ARTS & FARCES internet

Hold on to your virtual wallets, secure electronic commerce on the Internet—long promised but never quite delivered—is suddenly a lot closer to being real. IBM, MasterCard, Microsoft, and Visa have formed an alliance to support a new standard for providing secure transactions over the Internet. The new standard, Secure Electronic Transactions (SET), is based on public-key cryptography and digitally signed electronic certificates issued by credit card companies and banks. Customers will send these certificates to merchants who will use them to authorize the transaction with the credit card company or bank. Microsoft, lately quick on the trigger, has announced that it will build digital signature technology into its MS-Windows operating system.

Most of us think nothing of handing a credit card over to a merchant in the physical world, but hesitate to do the same in the virtual world. This is something I’ve never quite understood, and I’ve chalked it up mostly to the resistance of commercialization inherent in the Internet culture. Another part of the problem is related to the difficulty Net-based businesses experience in dealing with credit card companies and banks to obtain a merchant account. Add to the mix the historical lack of support for new electronic commerce technology by merchants, credit card companies, and the banks and it’s no surprise why Internet-based commerce has been mostly ignored.

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In a front page article on July 7, 1996, the Washington Post reported that the use of federal electronic surveillance in general, and telephone wiretaps in particular has nearly doubled during the Clinton administration. In the past, the high cost of wiretaps—more than US$70,000 per month for a federal wiretap—has deterred their use, but in recent years, spending levels on federal law enforcement has risen to levels that remove the cost concerns.

Jim McGee, the Washington Post staff writer who authored the article, quotes the person responsible for approving wiretap applications for the Justice Department as saying that wiretaps rose 32 percent in 1993 and between 30 percent to 40 percent in 1996. By way of contrast, there were 340 federal court orders issued allowing electronic surveillance in 1992—the last year of the Bush administration—and 672 in 1995. Estimates for 1996 are above 700 and the Justice Department has been on something of a shopping spree, adding more electronic equipment (including a US$33 million program to replace single-line wiretapping equipment with new devices that can monitor up to 40 lines at once), surveillance techniques, and personnel.

Alarmingly, these figures do not include any electronic surveillance court orders with regard to “national security” that have also risen at a sharp rate. According to a 1995 report by the administrative office of the U.S. Courts, governmental requests for electronic surveillance have become so commonplace that it’s been years since a prosecutor’s application for a wiretap order has been denied.

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According to a Forrester Research study of Web site economics released in mid-June 1996, Web-based content publishers shouldn’t expect to turn a profit until 2000. Content publishers are restricted to three basic revenue streams: advertising, subscriptions, and transactions, which so far have proved to be more of a trickle than a stream. Don’t expect for that to change in the near future, Forrester warns.

Forrester’s research indicates that an “average” Web site generates 1996 revenues of about US$170,000 but must meet expenses of US$1.37 million for the year. The costs associated with providing content on the Web will account for more than 75 percent of operating costs through 2000, according to the Forrester report.

The report maintains that over the next three years, content publishers can expect to see subscription revenue grow from US$60,000 in 1996 to US$210,000 in 2000. Similarly, transaction-based revenue will likely grow from US$10,000 in 1996 to US$60,000 in 2000. Unfortunately, costs will also continue to escalate, reaching US$1.88 million in 2000.

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As a writer, I get lots of press kits. Most of them are pretty boring; some of them are pretty creative. Before they caught the suspected Unabomber, some of them were even pretty scary. When a press-kit-like package from E-Data arrived this month, I figured it was one of the more boring ones. When I opened it up, I found an offer of “amnesty” for alleged patent infringement by ARTS & FARCES. All I had to do was sign a license agreement and pony up cash. Potentially lots of cash. As you can see below, E-Data’s amnesty offer also carried a threat.

E-Data, a Utah Corporation located in Secaucus, NJ. that runs a gift shop on the Web, claims it owns a patent on electronic transactions. Well, technically, the patent E-Data holds, U.S. Patent No. 4,528,643, relates to a “system for reproducing information in material objects at a point of sale location.” E-Data’s position seems to be that this 1985 patent, which it acquired about two years ago, grants it ownership over the means of electronically distributing digital data to a purchaser either online or on encrypted electronic media like CD-ROMs.

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A proposed digital copyright bill—the Omnibus Copyright Package—being marked up in the House of Representatives in mid-June 1996 could expose U.S. Webmasters to lawsuits if it becomes law. The proposed bill, backed by IBM, Microsoft, the Software Publishers Association, the Motion Picture Association of America, Cox Cable, Time Warner, Times Mirror, and Viacom would impose fines of up to US$1000 per violation if links are forged to sites that include material that infringes another’s copyright.

Current copyright law doesn’t address the transmission issues that take place on the Internet, such as when a copyrighted story from a publication is distributed to associates via email over a public network. In addition, current law makes any copyright infringement the responsibility of the infringer, regardless of whether or not they were aware of the infringement. By contrast the first draft of the National Information Infrastructure Copyright Protection Act (H.R. 2441) holds Internet service providers responsible for any copyright infringement that takes place on its servers. Subsequent changes to the proposed bill would give Internet service providers an opportunity to rectify any unwillful infringement without penalty.

Some content providers want to see the legislation pushed even further, redefining hypertext links as “publications.” These content providers, such as Viacom who has been the most vocal in its position, claim that when a link is created to a document owned by another, the creator of the link derives benefit from the external link. Viacom representatives believe that if you “showcase” an external site by creating a link to it, you should be held responsible for that external site’s content.

More reasoned copyright holders hope emerging technology—such as IBM’s Cryptolope, which provides a secure digital wrapper for content—will provide a solution.

Opponents to the legislation argue that Internet service providers, like telephone companies, act as common carriers (information conduits, nothing more) and can’t be held responsible for copyright infringements of their users.

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