Cyberspace and the Legal Matrix: Laws or Confusion?

From: elrose@well.sf.ca.us (Lance Rose)

Cyberspace, the "digital world", is emerging as a global arena of
social, commercial and political relations. By "Cyberspace", I mean
the sum total of all electronic messaging and information systems,
including BBS's, commercial data services, research data networks,
electronic publishing, networks and network nodes, e-mail systems,
electronic data interchange systems, and electronic funds transfer
systems.

Many like to view life in the electronic networks as a "new frontier",
and in certain ways that remains true. Nonetheless, people remain
people, even behind the high tech shimmer. Not surprisingly, a vast
matrix of laws and regulations has trailed people right into
cyberspace.

Most of these laws are still under construction for the new electronic
environment. Nobody is quite sure of exactly how they actually apply
to electronic network situations. Nonetheless, the major subjects of
legal concern can now be mapped out fairly well, which we will do in
this section of the article. In the second section, we will look at
some of the ways in which the old laws have trouble fitting together
in cyberspace, and suggest general directions for improvement.

LAWS ON PARADE

- Privacy laws. These include the federal Electronic Communications
Privacy Act ("ECPA"), originally enacted in response to Watergate, and
which now prohibits many electronic variations on wiretapping by both
government and private parties. There are also many other federal and
state privacy laws and, of course, Constitutional protections against
unreasonable search and seizure.

- 1st Amendment. The Constitutional rights to freedom of speech and
freedom of the press apply fully to electronic messaging operations of
all kinds.

- Criminal laws. There are two major kinds of criminal laws. First,
the "substantive" laws that define and outlaw certain activities.
These include computer-specific laws, like the Computer Fraud and
Abuse Act and Counterfeit Access Device Act on the federal level, and
many computer crime laws on the state level. Many criminal laws not
specific to "computer crime" can also apply in a network context,
including laws against stealing credit card codes, laws against
obscenity, wire fraud laws, RICO, drug laws, gambling laws, etc.

The other major set of legal rules, "procedural" rules, puts limits on
law enforcement activities. These are found both in statutes, and in
rulings of the Supreme Court and other high courts on the permissible
conduct of government agents. Such rules include the ECPA, which
prohibits wiretapping without a proper warrant; and federal and state
rules and laws spelling out warrant requirements, arrest requirements,
and evidence seizure and retention requirements.

- Copyrights. Much of the material found in on-line systems and in
networks is copyrightable, including text files, image files, audio
files, and software.

- Moral Rights. Closely related to copyrights, they include the
rights of paternity (choosing to have your name associated or not
associated with your "work") and integrity (the right not to have your
"work" altered or mutilated). These rights are brand new in U.S. law
(they originated in Europe), and their shape in electronic networks
will not be settled for quite a while.

- Trademarks. Anything used as a "brand name" in a network context
can be a trademark. This includes all BBS names, and names for
on-line services of all kinds. Materials other than names might also
be protected under trademark law as "trade dress": distinctive sign-on
screen displays for BBS's, the recurring visual motifs used throughout
videotext services, etc.

- Right of Publicity. Similar to trademarks, it gives people the
right to stop others from using their name to make money. Someone
with a famous on-line name or handle has a property right in that
name.

- Confidential Information. Information that is held in secrecy by
the owner, transferred only under non-disclosure agreements, and
preferably handled only in encrypted form, can be owned as a trade
secret or other confidential property. This type of legal protection
is used as a means of asserting ownership in confidential databases,
>from mailing lists to industrial research.

- Contracts. Contracts account for as much of the regulation of
network operations as all of the other laws put together.

The contract between an on-line service user and the service provider
is the basic source of rights between them. You can use contracts to
create new rights, and to alter or surrender your existing rights
under state and federal laws.

For example, if a bulletin board system operator "censors" a user by
removing a public posting, that user will have a hard time showing his
freedom of speech was violated. Private system operators are not
subject to the First Amendment (which is focused on government, not
private, action). However, the user may have rights to prevent
censorship under his direct contract with the BBS or system operators.

