Client Alert

Internet Law Bulletin, July 2000


Covering June 2000

In the Executive

  • The Federal Trade Commission is examining America Online's dominance of instant messaging as part of its review of AOL's acquisition of Time Warner. This examination is in response to submissions by Internet companies, which claim AOL has excluded them from its instant messaging system.

  • The White House has issued a directive that all federal agencies stop implanting "cookies" on the hard drives of people who visit government websites. This action was taken after it was learned that some government sites were using cookies in violation of their stated privacy policies.

In the Congress

  • Congress passed the electronic signature legislation, which President Clinton signed on June 30. The bill accords the same legal effect to an electronic signature, contract, or record as is accorded to a paper and ink signature, contract, or record. For more information, please read Morrison & Foerster's Electronic Signature Legislation Memo.

  • The Senate passed legislation requiring Internet service providers to offer free or low cost software filters.

  • The House Commerce Committee passed an anti-spam bill, but Commerce Committee Chairman Bliley indicated that more work needed to be done on the bill before it would be ready for consideration by the full House of Representatives.The House Banking Committee passed a bill that would prohibit Internet gambling businesses from accepting credit cards, debit cards, checks, or wire transfers for the placing of bets.

  • The House Government Reform approved a bill that would create a commission that would study online privacy issues.

In the Courts

  • The U.S. Court of Appeals for the Third Circuit affirmed a lower court ruling that the Children's Online Protection Act, which prohibited the online dissemination to minors of material harmful to minors, violated the First Amendment. (Congress passed COPA in 1998 in response to the Supreme Court's ruling that the Communications Decency Act was unconstitutional.)

  • The U.S. Court of Appeals for the Fourth Circuit ruled that a court order barring a website from posting commentary concerning ongoing trademark litigation was unconstitutionally overbroad.

  • The U.S. Court of Appeals for the Ninth Circuit ruled that a local cable franchise authority violated federal law last year by forcing AT&T to open its broadband network to other Internet service providers as a condition of renewing and transferring its franchise license. The court also held that Internet access over cable is a telecommunications service rather than a cable service and thus is subject to common-carrier regulation, making it a mixed victory for cable operators. For more information, please read Morrison & Foerster's ISP Access to Cable System Facilities Memo.

  • A federal court ruled that under Section 230 of the Communications Decency Act, web site hosts are not liable for indecent content posted by a subscriber.
    >> A California court has ruled that the state's anti-spam law is unconstitutional because it interferes with interstate commerce.

  • A Florida court approved a class action law suit by hourly subscribers against AOL for the "pop-up" advertising which appears on the screen while the subscribers are on line. The suit claims that the pop-up advertising interferes with and disrupts the subscribers' Internet access.

  • has settled its litigation with the major record companies. Under the settlement, reportedly will pay each company approximately $20 million in license fees in order to continue offering its "" service.

  •, a search engine that finds MP3 files, has filed a declaratory judgment action against the Recording Industry Association of America.The RIAA has filed a motion for preliminary injunction against Napster.

  • Twelve motion picture and entertainment companies filed a copyright suit against, a website that posts hours of recorded primetime television programming for free.

In the European Union

  • On July 5, the European Parliament voted in plenary (279 votes against 259) to adopt a report which was highly critical of the European Commission's draft decision to allow for the transfer of EU personal data to the US under the EU-US Data Protection Safe Harbor Agreement. The Parliament voted that the safe harbor system could be considered as offering an "adequate level of protection" only if several changes are made to it. The resolution is not legally binding, and the European Commission has decided not to follow it. Instead, it will proceed with the agreement, and will forward the Parliament's concerns to the U.S. for future consideration.

  • The European Commission adopted a draft directive concerning the application of the Value Added Tax (VAT) to electronic commerce. The most significant change is that VAT would be imposed in the jurisdiction where consumption occurs, so that when services are supplied over electronic networks for consumption within the EU, they would be subject to EU VAT, and services supplied for consumption outside the EU would be exempt from VAT. This would change the present rule, under which such services are generally exempt from VAT if offered from outside the EU into the EU, but VAT must be paid by EU sellers on sales to buyers outside the EU. Thus, under the proposed changes, the application of VAT would depend on the tax status and the location of the recipient (the "country of destination principle").

  • The EU Council of Ministers approved the revised Dual-Use Goods Regulation, which eliminates all restrictions on intra-Community transfer of cryptographic goods other than cryptoanalytic goods. The Regulation has been published in the Official Journal, and will take effect 90 days after publication. The new Dual Use Ordinance includes a number of major liberalizations of EU encryption law.

  • As mentioned in the last bulletin, at the beginning of June, a political agreement was reached on a Council Common Position for a Copyright Directive. The agreed-upon text offers Member States, under certain circumstances, the possibility of adopting exceptions to the exclusive rights of rightholders. The political agreement now must be formally approved by the Council of Ministers before proceeding to the European Parliament for a second reading.

In Latin America

  • On June 7, the Mexican E-Commerce Act took effect. The law amends the Civil Code, the Commercial Code, the Rules of Civil Procedure and the Consumer Protection Act. It covers consumer protection, privacy and digital signatures and electronic documents. Procedural rules were also amended to recognize evidence stored in electronic media.

  • An electronic signature bill was presented on June 20 in the Argentinean Senate by Senators Pedro Del Piero (Frepaso - Alianza) and Luis Molinari Romero (UCR - Alianza). The bill adopts a technology neutral position and excludes certain documents such as wills, estates and those related to family law acts. The bill distinguishes electronic signatures from digital signatures. It also contains a provision related to recognition of foreign certificates.

  • In May, the Peruvian Congress enacted a digital signatures law. The law covers electronic signatures and digital signatures (using asymmetric cryptography), digital certificates and certification authorities.

This memorandum is a general discussion of the legal problems of website operators and is not a substitute for professional advice on specific questions.

July 13, 2000




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