286CHAPTER 14CyberlawCHAPTER 15International and.docx

286
CHAPTER 14:
Cyberlaw
CHAPTER 15:
International and Environmental Law
Unit V
Business Law in the
21st Century
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© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
287
Businesses increasingly operate in a global environment, one
linked together by elec-tronic communication that is almost
instantaneous, and that now enables even small businesses to do
business on an international level. The Internet has vastly
increased
opportunity for both businesses and consumers, but it also has
brought new hazards in the
form of security and privacy issues. In Chapter 14, we will look
at some of the major con-
cerns involving law and the Internet.

As companies increasingly move across national boundaries, an
awareness of international
law is important for the business student. In Chapter 15, we will
discuss laws impacting
import and export of goods, international contracts, and some of
the problems that can
arise when one country’s laws conflict with another’s. We will
also examine the major areas
of environmental regulation, noting both where legal
protections have been effective, and
where they have fallen short.
As the world grows increasingly interdependent, in terms of
both economies and resources,
business practice and the law will both continue to evolve.
These chapters will introduce
business students to topics critical to globalization, and
hopefully pave the way for future
understanding as changes take place.
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Chapter Overview
14.1 Jurisdiction and the Problem of
Enforcement
14.2 Computer Crime
• Hacking
• Identity Theft
• Fraud
• Phishing
14.3 Cyber Torts
14.4 Privacy
• Cookies and Privacy
• E-Mail and Privacy
• Commercial E-Mail and Privacy
• The Constitution and Privacy
• Computer Crime and Privacy
14.5 E-Contracts
• Click-Wrap Contracts
• Sales Tax
14.6 Intellectual Property
• The Digital Millennium Copyright Act (DMCA)
• The Stop Online Piracy Act (SOPA)
14.7 Chapter Summary
• Focus on Ethics
• Case Study: American Guarantee & Liability Insurance
Co. v. Ingram Micro, Inc.
• Case Study: E. & J. Gallo Winery v. Spider Webs Ltd.
• Critical Thinking Questions

• Hypothetical Case Problems
• Key Terms
14
Learning Objectives
After studying this chapter, you will
be able to:
1. Distinguish the major statutes regulating
cyber activity.
2. Define spam, phishing, click-wraps, and
cookies.
3. Describe the issues relating to privacy
and the Internet.
4. Explain how legal issues about sales tax
affect business on the Internet.
Cyberlaw
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CHAPTER 14Section 14.1 Jurisdiction and the Problem of
Enforcement

The incredible capabilities of computers and the growth of the
Internet have greatly increased opportunities in the business
world, but have also resulted in new risks for both businesses
and consumers. Technology makes it possible for us to com-
municate with anyone in an instant, to buy goods with a click of
a mouse, and to gather
vast amounts of information with unprecedented speed and
efficiency. So, too, does
the brave new world of electronic communication present a
challenge for the law. How
do we translate the traditional contract rules of offer and
acceptance in a world of elec-
tronic transactions? What are the limits on how others collect
and use our personal
data? How do we balance the free flow of communication and
information with the
protection of our privacy? These are just a few of the issues this
chapter will explore. In
many ways, the Internet is the Wild West of the new
millennium, full of both opportu-
nity and danger!
Cyberlaw is a broad term used to refer to rules dealing with this
digital Wild West, with
the Internet and computer technology. In some cases, well-
established areas of law such
as torts and contracts have evolved to deal with situations
arising from computer use. In
others, legislatures have to enact new statutes when existing
laws fall short.
The main categories of cyberlaw include criminal law, tort law,
contracts, and intellectual
property. Note that there are issues that overlap these different
segments of the law. For

example, statutes such as the Digital Millennium Copyright Act
contain both criminal and
civil provisions, and privacy concerns in the cyber sector have
spawned legal develop-
ments in multiple areas of the law.
14.1 Jurisdiction and the Problem of Enforcement
Regardless of what the law says about behavior in cyberspace,
there is a major prob-lem when it comes to enforcement of the
rules in physical space. The Internet has no regard for state or
national boundaries. A hacker in Russia can target your com-
puter as easily as someone
who lives next door to you.
Counterfeiters in China do a
huge trade in bootleg DVDs
of Hollywood movies, some-
times hitting the market even
before the movie has been
released. The hacker and the
counterfeiter are both vio-
lating the law, but what can
you do about it? The answer
may well be nothing.
One obstacle is identify-
ing the culprit. The Inter-
net allows a certain degree
of anonymity, and even if a
particular account is iden-
tified as where the action
Digital technology has made it much more difficult to police
copyrights and prevent counterfeiting.
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CHAPTER 14Section 14.2 Computer Crime
originated, the Internet Service Provider (ISP) may not
cooperate in identifying who the
account belongs to.
Even if that problem can be overcome, and you know who is
responsible for the offense, the
problems of suing someone in a foreign country, particularly
one not known for cooperation
with the United States, are huge. And suppose you sue and win
and now are seeking to collect
your damages? Enforcing a judgment depends on the
government of the country where the
defendant’s assets are located.
14.2 Computer Crime
Hacking
Computers are both victims and tools of crime. A common
computer crime is hacking,
where a person gains unauthorized access to a computer from a
remote location. Hackers
may maliciously target a computer to raid its data or damage it
through the use of viruses,
and of course they are usually using computers and software

programs to commit these
offenses. In the early days of computers and the Internet, many
unauthorized incursions
of this type were not covered by existing law.
Example 14.1. A graduate student improperly uses university
computers
and databases to do personal research. If he had legally paid for
the ser-
vice, it would have cost about $12,000. Is this theft? He has not
“taken”
any information from the computers; he’s just shared it. And
while the old
saying goes “Time is money,” the common law says that time
and money
are actually very different things! So the student could not be
convicted of
a crime under traditional rules.
Cases such as this eventually resulted in the creation of new
regulations including the fed-
eral Computer Fraud and Abuse Act of 1986 (CFAA). The
CFAA applies to any computer
on the Internet (which today is the vast majority of them) and
prohibits computer tres-
pass, fraud, espionage, theft, damage to a computer such as
planting viruses or worms,
and selling of computer passwords, among other things.
Example 14.2. David, a college student, accesses Gov. Sarah
Palin’s Yahoo
e-mail account by guessing the answers to the prompt questions
that allow
the password to be reset. He posts the new password on a public
bulletin
board, allowing access by others. In 2010, David is convicted of

unauthor-
ized access and sentence to one year and one day’s
imprisonment.
However, the CFAA only applies within the United States,
which considerably limits its
effectiveness. Many hackers operate from outside the United
States, even if their victims
are in this country.
Example 14.3. On November 24, 2014, a massive cyberattack
was launched
against Sony Pictures Entertainment by a group calling
themselves the
Guardians of the Peace. The attackers wiped out the data on
thousands
of Sony’s computers and servers and stole a wide range of data
includ-
ing movie scripts, emails, and films. They also made off with
personal
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CHAPTER 14Section 14.2 Computer Crime
employee data including 47,000 social security numbers. Much
of this data

was subsequently posted on the internet. The FBI concluded that
North
Korea was responsible for the attack, although some private
security
experts have suggested that it was an inside job.
Despite the CFAA, hacking continues to occur on a regular
basis. As massive as the Sony
hack was, it only ranked as the 33rd largest data breach of 2014.
The largest data breach in
2014 occurred earlier in the year when an eBay database was
hacked, resulting in over 145
million customer records being compromised.
Identity Theft
Another law targeting criminal behavior on the Internet is the
Identity Theft and Assump-
tion Deterrence Act of 1998, which prohibits use of false
identification to commit fraud or
other crimes. Identity theft is a growing problem: in 2014,
approximately 17.6 million U.S.
residents age 16 or older (about 7%) were the victims of
identity theft. The law gives vic-
tims a right to sue for damages, but possibly more useful (since
a victim may never know
who put that $5,000 charge for Racy Stacy lingerie on his card,
and thus will be unable to
sue him or her!) is the provision that limits liability to the first
$50 when a stolen card has
been used. It is important for victims to report identity theft to
credit card companies as
soon as possible, so as to limit the liability for the fraudulent
credit card charges.
Fraud
Fraud is an enormously common crime committed via the

Internet and takes many dif-
ferent forms. One common variety is the Nigerian Letter scam,
in which the victim gets
an e-mail purporting to be from a Nigerian gov-
ernment official who seeks help in transferring
funds out of the country; the would-be official is
willing to pay a large sum of money to whoever
allows the funds to be transferred into their per-
sonal bank account. Of course, whoever actu-
ally agrees to help is actually the victim of the
crime since he will need to provide the “Nige-
rian official” personal bank account informa-
tion so that the funds can be transferred. The
perpetrator of this fraud then uses the informa-
tion to raid the victim’s account. To many, this
may seem like such an obvious hoax as to be
laughable, but millions of dollars are lost annu-
ally to such fraudulent schemes.
Phishing
Another fast-growing area of crime is phishing, where the
victim receives an e-mail that
appears to come from a site such as PayPal, eBay, or a bank,
asking her to verify her
account information. Clicking on the link provided takes the
victim to a “dummy” site,
one that appears to look legitimate but in fact is a clever
counterfeit. When the victim logs
in, her account information is then transmitted to the phisher.
E-mail has become a favorite tool of scam artists.
© 2009 Justin NB Francis/Just One Film/Getty Images
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CHAPTER 14Section 14.3 Cyber Torts
The Federal Trade Commission also has regulations that apply
in the area of consumer
fraud and deceptive practices committed via the Internet, and
some states have passed
additional statutes. California, for example, requires companies
to inform consumers
when their personal information has been the target of
unauthorized access.
14.3 Cyber Torts
There are a number of torts that can be committed in a cyber
setting as well as in the “real” world. Consider defamation,
which is the publication of a false statement about the plaintiff
that harms the plaintiff’s reputation.
Example 14.4. Puppy Love is the doggie day care and boarding
business
operated by Jenny Love. Fred tells Maggie that Puppy Love
mistreats dogs,
hiding them in overcrowded kennels when their owners aren’t
around.
Maggie in turn tells other neighborhood dog owners, and Puppy
Love
loses a great deal of business. Assuming this claim is untrue,
both Fred and