You can use contracts to create entire on-line legal regimes. For
example, banks use contracts to create private electronic funds
transfer networks, with sets of rules that apply only within those
networks. These rules specify on a global level which activities are
permitted and which are not, the terms of access to nearby systems and
(sometimes) to remote systems, and how to resolve problems between
network members.

Beyond the basic contract between system and user, there are many
other contracts made on-line. These include the services you find in
a CompuServe, GEnie or Prodigy, such as stock quote services, airline
reservation services, trademark search services, and on-line stores.
They also include user-to-user contracts formed through e-mail. In
fact, there is a billion-dollar "industry" referred to as "EDI" (for
Electronic Data Interchange), in which companies exchange purchase
orders for goods and services directly via computers and computer
networks.

- Peoples' Rights Not to be Injured. People have the right not to be
injured when they venture into cyberspace. These rights include the
right not to be libelled or defamed by others on-line, rights against
having your on-line materials stolen or damaged, rights against having
your computer damaged by intentionally harmful files that you have
downloaded (such as files containing computer "viruses"), and so on.

There is no question these rights exist and can be enforced against
other users who cause such injuries. Currently, it is uncertain
whether system operators who oversee the systems can also be held
responsible for such user injuries.

- Financial Laws. These include laws like Regulations E & Z of the
Federal Reserve Board, which are consumer protection laws that apply
to credit cards, cash cards, and all other forms of electronic
banking.

- Securities Laws. The federal and state securities laws apply to
various kinds of on-line investment related activities, such as
trading in securities and other investment vehicles, investment
advisory services, market information services and investment
management services.

- Education Laws. Some organizations are starting to offer on-line
degree programs. State education laws and regulations come into play
on all aspects of such services.

The list goes on, but we have to end it somewhere. As it stands, this
list should give the reader a good idea of just how regulated
cyberspace already is.


LAWS OR CONFUSION?

The legal picture in cyberspace is very confused, for several reasons.

First, the sheer number of laws in cyberspace, in itself, can create a
great deal of confusion. Second, there can be several different kinds
of laws relating to a single activity, with each law pointing to a
different result.

Third, conflicts can arise in networks between different laws on the
same subject. These include conflicts between federal and state laws,
as in the areas of criminal laws and the right to privacy; conflicts
between the laws of two or more states, which will inevitably arise
for networks whose user base crosses state lines; and even conflicts
between laws from the same governmental authority where two or more
different laws overlap. The last is very common, especially in laws
relating to networks and computer law.

Some examples of the interactions between conflicting laws are
considered below, from the viewpoint of an on-line system operator.

1. System operators Liability for "Criminal" Activities.

Many different activities can create criminal liabilities for service
providers, including:

- distributing viruses and other dangerous program code;

- publishing "obscene" materials;

- trafficking in stolen credit card numbers and other unauthorized
access data;

- trafficking in pirated software;

- and acting as an accomplice, accessory or conspirator in these and
other activities.

The acts comprising these different violations are separately defined
in statutes and court cases on both the state and federal levels.

For prosecutors and law enforcers, this is a vast array of options for
pursuing wrongdoers. For service providers, it's a roulette wheel of
risk.

Faced with such a huge diversity of criminal possibilities, few
service providers will carefully analyze the exact laws that may
apply, nor the latest case law developments for each type of criminal
activity. Who has the time? For system operators who just want to
"play it safe", there is a strong incentive to do something much
simpler: Figure out ways to restrict user conduct on their systems
that will minimize their risk under *any* criminal law.

The system operator that chooses this highly restrictive route may not
allow any e-mail, for fear that he might be liable for the activities
of some secret drug ring, kiddie porn ring or stolen credit card code
ring. The system operator may ban all sexually suggestive materials,
for fear that the extreme anti-obscenity laws of some user's home town
might apply to his system. The system operator may not permit
transfer of program files through his system, except for files he
personally checks out, for fear that he could be accused of assisting
in distributing viruses, trojans or pirated software; and so on.

