Terms of Use | TOUs | Privacy Policy Liabilities


Terms of Use: Don't Let Your Guests Misbehave!

March 17, 2011

Inviting people to your website is like having them over at your house for Thanksgiving; neither their behavior nor that of your other guests can simply go unchecked or you’ll be the one who has to pick up the pieces. These days, most businesses with an online presence offer some services via their website and allow their users or members to download or upload files, media, chat, create content, give recommendations, purchase good or services, advertise, etc. However, exciting websites that are packed with innovation and functionality can quickly become hotbeds of legal issues So having the appropriate rules of conduct and terms of use and requiring that a website’s visitors be bound to them are critical steps in protecting the website owners against potential legal claims.

Whenever users are empowered to do anything more than simply reading static information posted on a website, there’s probably a need for a Terms of Use agreement (“TOU”) to protect the website owner from potential legal claims. TOUs are a contract between an online business and the people accessing and using the site. In order to effectively protect business interests, a TOU must be carefully worded to deal with the particular range of legal issues germane to that business. As different business scenarios are added to the mix, TOUs typically become more and more critical, complex – and lengthy!

What flavor of TOU does my business require?

While smaller companies are sometimes tempted to cut and paste what they consider canned language for privacy policies –which by itself is a bad idea- (see discussion of privacy policies in the last issue of POINTERS), most realize that TOUs are almost always custom drafted, critically important, and not an area to improvise.  The many business-specific flavors of TOU terms include:

  • License to use the website. Any commercial website will typically use the TOUs to grant website visitors a limited license to access the website for personal use, and prohibit them from copying or selling its content without permission. The TOUs will typically include verbiage to protect trademarks, logos, and other proprietary information, often including web design of the site. The TOUs may also protect the URL, stating under what conditions users are permitted to link to the site (e.g. visitors must be 13 and over).
  • E-Commerce.  Whenever a business sells goods or services online – be they Amazon, Ebay, or the stay-at-home mom selling handmade gifts on her home-designed website – TOUs are necessary to dictate how payment shall be made, and specify whatever other charges the customer must pay, including taxes, fees, shipping, etc. Any website selling financial products or services must almost always include a TOU agreement that requires the consumer to assume the inherent risks of investing and trading, as well as myriad other considerations. See Charles Schwab’s TOUs, for a detailed example.
  • Software licensing. If a website offers digital downloads to its users, it will almost certainly need TOUs (often called End User License Agreements (“EULAs”) in this context) to protect that intellectual property under copyright law, limit the website owner’s liability for any damage caused to the user’s computer, prohibit users from reverse engineering the software, etc.
  • Location aware information.  Website applications that deliver online content to users based on their physical location, such as Google Maps, Facebook Places, and the like, raise obvious privacy and security concerns. Not only is it critical that these be opt-in features, allowing users to disable them whenever they choose, but website owners should be careful to disclaim resulting liabilities via appropriate language in their TOUs.
  • Chat rooms. Websites containing chat rooms, discussion boards, forums and the like will need to include rules of conduct to govern their users’ behaviors, providing guidance and consequences related to spam, profanity, irrelevant postings and solicitations. See Rules of Conduct for Microsoft Forums for a representative example.
  • Children and minors. Of course, any website that could – or should not – be used by children should contain TOUs that address that scenario. Many websites require users to verify their ages in order to ensure they are of legal age to complete the transaction, and to disclaim liability for user misrepresentation with respect to age.
  • Recommendations and referrals. Whenever a website enables or encourages its users to rate, recommend or refer other users or third parties – think eBay, Amazon’s and CNET customer feedback and reviews –TOUs should include language disclaiming the website owner’s endorsement of its users’ statements and opinions, and liability for any resulting damages. The TOUs will typically also grant the website owner the right to use that content however they please.
  • User-generated content.  If the website features any user-generated content, a company needs TOUs that include representations and warranties as to ownership and noninfringement of posted content. In other words, the website user must agree that they use the website at their own risk, acknowledge that the website owner disclaims all representations or warranties about the content, as well as all liability for damages resulting from use of the website. Theyshould also include indemnification language in case a third party claims that the content is infringing on their copyrighted materials.

When you think about user-generated content, no company springs to mind faster than YouTube, the wildly successful website which enables you to “Broadcast Yourself” by uploading and sharing “originally created” videos. In 2007, Viacom sued Google alleging that YouTube (acquired by Google in 2006) engaged in “massive intentional copyright infringement” by enabling users to post 160,000 video clips taken from Viacom’s various cable channels. Google successfully defended against the suit by taking refuge in the Safe Harbor protections provided by the Digital Millennium Copyright Act, under which service providers can claim immunity to copyright infringement liability if they promptly remove illegal user-generated content once notified of a violation.

While many lessons can be learned from Viacom v. Google, the most relevant to our discussion is the fact that YouTube’s tightly-woven TOU, particularly the warranty disclaimer and indemnification language, in concert with the DCMA safe harbor provisions, were critical to Google’s successful defense against Viacom’s billion-dollar claim. Indeed, when you begin uploading a video to YouTube, you encounter the following message, apart from and in addition to the standard TOUs: “Important: Do not upload any TV shows, music videos, music concerts, or commercials without permission unless they consist entirely of content you created yourself. The Copyright Tips page and the Community Guidelines can help you determine whether your video infringes someone else's copyright. By clicking "Upload Video", you are representing that this video does not violate YouTube's Terms of Use and that you own all copyrights in this video or have authorization to upload it.” Google was able to prove not only that they removed the infringing materials almost immediately upon notice, but also that YouTube’s TOU adequately put their users on notice that the site owners assumed no liability for copyright infringement on the part of their users, and that they would not police the site for stolen content.

So before entering discussions with your attorney about drafting a robust, comprehensive TOU agreement that properly addresses your business scenarios, it’s worthwhile to make a long list of any and every thing that could possibly go wrong with people visiting your website and make sure you’ve addressed those specifically.  You certainly don’t want your business to wake up with a hangover because you let a virtual “guest” ruin the party!