Maggie can be liable to Jenny Love for defamation under the
common law.
If Fred had instead posted the defamatory statement on his
website, he would still be lia-
ble. But note that the ISP that hosts Fred’s site is not liable for
passing on the information
in the same way that Maggie is. Under the Communications
Decency Act of 1996, ISPs and
Web hosts are not liable for information posted by others,
because they are not the content
providers. The law recognizes the reality that the volume of
communication is such that to
require a site or provider to police content might severely
restrict the flow of free speech.
If Fred posted the statement on an Internet bulletin board,
Everything Dogs, that site is
likewise not liable. But if Everything Dogs has a policy stating
they will investigate and
respond to complaints and three months after Jenny Love has
asked them to remove the
post, they still have not acted, they may have liability under a
contract theory.
The property torts of trespass and conversion can also be
committed in computer
situations.
Example 14.5. Keisha is a realtor with Sunshine Realty who
maintained a
client list on her computer at the Sunshine office. Keisha’s
contract with
Sunshine specifies that she is an independent contractor who
retains own-
ership of her work product. After a disagreement with

Sunshine’s manage-
ment, Keisha decides to leave the firm. Sunshine refuses to give
her access
to her list. Even though the list exists in electronic, rather than
tangible,
form, Sunshine is still interfering with Keisha’s ability to
possess her prop-
erty, so Sunshine may be liable for conversion.
Example 14.6. Alpha Corp has done business via the Internet
with Beta
Inc. Unknown to Alpha, Beta has installed software on Alpha’s
computers
that interferes with the speed at which the computers operate.
Beta may be
liable for trespass.
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CHAPTER 14Section 14.4 Privacy
14.4 Privacy
The same tools that contribute to the ease and speed of Internet
communications (think one-click shopping, which lets you buy
without always reentering your address and credit card
information) also present a threat to personal privacy. Inter-
estingly enough, federal law does not require companies to have

a privacy policy. How-
ever if a company chooses to have a policy, it must comply with
it.
Cookies and Privacy
The lack of regulation means that most popular websites
routinely install thousands of
tracking tools (often called “cookies”) on the computers of
consumers who visit. The
cookies track such information as what websites you visit, but
also record the keystrokes
you enter online. This information is often then sold to
marketers, who use it to target
online advertising. But the security implications go beyond a
consumer’s being plagued
with unwanted ads. Once that information has been recorded, it
may be accessed by hack-
ers, or by the government, and used in harmful ways.
Congress has acted to protect children specifically with the
Children’s Online Privacy Pro-
tection Act of 1998 (COPPA) that prohibits Internet operators
from collecting information
from children under 13 without their parents’ permission. Sites
must also disclose how
they will use any such information. Mrs. Field’s Cookies ran
afoul of the law when their
site offered birthday coupons for free cookies to children; they
were collecting names and
birth dates without parental consent.
The European Union has taken a more proactive approach,
requiring sites to offer an
“opt-in” system under which tracking cookies may not be used
unless the consumer has
authorized it. The website must also state how the tracking

devices will be employed.
E-Mail and Privacy
Many people routinely discuss very personal matters via
electronic communications such
as e-mail, and use computers in ways they would not like to see
made public. Suppose
Sally is using her work e-mail account to tell her best friend all
about her recent divorce.
Could her employer read this e-mail? Or Bob has downloaded
child pornography using
his computer at the office after hours, although he subsequently
deleted all the images.
A coworker tips off the police. Can the police then obtain a
warrant, seize the computer,
recover the images, and use them as evidence against Bob?
In all likelihood the answer to both these questions is yes
because most employers have
stated policies that make clear that office computers and e-mail
accounts belong to the
employer and information transmitted or stored is not
confidential. The Electronic Com-
munications Privacy Act of 1986 does prohibit unauthorized
access to, or disclosure of,
e-mail and transmissions from pagers or cell phones. Despite
this lack of actual privacy,
sitting alone at your computer does create an illusion of
privacy.
Perhaps the best advice is to never say anything on the Internet
that you would not say in
a crowded café, where the person eavesdropping at the next
table might be a police officer
or your worst enemy!

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295
Commercial E-Mail and Privacy
A different type of privacy issue—and a very
common one for many e-mail users—is the flood
of unwanted e-mail that appears in your inbox
(frequently advertising things such as penile
enlargements and drugs to enhance your sex
life). Known as spam, this e-mail is not banned
but is regulated by the Controlling the Assault of
Non-Solicited Pornography and Marketing Act of
2003 (CAN-SPAM). This law prohibits deceptive
headings (To, From, Subject, etc.) and requires an
unsubscribe option and that the advertiser pro-
vide a legitimate physical address, among other
things. Unfortunately this law does not seem to
have had much effect and spam continues to be a
problem for computer users. There have been a few tort lawsuits
arguing that unwanted
e-mail in volume is a kind of trespass, but courts have generally
refused to allow dam-
ages for sheer annoyance, instead restricting liability to

situations in which the plaintiff’s
computer is actually damaged.
The Constitution and Privacy
The First Amendment protects free speech and has significant
implications for statements
made on the Internet as well. As already noted, ISPs are largely
shielded from liability for
disseminating statements that may be defamatory.
The Fourth Amendment also has implications for online
privacy. Note that if the govern-
ment wants to get evidence such as e-mail from a computer, the
officers will ordinarily
have to obtain a warrant. This is equally true if they are seeking
the information from the
ISP. However it should be noted that there are situations, such
as those involving national
security under the USA Patriot Act, where the legalities of
government intrusions are less
clear, and the warrant requirements may not be applicable.
Example 14.7. The FBI suspect Jason of having robbed five
banks. They
have reason to think he communicates with some of his gang by
e-mail and
text messages. The FBI needs a warrant to obtain access to
Jason’s e-mail
from his ISP.
Example 14.8. Comcast thinks one of their account holders is
using the ISP
to traffic in porn. Because Comcast is not a government entity,
it does not
need a warrant to access the suspected porn user’s account.

Spam is the modern form of junk mail.
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Computer Crime and Privacy
While invasion of privacy is often
treated as a civil matter, it can also
be a crime. One of the highest-
profile computer-based privacy
cases of recent years involved
a college student, Dahrun Ravi,
who used a computer-mounted
webcam to spy on his roommate
Tyler’s intimate encounter with
another man. Ravi then sought to
use social media to encourage oth-
ers to watch. A few days later, Tyler
committed suicide by jumping off
a bridge. Ravi was prosecuted for

multiple crimes, including crimi-
nal invasion of privacy, and even-
tually sentenced to 30 days in jail,
three years of probation, counsel-
ing, and community service.
In the Media: Apple vs. the FBI
How much privacy should an individual who commits a crime
be entitled to during an investigation?
Should the government be able to force companies to hack into
their customers’ private data? Apple
and the United States FBI faced these questions during the
investigation into a mass shooting in
Southern California. On December 2, 2015, Syed Rizwan
Farook and Tashfeen Malik shot and killed 14
people and wounded 22 others at a banquet held at a community
facility in San Bernardino, Califor-
nia. In the course of their investigation into the mass shooting,
the FBI seized an Apple iPhone from
a Lexus belonging to Farook’s family that was found parked
outside Farook’s residence. The FBI asked
Apple to help them disable some security features on the phone
so that they could unlock the phone
and access the data stored on the device. In particular, the FBI
wanted Apple to disable an encryption
feature that automatically erases the data on the phone after ten
failed password attempts. When
Apple declined the FBI’s request, the FBI obtained a court order
directing Apple to assist the govern-
ment in accessing the data on the phone.
Apple filed an objection to the order, setting off a debate
between privacy and national security inter-
ests. Apple claimed that complying with the court order would
require writing software which did not

yet exist. The government could then use this software to access
data on anyone’s device. Compro-
mising the security of the iPhone would also leave iPhone users
vulnerable to hackers. Apple argued
that forcing the company to comply with the FBI’s request
would set a dangerous precedent which
could be used as the basis for requiring Apple or other
technology companies to create software that
would give the government access to citizens’ private,
encrypted data such as messages, location, and
financial and health information.
The government argued that not only did they have a valid
search warrant authorizing law enforce-
ment to access the device, but the owner of the device (Farook’s
employer) consented to allow the
Dharun Ravi (right) was convicted for criminal invasion
of privacy. He set up a webcam to record his roommate’s
intimate encounter with another man. His roommate
later committed suicide.
Mel Evans/Associated Press
(continued)
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CHAPTER 14Section 14.5 E-Contracts