In this way, the most restrictive criminal laws that might apply to a
given on-line service (which could emanate, for instance, from one
very conservative state within the system's service area) could end up
restricting the activities of system operators all over the nation, if
they happen to have a significant user base in that state. This
results in less freedom for everyone in the network environment.

2. Federal vs. State Rights of Privacy.

Few words have been spoken in the press about network privacy laws in
each of the fifty states (as opposed to federal laws). However, what
the privacy protection of the federal Electronic Communications
Privacy Act ("ECPA") does not give you, state laws may.

This was the theory of the recent Epson e-mail case. An ex-employee
claimed that Epson acted illegally in requiring her to monitor e-mail
conversations of other employees. She did not sue under the ECPA, but
under the California Penal Code section prohibiting employee
surveillance of employee conversations.

The trial judge denied her claim. In his view, the California law
only applied to interceptions of oral telephone discussions, and not
to visual communication on video display monitors. Essentially, he
held that the California law had not caught up to modern technology -
making this law apply to e-mail communications was a job for the state
legislature, not local judges.

Beyond acknowledging that the California law was archaic and not
applicable to e-mail, we should understand that the Epson case takes
place in a special legal context - the workplace. E-mail user rights
against workplace surveillance are undeniably important, but in our
legal and political system they always must be "balanced" (ie.,
weakened) against the right of the employer to run his shop his own
way. Employers' rights may end up weighing more heavily against
workers' rights for company e-mail systems than for voice telephone
conversations, at least for employers who use intra-company e-mail
systems as an essential backbone of their business. Fortunately, this
particular skewing factor does not apply to *public* communications
systems.

I believe that many more attempts to establish e-mail privacy under
state laws are possible, and will be made in the future. This is good
news for privacy advocates, a growing and increasingly vocal group
these days.

It is mixed news, however, for operators of BBS's and other on-line
services. Most on-line service providers operate on an interstate
basis - all it takes to gain this status is a few calls from other
states every now and then. If state privacy laws apply to on-line
systems, then every BBS operator will be subject to the privacy laws
of every state in which one or more of his users are located! This
can lead to confusion, and inability to set reasonable or predictable
system privacy standards.

It can also lead to the effect described above in the discussion of
criminal liability. On-line systems might be set up "defensively", to
cope with the most restrictive privacy laws that might apply to them.
This could result in declarations of *absolutely no privacy* on some
systems, and highly secure setups on others, depending on the
individual system operator's inclinations.

3. Pressure on Privacy Rights Created by Risks to Service Providers.

There are two main kinds of legal risks faced by a system operator.
First, the risk that the system operator himself will be found
criminally guilty or civilly liable for being involved in illegal
activities on his system, leading to fines, jail, money damages,
confiscation of system, criminal record, etc.

Second, the risk of having his system confiscated, not because he did
anything wrong, but because someone else did something suspicious on
his system. As discussed above, a lot of criminal activity can take
place on a system when the system operator isn't looking. In
addition, certain non-criminal activities on the system could lead to
system confiscation, such copyright or trade secret infringement.

This second kind of risk is very real. It is exactly what happened to
Steve Jackson Games last year. Law enforcement agents seized Steve's
computer (which ran a BBS), not because they thought he did anything
wrong, but because they were tracking an allegedly evil computer
hacker group called the "Legion of Doom". Apparently, they thought
the group "met" and conspired on his BBS. A year later, much of the
dust has cleared, and the Electronic Frontier Foundation is funding a
lawsuit against the federal agents who seized the system.
Unfortunately, even if he wins the case Steve can't get back the
business he lost. To this day, he still has not regained all of his
possessions that were seized by the authorities.

For now, system operators do not have a great deal of control over
government or legal interference with their systems. You can be a
solid citizen and report every crime you suspect may be happening
using your system. Yet the chance remains that tonight, the feds will
be knocking on *your* door looking for an "evil hacker group" hiding
in your BBS.

