Edwards Wildman Client Advisory: Creating & Modifying Online Terms of Use - What to Do, What Not to Do


    Instagram LLC caused an uproar last December when it announced changes to its terms of use agreement. The blowback continued recently when a customer filed a class action lawsuit in California state courts to stop the implementation of Instagram’s new terms. Rodriguez v. Instagram, LLC, Case No. CGC-13-532875 (Super. Ct. San Fran. July 16, 2013). This lawsuit is in the wake of a federal court voiding Zappos.com’s terms of use after the web retailer sought to compel some customers to arbitrate a dispute over a customer data breach, finding that providing for a unilateral right to change terms made any agreement illusory and, further, that the browsewrap terms were insufficient to establish the mutual assent necessary to create a binding agreement. In re Zappos.com, Inc. Customer Data Sec. Breach Litig., 893 F. Supp. 2d 1058 (D. Nev. 2012). Online and mobile publishers, service providers and retailers should revisit their terms of use, service and sale to look for similar vulnerabilities. Certain steps can be taken when implementing and revising such online agreement to make them more likely enforceable.

    Instagram’s New Terms of Use

    Instagram is a social networking service that allows users to post images and videos, apply digital filters, and share the images on a variety of social networking websites, such as Twitter, Tumblr, Flickr, and Facebook, Instagram’s parent company.

    In December 2012, Instagram announced that it was amending its terms of use. The new terms expand the scope of the license granted by users to Instagram, essentially clearing the way for Instagram to use and license members’ data and photos for more expansive commercial purposes. By contrast, under the old terms, Instagram had a more limited right to exploit user-generated content. Despite the uproar, Instagram’s new terms of use were implemented in January 2013.

    Lawsuit – Rodriguez v. Instagram LLC

    On July 16, 2013, an Instagram customer Lucy Rodriguez sued Instagram, purportedly representing a class of other Instagram users, alleging that the new terms retroactively grant Instagram an unlimited license to commercially exploit its members’ content in violation of the implied covenant of good faith and fair dealing and California unfair competition laws, CAL. BUS. & PROF. CODE §§ 17200, et seq. Further, since Instagram purportedly does not purge user photos after an account is deleted, the plaintiff alleges that is impossible to stop Instagram from commercially exploiting user content that was uploaded under the old terms. As a result, plaintiff alleges that even if a user does not agree to the new terms and deletes their account, Instagram saves their content. Thus, it is alleged that users cannot avoid the application of the new terms even if they attempt opt out by deleting their accounts and never accept the new terms.

    The suit asks the court to enjoin Instagram from implementing the new terms, prevent Instagram from claiming any rights of ownership over user data and photos, and force Instagram to allow users to control how Instagram or third parties can exploit such photos and data.

    What Can Companies Do?

    The following are some precautions that companies can take to improve the likelihood that online terms, and changes to them, will be enforceable.

    Use A Clickwrap Agreement. Website terms of use agreements generally come in two forms: “clickwrap” and “browsewrap” agreements. A “clickwrap” agreement requires users make an affirmative action to assent to the underlying terms, for example, by clicking an “I agree” button. Courts have typically upheld these as enforceable finding evidence of mutual agreement. In a “browsewrap” agreement, by contrast, users do not expressly assent to the terms, but are said to be bound by merely visiting the website where a link to the terms is somewhere posted. While some courts have upheld browsewrap terms, particularly where notice of their application is clear and conspicuous, others have not done so finding insufficient evidence of mutual assent. The court in Zappos found that Zappos’ browsewrap agreement was void because the terms were buried at the bottom of the website, and that the record did not establish that the plaintiffs knew of and assented to the terms. Using a clickwrap agreement is a good first step to ensure that the terms of use are legally enforceable.

    In addition, the following steps can further strengthen a clickwrap agreement:

    • Layer agreements with notice of the most material and unexpected terms highlighted upfront.
    • Require a two-step clickwrap agreement (e.g., check a box next to “I agree to the Terms of Use [Link]”) followed by the need to click a button (labeled “ACCEPT”) to make intent to assent clear. There are other variations on clickwrap mechanics, providing lesser or greater certainty depending on approach.
    • Maintain records of user acceptance.
    • Allow users to print or, especially for mobile device users, e-mail or otherwise send themselves the terms.

    Obtain Consent To Changed Terms. The Instagram lawsuit alleges that the new terms provide no consent mechanism before the terms were enacted and purport to bind users that no longer even use the service and accordingly make unilateral and retroactive changes. If notice of changes is clearly given, particularly when a service is provided for free and not subject to any specific period of time, then the operator can require that accepting the new terms is a condition of continued use. Again, clickwrap acceptance to such changed terms is preferable with respect to certainty of enforceability. Further, companies should lay out in the terms a clear procedure for providing notice to users and how consent will be accomplished. If carefully structured, prospective changes can be accomplished by continued use.

    No Unilateral Right to Change Agreement. The Instagram terms of use says “We reserve the right to alter these Terms of Use at any time.” The court in Zappos voided terms with identical language. Courts are generally hostile towards agreements that provide one party the unilateral right to change the terms of a contract, and may strike such a provision as unconscionable or, like the court in Zappos’, void the entire agreement as illusory – something that all operators should want to avoid. Rather, as discussed above, operators should provide for a methodology for notice and consent with regard to amending website or mobile app terms of use, which will vary depending on the nature of the service and the original terms. Further, operators should not retroactively apply changed terms until users are given notice and have consented to the new terms.

    Edwards Wildman’s Advertising, Digital Media, and e-Commerce practice regularly assists clients in developing Terms of Sale, Terms of Use, End User License Agreements, and other electronic contracts. If you would like further information, please contact the Edwards Wildman lawyer responsible for your matters or one of the authors linked above.

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