14.5 E-Contracts
Click-Wrap Contracts
Many times when a transaction is conducted over the Internet, a
consumer is confronted
with a section that says something like “I have read and agree to
all terms and condi-
tions.” Such agreements are sometimes called click-wrap
contracts. Many people will
click without ever reading such terms, which are often stated in
dense legalese and seem
to go on forever.
Example 14.9. Emily buys a software program for graphics from
an
Inter¬net site. She clicks “I accept” without reading, since she
must do this
to download the program. Later the program crashes her
computer and
she loses valuable data. Now Emily discovers that the
company’s liability
is limited by her “acceptance” of their warranty, which provides
they will
only refund the purchase price.
Click wrap agreements are generally held to be enforceable as
long as certain conditions
are met. The user must be required to take some affirmative
action such as clicking a
checkbox manifesting their agreement to the terms and
conditions, or clicking a button
that states that the user agrees to the terms and conditions. In
addition, the terms and
conditions must be readily available to the user either through a
hyperlink or in a textbox

conspicuously displayed close to the “I agree” check box or
button.
Some of the most common provisions to be found in these click-
wraps are provisions that
mandate arbitration will be used to settle disputes, and ones that
limit liability (such as
In the Media: Apple vs. the FBI (continued)
government access to the device. The government further
argued that they were seeking Apple’s
assistance in accessing only this device, and the software
required to do so would remain in the pos-
session and control of Apple. Others have argued that
encryption such as that on the iPhone makes
it more difficult for law enforcement to solve crimes and
combat terrorism and that digital data is not
entitled to any greater protection from the government than any
other type of information.
Prior to the final hearing in the case, the Department of Justice
reported that it had been able to
unlock the device and access the data with the help of a third
party and asked the court to dismiss
the case against Apple. Although this case is over, the broader
public policy debate pitting encryption
and data privacy against public safety and national security
continues.
Sources: http://www.latimes.com/local/lanow/la-me-ln-san-
bernardino-shooting-live-updates-htmlstory.html
https://www.docketalarm.com/cases/California_Central_District
_Court/5--16-cm-00010/USA_v._In_the_Matter_of_the_Search_
of_an_Apple_iPhone_Seized_During_the_Execution_of_a_Searc
h_Warrant_on_a_Black_Lexus_IS300_California_License_

Plate_35KGD203/1/
http://www.nbcnews.com/storyline/san-bernardino-
shooting/judge-forces-apple-help-unlock-san-bernardino-
shooter-
iphone-n519701
http://www.cnbc.com/2016/03/29/apple-vs-fbi-all-you-need-to-
know.html
http://www.cnbc.com/2016/02/17/apple-order-to-hack-iphone-
for-fbi-in-san-bernardino-case-chilling-tim-cook.html
rog80328_14_c14_286-306.indd 297 9/20/16 11:04 AM
http://www.latimes.com/local/lanow/la-me-ln-san-bernardino-
shooting-live-updates-htmlstory.html
_Court/5--16-cm-
00010/USA_v._In_the_Matter_of_the_Search_of_an_Apple_iPh
one_Seized_During_the_Execution_of_a_Search_Warrant_on_a
_Black_Lexus_IS300_California_License_Plate_35KGD203/1/
_Court/5--16-cm-
_Court/5--16-cm-
shooter-iphone-n519701

shooter-iphone-n519701
http://www.cnbc.com/2016/03/29/apple-vs-fbi-all-you-need-to-
know.html
http://www.cnbc.com/2016/02/17/apple-order-to-hack-iphone-
for-fbi-in-san-bernardino-case-chilling-tim-cook.html
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CHAPTER 14Section 14.5 E-Contracts
the clause that confronted Emily in the example above). In
Specht vs. Netscape Communica-
tions Corporation, the plaintiffs downloaded software from
Netscape’s web page by click-
ing on a button labeled “Download.” If the plaintiffs had
scrolled further down the page,
they would have seen a link to another page where they could
have reviewed the terms
and conditions of Netscape’s software license agreement, which
included an arbitration
clause requiring arbitration of any disputes. When the plaintiffs
later sued Netscape over
an issue with the software, Netscape moved to dismiss the
lawsuit on the grounds that
by clicking on the download button, the plaintiffs had agreed to
arbitrate the dispute. The
Court ruled that the plaintiffs were not bound by the terms and
conditions of the Netscape
license because there was no “immediately visible notice of the
existence of the license
terms” conspicuously displayed by the download button. In
addition, the users down-
loaded the software without having to do anything that would
indicate their unambigu-

ous assent to the terms of the Netscape license.
Sales Tax
Another major legal issue relating to e-commerce concerns the
imposition of sales tax
on Internet-based sales of goods. State governments often rely
on sales taxes as a major
source of revenue, especially in states that do not impose an
income tax. During the 2008
recession the federal government cut aid to state and local
governments; by 2012 states
faced a projected $50 billion shortfall in their budgets. One
suggested way to make it up
was by taxing online retailers such as Amazon.com,
Overstock.com, Blue Nile, and others.
A 1992 Supreme Court ruling, Quill v. North Dakota, had found
that retailers generally can’t
be made to collect taxes for out-of-state sales unless they have
either a physical presence
or an alliance with a business with a physical presence in the
tax jurisdiction in question.
Example 14.10. Book Exchange Company has an office and
warehouse in
Illinois, but does only online and mail order business in other
states. Book
Exchange can be made responsible for collecting sales tax only
for its Illi-
nois customers. Brooks and Stalwart Ltd. has an extensive
online store but
also has brick-and-mortar bookstores across the country. Brooks
and Stal-
wart Ltd. can be made to collect taxes in any state in which it
has a store.
Theoretically consumers are supposed to pay a “use tax” for

Internet transactions with
no sales tax. The difference between a sales tax and a use tax is
simply who collects the
money and remits it to the state: a sales tax is collected by the
seller, and a use tax is paid
directly by the buyer to the state. In practice, consumers simply
don’t pay the tax, and the
state has no effective way of tracking such purchases and the
money goes uncollected. Of
course, many consumers have no idea this tax exists! In some
states, if you buy an item at
a garage sale, you should be paying use tax to the state.
However, there is an ongoing lobbying effort by big-box
retailers such as Walmart to have
Congress pass legislation that would force online retailers to
collect sales tax from con-
sumers. These stores argue that they are put at a competitive
disadvantage by having to
charge sales tax; the online sellers counter that expecting them
to deal with a confusing
patchwork of regulation in 50 different states is unrealistic. The
online businesses point to
states such as Rhode Island, where the purchase of a mink coat
would be subject to sales
tax but the purchase of a mink purse would not, and New Jersey,
where candy is taxed but
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CHAPTER 14Section 14.6 Intellectual Property
cookies are exempt. Brick-and-mortar stores at least only have
to worry about the states in
which they are physically located, since that is where their sales
will take place. An online
business may be getting orders from fifty states and all around
the world, which makes
compliance much more difficult.
14.6 Intellectual Property
The Digital Millennium Copyright Act (DMCA)
The Digital Millennium Copyright Act (DMCA), signed into law
by President Clinton in
1998, amended previous federal copyright law in part to
implement two international
treaties on intellectual property protection. It criminalizes the
circumventing of measures
that control access to copyrighted materials (known as digital
rights management or
DRM) and to copyrighted works.
Example 14.11. Mega Music Online sells music for download by
custom-
ers. Mega Music uses DRM to prevent copying and to prevent
the down-
loaded music from being played on non-Mega Music apps and
devices.
Devri writes a software program that can bypass the DRM and
allow the
music to be copied and played on a wide range of non-Mega
Music devices.
Devri’s act of decrypting the DRM constitutes an offense under

the DMCA.
In addition, the DMCA heightens the penalties for copyright
infringement on the Inter-
net, although it does provide a safe harbor for ISPs whose
clients are infringing. The file-
sharing sites MP3.com and Napster were early targets under the
DMCA; more recently
Bit-Torrent Inc., which maintains a file-sharing protocol that
allows large filesto be trans-
ferred (such as movies), has been the subject of lawsuits by the
entertainment industry.
Not only the sites, but the people who download from such
places can be liable. By 2008
the recording industry had filed over 20,000 lawsuits against
downloaders. In one case, a
woman in Minnesota was ordered by the court to pay $220,000
to media companies, rep-
resenting $9,250 for each of the 24 songs she was found to have
shared online.
The Digital Theft Deterrence and Copyright Damages
Improvement Act of 1999 autho-
rized increased damages for copyright infringement, seeking to
discourage would-be
pirates and compensate copyright holders. Penalties were
increased from the $500 to
$20,000 range to $750 to 30,000 per act of infringement, and
from a maximum of $100,000
for willful infringement to $150,000. Although the increase may
not seem drastic, it is
important to note that the penalty is assessed for each individual
instance of violating a
copyright, which can add up in short order.
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CHAPTER 14Section 14.6 Intellectual Property
In the Media: You Gotta Fight, for Your Right . . . to
Download?
The Digital Theft Deterrence and Copyright Damages Improve-
ment Act of 1999 attempts to do what its name suggests: deter
electronic copyright infringement by allowing for the imposi-
tion of huge fines. In fact, under the statute the maximum fine
allowed for each willful, illegal music download is $150,000.
That’s serious deterrence, but not enough to deter everyone
from taking a song or two through the use of file-sharing ser-
vices like Kazaa and the former, but still infamous, Napster.
In 2003, Joel Tenenbaum, while still living at his parents’
home,
illegally downloaded hundreds of songs. The Recording Indus-
try Association of America (RIAA) took notice of 30 of those
downloads and—under the authority of the Digital Theft Deter-
rence and Copyright Damages Improvement Act—sent him a
letter demanding $3,500. According to his downloads, Tenen-
baum liked what most teenagers listened to at the time: Green
Day, Limp Bizket, Eminem, and Red Hot
Chili Peppers. Tenenbaum (who had also downloaded Incubus’s
song “Pardon Me”) acknowledged the
downloads and told the RIAA he couldn’t afford to pay the
demanded amount, but offered $500. The

