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The cyberlaw informer #31

Welcome to the 31st issue of the weekly Mishpat Update, 
Law on the net newsletter from

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In this issue:

1. Introduction
2. Priceline sues Microsoft 
3. Computer Legislation and its Application in Israel
4. IPv6 raises privacy concerns
5. Cyberlaw resource of the week
6. Computer & Internet law news and updates


1. Introduction

I would like to welcome the 74 new subscribers who joined the list this

This weeks' issue is especially inclusive, featuring 3 articles on top
of the regular sections. The first article takes a look at a recent
lawsuit filed by against Microsoft, claiming patent
infringement and unfair business practices. 
The second article is the first guest article published here. It is a
summary of an article by Boaz Guttman, describing the Israeli Computer
Law. At the end of the article is a link to download the full 10 page
The third article shows a few privacy concerns with the new suggested
Internet Protocol, called IPv6. At the end of this newsletter are the
regular sections: Resource of the week and the cyberlaw news and

I hope you enjoy reading this newsletter. If you do, don't forget to
forward it to a friend and ask them to subscribe. Comments,
recommendations, contributions and articles are always welcome. Send
them to

The Mishpat Update archive (issues 1-29) is available at:

Feel free to use any of the material, or forward the newsletter to a
friend. Just don't forget to mention that they can subscribe by sending
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2. Priceline sues Microsoft 
############################ Inc. filed a lawsuit against Microsoft Corp. over a new
"name your price" service that the software giant introduced recently
on its Expedia travel site.

The suit also alleges that Microsoft's conduct violates the Connecticut
Unfair Trade Practices Act. The Priceline suit seeks declaratory
relief, permanent injunctive relief and punitive damages.

Priceline alleges that over an eight month period (in which the
companies sought mutual business including a possible joint marketing
deal and licensing of Priceline's patent), Microsoft was provided with
detailed confidential information and technical data regarding

A key aspect of Priceline's suit is the controversial practice, used
by numerous e-commerce companies, of patenting elements of their
business plans, not just their technologies. Priceline, for example,
holds patents that relate to the core of its business: letting buyers
name the prices they are willing to pay for goods or services. 
Last year, Priceline received a US patent for "buyer driven conditional
purchase offers," which the e-commerce site uses to sell discounted
airline tickets, cars and mortgages in addition to hotel rooms. The
important 'nonobvious' innovation that makes the system patentable
('obvious' systems can not enjoy patent protection) is that buyers may
not revoke their offers. But obtaining a patent is only half the battle
because they can be challenged and overturned in court or by the Patent
and Trademark Office (PTO). 

Introduced last month, Microsoft's Expedia service allows customers to
pick the city and the type of hotel in which they want to
stay. Customers then enter how much they are willing to pay for the
room, and Expedia automatically chargers customers' credit cards if the
hotels accept their bids. Expedia insists its product is a home grown
response to the requests from customers and hotel owners.

Priceline alleges that the new Expedia service is based on the detailed
confidential information that Priceline passed on to Microsoft as part
of the negotiation between the companies. 
In the summer of 1999, the question of business partnerships was part
of a discussion between Priceline founder Jay Walker, and Microsoft
Chairman Bill Gates. During that conversation, Priceline claims Gates
said that Microsoft had no intention of allowing patent rights to stand
in its way. Gates allegedly said that many other companies have sued
Microsoft over patent squabbles and that Priceline could get in line. A
few weeks after the discussion between Gates and Walker, Microsoft
launched Expedia's Hotel Price Matcher service, which Priceline claims
infringes on its patent.
Well now it seems Priceline paid attention to Gates' advice and joined
the line...

Further details are available at:

Priceline's press release:

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3. Computer Legislation and its Application in Israel

Guest Article

by Boaz Guttman

A. General
The regularization of computer laws has become widespread in the last
decade. Legislation is varied, mainly in the criminal area.
Propositions, memos and Israeli versions in the area of computer laws
were already processed in the previous decade, despite the school of
thought that warned of the demonization of computers, and claimed that
there was no cause for special laws concerning computers. The topic of
damage to computers is not addressed explicitly in any Western
constitution, although it was suggested within the American legal
constitution. The inclination is to uphold a legal system, which draws
from constitutional norms, the aim of which is to protect computers'
inherent interests by interdisciplinary legislation, or by means of a
separate framework as in Israel. This legislative system is an
exception compared to what is common outside Israel.

