As any entrepreneur or business owner knows, building a website or online storefront to advertise, promote, or sell goods or services can be a detailed, time-consuming, and expensive process. The goal of attracting even the most discerning consumer on the internet makes those extra hours and expense worth it, especially when general marketing and branding goals include repeated visits, contact, and impressions to finally engage a customer or user. All successful businesses similarly understand that protecting the logos, content, design, functionality and, most importantly, the integrity of the website. An attorney-drafted “Terms of Use” or “User Terms and Conditions” page is extremely important because it provides, among other benefits, a mechanism 1) to prevent competitor copying or intellectual property infringement, 2) to legally bind users of the website, 3) to limit the business liability in certain contexts, and 4) to comply with federal law.
1. Prevent intellectual property infringement.
Valuable dollars and hours are spent building a website for goods or services, but the failure to secure or enforce proprietary intellectual property rules can nullify all of that value. A valid Terms of Use will enumerate the myriad of intellectual property present on the business website, and will make it clear to all users (guests or registrants) that the copying, stealing, scraping, or unauthorized use of proprietary information is grounds for termination of any user account, a claim for breach of contract, and claims of copyright, trademark, or trade secret infringement, and any other remedy available at law to the business. While the deterrent impact of a Terms of Use may be debatable, failing to have a Terms of Use removes any enforcement mechanism for a business owner against a rogue user.
2. Legally bind users of the website.
Having a Terms of Use section on the business website is not required by law in the United States, but consider that it has been (and may solely be) a binding agreement enforceable by a court between any user or abuser on the internet and the business (even if no transaction of money for goods or services occurs). Because the website is the property of the business, businesses may set user standards for use of the site as well as the penalties for failing to comply, including to terminate a user account or ban future use. Having this ability is extremely important for any online business to ensure smooth user engagement and process management.
3. Limit the business liability.
A legally binding contract may include disclaimers against liability – and in certain cases, even where liability would normally be imputed by law. This includes common issue situations like outdated or incorrect marketing materials (especially those quoting prices or fees), governing the interactions between users (especially in the context of harassers or trolls), and updating the features or functionality of applications or other products. Note that by failing to disclaim against liability in these scenarios, a business may become an easy target for traditional lawsuits over small errors.
4. Compliance with privacy laws and the “privacy policy.”
If the site collects personal data that may identify an individual (e.g., a user’s email address, first or last name, physical address, or social security information), legislation like the Americans with Disability Act (ADA), Children’s Online Protection Act (CIPA), and more mandate privacy policies according to these Federal Trade Commission guidelines.
From our experience, while every business and proposition is unique, businesses should consider the following broad issues when either self-drafting or having an attorney draft the Terms of Use:
- Privacy policy (if collecting personally identifying information)
- How the user accepts the Terms of Use
- Account security
- Intellectual property rights (trademarks, copyrights, licenses)
- User-posted content and content standards
- Infringement
- Social media integration
For more information or guidance on your online business practices, or if you are ready to prepare a terms of use and privacy policy, please call our office at (323) 543-4453 to schedule a consultation and speak with our savvy attorneys.
