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October 2001 Volume 2, Issue 10
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
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Chemical
Plant, Oil Pipeline Information Pulled From Internet In
the weeks since the September 11 attacks in New York and Washington,
several government agencies and even some private entities have been
removing information from their Web sites that they fear may be of use
to terrorists. The
Environmental Protection Agency, among others, increasingly concerned
about possible attacks involving chemicals, has removed from its Web
site information on the nation’s chemical plants and contingency plans
that companies had in place in case chemicals escaped. Additionally, the
Department of Transportation has removed from its Web site information
on pipeline mapping, infrastructure system data and related materials.
Some of the information removed from these Web sites can, however, still
be found on the Web sites of publicly-traded and private companies. It
remains to be seen whether a more complete effort to remove sensitive
data available for potential terrorists is undertaken. State
and Local Sales Tax Losses on
E-Commerce to Top $54 Billion According
to a recent study by the University of Tennessee, state and local
governments will lose more than $54 billion in sales taxes due to
increasing purchases made over the Internet by 2011. The study also
raises by 41 percent its previous estimate of sales tax losses in 2001,
from $9.4 billion to $13.3 billion. Many states are arguing that
the current sales tax system is not compatible with a 21st
Century economy and that states should be allowed to remedy the system.
State governments are seeking to influence the debate on Capitol Hill
about the collection of sales taxes on remote purchases. The University
of Tennessee study found that projected sales tax revenue losses in 2001
ranged from a low of $21 million in Vermont to a high of $1.75 billion
in California. According to the study, by 2011, California’s sales tax
losses would top $7 billion. With losses of this magnitude, the study
predicts that state and local governments will quickly be forced to
choose between raising taxes or cutting services such as schools, law
enforcement and fire protection. Cybersquatting
After the World Trade Center and Pentagon Attacks Even
before the second World Trade Center tower was attacked, individuals had
launched a domain name land grab to capture descriptive Web sites for
personal and commercial use. Domain
name registrants snapped up hundreds of domain names including “WTCcollapse.com”,
“nukeafghanistan.net”, “worldtradecentercrash.com”,
“WTCplanecrash.com” and “WTCcrash.com”. Within minutes after the
Pentagon was hit, domain registrars faced a rush on names such as “Pentagonattack.com”,
“Pentagondisaster.com” and “Pentagoncrash.com”. Memorial Web
sites also sprang up quickly, such as “Flight175.com”. Some of these
registrations have, of course, been used for tributes or relief efforts,
but others were registered solely for a quick buck. Asking prices for
several of the Web sites ranged from $75,000 to $500,000 in the days
following these horrific events in New York and Washington. Coed
Dorm Web Site Wins Court Appeal Tampa,
Florida-based Entertainment Network, an operator of an adult Web site
that allows viewers to peek into a coed dorm room 24 hours a day,
recently won an appeal of a federal district court decision that would
have closed the Web site. The company said that its site
“voyeurdorm.com” would continue to operate normally as a result of
the court decision. The site publishes video and images taken 24 hours a
day by Web cameras placed inside six Florida coed dormitories. The City
of Tampa tried to close the subscription-based Web site, arguing that it
violated city zoning regulations, but the federal appeals court ruled
that the zoning rules did not apply. eBay
Halts Sale of Certain Items Related to WTC Attacks Facing
increasing outrage across its user message boards, California-based eBay
pulled hundreds of listings from its auction site and suspended nine
users seeking to capitalize on the World Trade Center and Pentagon
attacks. e-Bay says that it often sees troublesome listings on its site
following disturbing news. T-shirts and other items, for instance, were
listed for sale surrounding the execution of Timothy McVeigh. The
company says it has to walk a fine line in deciding whether and when to
interfere with particular listings on its Web site. Bermuda
Blocks Web Access By Employees With
Internet access having become available on most government computers in
Bermuda only in the last two years, the government there has found that
an increasing number of its employees have accessed adult sites using
their government computers. A
recent review found that 570 employees, or fully 12 percent of
Bermuda’s government employees, had accessed one or more adult sites.
To combat this access, Bermuda’s government has installed
pornography-blocking software on its computers. Internet
Increases Reach Into U.S. Homes According
to the U.S. Census Bureau, Internet access in the United States has
skyrocketed, with 42 percent of
U.S. households connected to the Internet in 2000, up from 18 percent
three years earlier. According to the report, nearly two-thirds of all
children between the ages of 3 and 17 lived in homes with computers, and
nearly one-third of those children had gone online. According to the
Bureau, nearly 90 percent of all school-age children aged 6 to 17 had
access to computers either at home or at school.