B. Legislation Design
The Israeli legislator chose a constitutional design for the computer
law, apparent in two main areas:
1. Full treatment of computers within a single framework, rather than
scattered amendments.
2. Isolation of the computer and its materials as a unique object
addressed by the law.
Within the comprehensive design of computer legislation the legislator
clarifies in principle that we have before us a real legal branch. In
view of the definition chapter of the law, the meanings of the
terminology are uniform throughout the entire legal branch. Civil legal
rulings already exist, as do the developing criminal rulings, which are
supported by the definition chapter in the law. The application stems
from the legal structure, common to both the civil and the criminal
The legislator thus appropriately located the nucleus of the
innovation, that is to say the need to defend computer related abstract

C. The Computer Law of 1995
The law includes 4 chapters. The first deals with the definition of
terms of the objects covered by the law, such as: computer, computer
material, software and information. The perception is wide and so is
the object. The second - deals with computer crimes, the third with the
law of torts, and the fourth with indirect legislation amendments
concerned with computers and evidence, search and seizure. Copyrights
will receive separate legislative attention.

D. Grounds for Legislation
The central role filled by the computer compels the legislator to
protect the varied interests concerned with it. The increase of
computer related crimes, the difficulty of applying criminal and torts
law to misuse of computers, the special nature of computers, software
and hardware, the need for legislation that was accepted so far by many
countries - have all led to legislation that incorporates all
computer related aspects. 

E. The Punitive Section of the Computer Law
The term "computer crimes" in the legal terminology of computer laws
includes two separate categories of crimes. The first - against the
computer, and the second - by means of the computer. The computer law
imposes criminal prohibitions regarding both these categories. As there
is no reference to the mental grounds of computer crimes, the crimes
are regarded as requiring an element of criminal thought.

F. The Computer Crimes Chapter
Paragraphs 2-6 of the law deal with crimes of disruption or disturbance
to a computer or computer material; producing false information or
false output in any form; intrusion into computer material - also for
the purpose of committing another crime; editing, transferring or
inserting a computer virus. Some of these crimes require "unlawful"
action. The main significance of inserting the term "unlawful" is the
transfer of the burden of proof to the prosecution. The penal sanction
in these paragraphs is 3 to 5 years. The legislator in this chapter
also supplies a legal-penal solution for someone who intrudes into
computer materials while overstepping his mandate - a solution that was
not evident before this legislation. Damage to computers due to strike
will not be deemed a crime and will be subject to general legal
principles, if the strike was "lawful". An action committed with the
injured party's assent will not be regarded as criminal if there the
consent to perform it was given by someone authorized to give it.
Authorized consent is a typical case in which the action is regarded as
"lawful", as well as in cases in which there is a judgment that
sanctions the action.  Due to the proof difficulty in locating a
perfect criminal action, this chapter determines criminal behaviors
characterized by a relatively large number of preparatory actions that
are considered computer crimes. Therefore, the existence of the crime
is recognized from the early stages of the criminal activities.

G. Summary
The Computer Law is the general guide of all computer laws. Its
instructions are applicable to various areas of computerized activities
and to criminal Internet activities. The laws of Search and Seizure and
of Evidence were adapted and revised accordingly. Legal-commentary
norms of courts in the areas of evidence, search and seizure have not
been set yet. This system of laws will eventually require further
development in the courts. Complex legal issues have not yet been
sufficiently clarified in the courts due to lack of legal experience
regarding a new law of legal and technologic complexities not
envisioned at the time of its conception. This legal phenomenon is
apparent in other legal methods as well, and is worthy of separate
consideration. For example, although the law protects investigators who
access computer materials under court-order ("...receiving information
from communication between computers while executing search... will not
be considered wiretapping..."), there are grounds to investigate the
status of recorded voice-mail messages accumulated on a business
computer through the Internet, when the computer is examined by the
police. The term "communication between computers" is problematic in
the context of the new law or of the Wiretapping Law, where legislation
usually lags behind technologic innovations. Furthermore, an Israeli
computer crime could be considered a different wiretapping crime by
foreign law (for instance, US Federal Laws), which has legal, real and
practical ramifications on the action of law enforcement agencies.
Another example could be the lack of legal procedure that stems from
adjudication, to clarify to law-enforcement agencies how to "extract"
electronic evidence, besides overcoming enforcement difficulties not
yet established. All the above-mentioned points lead to the conclusion
that the legal developments in the branch of computer laws are still in
their infancy.