This Keystone Kops style of "law enforcement" can turn system
operators into surrogate law enforcement agents. System operators who
fear random system confiscation will be tempted to monitor private
activities on their systems, intruding on the privacy of their users.
Such intrusion can take different forms. Some system operators may
declare that there will be no private discussions, so they can review
and inspect everything. More hauntingly, system operators may indulge
in surreptitious sampling of private e-mail, just to make sure no
one's doing anything that will make the cops come in and haul away
their BBS computer systems (By the way, I personally don't advocate
either of these things).

This situation can be viewed as a way for law enforcement agents to do
an end run around the ECPA's bar on government interception of
electronic messages. What the agents can't intercept directly, they
might get through fearful system operators. Even if you don't go for
such conspiracy theories, the random risk of system confiscation puts
great pressure on the privacy rights of on-line system users.

4. Contracts Versus Other Rights.

Most, perhaps all, of the rights between system operators and system
users can be modified by the basic service contract between them. For
instance, the federal ECPA gives on-line service users certain privacy
rights. It conspicuously falls short, however, by not protecting
users from privacy intrusions by the system operator himself.

Through contract, the system operator and the user can in effect
override the ECPA exception, and agree that the system operator will
not read private e-mail. Some system operators may go the opposite
direction, and impose a contractual rule that users should not expect
any privacy in their e-mail.

Another example of the power of contracts in the on-line environment
occurred recently on the Well, a national system based in San
Francisco (and highly recommended to all those interested in
discussing on-line legal issues). A Well user complained that a
message he had posted in one Well conference area had been
cross-posted by other users to a different conference area without his
permission.

A lengthy, lively discussion among Well users followed, debating the
problem. One of the major benchmarks for this discussion was the
basic service agreement between the Well and its users. And a
proposed resolution of the issue was to clarify the wording of that
fundamental agreement. Although "copyrights" were discussed, the
agreement between the Well and its users was viewed as a more
important source of the legitimate rights and expectations of Well
users.

Your state and federal "rights" against other on-line players may not
be worth fighting over if you can get a contract giving you the rights
you want. In the long run, the contractual solution may be the best
way to set up a decent networked on-line system environment, except
for the old bogeyman of government intrusion (against whom we will all
still need our "rights", Constitutional and otherwise).

CONCLUSION

There are many different laws that system operators must heed in
running their on-line services. This can lead to restricting system
activities under the most oppressive legal standards, and to
unpredictable, system-wide interactions between the effects of the
different laws.

The "net" result of this problem can be undue restrictions on the
activities of system operators and users alike.

The answers to this problem are simple in concept, but not easy to
execute. First, enact (or re-enact) all laws regarding electronic
services on a national level only, overriding individual state control
of system operators activities in cyberspace. It's time to realize
that provincial state laws only hinder proper development of
interstate electronic systems.

As yet, there is little movement in enacting nationally effective
laws. Isolated instances include the Electronic Communications
Privacy Act and the Computer Fraud and Abuse Act, which place federal
"floors" beneath privacy protection and certain types of computer
crime, respectively. On the commercial side, the new Article 4A of
the Uniform Commercial Code, which normalizes on-line commercial
transactions, is ready for adoption by the fifty states.

Second, all laws regulating on-line systems must be carefully designed
to interact well with other such laws. The goal is to create a
well-defined, reasonable legal environment for system operators and
users.

The EFF is fighting hard on this front, especially in the areas of
freedom of the press, rights of privacy, and rights against search and
seizure for on-line systems. Reducing government intrusion in these
areas will help free up cyberspace for bigger and better things.

However, the fight is just beginning today.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Lance Rose is an attorney who works primarily in the fields of
computer and high technology law and intellectual property. His
clients include on-line publishers, electronic funds transfer
networks, data transmission services, individual system operators, and
shareware authors and vendors. He is currently revising SYSLAW, The
Sysop's Legal Manual. Lance is a partner in the New York City firm of
Greenspoon, Srager, Gaynin, Daichman & Marino, and can be reached by
voice at (212)888-6880, on the Well as "elrose", and on CompuServe at
72230,2044.