaucracy and a lack of expertise,
equipment and money.
Experts hope that the complacency apparent in the world prior to
September 11 will soon be replaced by a realization of what could
happen, for instance, just to transportation and financial systems in
the event of a coordinated cyber-terrorist attack. Safeguarding
Your Computer Network With
growing concerns about potential difficulties that could result from
cyber-terrorism, authorities in computer and network security strongly
urge companies to take steps to protect themselves from the
vulnerabilities of the Internet.
Suggestions include:
Creditors
Protest Chapter 11 “Liquidations” by Internet Companies With
the economy continuing to decline, and with Internet companies being
especially hard hit, many of these “dot coms” are making somewhat
unconventional filings under the U.S. Bankruptcy Code.
Several insolvent “dot coms”
have filed for bankruptcy liquidation under Chapter 11, rather
than liquidating their businesses under the traditional route of filing
under Chapter 7.
Recent Chapter 11 liquidations include Standard Media, Inc.,
Quokka Sports, Inc., Web Van Group, Inc. and Egghead.com, Inc.
While bankruptcy attorneys advise that liquidating a company
under Chapter 11 is legal, such filing is usually reserved for
restructuring a company rather than liquidating it.
The reason these companies are filing under Chapter 11 is that
the company executives typically receive bonuses and other incentives to
ensure that the auctioning off of a company’s assets goes smoothly.
Under Chapter 7, the liquidation is handled by an impartial
trustee whose fees are set pursuant to the Bankruptcy Code.
Creditors and investors of the liquidating companies have filed
suits in several instances seeking to quash the payment of bonuses and
incentives for the people who they believe ran the companies into the
ground in the first place.
In one instance, a U.S. Bankruptcy Court judge has nixed the
proposed bonuses and commissions in the case involving Quokka’s
Chapter 11 liquidation. Internet
Tax Ban Expires A
ban on taxes on transactions over the Internet recently expired, with
Congress unable to agree on an extension of the ban.
The U.S. House of Representatives passed a 2-year extension of
the ban on Internet taxes, but the bill died on the Senate floor after
failing to win sufficient support from Senate lawmakers.
There is concern that U.S. tax officials could begin interpreting
current state tax laws as applying to Internet transactions.
Many lawmakers and business people believe such a move could
significantly reduce the growth of Internet business, which has become a
crucial engine in the U.S. economy, adding to the nation’s current
economic woes.
State and local government officials have argued that Internet
competitors have an unfair advantage over traditional retailers, and
that a ban on Internet transaction taxes results in huge revenue losses. Officer
Fired for Arab-Hating E-mail A
suburban Atlanta police officer was fired after sending an e-mail
advocating the killing of millions of Arabs and suggesting the United
States should eliminate the entire Arab world.
Ray Sanford, a police crime analyst, made the comments on an
e-mail discussion list he created for law enforcement officers, saying
he thought 1,000 Arabs should die for each American killed.
Sanford also advocated starving the people of Afghanistan to
death and bombing Mecca so Muslims would be forced to pray “at a
crater 25 miles across.”
Sanford, who later apologized, is not the only one who has been
punished for sending offensive e-mail from company accounts or with
work-related signatures. In May 2001, 19 patrol officers in Washington
D.C. were reassigned after they were suspected of sending offensive
e-mail from their police car computers. In addition, in 2000, Dow
Chemical fired over 50 workers and disciplined another 200 for e-mailing
pornography and violent images from company computers. Tech-Savvy
Texas Judge Cracks Down on Sex Offenders A
Texas judge has sent three paroled sex offenders back to jail after
software he ordered them to install on their computers alerted probation
officers that they were trying to view online pornography in defiance of
his orders.
In addition to preventing access to these pornographic sites, the
software installed at the insistence of the judge also sent out e-mail
messages to probation officers, alerting them to the violations and
making it relatively easy to prove violations of parole. Purchases
of Cipro Online Prompts Major Concerns Chances
are that someone buying Cipro online following the recent Anthrax scare
is purchasing the drug from the Raleigh, N.C. company MedicalWeb.com,
Inc.
This Internet operation has seen its fortunes spike recently as
demand for Cipro, the only drug with specific approval from the Food and
Drug Administration (FDA) for Anthrax treatment, has skyrocketed.
At least eight separate Web sites advertising Cipro sales are
connected to MedicalWeb.com.
The major concern from regulators is that the company is filling
prescriptions from doctors who have never physically met the patients
for whom they are prescribing Cipro.
Other concerns not related to this particular company have led
the FDA to stop all incoming Cipro shipments from overseas in a move to
crack down on illegal Internet antibiotic sales spurred by the Anthrax
scare. Programmer
Exposes Microsoft Flaws on the Internet An
anonymous programmer, writing under the pseudonym “Beale Screamer,”
recently published software on the Internet that disables Microsoft
technology designed to limit the copying of music purchased by consumers
online. The
programmer described his decision to publish the software as an “act
of civil disobedience” to protest a 1998 copyright law that makes
exploiting security flaws a crime when it involves software designed to
protect copyrighted material.
The law was aimed at preventing piracy of copyrighted works in
digital form but critics argue that it prevents consumers from obtaining
full value and use of material they have purchased.
A Microsoft spokesperson said the company was considering its
legal options, including a lawsuit against the programmer. SEC
Sues Individual Acting as Securities Broker From His Home PC The
Securities and Exchange Commission (SEC) recently filed a civil lawsuit
in Dallas against Mark Snader for allegedly carrying out fraudulent
brokerage activities from his home computer.
Claiming to be a former purchasing manager for one of the top 50
corporations in the world, Snader was in fact a former truck driver and
welder with a high school education and no investment experience.
He made promises of annual investment returns ranging from 60 to
208 percent.
The SEC and Snader agreed to settle allegations concerning his
fraudulent brokerage activities using his Web site, with Snader agreeing
to pay back the money he had made plus a significant fine. Content
Providers to Label Sites for Questionable Content Three
of the nation’s most popular online destinations, America Online,
Microsoft’s MSN, and Yahoo, have agreed on a uniform system for
labeling Internet sites in an effort to help parents restrict
children’s access to questionable content.
These three content providers will be using a voluntary system
developed by the Internet Content Rating Association which will rate Web
sites based on a common set of categories including sex and nudity,
violence, gambling and promotion of drugs.
The ratings will then be coded onto the Web sites and can be read
by Internet filtering software preset by parents to prevent browsers
from accessing these sites. Electronic
Surveillance in the Workplace We
have written before about the increasing use of electronic surveillance
by employers in the workplace. As
employees have become increasingly concerned about losing their privacy
due to employers’ electronically monitoring their activities, several
state efforts to prevent employee electronic monitoring have failed,
including a recent bill in the California State Assembly.
According to a survey by American Management Association,
approximately 78 percent of businesses monitor their employees in some
way. Over 63 percent of
employers monitor their employees’ Internet use, and 47 percent store
and review employee e-mail messages.
So despite increasing concerns of employees, employers have
proven effective in stemming state efforts to restrict monitoring.
Nevertheless, prior to monitoring employee e-mails, employers
should make sure their actions are not in violation of the National
Labor Relations Act or the Electronic Communication Privacy Act. Credits:
Washtech.com; USA Today.com; Newsbytes.com; SiliconValley.com;
USA.com; Interactive Wall Street Journal; NYTimes.com;
WashingtonPost.com.
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