Legal Issues Should Heimusic Be Thinking About? Case Study

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legal issues should Heimusic be thinking about?

Choice of Laws

Heimusic is a UK-based website, however it does not limit the use of its website to only UK citizens. The Heimusic website can be accessed by anyone in the world through the Internet and therefore the company may be subject to the rules and laws of many different countries. Heimusic should consider the legal implications of being subject to numerous jurisdictions and take action to implement user policies that will limit the laws governing its operations. A choice of laws provision in the websites terms and use will be provide some protection for Heimusic, but will not entirely eliminate the application of other countries laws. Heimusic should continue to consider the risks of liability from multiple jurisdictions because it is operating in a global market.

Heimusic faces the possibility of having to comply with multiple laws from its data collection activities. The company collects information about its users in a database and then licenses the use of the data to third parties. The users of the website must consent to the inclusion of their information in the database, but are enticed to do so through and offer of small discounts. Depending on how much detail is present in the actual terms of the consent given by users, Heimusic may be entering into consumer contracts with each of users for the use and licensing of their information. The formation of a contract requires an offer by a party, an acceptance on the offered terms, definite terms as to what the contract is for and adequate consideration (Ollek, 2009). There is an offer to consent to the use of the information from Heimusic to the user made in the login process. There is consideration for the use of the information by the giving of the discount from Heimusic to the user. There are terms regarding the use of the information, although these terms are not specified, which may create a contract. Lastly, there is acceptance by the user of the terms when they consent to the use of their information during in the logging in process. If a contract has been created, Heimusic should be concerned about the application of other countries laws to these activities.

The creation of a consumer contract may cause Heimusic to be subject to the consumer protection laws of the country where the user resides. The Rome I Regulation, which took effect in the UK on 17 December 2009, updates the rules determining which country's laws apply to a contract (Halton, 2010). This law provides that a consumer's local consumer law will apply where the seller either "pursues his commercial or professional activities" in the customer's country of habitual residence or "by any means, directs such activities to that country" (Halton, 2010). "Directing activities" towards a country could include activities such as offering a choice of languages on a website or providing prices in Euros for other EEA states (Halton, 2010). The parties to a consumer contract can choose the law that governs the contract but the consumer retains the benefit of any mandatory consumer law protections in their home country, provided certain conditions are met (Halton, 2010).

Since Heimusic is a consumer-based website, it should be concerned with the application of the Rome I Regulation in light of the possibility that it is forming consumer contracts with users. A website disclaimer would be a very good idea for Heimusic to limit liability, provide for a choice of law, and to set forth the terms that users must agree to in accessing and using the website (Davey, 2008).

B. Copyright Infringement

The most glaring copyright issue for Heimusic is the file swapping portion of its website that allows users to upload and download music files with software provided by Heimusic. File sharing was first brought into controversy by Internet giant Napster and the subsequent legal battles over its peer-to-peer (P2P) file sharing website. The Napster litigation began in December of 1999, when the five major recording industry companies -- BMG, Sony, EMI, Universal and Warner -- filed suit against Napster for copyright infringement (Sher, 2002). The Internet music-swapping or file sharing brought into the spotlight by the Napster litigation is now known the industry as the "digital distribution of music" (Sher, 2002). Numerous file sharing websites experienced similar lawsuits as the world's legal systems tried to deal with the flood of electronic media sharing. Gnutella, Madster/Aimster, Grokster, Morpheus, KazaA, FreeNet and numerous other peer-to-peer systems use different technological frameworks and present varying legal issues (Bower and Rimmer, 2005).

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As the law regarding file sharing developed, it became clear that the law diverged into "normal" copyright law and then "P2P file sharing" copyright law, but the two legal doctrines are not closely related (Goldman, 2010).

Heimusic should consider the substantial risk of litigation from copyright owners if it is facilitating copyright infringement by making peer-to-peer file sharing software available through its website. Copyright infringement is not only illegal in most countries, but highly unethical for a business. If Heimusic is interested in maintaining an ethical reputation in its industry it should consider how its current system will be viewed by competitors and users alike.

Another area of copyright concern for Heimusic is its use of CD images and music clips on its website. The images and music may be copyrighted material belonging to the creator of the works. Copyrighting protects the author from plagiarism and illegal copying and reselling of the work (Jay313, 2008). In order to legally display images and allow users to listen to music on its website, Heimusic needs a license from the copyright owners (Pinset Mason, 2008a). The fact that only a portion of the song can be heard before the user must purchase it does not avoid copyright infringement claims. Copyright in a work is infringed if it is reproduced in any material form (Pinset Mason, 2008a). Copywriting in modern times can be confusing because even if a work does not say it is copyrighted it still could be (Jay313, 2008). If Heimusic has any concerns about the materials it is using on its website it should determine whether or not the material is copyrighted and obtain a license to use any copyrighted material from the copyright owner.

Heimusic's sale of advertising may also pose a copyright infringement risk. Heimusic allows advertisers to purchase advertising, however it does not monitor or otherwise limit the advertiser's use of materials and this could subject Heimusic to claims for copyright infringement. There may be other claims made by the use of this advertising which will be covered later.

Another copyright problem may exist with the hypertext links and thumbnail illustrations that Heimusic provides in its news search engine. Many of the disputes which have arisen related to news aggregation services involved sites 'scraping' the content of others, by extracting the data, reformatting it and making it available on their own web sites without permission (Pinset Mason, 2008a). Heimusic should determine if the software they are using is truly a search engine displaying websites as they were created or if the software reformats any of the information it takes from news websites.

C. Privacy and Data Collection

Heimusic's collection of personal data from users poses a privacy issue which could subject the company to penalties. In the UK, the Data Protection Act of 1998 ("DPA") requires that companies storing and using personal data adhere to certain requirements (Dotmailer, 2010). The data must be fair and lawfully processed; processed for limited purposes; adequate, relevant and not excessive; accurate; not kept for longer than necessary; processed in accordance with the data subjects rights; secure; and not transferred to countries without adequate protection (Dotmailer, 2010). Failure to comply with these guidelines can result in stiff penalties.

To adhere to the requirements of the DPA, Heimusic should have a privacy policy on its website which can be easily located by users. The privacy notice should explain to users that Heimusic collects data from their usage of its website and it should explain how Heimusic uses the data it collects. It would be a good practice for Heimusic to require users to acknowledge that they have reviewed the company's privacy policy prior to completing their registration. The privacy policy should also include information about how long the data will be maintained and provide a statement as to the security of the personal information provided. The security of credit card numbers, birth dates and personal identification information is particularly important to consumers as identify theft continues to grow.

Security is just one of the user rights issues Heimusic needs to be concerned about when collecting and using personal information. The actual use of the information collected must also adhere to the requirements of the DPA. For example, the DPA provides that users of the website may opt out of having their data used for direct marketing, which is one of the ways Heimusic uses the information in its database (Dotmailer, 2010).….....

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