RIAA then filed suit, whereupon Tenenbaum increased his offer
to settle to the originally demanded
figure, and then to $12,000. Although the RIAA settles most
cases it brings against downloaders, it
pressed on and in 2009 a federal jury ordered Tenenbaum to pay
$675,000 to the RIAA, which is much
less than the maximum allowed $5.4 million it could have been.
The judge, however, reduced the jury’s
damages to $67,500, calling the fines allowed for under the
Digital Theft act oppressive and in violation
of the Constitution’s Due Process clause.
Both sides appealed the decision and a federal appeals court
upheld the verdict, and also reinstated the
original $675,000 damages award. Tenenbaum wouldn’t give up
and sought a review of the decision
with the U.S. Supreme Court. But in 2012, it refused to hear his
appeal. Tenenbaum, who is earning a
Ph.D. in physics from Boston University, has had a legal team
that included famed Harvard law profes-
sor Charles Nesson, whose legal arguments included the Fair
Use doctrine. Tenenbaum never paid any
of the $675,000 judgment against him. In 2016, the entire
amount was discharged in bankruptcy.
Sources:
http://www.informationweek.com/news/internet/policy/2189003
65
http://www.boston.com/news/local/massachusetts/articles/2011/
04/05/student_fights_music_sharing_fine/
http://blogs.wsj.com/law/2011/04/05/whats-the-appropriate-
punishment-for-illegal-downloading/
http://www.scribd.com/doc/17299117/Plaintiffs-Supplemental-
Disclosure-Statement-102808
http://www.plainsite.org/dockets/2yne4d2qg/massachusetts-
bankruptcy-court/joel-n-tenenbaum/

The Digital Theft Deterrence and
Copyright Damages Improvement
Act of 1999 was put in place to
control high rates of piracy and
copyright infringement.
Imagebroker.net/SuperStock
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65
http://www.boston.com/news/local/massachusetts/articles/2011/
04/05/student_fights_music_sharing_fine/
http://blogs.wsj.com/law/2011/04/05/whats-the-appropriate-
punishment-for-illegal-downloading/
http://www.scribd.com/doc/17299117/Plaintiffs-Supplemental-
Disclosure-Statement-102808
http://www.plainsite.org/dockets/2yne4d2qg/massachusetts-
bankruptcy-court/joel-n-tenenbaum/
301
CHAPTER 14Section 14.7 Chapter Summary
The Stop Online Piracy Act (SOPA)
How to stop online piracy remains a major concern for business,
but much of the pro-
posed legislation is highly controversial. The Stop Online
Piracy Act (SOPA) and the Pro-
tect IP Act (PIPA) were statutes that would have required

search engines such as Google
to delete links to sites that infringe copyrights, and that would
block payments from com-
panies such as Visa and PayPal to infringing sites. Unlike the
DMCA, which can require
a website to remove infringing content (YouTube, for example,
does this regularly), these
proposed laws target the entire site. They have been compared
to shutting down an entire
flea market because one vendor is selling counterfeit Gucci
bags. There have been public
protest against the laws, including the popular website
Wikipedia’s going offline for a
day, and, for the time being, both statutes seem to have stalled
short of becoming law.
The 21st century has brought a veritable explosion of computer-
related technology, and with it has come amazing opportunity
for business and individuals, but also unprecedented threats to
privacy and security. Spam, phishing, and tracking cook-
ies represent problems ranging from annoying to extremely
harmful, and there is no
doubt that computers and the Internet have made identity theft
an ever greater threat.
Even traditional areas of law such as torts and contracts have
been impacted in various
ways by technology. Invasion of privacy has taken on new
dimensions when social media
and webcams are used as tortious tools. Contracts made online
with a click of a mouse are
less likely to have been read first. Even a relatively
straightforward transaction such as the
sale of goods becomes more complicated when made online,
since the assessment of taxes

is different than transactions made in a bricks-and-mortar store.
The law has in some cases struggled to catch up with
technology, and in many areas there
is either little regulation or little effectiveness in implementing
what regulations do exist.
But there is no easy answer: many proposed regulations
immediately run into conflicts
with perceived censorship of the Internet or stifle innovation.
As the world continues to
be increasingly linked by electronic communication, societies
will have to find a balance
between technology and safety.
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302
Section 14.7 Chapter Summary CHAPTER 14
Focus on Ethics
Facebook is an enormously popular social media site with a
reported 1.71
billion monthly users at the end of June 2016. But a number of
Facebook
users became disenchanted with the company’s gathering of
their personal

information and filed lawsuits, seeking $15 billion in damages.
At issue was
Facebook’s practice of tracking users’ Web activity, even after
they had
logged out of Facebook. The lawsuit is just one of a pattern of
complaints
against Facebook relating to privacy issues. These include:
• Not allowing users to terminate their accounts. Users could
deactivate their accounts, but Facebook continued to store their
information unless each item was manually removed by the
user.
• Data mining (the collection of large data sets) by third parties.
College students doing a research project were able to download
70,000 Facebook profiles from four target schools.
• Reserving the right to sell information about users to third
parties.
• Using of a script called Beacon, which allowed third-party
web-
sites to publish their activity with Facebook users on Facebook,
so
that users’ recent purchases and games played were published
on
the site. If a Facebook user bought videos at Video.com, it
would
appear on the user’s Facebook site where it could be seen by
any “friend.” This meant that
you could purchase a gift for someone who would see on your
Facebook site that you had
bought it! So much for surprises.
• Facilitating identity theft. Researchers have been able to use
off-the-shelf face recognition

software and match Facebook users with supposedly anonymous
Match.com profiles, and
also to take pictures of random experimental subjects on a
college campus and match them
to corresponding Facebook profiles. Furthermore, the
researchers were also able to use pre-
viously developed algorithms to predict social security numbers
with significant success. The
result is that a photo taken of a person in public could be used
to eventually discover very
sensitive information about that person.
In many cases, after the privacy problems were exposed in the
press or after legal complaints were
filed, Facebook changed its policy or instituted new procedures.
Questions for Discussion
1. Do you believe Facebook is ethical with regard to protecting
users’ privacy? Do you think Face-
book does an adequate job of alerting its users to possible
privacy issues?
2. Is it an adequate response for a company such as Facebook
to say that users may opt out
of various procedures that may compromise their policy? Or
should sites like Facebook be
required to change their default so that users have opted out
unless they specifically choose
to “opt in”?
Source: http://newsroom.fb.com/company-info/
Facebook revolutionized
social media, but it
also facilitated invasion

of privacy to a degree
many users did not
understand.
Dominic Lipinski/
Associated Press
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303
Case Study: American Guarantee & Liability Insurance Co. v.
Ingram Micro, Inc.
Civ. 99-185 TUC ACM, 2000 U.S. Dist. LEXIS 7299 (D. Ariz.,
Apr. 19, 2000)
Facts: Ingram is a wholesale distributor of microcomputer
products. Ingram uses a computer system
to track all of their business transactions. Ingram’s computers
are insured by American, under a policy
covering real and personal property and loss of business
income. The policy insures against all risks of
direct physical loss or damage.
On December 22, 1998, Ingram’s data center had a power
outage. Although electrical service to the
buildings continued, all of the electronic equipment, including

the computers and telephones, stopped
working. As a result, Ingram could not conduct business in
either the United States or Europe. After
eight hours, during which Ingram employees strove to discover
and solve the problem, power was
restored to the electronics by bypassing a faulty switch.
When the power outage occurred, all of the programming
information disappeared from the random
access memory of the computers. The customized configurations
Ingram’s computers had used before
the outage were different than the default settings that were
restored afterwards. As a result, the con-
figurations had to be reprogrammed before business could
resume.
Ingram filed a claim under its policy with American. American
denied coverage, and Ingram sued.
Issue: Did Ingram suffer a loss attributable to direct physical
damage to its property?
Discussion: American contended that because the computer
system and switch were not physically
damaged, the loss was not covered. Both items worked after
power was restored, and the inherent
ability to accept and process data and configuration settings was
not adversely affected.
Ingram’s argument was that “physical damage” includes loss of
use and functionality. When power was
restored, the computer system could not function until it had
been “repaired” by restoring the custom
configurations.
The court found Ingram’s argument to be more persuasive,

saying:
At a time when computer technology dominates our professional
as well as personal
lives, the Court must side with Ingram’s broader definition of
“physical damage.”
The Court finds that “physical damage” is not restricted to the
physical destruc-
tion or harm of computer circuitry, but includes loss of access,
loss of use and loss
of functionality.
The court went on to note:
Lawmakers around the country have determined that when a
computer’s data is
unavailable, there is damage, when a computer’s services are
interrupted, there is
damage; and when a computer’s software or network is altered,
there is damage.
Restricting the Policy’s language to that proposed by American
would be archaic.
Holding: For Ingram. The policy covered the loss. (continued)
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304

