Fraud on the Internet

Internet fraud has grown even faster than Internet use itself. In one case, stock promoters falsely spread positive rumors about the prospects of the companies they touted in order to boost the stock price. In other cases, the information provided might have been true, but the promoters did not disclose that they were paid to talk up the companies. Stock promoters specifically target small investors who are lured by the promise of fast profits.

Stocks are only one of many areas where swindlers are active. Auctions are especially conducive to fraud, by both sellers and buyers. Other types of fraud include selling bogus investments and setting up phantom business opportunities. Because of the growing use of e-mail, financial criminals now have access to many more people. The U.S. Federal Trade Commission (FTC, www.ftc.gov) regularly publishes examples of scams that are most likely to be spread via e-mail or to be found on the Web.

Domain Names

Another legal issue is competition over domain names. Domain names are assigned by central nonprofit organizations that check for conflicts and possible infringement of trademarks. Obviously, companies that sell goods and services over the Internet want customers to be able to find them easily. In general, the closer the domain name matches the company’s name, the easier the company is to locate.

A domain name is considered legal when the person or business who owns the name has operated a legitimate business under that name for some time. Companies such as Christian Dior, Nike, Deutsche Bank, and even Microsoft have had to fight or pay to get the domain name that corresponds to their company’s name.

Consider the case of Delta Air Lines. Delta originally could not obtain the Internet domain name delta.com because Delta Faucet had purchased it first. Delta Faucet had been in business under that name since 1954 and therefore had a legitimate business interest in the domain name. Delta Air Lines had to settle for delta-airlines.com until it bought the domain name from Delta Faucet. Delta Faucet is now at deltafaucet.com. Several cases of disputed domain names are currently in court.

Copyright

Intellectual property is protected by copyright laws and cannot be used freely. This point is significant because many people mistakenly believe that once they purchase a piece of software, they have the right to share it with others.

In fact, what they have bought is the right to use the software, not the right to distribute it. That right remains with the copyright holder. Similarly, copying material from Web sites without permission is a violation of copyright laws.

Protecting intellectual property rights in e-commerce is extremely difficult, however, because it involves hundreds of millions of people in some 200 countries with differing copyright laws who have access to billions of Web pages.