Chief-Superintendent Boaz Guttman, Advocate, LLB, BA; is head of an
Investigation Section in the National Unit for Fraud Investigations of
the Israeli Police. 

This is a summary of the original article. The full version, 10 pages
long including footnotes, can be downloaded (in Rich Text Format that
can be read by any Windows based word processor) from

This article was adapted from a lecture on "Computer Crimes - The
Criminal Aspect" delivered by the author at a conference on
"Information Assurance in the Internet Era" on March 28th, 1999. . The
article was published originally in the I.D.F. law review LAW and ARMY
(MISHPAT VEZAVA) NO. 13 MAY 1999, pp. 175 - 185.

4. IPv6 raises privacy concerns

Next month, the Internet Engineering Task Force (IETF) will decide
whether a new standard for assigning Internet Protocol (IP) numbers
should improve the ability of law enforcement to tap online
communications, such as phone calls carried over the global network.
The FBI says the IETF should craft technology to facilitate lawful
government surveillance. The new IP standard, called Internet protocol
version 6 (IPv6), will eventually affect every Net user if it is widely

Another feature being proposed could also improve the ability to track
net users through unique identifiers attached to their computers' IP
numbers. The identifying tag could be used to collect marketing data or
to build a detailed user profile in conjunction with Web site
registration forms. An IP number is a number assigned by Internet
service providers (ISPs) to every computer that connects to the net,
and is necessary in order to enable Internet communication. Unlike a
person's phone number, IP addresses are usually assigned to Net users
every time they access the network, which makes it difficult to track
their online travels from session to session. Under the new protocol,
those numbers wouldn't change as often. 

Many governments require telephone companies to configure their
networks so law enforcement officials can easily wiretap calls. If IETF
will not include wiretap options, governments around the world will
probably require ISPs to install such technology. 

IPv6 was developed in response to a potential shortage of IP numbers
and other infrastructure issues. There are 4 billion IP numbers, but
the supply of free numbers is expected to decline because of devices
that require static IP addresses -- computers that have a fixed
connection to the net (e.g. computers connected through cable TV).
Proponents of IPv6 say it will increase the IP pool, the same way
adding a new area code increases the amount of phone numbers available,
and could provide for better security while supporting wireless phones.

Companies like Microsoft, Apple, Sun and IBM have endorsed IPv6, and
the Internet Corporation for Assigned Names and Numbers (ICANN), which
is responsible for allocating Internet addresses, issued numbers based
on the new standard for the first time in July. The new protocol could
be fully implemented within four years.

IETF's press release announcing the debate:

More details about the debate are available at:,1283,31895,00.html

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5. Cyberlaw resource of the week

The U.S. Federal Trade Commission (FTC) Bureau of Consumer Protection's
mandate is to protect consumers against unfair, deceptive, or
fraudulent practices. The Bureau's web site at is one of the richest sources of
information about fraud, privacy, credit and consumer protection
available online.

The site is full of articles, reports and cases concerning various
forms of consumer abuse. For example, the privacy section at covers issues such as gathering
information by online companies, methods of protecting privacy on the
net and relevant statutes such as the U.S. 'Children's Online Privacy
Protection Act' of 1998.

If you have encountered a pattern of possible law violations by a
or organization, you can complain online at:

If you would like to recommend an Internet legal resource, please send
it to

6. Cyberlaw news and updates

Each week Mishpat-Update brings you the latest news about
online and computer law, with links to the full reports available
on the web.