Case Study: American Guarantee & Liability Insurance Co. v.
Ingram Micro, Inc. (continued)
1. Does the court’s definition of physical damage make sense
to you?
2. Note that although Ingram eventually won their case, it was
only after they had spent time
and money on a lawsuit. If you had a business that relied
heavily on computer operations, are
there additional clauses you would want put in your insurance
policy to avoid this sort of situ-
ation in the first place? What sort of hazards have you learned
about in this chapter that might
be relevant here?
3. In another case involving loss of data due to alleged
negligent service on a computer system,
insurance coverage was denied but the court upheld the
insurance company’s decision. There,
the language in the policy referred to “physical injury to
tangible property.” How might that be
distinguished from the policy language in the Ingram case? Do
you agree with the distinction?
Case Study: E. & J. Gallo Winery v. Spider Webs Ltd.
129 F. Supp. 2d 1033 (S.D. Tex. 2001)
Facts: E. & J. Gallo Winery (Gallo) is a California corporation
founded in 1953 that produces and sells
alcoholic beverages under its various trade names. Gallo
registered the mark ERNEST & JULIO GALLO
with the U.S. Patent and Trademark Office in 1964. Gallo has

sold more than four billion bottles of wine
bearing the Gallo trademarks and has spent over $500 million
promoting its brand name. Gallo owns
several Internet domain names incorporating Gallo’s registered
trademarks, e.g., GALLOWINERY.COM.
Spider Webs Ltd (Spider Webs), a Texas partnership, registered
about 2,000 Internet domain names
and offered them for sale on its website and eBay.com. In 1999,
Spider Webs registered the domain
name “ERNESTANDJULIOGALLO.COM” to sell it for profit.
Gallo sued Spider Webs for violation of the
Anti-Cybersquatting Consumer Protection Act (ACPA). Gallo
asked for a permanent injunction to pre-
vent Spider Webs from using the Internet domain name
ERNESTANDJULIOGALLO.COM and registering
any domain name that contains the words “Gallo,” “Ernest,” and
“Julio.” Gallo also asked for damages.
After the suit began, Spider Webs published a website at
ERNESTANDJULIOGALLO.COM to discuss the
pending litigation and risks of alcohol use.
Issues: Did Spider Webs violate the ACPA by registering the
domain name “ERNESTANDJULIOGALLO
.COM”? Did Gallo satisfy the conditions to justify a permanent
injunction?
Discussion: The trial court noted the goal of the ACPA—to
protect businesses from “cybersquatting”
(the “abusive registration of distinctive marks as Internet
domain names with the intent to profit from
the goodwill associated with such marks”). The evidence proved
that Spider Webs registered the
domain name ERNESTANDJULIOGALLO.COM with “a bad
faith intent to profit from the (continued)
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305
Critical Thinking Questions
1. Write down a list of the advertisements you see when you
browse the Internet.
Do the advertisers seem to know your age range and your
gender? Do they know
something about your interests? Make a profile of the person
the advertisers
think you are. Where do you think they compiled this data
from? Can you think
of sites you have visited that would give this impression of you?
2. If you use social media such as Facebook, how familiar are
you with their pri-
vacy policy? How easy is it to figure out what information they
are collecting and
what is being done with it? Can you tell from Facebook’s site
how to delete an
account and the information posted?
Case Study: E. & J. Gallo Winery v. Spider Webs Ltd.
(continued)
sale of the domain name.” Gallo registered the trademark
“ERNEST & JULIO GALLO,” but Spider Webs

had “no intellectual property interest” in the name
“ERNESTANDJULIOGALLO” apart from its regis-
tered domain. Therefore, Spider Webs violated the ACPA. To be
granted an injunction, a plaintiff must
show the existence of a wrongful act, the existence of imminent
harm and irreparable injury, and the
absence of an adequate remedy at law. The wrongful use of the
ERNESTANDJULIOGALLO.COM website
by Spider Webs, especially publication of disparaging
comments about the current lawsuit and alcohol
use, proved the existence of imminent and irreparable harm. The
court concluded that Gallo satisfied
conditions for being granted a permanent injunction.
Holding: The court ordered a permanent injunction to Spider
Webs against using the Internet domain
name ERNESTANDJULIOGALLO.COM and registering any
domain name that contains the words “Gallo,”
“Ernest,” and “Julio.” The court found Spider Webs and its
partners jointly and severally liable to Gallo
for $25,000.
1. What evidence is there that the trademark Gallo registered
was well-known and distinctive?
Did Gallo register an Internet domain name?
2. Why did Spider Webs register the domain name
ERNESTANDJULIOGALLO.COM? Was this
registration made in good faith?
3. Why did Gallo sue Spider Webs, asking the court for a
permanent injunction? What is a
permanent injunction? What conditions must a plaintiff satisfy
to be granted a permanent

injunction?
4. The main issue of the lawsuit is an allegation of a violation
of the ACPA. Why did Gallo sue
Spider Webs in a federal court instead of a state court?
5. Imagine you are a business owner planning to launch your
website. What should you do to make
sure your business name is not used by other companies? Why
is it important for business own-
ers to ensure that their trademarks are not subjected to
“cybersquatting”?
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306
click-wrap An agreement that one must
make in order to use a program or website.
They are often very long and complex and
many people never read them.
cookies Tracking programs installed on
computers to track Internet usage, often
without the computer owner’s awareness.
cyberlaw A general term referring to vari-
ous laws regulating the Internet and com-
puter usage. It can include criminal, tort,

regulatory, and intellectual property law.
digital rights management (DRM) Any
technology that inhibits uses of digital
content. Often used by manufacturers of
music CDs, DVDs, and software to prevent
copying after first sale.
hacking Gaining unauthorized access to a
computer.
phishing Internet-based type of fraud that
involves sending an e-mail that appears
to come from a legitimate source such as
a bank, asking the victim to click on a link
that takes him to a dummy site, where he
is asked to” verify” personal information.
spam The Internet equivalent of junk
mail, unsolicited and often sent in bulk.
use tax A tax paid by a consumer on pur-
chases, as opposed to a sales tax, which is
paid by the seller.
Hypothetical Case Problems
Case 1. Terrell sends an e-mail “bomb” to his ex-girlfriend,
Sofia, which floods her
inbox with 200,000 e-mails. What statute has Terrell possibly
violated?
Case 2. Amazon.com allows people to post reviews on items
sold on the site. Ama-
zon’s policy suggests that posters be civil. Amazon retains
editorial rights

over content. Jerome published several books about how to
avoid pay-
ing taxes and sold them through Amazon. Some readers posted
negative
reviews; a few went so far as to label Jerome a “crook” and a
“felon.” Jerome
complained to Amazon, which agreed to remove the posts. After
two days,
the posts were still there so Jerome sued Amazon. Will the
CDA’s “safe har-
bor” prevent Amazon from being held liable?
Case 3. Cyberheat, Inc. ran a website with sexually explicit
content for consenting
adults. It contracted with other companies, called affiliates, to
direct potential
subscribers to its site. It provided the affiliates with a hyperlink
to sexually
explicit images. Some of the affiliates sent e-mail with fake
subject lines that
contained porn in the message. The FTC received over 400
complaints from
consumers. Which federal law may Cyberheat have violated?
Key Terms
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307

Chapter Overview
15.1 International Law and Business
• Sources of International Law
• Some Basic Principles of International Law
• Conducting Business in the International Arena
• The International Business Contract
• Doing Business Internationally Within the
Limits of U.S. Law
15.2 Environmental Law and Business
• Types of Environmental Law
• Air Quality Regulation
• Water Quality
• Toxics and Waste
• Focus on Ethics
• Case Study: Arc Ecology v. U.S. Dept. of Air Force
• Case Study: Karuk Tribe of California v. United States
Forest Service
• Critical Thinking Questions
• Hypothetical Case Problems
• Key Terms
Edi_Eco/iStock/Thinkstock
15
Learning Objectives
After studying this chapter, you will
be able to:

1. Describe the sources of international law.
2. Explain some of the major principles of
international law.
3. Discuss major concerns for U.S. companies
doing international business.
4. Describe the major areas of environmental
regulation and the statutes that regulate
them.
International and
Environmental Law
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308
CHAPTER 15Section 15.1 International Law and Business
Business today exists in a global environment. Even if your
company only sells in the United States, it is still potentially
affected by competition from overseas. If you seek to expand
your markets beyond the borders, there are many issues to be
consid-
ered. What kind of regulations must you deal with, both in your
own country and in the
foreign country? Where would disputes be settled, and under
whose law? Do U.S. laws
still apply when your company is acting outside U.S. borders? A

basic understanding of
international business law is important for the business student.
Increasingly important, too, is the state of that globe, the planet
on which we live and do
business. An awareness of environmental issues and laws is
relevant not just from the
standpoint of compliance with regulations and avoiding
liability, but also because we face
in the 21st century a stark necessity of working to preserve our
limited resources of fresh
air and water, or dealing with ever worsening consequences.
15.1 International Law and Business
International law is in many ways very different from the law
you studied earlier in this book. Until now, we have been
examining law in the context of its being rules enforced by the
government. If someone commits a crime, the government
prosecutes. If some-
one breaches a contract, the other party can use the courts to
enforce it. With international
law, enforcement is less likely, because there is no powerful
international entity that can
do so to the same degree an individual country can within its
own borders. Nonetheless,
international law does still exist, and in this section we shall
examine its sources and some
of its basic principles.
Sources of International Law
Treaties and Agreements
A treaty is an agreement or contract between two (bilateral) or
more (multilateral) nations
that must be authorized and ratified by the government of each

nation. Some notable
examples of treaties relating to business are the North American
Free Trade Agreement
(NAFTA) and the General Agreement on Tariffs and Trade
(GATT). Both are the subject of
considerable disagreement as to whether they are good or bad
for the U.S. economy.
NAFTA, which originally took effect in 1994, is an agreement
between the United States,
Canada, and Mexico to eliminate most trade barriers between
these countries. It has
resulted in much more trade among these countries, but some
charge that because Ameri-
can manufacturers must compete with Mexican companies with
much lower labor costs,
NAFTA has caused jobs to leave the United States. Others
counter that the United States
benefits from the expanded market.
The European Union (EU) is a similar agreement among 28
countries as of 2016, includ-
ing Great Britain, France, Germany, and most of Europe
(Switzerland being a notable
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agreements/north-american-free-trade-agreement-nafta
http://www.ustr.gov/trade-agreements/free-trade-
agreements/north-american-free-trade-agreement-nafta
https://www.loc.gov/law/help/us-treaties/bevans/m-ust000004-
0762.pdf