Seventy-three percent of those under 17 years old used the
Internet for e-mail with the next most popular uses being research and
general information searches. FTC
Targets Web Sites that Trap Surfers As
part of a major effort at cleaning up abusive or fraudulent Web
practices, the Federal Trade Commission (FTC) has won a court order
blocking the activities of an individual who operates Web sites under
dozens of different names. These
sites are misspellings of legitimate sites including 41 variations on
the name of teen pop star Britney Spears.
Once a Web surfer misspells a domain name and is mis-directed to
an offending site, the “cyberscammer” site takes control of the
computer user’s Web browsing software. The surfer is then diverted to
display ads for goods and services ranging from Internet gambling to
pornography. In these cases, the surfer is unable to “back” out of
the unwelcome Web site and the cyberscammer’s site launches new pages
of advertising. In this most recent FTC suit, the individual targeted
was allegedly earning approximately $1 million annually from advertising
he had sold on these various “mousetrapping” Web sites. New
Office of Homeland Security Needs to Focus on Cybersecurity President
Bush has created a new Office of Homeland Security in his cabinet and
has named Pennsylvania Governor Tom Ridge as its head. This
Cabinet-level office will coordinate the many federal, state and local
agencies involved in protecting the nation against terrorist attacks.
Experts say that a cornerstone of this new Office needs to be
information technology and cybersecurity in order to ensure that
critical computer systems are protected.
One administration official states that it is essential to link
the government strategy for combatting computer-based attacks to the
national strategy for combatting terrorism, with special emphasis on
protecting the nation’s telecommunications sector. Hacker
Changes Content on Yahoo! Site A
20-year-old hacker from San Francisco, saying he just wanted to show
Yahoo! Inc. that it had a network security problem, entered Yahoo!’s
news pages and inserted phony quotes and wrong information in stories.
This is but one example of the easy manipulation of content on what are
assumed to be trusted Web sites and demonstrates how vulnerable the
Internet can be for quickly spreading misinformation. Yahoo!, with a
claimed user base of over 200 million, is one of the Internet’s most
popular sources of information. Chief technology officers expect a new
wave of such content assaults on computer networks in the future. With
improved detection of viruses, worms and other threats, hackers appear
to be heading toward tactics that play off of people’s tendency to
believe anything they read. In the Yahoo! case, the hacker changed a
story about a Russian computer programmer circumventing copyrights on
the Internet by saying, among other things, that the Russian could face
the death penalty if convicted. In reality, the maximum sentence would
be five years in prison. Yahoo! issued a statement announcing that it
was taking “appropriate steps to block unauthorized access to help
ensure that we maintain a secure environment.” Court
Rules that Ownership of a Cybercompany Falls Within Federal Securities
Laws A
federal appellate court, in the case SEC
v. SG, Ltd., has decided that shares owned in a company existing
only in cyberspace fall within the federal securities laws and are to be
regulated by the Securities and Exchange Commission (SEC). SG operated a
“StockGeneration” Web site offering the online purchase by
individuals of stock in 11 different companies. SG would arbitrarily set
the bid and ask prices for these companies and guaranteed that investors
could buy or sell any quantity of shares at the posted prices. SG stated
on its Web site that the cyberspace company shares would appreciate at a
rate of 10 percent monthly and contained testimonials from supposedly
satisfied participants. At least 800 people in the United States bought
shares in SG’s “virtual” companies in an amount totaling at least
$7.4 million. The SEC undertook an investigation into SG’s activities
following a complaint and alleged that SG’s operations constituted a
fraudulent scheme in violation of federal securities laws. A federal
appellate court ruled that the SEC had jurisdiction over SG and that
federal securities laws did apply because the three prongs of the
standard investment contract analysis, that is, an investment of money
by individuals in a common enterprise with the expectation of profits,
were satisfied. U.S.
Treasury Allows Online Tax Payments The
federal government now allows all businesses and individuals to pay
their taxes over the Internet. The Treasury Department recently launched
the federal government’s newest version of the Electronic Federal Tax
Payment System (“EFTPS”) which allows businesses and individuals to
pay all of their federal taxes through a secure Web site. While
originally introduced in late 1996, the government maintains that the
recent roll out of additional access and services should greatly
increase the number and amount of online tax payments. The Treasury
Department says businesses have already used EFTPS to pay more than $5.7
trillion in federal taxes. Credits: Interactive Wall Street Journal; USAToday.com;SiliconValley.com; FCW.com; Salon.com; Newsbytes.com; Newsfactor.com; The Associated Press; DC.internet.com. |