* Intel wins another round in Intergraph case *
Reversing a June decision, U.S. District Judge Erwin Nelson ruled that
Intel Corp. had the right to use patent licenses that Intergraph Corp.,
a computer workstation manufacturer, claimed were its own. The ruling
was the latest in an bitter antitrust lawsuit Intergraph filed against
Intel in November 1997 claiming that Intel has used a number of
coercive tactics against it over the years.
Intergraph makes computer workstations, it originally built those
machines using a chip known as 'Clipper' based on technology Intergraph
acquired from Fairchild Semiconductor in 1987. Intergraph shifted to
Intel chips in 1993. That same year, chip maker National Semiconductor
Corp. - with which Intel has a cross patent licensing arrangement -
bought parts of the former Fairchild Semiconductor. Intel began
incorporating Clipper technology in some of its products.  Several
years later, Intergraph began asserting patents on the Clipper
technology and seeking royalties from Intel customers. Intel objected
to that practice, and responded by using its dominant position in the
chip industry. Intel cut off access to information and samples of its
products, which Intergraph needed to build its products.
In the new decision, Judge Nelson wrote that Intel is now licensed to
use the patents according to the agreement with National Semiconductor.
Intergraph said it would appeal the decision, and said the company
would continue to battle Intel with claims the chip maker violated
antitrust law.

* Led Zeppelin goes after domain name *
Lawyers representing the legendary rock band Led Zeppelin have asked
Robert Siciliano to give up the name Siciliano said he
bought the name about five years ago because he is
"Boston's biggest Led Zeppelin fan." Siciliano isn't the only music
lover who felt the urge to own a piece of his favorite band. Last week,
lawyers representing Don Henley and The Eagles filed a trademark
infringement lawsuit in Los Angeles over various domain names using
Henley and Eagles related wording. The names under fire include, and

* Privacy group sues the FTC *
The Electronic Privacy Information Center (EPIC), a privacy advocacy
group, filed a lawsuit intended to force the U.S. Federal Trade
Commission (FTC) to disclose records about privacy complaints received
by the agency. EPIC  contends that the consumer protection agency
has failed to take action on many of the privacy complaints it received
from consumers. EPIC said that if the FTC has no effective ways to
respond to privacy complaints or public concerns, then more aggressive
steps should be taken. According to EPIC, the lawsuit was prompted in
part by an FTC announcement (reported here last week) that it plans to
fast track privacy complaints referred to it by agencies such as
TRUSTe. An FTC spokeswoman said the commission is working on a response
to EPIC's request.

This suit comes as the private sector Internet industry strengthens it
efforts to self regulate Internet privacy. In April 1998, several
companies including America Online (AOL), IBM, Hewlett-Packard (HP) and
Microsoft formed the Online Privacy Alliance, that now has nearly 100
corporations and associations as members. It seems that the alliance
has done a remarkable job in turning the public debate over Internet
privacy in the industry's direction. In early 1998, when the FTC
surveyed 1,400 commercial Web sites, only 14 percent gave users any
notice of how they handled personal information. In early 1999, a
Georgetown University survey of some 360 heavily trafficked Web sites
found that 66 percent gave users some notice of how they handled
personal data. But privacy advocates note that the 1999 Georgetown
survey also found that only 10 percent of Web sites included the four
touchstones of what the FTC calls "fair information practices":
notifying users of the sites' data collection practices; giving users a
choice of opting out; giving them access to personal data; and assuring
them that their personal data were secure.
(Free registration with the NY Times required)

* California governor vetoed workers privacy bill *
California Governor Gray Davis has vetoed legislation that would have
prohibited companies from secretly monitoring workers' e-mail, computer
files and Web surfing. The bill would have allowed monitoring, but only
if companies established electronic monitoring policies and formally
notified employees about them. Privacy advocates denounced the veto as
a strike against employee privacy and rights. But Davis said he was
protecting employers' right to control their workplace. He likened
e-mail monitoring to other employer rights, such as the right to limit
personal long distance phone calls. He also noted that companies should
be able to monitor employees because the company can be sued if a
worker uses company equipment to defame or harass someone.