309
holdout). However, in 2016 Great Britain voted to leave the EU,
a process which, if com-
pleted, could take up to two years. Most of the countries in the
EU share a common cur-
rency, the Eurodollar, and have cooperated to facilitate
increased trade among nations and
(to a lesser extent) to coordinate fiscal policy. The economic
recession that began in 2008
has, however, strained EU relations in recent years, with
countries such as Ireland and
Greece experiencing financial crises and needing much aid from
the EU.
GATT, which began in the 1940s, has done much to lower trade
barriers between the sig-
natory nations by decreasing tariffs, which are taxes on
imported goods, from 40 percent
to an average of 4 percent for manufactured goods. One effect is
that consumers tend
to see lower prices from increased competition among
manufacturers. GATT also led to
creation of the World Trade Organization, or WTO, which may
hear and adjudicate trade
disputes among signatory nations.
Example 15.1. Brazil claimed that U.S. government subsidies
for its domes-
tic cotton industry violated trade agreements and were
distorting the mar-
ket, since U.S. manufacturers were able to offer cotton at a

lower price
(because the government was in effect paying part of their costs
for them).
In 2004 the WTO agreed with Brazil. The usual remedy the
WTO offers is
that of “retaliation,” meaning that Brazil could legally tax U.S.
goods at a
higher level. But the WTO went a step further, and allowed
Brazil “cross-
retaliation,” which meant lifting intellectual property protection
of U.S.
products. This would mean that patents and copyrights could be
ignored
by Brazil; for example, it could legally pirate Hollywood
movies and make
knock-offs of U.S. patented drugs. To avoid Brazil’s retaliation
without
ending the cotton subsidies, the U.S. government agreed in 2010
to pay
$150 million a year to support Brazilian cotton farmers.
International Organizations
There are many organizations created by the agreement of
member nations. Some are
primarily military in focus, such as the North Atlantic Treaty
Organization (NATO), but
some, such as the United Nations, deal with a wide variety of
international issues. The UN
has fostered increased uniformity in trade regulations with the
1980 Convention on Con-
tracts for the International Sale of Goods (CISG), which is
similar to the Uniform Com-
mercial Code’s Article 2.
Some Basic Principles of International Law

Comity
The principle of comity means that a nation will defer to and
give effect to the laws and
judicial rulings of another country, to the extent that they are
consistent with the law and
public policy of the accommodating nation.
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310
Example 15.2. Buyer in Great Britain contracts
with Seller, a U.S. company, for certain goods.
The goods are shipped and paid for, but unfor-
tunately turn out to be defective. Buyer sues
in English courts and wins a judgment against
Seller. However, because Seller’s assets are in
the United States, Buyer will need the coopera-
tion of the U.S. courts to enforce the judgment.
Will the United States honor the British court’s
judgment? Probably yes, because it is unlikely
that there is any conflict with American law or
public policy.
Example 15.3. Under French law, fashion designs
are protected by very strict copyright laws. An
American company that published photographs
of original French fashions on a website without

permission of the designer could be held liable
under French law for infringement. But if the
French designer sought to enforce the judgment
in the United States, the U.S. court might find
that French law conflicts with the First Amend-
ment right to freedom of expression, and refuse
to enforce the judgment.
Sovereign Immunity
The doctrine of sovereign immunity means that one
nation cannot sue another. In the United States, a spe-
cific federal law, The Foreign Sovereign Immunities Act
(FSIA) of 1976, provides that a foreign nation cannot gen-
erally be sued, but there are exceptions where the foreign
state has:
• Waived its immunity;
• Engaged in commercial rather than political activity; or
• Committed a tort in the United States or violated specific
international laws.
Example 15.4. Canada contracts to buy 15 airplanes from U.S.-
based Boe-
ing Co. Canada breaches the contract. Since this is commercial
activity,
Canada can be sued in the United States.
The Doctrine of “The Act of State”
The legal principle of respecting an act of state means that
courts in one nation will not
question public acts committed by a recognized foreign
government within its own bor-
ders. One situation where this can arise is with regard to
expropriation, which is the
seizure of private assets or business for the public good. This
occurs when a government

seeks to nationalize an industry, as Great Britain did with coal
mining after World War II.
If just compensation is provided, this is considered legal.
Under French law, images of Paris fashion
designs are protected, which in some
cases has led to a conflict with the U.S.
Constitution’s First Amendment right
to freedom of expression. When a U.S.
company violated French law by publishing
pictures on its website, the designer
was unable to enforce a French court’s
judgment in the United States.
Jodi Jones/Associated Press
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.pdf
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.pdf
311
Example 15.5. A U.S. company has an oil refinery in an African
nation.
After an election where a different political party comes to
power, the Afri-
can country’s new government decides to nationalize the oil

industry. If
the nation pays the company for the refinery, this is legal
expropriation. If
the government simply seizes the refinery and does not pay fair
compensa-
tion, this is called confiscation and violates international law.
Obviously acts of state such as expropriation represent a
significant risk of doing business
in other countries. Companies may want to invest in insurance
to cover such risks. While
not cheap, such insurance can nonetheless remediate otherwise
catastrophic losses.
In the Media: 9/11 Families Seeking Justice Through
International Law
FSIA protects a foreign government from being sued in Ameri-
can courts under most circumstances, with limited exceptions.
The statute (16 U.S.C. §§ 1601–1611) is a legislative version of
what American common law provided, going as far back as a
U.S. Supreme Court case in 1811, The Schooner Exchange v.
M’Fadden, and it establishes under what conditions a foreign
sovereign nation can be brought under the jurisdiction of the
American legal system.
After the 9/11 attacks on America, hundreds of families whose
loved ones were murdered sued the kingdom of Saudi Arabia
and
members of the Saudi royal family for over $100 trillion,
alleging
that the Saudis helped fund the Al Qaeda terrorists behind 9/11.
The evidence was compelling, and even as late as 2012 two for-
mer U.S. Senators who were privy to secret information the U.S.
government gathered following the September 11 attacks filed
affidavits. One of the senators even stated under oath that he

was “convinced that there was a direct line between some of the
terrorists . . . and the government of Saudi Arabia.”
In 2005, the federal district judge who had jurisdiction over the
suit dismissed it because of the Foreign
Sovereign Immunities Act. That dismissal also applied to the
Saudi royal family members, because
they are part of the Saudi government. The families then
appealed to the 2nd Circuit Court of Appeals,
which affirmed the trial court’s decision in 2008. Finally, the
families sought an appeal of that deci-
sion before the U.S. Supreme Court. The primary argument of
the 9/11 families was that an exception
added in 1996 to the FSIA applied, namely, that a government
that sponsors terrorism loses the pro-
tection of the FSIA. While the Supreme Court was considering
whether to take the case, the Obama
administration filed a legal brief with the Supreme Court (a
brief written by then Solicitor General Elena
Kagan, who would become a Supreme Court justice in 2009),
arguing that the 2nd Circuit’s decision
should be upheld.
After the attacks on the World Trade
Center in 2001, family members of
victims filed a $100 trillion lawsuit
against the Saudi Arabian royal
family. After it was determined
that Saudi Arabia does not sponsor
terrorism, the FSIA protected the
royal family from the suit.
Lawrence Jackson/Associated Press
(continued)

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312
In the Media: 9/11 Families Seeking Justice
Through International Law (continued)
The gist of the Obama administration’s argument was that the
terrorism exception didn’t apply because
Saudi Arabia was not on the State Department’s list of
governments that sponsored or financed ter-
rorism. That legal argument infuriated the 9/11 families who
had brought the suit. In June 2009, the
Supreme Court refused to take the appeal. But in 2010, it ruled
in the case Samatar v. Yousuf that an
individual foreign official sued for actions taken in his official
capacity is not protected by the FSIA,
which, in effect, seemed to reopen the debate all over again.
In 2013, the Second Circuit Court of Appeals reversed its 2008
ruling and reinstated Saudi Arabia as a
defendant in the case. Saudi Arabia appealed the ruling to the
United States Supreme Court. In 2014,
the Supreme Court declined to hear the appeal, clearing the way
for the case to proceed in federal
district court. In 2015, Saudi Arabia was again dismissed as a
defendant by Federal District Court Judge
George Daniels, who ruled that the plaintiffs did not present
enough evidence that Saudi Arabia was

involved in the 9/11 attacks to overcome its sovereign
immunity. Meanwhile, Congress had been
considering legislation that would make it easier for the 9/11
plaintiffs to sue Saudi Arabia. They
passed the Justice Against Sponsors of Terrorisms Act in
September 2016, but President Obama
vetoed the bill shortly after.
Sources: http://www.cnn.com/2002/LAW/08/15/attacks.suit/
http://www.cbsnews.com/2100-201_162-5051884.html
http://www.nytimes.com/2009/06/30/us/30victim.html
http://www.scotusblog.com/case-files/cases/samantar-v-yousuf/
http://articles.philly.com/2014-07-
02/business/51005807_1_saudi-arabia-saudi-government-cozen-
o-connor
http://www.bbc.com/news/world-us-canada-34405451
http://www.cnn.com/2016/05/17/politics/senate-9-11-saudi-
arabia-bill/
https://www.govtrack.us/congress/bills/114/s2040/text/enr#com
pare=es
http://www.usnews.com/news/articles/2016-09-20/9-11-
families-protest-at-white-house-ask-obama-to-
sign-bill-allowing-them-to-sue-saudi-arabia
Conducting Business in the International Arena
Suppose your company wants to take advantage of overseas
markets. One of the first
things you will have to do is make sure that you are allowed to

export, or sell outside the
United States, your goods. Exports are regulated by a number of
different laws, including
those designed to protect national security. For example, if you
manufacture ballistic mis-
sile systems, you would probably expect there to be restrictions.
But what if you manu-
facture lie-detector equipment? Sometimes restrictions are
based on not just what is being
sold, but where it is being sold.
Example 15.6. Polyglot Polygraph Inc. plans to sell polygraph
equipment
to Honduras. This export is regulated and a license will be
required. But if
Polyglot is selling the same equipment in Iceland, a license is
not required.
Often a U.S. company will find an agent to act for them in the
foreign country, and the
agent will receive the exported goods and arrange for their sale.
Sometimes a company
will instead decide to do the actual manufacturing overseas.
Alternatively, the company
may elect to work overseas through a licensing or franchising
scheme.
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http://www.cnn.com/2002/LAW/08/15/attacks.suit/
http://www.cbsnews.com/2100-201_162-5051884.html
http://www.nytimes.com/2009/06/30/us/30victim.html
http://www.scotusblog.com/case-files/cases/samantar-v-yousuf/

