Legal Risks and Solutions to E-Marketers’ Data Mining
© Springer-Verlag Berlin Heidelberg 2015
Yimeei Guo (ed.)Research on Selected China’s Legal Issues of E-Business10.1007/978-3-662-44542-6_33. Legal Risks and Solutions to E-Marketers’ Data Mining
(1)
Management Science Department, Xiamen University, Xiamen, 361005, China
Abstract
Nowadays, data mining is popular in the science and mathematical fields but also is utilized increasingly by marketers trying to distill useful consumer data from Web sites. Data mining is a powerful new technology with great potential to help companies focus on the most important information in the data they have collected about the behavior of their customers and potential customers. In addition to e-privacy concern of data mining, other disputes are also becoming more popular for e-marketers. Therefore, this article discusses some legal risks of e-marketers’ data mining imposed by the captioned issues on the net and presents some solutions that enable data mining projects to proceed without violating these constraints.
Keywords
Data mininge-PrivacyCopyright infringementTrespassLegal solutions(Published by “2005 Int’l Conference on Services Systems and Services Management-Proceedings of ICSSSM’05” of IEEE, Inc., June 2005, pp. 1085–1089<EI,ISTP indexed>)
3.1 Introduction
As we enter the twenty-first century, every opinion, interest, and lifestyle known to man seem to have found a home somewhere on the Internet. The new technology and the new form of commerce it has generated have opened up much debate about how to deal with traditional business issues, namely privacy, security, and intellectual property protection right (IPR).
According to Thearling (1995), a senior director of Wheelhouse Corporation, “data mining” is a set of automated techniques used to extract or previously unknown pieces of information from large databases. He points out that data mining is not a business solution but simply the underlying technology. In technical terms, data mining is described as the application of artificial intelligence (AI) and other intelligent techniques such as neural networks, fuzzy logic, genetic algorithms, decision trees, nearest neighbor method, rule induction, and data visualization, to large quantities of data to discover hidden trends, patterns, and relationships.
Whereas Cavoukian (1998), the Information and Privacy Commissioner of Ontario, says that successful data mining makes it possible to reveal patterns and relationships and then uses this “new” information to make proactive knowledge-driven business decisions.
Nowadays, data mining is popular in the science and mathematical fields but also is utilized increasingly by marketers trying to distill useful consumer data from Web sites. Data mining is a powerful new technology with a great potential to help companies focus on the most important information in the data they have collected about the behavior of their customers and potential customers.
For the hundreds of companies that develop and market such online tracking and data mining capabilities, the development of these technologies and their adoption by millions of Web sites represent vital entrepreneurial opportunities. Clearly, these online data tracking and analysis products are much in demand. For all types of companies that do business on the Web, learning as much as possible about visitors is a precondition for offering customized services and may be the key to growth and expanded revenues.
With data mining tools running on massively parallel-processing computers, someone may have access to all kinds of data about anyone in a database. All these data do not have to reside in one physical location; as the Web grows, information of this type becomes more available to more people.
For example, www.Amazon.com started featuring thousands of individual bestseller lists calculated by zip codes, workplace, and colleges. DoubleClick, the Internet’s largest advertising company, faithfully captures each Web browser’s mouse click and uses the information to direct consumer advertising. MessageMedia Inc. (a Softbank Holdings Inc.) company even links traditional direct marketing databases to cyberspace pitches. Other companies such as Microsoft, Netscape, and FireFly Networks also track individual interests in everything from music to Web pages.1
All these practices could raise serious privacy concerns. Among them, under pressure from privacy advocates, DoubleClick announced in March 2000 that it would postpone its profiling scheme until the federal government and the e-commerce industry agree on privacy standards.2
In addition to e-privacy concern of data mining, other disputes are also becoming more popular for e-marketers. For instance, data mining involves copying data from one site and reproducing it on the other. Queries can be set out to extract information from another site and report it on your site. A number of sites that contain large amounts of data are very concerned about this. In 2000, Australia Web site Telstra was in dispute with Desktop Marketing over the ownership of its white pages entries and whether or not copyright exists.
Earlier in 2003, American Airlines (AA) sued Farechase, Inc. in Federal District court in Texas, claiming that Farechase’s screen-scraping of AA’s flight information from www.AA.com was illegal and won a temporary injunction against Farechase, Inc., prohibiting it from the sale or distribution of its Web automation software. www.Register.com also won a preliminary injunction in 2004 enjoining Verio, Inc., from either utilizing a search robot to obtain information from www.Register.com’s Whois database or utilizing information derived from that database for mass unsolicited advertising by telephone, direct mail, or electronic mail.
Therefore, this article plans to discuss some legal risks of e-marketers’ data mining imposed by the captioned issues on the net and presents some solutions that enable data mining projects to proceed without violating these constraints.
3.2 e-Privacy Concern on Data Mining
As Mary J. Cronin, professor of management at Boston College, pointed out: If companies on the Internet continue to soak up information as fast as customers can click through a Web site, then privacy will be hostage to technology.
A May 1999 survey on privacy in The Economist notes that “the trade in consumer information has hugely expanded in the past 10 years. One single company, Axicom3 Corporation in Conway, Arkansas, has a database combining public and consumer information that covers 95 % of American households.” In fact, Acxiom has databases profiling most households in the USA. The company sells its information to both the public sector, including law enforcement, and the private sector, including such industry giants as Walmart and Citicorp.
A Forbes’ cover story in November 1999, “I Know What You Did Last Night,” further highlights the way different slices of consumer data can now be pulled together to create a composite picture of any individual’s life. “Computers now hold half a billion bank accounts, half a billion credit card accounts, hundreds of millions of mortgages and retirement funds and medical claims and more. The web seamlessly links it all together. As e-commerce grows, marketers and busybodies will crack open a cache of new consumer data more revealing than ever before.”4
In an effort to survive the dot-com bust, many online retailers have become even more dependent on online profiling. Many marketing companies argue that they do not use individual personal information, but rather they use trends to target their marketing activities. But there is still the concern that these companies, should they wish, may access personal information of Internet users.5 The fact is that there is virtually no regulation of Internet marketers or data mining companies. Internet consumers are forced to place concern for confidentiality in a company’s goodwill and internal privacy policies.
However, any discussion of e-privacy also requires consideration of international aspects. The Internet does not stop at any countries’ borders, nor does the transfer of personal information. In Europe, privacy of personal information is considered a basic human right. The European Union Data Directive6 requires the protection of personal information of European Union citizens. This EU law requires that no information be shared with companies in other countries who do not agree to protect said personal information.
The directive adopts a broad definition of the term “personal data,” so as to include any information relating to an identified or identifiable person. For instance, in AIMedia,7 personal data consist of collected data (the user has answered questionnaires) and extracted data (the AIMedia deduces user characteristics based on purchase history and statistical comparisons). These data form a user profile, which is directly related to the customer’s identity. Thus, all user-related data in the AIMedia user profile are considered “personal data.”
In July 2000, the EU and the US Department of Commerce worked out a “Safe Harbor” agreement to protect the privacy of European Union citizens. The “Safe Harbor” agreement became effective on November 1, 2000. Under this agreement, US companies that establish privacy polices will be protected from prosecution by EU nations.8