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Online Terms of Use – What Should We Include?

Logo for Quora, where Dana Shultz answered a question about online terms of useThis post about online terms of use is based on a Quora question that I answered today. The question and my answer are reproduced with minor edits below.

Q. What things should I include in an online terms of use agreement for a new internet startup?

A. Assuming that your lawyer is experienced at drafting terms of use, s/he will be able to contribute the required knowledge of relevant legal issues.

Your input is critical with respect to the specific needs of your business:

  • Identify the various classes of users of your site.
  • For each class, describe the business relationship between users and your site / business. Include risks and other issues that particularly concern you.
  • Examine the terms of use for similarly-situated existing sites to uncover additional issues that you may not have thought of on your own.

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Which Protections Should be Included in Online Terms of Use?

Knight's armor with shield and mace

This post is based on my response to a LawPivot question from an entrepreneur who wanted to know which protective provisions should be included in his website’s terms of use.

The provisions that bear most closely on protecting website owners include those pertaining to:

  • Disclaimer of warranties made by the owner
  • Limitations on the extent of the owner’s liability
  • Users’ warranties, especially as concerns any information that they may post
  • Users’ acceptable behavior policies, which set the stage for . . .
  • The owner’s right, in its sole discretion, to terminate use privileges
  • Users’ obligation to indemnify the website owner against liabilities that result from user activities
  • A requirement that any lawsuit related to the website be brought at a venue that is convenient for the owner
  • An arbitration provision as a way to avoid litigation (though I am not a big fan of arbitration because it can be expensive and precludes small-claims court, which can be relatively quick and inexpensive)

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Changing Online Terms of Use: How Detailed Must Notice Be?

Blue change button

In “Changing Online Terms of Use? Be Sure to Give Notice First!“, I explained that if you are going to change a website’s terms of use, you first need to provide notice that the terms have been changed and explain how they have been changed. This post – based on a Quora question and my answer – discusses how detailed the notice must be.

Unfortunately, there are no definitive rules regarding the level of detail that the notice must contain. I have two guidelines that I like to follow.

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The Top Ten Legal Mistakes of Startup and Early-stage Companies

I am pleased to make the article “The Top Ten Legal Mistakes of Startup and Early-stage Companies” available as a Free Download on the Downloads page.

Here are the ten mistakes that are discussed:

  1. Failing to comply with corporate formalities
  2. Pretending that employees are independent contractors
  3. Neglecting to provide and update an employee handbook
  4. Failing to establish or adhere to discipline or termination procedures
  5. Failing to ensure that the company owns its intellectual property
  6. Believing that “open source” means “no restrictions”
  7. Thinking that all NDAs have the same terms
  8. Believing that websites can unilaterally change their terms of use
  9. Using another company’s standard-form agreement
  10. Giving “family jewels” to an overseas supplier

Related post: Top Ten Intellectual Property Mistakes of Startup Entrepreneurs

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Changing Online Terms of Use? Be Sure to Give Notice First!

First page from the Douglas case, which discusses changes to terms of use

Let’s assume that you have a website with great content. When users sign up, they eagerly click the “I agree” button to accept your standard terms of use. In those terms, you give yourself the right to make future changes to the terms of use via the following provision:

“We may change these terms of use at any time by revising them on our website. You agree to be bound by any such revisions. Therefore, you should review these terms periodically. If you do not agree with any revision, you must stop using our website.”

Changes to Terms of Use Require Notice

This approach is routine on the web and, until recently, was considered by many to have precisely the effect that was intended. In 2007, however, the United States Court of Appeals for the Ninth Circuit (which has jurisdiction over federal cases in the Western U.S.) stated that website owners must do more than just change terms of use online if they want the changes to take effect for existing users.

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