http://articles.philly.com/2014-07-
02/business/51005807_1_saudi-arabia-saudi-government-cozen-
o-connor
http://www.bbc.com/news/world-us-canada-34405451
http://www.cnn.com/2016/05/17/politics/senate-9-11-saudi-
arabia-bill/
313
Example 15.7. If Polyglot decided to instead license a Honduras
company
to make the machines according to Polyglot’s design, and in
exchange
the Honduras company pays Polyglot a percentage of the sales
on the
machines, this would be a licensing arrangement.
There are also restrictions on importing, or bringing goods into
the country that were
made in foreign countries. While in many cases imports are
desirable for a nation, there is
also a fear that too much importing can hurt domestic
businesses, as discussed earlier in
relation to treaties such as NAFTA. One way in which countries
restrict imports is by the
imposition of tariffs, or duties, which, as mentioned earlier, are
basically a tax on goods
entering the country.
Example 15.8. Polyglot now has gone into the general security
business,
and is looking to import burglar alarms from France. Polyglot
will need

to find out if there are any restrictions on such imports, and if
they are
allowed, how much the tariff will be. The costs of tariffs should
be factored
into the cost of acquiring the product.
Tariffs can vary widely, depending on the type of goods and the
country from which one
is importing. For example, there are generally no tariffs on
trade between Canada and the
United States.
Dumping refers to a foreign company selling its goods in the
United States at a cost less
than fair value, usually in an attempt to dominate the market
and be able to raise prices
in the long run.
Example 15.9. A Chinese company was selling solar panels in
the United
States at less than the cost of production, putting U.S.
companies at a com-
petitive disadvantage. The U.S. government then assessed
additional anti-
dumping tariffs of 30 percent and higher on the Chinese solar
panels.
Of course, there is always a risk that the manufacturing country
will then raise its tariffs
in retaliation, and thus cause what is sometimes known as a
trade war to break out, where
countries act in an increasingly protectionist fashion and grant
preference to manufactur-
ers in their own countries. Governments have to strike a careful
balance, seeking to keep
good trading relationships while not disadvantaging business

within their borders.
The International Business Contract
Obviously much of what you have already learned about
contracts is equally applicable
in the international setting, but when contracting across
international borders, there are
some additional considerations to take into account. What
language should the contract
be written in? For example, the law of France requires that
some types of contracts be in
French. If disputes arise, what country will have jurisdiction?
What law will be applied?
How will payment be made, and whose currency will be used?
These are all matters that
should be spelled out in the contract.
Example 15.10. Cargo Four, a U.S. shipping company, decides
to contract
with a Swedish company for a shipment of sweaters. The parties
agree
that the language should be English, but that Swedish law will
apply and
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CHAPTER 15Section 15.2 Environmental Law and Business
that the choice of forum (where any lawsuits will be brought) is

Sweden.
Payment will be in U.S. dollars, and the payment method will be
wire
transfer from the Swedish company’s bank to Wells Fargo,
which is Cargo
Four’s U.S. bank. Because Cargo Four is a company that
routinely engages
in international business and they are familiar with Sweden,
Cargo is not
concerned about the choice of law and forum. The Swedish
company, on
the other hand, is a small boutique business that was not willing
to risk an
international lawsuit.
Doing Business Internationally Within the Limits of U.S. Law
One of the difficult issues confronting those doing business in
an international environ-
ment is combining compliance with U.S. law with the differing
customs of other nations.
Nowhere is this more highlighted than when one considers the
impact of the Foreign Cor-
rupt Practices Act (FCPA). Passed by Congress after
investigations discovered U.S. compa-
nies were paying millions of dollars in bribes (payments made
to influence the decision of
a public official in performance of public duties) to foreign
officials, the law is intended to
preserve confidence in the free market system. However, the
companies complain that in
fact it puts them at a competitive disadvantage, given that
bribes are “business as usual”
in much of the world. Even in countries where such payments
are illegal, there is often
little enforcement. One confusing aspect of the FCPA is that
while bribery is illegal, grease

payments (which are made not to influence an official’s
decision, but to expedite a pro-
cess) are not.
Example 15.11. Can-do Inc. pays a Mexican official to award
Can-do a con-
struction contract for a new highway. This is an illegal bribe.
Example 15.12. Can-do pays an official to move its application
to the front
of the line, so that it gets looked at six months earlier than it
would other-
wise. This is a legal grease payment.
Another significant issue relates to whether U.S. employment
laws that protect against
discrimination apply extraterritorially (outside the United
States). Generally, courts have
held that the laws do apply to U.S. companies with regard to
employees who are U.S. citi-
zens, except when it would break the law of the foreign country
(such as with mandatory
retirement ages), or if there is a bona fide occupation
qualification or BFOQ (discussed
previously under employment law).
Example 15.13. In Saudi Arabia, women cannot drive vehicles
on public
roads, so there would be a valid BFOQ for a delivery driver to
be male.
15.2 Environmental Law and Business
Businesses must be fully aware of environmental regulation, as
they are expected to operate within its constraints. If an energy
company does not comply with design and inspection standards

when it builds an oil drilling platform, it may end up
paying billions of dollars in damages when a catastrophic oil
spill occurs, as British Petro-
leum (BP) did after the Deepwater Horizon spill in the Gulf of
Mexico in 2010. A factory
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315
that dumps waste containing toxic chemicals may end
up being liable for increased cancer rates and other
health problems in the community, as happened with
Hooker Chemical Company in Love Canal, New York,
in the 1970s and W.R. Grace in Woburn, Massachusetts,
through the 1980s (the latter became the subject of a book
and movie, A Civil Action).
But environmental issues are not just a matter of busi-
ness compliance and costs. The state of the environment
has profound consequences for every living thing on the
planet, and without effective regulation we can all expect
to pay a heavy price in the form of our health and that of
future generations.
As individuals, we all have little control over the quality

of the air we breathe, the water we use, or the soil in which
our food is grown. Yet clearly we are affected deeply and
directly by polluted air and water and soil. Even when
we seek to make healthy choices, there is often too little
information available (or so much it becomes hopelessly
confusing) or no way to protect ourselves.
Example 15.14. Organic brown rice has long been
a staple of healthy diets. In 2012 it was found that
it absorbs arsenic, often found in agricultural land even when
chemicals
have not been used on crops, at an especially high
concentration. Syrup
made from brown rice is a common ingredient in energy bars
and baby
formula.
A famous story, “The Tragedy of the Commons” by Garrett
Hardin, illustrates one of
the difficulties of regulating the environment. At the center of a
community is a pasture,
which is a “common,” that is, property that belongs to no
particular person. Members of
the community use the pasture to graze their cows and sheep.
This works well as long
as no one puts too many animals on the pasture. But one day, a
farmer decides to add
more cows. His neighbor sees this, and she decides that if he is
going to use more graz-
ing, so should she and she puts out more sheep. Before long,
everyone in the community
is crowding the common pasture with livestock. Each person
thinks there is no point to
being the one to withdraw their animals, since the others will
only continue to graze the
land. In time, the animals have eaten all the grass and the

former pasture is barren ground.
The problem is that for the individual farmer, the benefit of
giving his cows more grazing
is obvious and immediate, while the down side of overgrazing is
a problem longer in the
making, and shared by all.
Air and water are clearly commons, and the tragedy is that
people use them in the way
that is convenient, without having to bear the costs. Thus a
factory may find it makes
sense to dump pollutants in a river, because it’s a cheap
disposal method. The long-term
effects of the pollution are not borne by the factory’s owners,
but potentially by everyone
downstream. This is an example of an externality, a cost that is
not factored into that of
The 2010 explosion on the Deepwater oil
rig set off a chain of litigation against both
British Petroleum and its contractors.
Gerald Herbert/Associated Press
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316
the goods the factory produces. The factory has little incentive

to install pollution control
equipment as a result. Compounding the problem is the fact that
corporate law often rein-
forces that the duty of management is to increase the value to
the company’s shareholders.
Even a socially responsible, ecologically concerned manager
may find it difficult to make
decisions that benefit society but cost the company profits.
Another problem with achieving effective regulation is that
when lawmakers do cost/
benefit analyses, the environment is often left out of the
equation. It is much easier to
calculate the economic benefits of drilling for oil in a wildlife
refuge than it is to know the
cost of an animal species becoming extinct. Scientists have long
recognized that the planet
is a complex, interrelated system that exists in a delicate state
of balance, but the ramifica-
tions of upsetting that balance are not always known.
Compounding the problem is the
fact that lawmakers are generally politicians who act in
response to fairly short (in the
United States, two to six years) election cycles. Generally, the
effects of pollution, of global
warming and climate change, and even of exposure to toxic
substances are longer term,
making it easy for lawmakers to keep putting off until some
indefinite point in the future
the need to regulate and enforce environmental protections.
Free markets and personal ethics cannot protect the environment
from degradation; the
job is left to the law. In this section we will examine the
primary types of regulations and
analyze their effectiveness.

