6 Important Terms in Your Website Terms of Use

February 10th, 2010

Website Terms of Use are challenging for many entrepreneurs.  Many new companies have limited cash resources so deciding to pay a lawyer for a set of TOU can be a hard decision, especially with so many free examplars out on the web.  You should definitely review existing TOU prepared by other companies in your space.  At the same time, details matter a lot.  A company in your sector may have a different set of features that makes its TOU mostly, but not quite applicable to your exact circumstances.  I can’t tell you exactly what should go in your terms or whether you always need to pay a lawyer to prepare them, but here are some key terms to think about when you review the TOU landscape in your field.

This is a fairly obvious one, but will your site’s model be free, freemium or full-fare to users?  Will there be a trial period?  You would get extremely different pictures of what is standard for a news website depending on whether you used WSJ.com or NYTimes.com as a model.

Use and Content Licensing
This point is critical.  Will your users principally browse content on your site?  Will they use it to filter content from other sites?  Will they post a lot of original content? Reblogged content?  Will their information all be publicly available or will users maintain private information?  There are a lot of variables here and good terms of use will tailor themselves to your site’s particular needs.

For example, if your site is social like Flickr, your terms will reflect a higher degree of concern for ownership rights and you will want your users to affirm that they own or have rights to the content they post in very clear terms.  You also want unequivocal rights to display posted content publicly.

At the other end of the spectrum is a site like Mint, where users import private information on their banking and financial records.  You would want your users to grant you a license to incorporate their financial information within their accounts, but you would probably not want a lot of language about public display lest you cause confusion about what information you can/will make public.

Social Networking
Will your users interact on the site?  If so terms regarding a code of conduct are warranted.  Nearly all new web businesses I talk to these days envision some kinds of user interaction, so this is pretty close to “boilerplate” but I beef it up or trim it down depending on the site’s exact model.

Third Parties
If your site relies on advertising, sponsorship or other types of promotional content from third parties you need to explain to users what types of interaction to expect, what types of user information you can give to third parties and when you can/will give it.  This is a touchy area since sites need to develop partnerships and mine value from their user bases, but users are very wary of being spammed.  There is a delicate balance to be found depending on a site’s model.

Governing Law/Disputes
This one varies a bit less from site to site.  The important thing to know is that website TOU are enforceable in court, but fairness is a strong consideration.  If your TOU require users to come to a specific location to bring action against you, be aware that a court may well decide to throw out the term if the value users get is low.  Having a bunch of onerous provisions in your TOU may well lead a judge to look unfavorably on the whole thing as well.  There hasn’t been that much litigation over TOU in the last 15 years so it is hard to draw strict rules here, but the rule of thumb is to be reasonable.

Notice of Changes
The last important point is- what happens when you need to change your terms?  Most TOU say that changes are effective when posted to the site, and there is also case law saying that it is not reasonable to require users to check up on the current TOU continually.  Opinions vary widely on how to manage this, but my own view is that (i) non-material changes are ok to simply post, but (ii) if you need to add significant provisions or change material terms, you should let your users know by email as well.  That is why my practice with TOU is to tailor terms as carefully as possible to a client’s needs, and also leave room for the model to evolve so that we don’t need to revisit the TOU frequently and/or send out notices to users except in rare situations.

This is a complex topic and I have certainly not tried to be comprehensive.  Proper treatment of this subject would also include key terms in a Privacy Policy, since privacy policies and TOU go hand in hand.  This post is long enough already, though.  I will come back to privacy another day.




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