Protect Yourself and Your Online Business
Terms of Use or Terms and Conditions, as referred to in the context of websites, online commerce, and electronic business transactions have changed dramatically over the past 15 years, particularly in the context of what courts will recognize as an electronic contract. Traditionally, courts required several things for contracts that are simply not present in electronic transactions, the most important perhaps being the identity of both parties.
Terms of Use have come a long way since then and the “click here” terms of use (for discussion of these agreements and genesis terminology see Mark A. Lemley, Intellectual Property and Shrinkwrap Licenses, 68 S.CAL. L. REV. 1239, 1248−53 (1995)) that is part and parcel of the Terms of Use “click here to agree” standard form agreements are not only enforceable; it would be business suicide not to include them in any website that engages in any type of e-commerce of any form.
Virtually, every jurisdiction has adopted one type or another Terms of Use language accepting the idea that a website’s document/writing that a user clicks acceptance of is indeed a binding contract even if no one agrees to it in the traditional contract law sense. Every court to consider the issue has found Terms of Use licenses, in which an online user clicks “I agree” or some other similar phraseology to standard form terms, enforceable.
While Terms of Use for software that is purchased at a store (boxed software) has for some time been using Terms of Use for binding licensure, wherein a user cannot use the software without agreeing to the Terms of Use, ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1448−49 (7th Cir. 1996), more recent usage of the Terms of Use applies to use of websites, website based software, cloud based software and virtually every other type of commerce that can be had through a website.
In these situations, the Terms of Use provide that simply using the website constituted a legally binding agreement. It is not even required that the user know that use constitutes agreement, again in contravention of typical contract law language.
While the above discussion may make a business owner feel safe in the new Terms of Use age that would be a grossly inaccurate understanding of the law. To be clear, many courts that have enforced Terms of Use, have done so AGAINST the business entity, thus using that own entity’s terms of use against them. Scarcella v. Am. Online, Inc., 811 N.Y.S.2d 858, 858−59 (N.Y. App. Div. 2005) Aral v. Earthlink, Inc., 36 Cal. Rptr. 3d 229, 231 (Cal. App. 2d 2005); Am. Online, Inc. v. Superior Court, 108 Cal. Rptr. 2d 699, 701−02 (Cal. App. 2001).
What this should tell a savvy business owner is that in order to protect oneself in this age, not only is it important to have a Terms of Use on one’s site, but it is vital to have the correct Terms of Use. A business owner who has the appropriate Terms of Use language can rest assured that they are protected in the digital age from most reasonably foreseeable events.
Click here to see a sample of our attorney-drafted website terms of use (terms and conditions).
A website operator should keep in mind a few simple principles: First, the intellectual property on the website belongs to the owner. An owner can set REASONABLE terms of how people can view and use that material. The key here is reasonable. Courts will never enforce terms that are overly onerous and difficult. By way of example, a website operator can reasonably say something to the effect that the material contained in the website can only be used under certain circumstances and cannot be reproduced, even if the user didn’t read that before clicking on the “I agree.”
The website operator cannot say, again by example that the first-born child of any user belongs to the website operator, even if the user sees that term and clicks “I agree.” Think of the Terms of Use as a sort of “no trespassing” sign to your intellectual property, with an asterix by the “NO” allowing some trespassing in certain situations.
Next, the click here Terms of Use is indeed a contract. Because the user has “signed” the contract by clicking “I agree,” every court to consider the issue has held these Terms of Use enforceable. The website operator should look to the Terms of Use to guide the contract terms.
One of the most important aspects is Forum Selection. This is where the legal action or arbitration must take place in the event that litigation is required under the terms of the contract. The website operator can specify the State and County of the legal action. Typically this is done in a forum most convenient to the operator (either geographically, or operator-friendly forums).
Additionally, arbitration clauses are also another important inclusion in the Terms of Use. Arbitration, made mandatory under the Terms of Use, allows the operator to save substantially on attorneys’ fees and litigation clauses, by requiring that the parties first undergo arbitration. Even binding arbitration is now allowed, where it previously was not, again so long as the terms are reasonable.
In short, a Website or Blog Terms of Use should give a visitor to the website a guide as to how they can use the intellectual property, interact with the website or blog, and what ramifications, there are for violation of that use. It can be used to limit the website or blog owner’s liability for reasonably foreseeable events, and limit costs of fighting the Terms of Use.
A website or blog owner cannot possibly draft the Terms of Use themselves without the use of an attorney, and should look to experts and or businesses that provide a professionally drafted Terms of Use as a template for a reasonable, enforceable Terms of Use contract.