Types of Environmental Law
Much environmental law is statutory, such as the federal Clean
Air Act and Clean Water
Act. The Environmental Protection Agency (EPA), created in
1970, has the primary respon-
sibility for passing rules to implement such laws and for
bringing actions against those
who violate the law. States also regulate in this area; for
example, many of the laws that
require recycling are state or local in origin.
The common law also plays a role. For example, an agricultural
worker exposed to dan-
gerous chemicals who later developed lung disease might sue
the manufacturer for neg-
ligence because of inadequate warnings. Homeowners with
riverfront property whose
beaches are fouled by a factory’s discharge might sue for
trespass. In what are known
as toxic tort cases, multiple plaintiffs may bring lawsuits for
personal injuries caused by
dangerous substances, such as the situation where a company’s
dumping of a chemical
pollutes a town’s water supply. But many people injured by
pollution lack the resources to
bring a lawsuit, and proving that a particular defendant’s
activities caused specific dam-
age can be extremely difficult.
Example 15.15. After Hurricane Katrina devastated the Gulf
Coast, a law-
suit was brought by people in those wrecked communities
against pol-
luters alleged to have discharged greenhouse gases, which
contributed to

climate change, which made the storm worse than it would
otherwise have
been. Although a court ruled the plaintiffs had standing to sue,
clearly the
difficulties of meeting their burden of proof are considerable!
There are several different approaches to statutory regulation.
Sometimes the law sets
standards for air or water quality and leaves it up to the
individual as to how to obtain
compliance.
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317
Example 15.16. A factory discharges water that has been heated
into a
nearby stream. Because the warm water can affect the ecology
of the
stream in a negative manner, the change in water temperature is
consid-
ered a form of pollution. The factory is ordered to keep
discharged water
within certain temperature limits, but the factory is free to
decide whether
to hold the water in tanks until the temperature comes down or
to install

cooling equipment.
Another method is the command-and-control model, such as
requiring that power plants
install certain emissions control equipment.
One problem with both these type of rules is that they are only
effective to the extent they
are enforced.
Example 15.17. Suppose a utility company has failed to reduce
emissions
to the proper level. The company may actively lobby for the
rules to be
changed, or it may contribute to the political campaign of a
presidential
candidate who will seek a smaller budget for the EPA and cut
its personnel.
In some cases, companies simply find it cheaper to pay an
occasional fine
than to follow the law.
Some statutes authorize criminal prosecutions as well as civil
lawsuits for damages. For
example, under the Clean Air Act (42 U.S.C. § 7401 et seq.
(1970)), not only the company
may be fined, but corporate officers who knowingly violate the
law (for example, by
falsely reporting information) may be subject to fines up to $1
million and imprisonment
up to two years. The same law authorizes citizen suits, which
give private individuals
some ability to enforce the law even if the government doesn’t
act. However, in many
situations polluters have sufficient political clout that
authorities may take a hands-off

approach to enforcement, and citizens may not have the
resources to bring private suits.
Example 15.18. An area known as the Chemical Corridor in
Mississippi
and Louisiana was home to operations of several major
companies, who
were polluting with highly toxic substances. Residents of the
Corridor were
suffering from many often fatal health problems, but they were
primarily
low-income minorities who could not afford lawyers. After a
law clinic at
Tulane Law School stepped in to represent them and took
effective action
on their behalf, the governor of Louisiana threatened to
withdraw funding
from the school, and the Louisiana Supreme Court (which is
elected and
thus subject to political concerns) barred the clinic from
representing resi-
dents in suits against the chemical industry.
Other types of legal mechanisms include taxes on pollution and
market-based regula-
tion, which seeks to turn the external cost of pollution into an
internal cost. Cap and
trade systems, where, for example, a factory must buy a credit
for every ton of emissions
it produces, mean that businesses have incentive to reduce
emissions. Since there are a
limited number of credits available, and typically such systems
reduce the credits over
time so that the cost goes up, polluters face rising costs and will
become less competitive
in their business as they pass the cost on to consumers.

Furthermore, the money raised by
the sale of the pollution credits can go to environmental
programs. An example of such
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318
an emissions trading program can be found in the sulfur dioxide
part of the 1990 Clean
Air Act Amendments, although it was weakened by subsequent
court decisions and EPA
rules.
Air Quality Regulation
Air pollution is known to have effects on human health ranging
from unpleasant to fatal.
The Clean Air Act, along with its subsequent amendments,
regulates emissions from
sources both stationary (power plants, factories) and mobile
(cars). For stationary sources,
the EPA sets the maximum limits for various pollutants, but
states have the first respon-
sibility for planning how to achieve those
standards. Substances regulated include
carbon monoxide, nitrogen dioxide, mer-
cury, asbestos, particulate matter (dust,
soot), and ozone (smog, not to be confused

with the ozone layer in the atmosphere,
which prevents harmful rays from the sun
from penetrating to the surface), among
others. In setting limits the EPA does not
have to consider the cost of compliance to
a factory or industry, and one of the goals
of the law is to prevent deterioration of air
quality in places with clean air.
Acid rain is a type of pollution caused by
sulfur dioxide emissions, which largely
emanate from coal-burning plants located
in the Midwest and eastern states such
as Ohio and Pennsylvania. One problem
is that the pollutants are carried on the
wind to other states and countries such as
Canada, where the precipitation falls and the damage is done to
forests, crops, lakes,
and ponds. The states with the plants may have little incentive
to demand costly equip-
ment be installed, since they are not suffering the harm.
Another problem is that older
power plants were not covered by the law unless they undergo
major renovation, so
that power companies have little reason to clean up existing
plants or build newer, more
efficient ones.
Mobile sources of emissions (primarily cars) are regulated
primarily through require-
ments on auto manufacturers that call for reducing pollutants
over time. For example,
beginning with 2004 models, makers had to cut nitrogen oxide
emissions by ten percent
by 2007. Other regulations require cleaner burning gasoline,

primarily in urban areas.
As technology advances, the EPA updates regulations. For
example, in 2012 the agency
announced that it would phase out the requirement that service
stations use vapor cap-
ture mechanisms on gas pumps, since modern cars are designed
to eliminate most of that
vapor anyway.
The Clean Air Act put regulations in place to try to reduce
carbon emissions and improve smog in urban areas like Los
Angeles, California.
Purestock/Thinkstock
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319
Despite some of its weaknesses, the Clean Air legislation has
undoubtedly been effective
in reducing some pollutants and their negative consequences for
human health. The EPA
estimates that by the year 2020, regulations will save 230,000
lives in the United States.
Water Quality
The Clean Water Act (CWA), 33 U.S.C. § 1251 et seq. (1972),

and its subsequent amend-
ments, regulate discharge of pollutants into navigable waters.
Originally this definition
was broadly interpreted, but more recently the courts have
excluded wetlands, intermit-
tent streams, ponds, or lakes that do not connect to open water,
and waterways within a
single state. While the EPA has a permitting system for point
source discharges, such as
those from a factory, an animal feedlot, or a municipal sewage
treatment plant, it is largely
left to the states to oversee regulation for non-point sources,
such as agricultural or urban
runoff, a significant source of water pollution. The CWA also
sets water quality standards,
which vary with the intended use of the body of water. For
example, a lake used for swim-
ming and fishing would have tougher standards than a pond
used for irrigation. The
minimum standards are initially based on the Best Available
Technology that could be
used to control pollution, but the CWA includes antidegradation
policies as well.
Another provision requires a permit before a wetland can be
dredged and filled, in an
attempt to prevent real estate developers from eliminating these
natural filtering systems
and wildlife habitats. Wetlands policy is intended to result in no
net loss, but in practice
this has not proved to be the case. Environmentalists point to
the aftermath of Hurri-
cane Katrina as an example of the consequences of wetland
destruction. Draining of the
swamps around New Orleans meant elimination of the natural
“overflow” that histori-

cally prevented much flooding. The result was that large
sections of the city were ren-
dered uninhabitable. Years later, much of the New Orleans
displaced population has not
returned to the city.
The Safe Drinking Water Act (SDWA) applies to public
drinking water systems and
requires the EPA to set standards and oversee implementation
by the states. It also requires
that community water systems send consumers an annual report
disclosing the level of
contaminants in drinking water. Unfortunately, no standards
have been set (and thus no
testing done) for the vast majority of chemicals (upwards of
70,000) in the United States,
many of which may be leaching into groundwater, and so the
real level of contamination
in drinking water is unknown. In a recent high profile case, city
officials in Flint, Michigan
have been charged with violation of the SDWA due to high
levels of trihalomethanes and
lead in the city’s water supply. Congressional hearings have
called into question the EPA’s
effectiveness in administering the SDWA in Flint.
Other federal laws governing water are the Ocean Dumping Act
of 1972, which prohibits
waste disposal without a permit, and the Oil Pollution Act of
1990, which regulates ships.
Tankers using U.S. ports are required to have double hulls to
help prevent leakage and
minimize spills, and the law imposes significant fines and
cleanup costs in the case of an
oil spill.

rog80328_15_c15_307-326.indd 319 9/20/16 11:03 AM
https://www.epa.gov/laws-regulations/summary-clean-water-act
http://water.epa.gov/lawsregs/rulesregs/sdwa/index.cfm
https://www.epa.gov/ocean-dumping
320
Toxics and Waste
The Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA) required pesticides to be
registered with the EPA, but the only required testing was to
validate the substance’s “kill
power”—that is, that it will eradicate the species it claims to.
There was no preliminary
testing for safety with regard to either human health or that of
the environment. Although
Congress in 1972 directed the EPA to test for safety, the
backlog and inadequate funding
mean that only a small percentage of the over 50,000 pesticides
already registered have
been tested for health effects.
There are two major laws that deal with toxic waste. The
Resource Conservation and
Recovery Act (RCRA) deals with disposal of present waste,
both household and toxic, set-
ting standards for landfills and mandating processes and
recordkeeping for disposal of
dangerous substances. The Comprehensive Environmental

286CHAPTER 14CyberlawCHAPTER 15International and.docx

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