* Excite@Home share holders lawsuit *
In a suit filed in Delaware state court, Excite@Home shareholder
Sheldon Pittleman, asked a judge to lift restrictions on Excite@Home's
board that give AT&T officials veto power over any significant business
move by the company. AT&T owns a 26 percent stake in Excite@Home, a
cable Internet access and content provider, and controls 58 percent of
the shareholder voting rights. Pittleman claims AT&T, is interfering
with the firm's operations to gain competitive advantages in the online
services industry

* FCC: keep hands off cable *
A new report by the US Federal Communications Commission (FCC)
recommends that regulators should maintain a hands-off approach to
overseeing the high speed Internet business. The FCC's Cable Services
Bureau, which wrote the report, concluded that the threat of regulation
could slow down this deployment high speed services, that are now used
in more than 1 million American homes.
America Online (AOL) is leading a campaign to make cable companies such
as AT&T open their high speed systems to unaffiliated Internet service
providers (ISPs), a policy adopted by several local governments. AT&T
and other cable companies oppose the open-access requirement, saying
they're spending billions of dollars to upgrade cable networks for
high-speed Web connections, while AOL and other ISPs aren't spending a

* Naughton pleads not guilty *
Patrick Naughton, 34, former top executive with Walt Disney's Go
Network, who was accused of trying to arrange sex over the Internet
with a 13 year old girl, pleaded not guilty. As reported in Mishpat
Update #28, prosecutors say Naughton, using the screen name
"Hotseattle," chatted over the Internet with an undercover FBI agent
whom he thought was a 13 year old girl and told her he was interested
in meeting in Los Angeles. The indictment against Naughton also says
that authorities seized his laptop and found it contained child

* raided by law enforcement * said it was cooperating with law enforcement officials who
raided the headquarters of the Internet horse race betting service. The
Los Angeles based company had 12,000 subscribers to its service. The
subscribers can watch and bet on races at U.K. based Hilton Group's
more than 30 racetracks in the United States. A search warrant was
issued by a state court judge who determined there was probable cause
that evidence of criminal activity (illegal gambling) would be found at's Los Angeles headquarters.

* Corel CEO charged with securities violations *
Michael Cowpland, CEO of Canadian software maker Corel Corp., was
charged with three counts of violating securities law. The Ontario
Securities Commission also said it has charged Cowpland's personal
holding company M.C.J.C. Holdings Inc. The charges will be heard at the
Ontario Court of Justice in Toronto on Nov. 22. The insider trading
investigation relates to 1997 trading activity. Cowpland's sale of 2.4
million Corel shares, for 20.5 million Canadian Dollars, one month
before the firm reported a surprising 32 million dollar third quarter
loss, sent the stock into a 40 percent decline.,4586,2354417,00.html

* No ruling in Java case *
Sun Microsystems and Microsoft went back to court today in the ongoing
battle over the use of Java, but the judge made no immediate ruling
after hearing both parties state their cases for two hours. The issue
at stake is
whether Microsoft violated its contract with Sun for developing and
deploying products using the Java programming language and also Sun's
Java copyright Sun alleges Microsoft made changes to Java's software
code in violation of its copyright and the licensing agreement for
using Java. Microsoft contends it is not trying to "highjack Java" as
Sun alleges, but to make it work better with Windows. (the full details
were described in previous issues of Mishpat Update).

* AOL passwords stolen *
Christian Dysthe, sales manager at e-mail service OperaMail, charges
that America Online (AOL( has taken weeks to even begin to address a
security hole that allows passwords to be stolen. According to Dysthe,
OperaMail has been flooded with complaints from AOL users who are
opening e-mail attachments that include a Trojan horse virus that
swipes their passwords. The password is then automatically mailed back
to the malicious sender. Victims have traced the messages back to
OperaMail, which is owned by Opera Software in Oslo, Norway. Dysthe
said he has responded to the complaints by shutting down the abusive
OperaMail accounts and, in one case, freezing an account to preserve
evidence. But he said OperaMail cannot squelch the attacker or
attackers because they rapidly reopen new accounts.

If you know of any cyberlaw updates, please send them to

That's all for this time,
see you next week

Yedidya M. Melchior 

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