Articles Posted in Terms of Service

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A Chicago law firm has challenged Jay-Z and Kanye West, filing a class action complaint for violations of the California Business & Professions Code, fraudulent inducement and unjust enrichment in the Northern District of California. The complaint alleges that Tidal, a music streaming service owned by Shawn “Jay Z” Carter and Kanye West, was in financial straits earlier this year but that help arrived when Kanye West used his Tidalvaluable star power on Twitter to encourage his followers to subscribe to Tidal by tweeting that his highly anticipated new album The Life of Pablo would only be available on Tidal. Mr. West also tweeted that the “album will never never never be on Apple. And it will never be for sale… You can only get it on Tidal.” The complaint further alleges that subsequently “[n]ew subscriptions to the streaming platform skyrocketed, tripling its consumer base from 1 million to 3 million subscribers in just over a month.” All would have been well except that Mr. West made The Life of Pablo available through Apple Music, Spotify and his own online marketplace a month and a half after its initial release.

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Frequent readers of our blog will recall that in prior posts on companies such as Uber, Ashley Madison and Twitter, we have stressed the importance of having a robust terms of service (TOS) agreement. In many instances, TOS, if adeptly deployed, can limit a social media or gaming company’s liability to its users. We now see that TOS can also effectively limit the remedies available to these potential plaintiffs.
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The future of ride-sharing companies has hung in the balance for more than two years while class actions and labor complaints were pending against industry giants Uber, Lyft and others. The ride-sharing companies have primarily fought with their drivers over the driver’s employment status—a conflict between whether the drivers are employees entitled to benefits or independent contractors responsible for paying for their own expenses such as gas and vehicle maintenance. (See our earlier posts, Uber Is Driving an Unknown Road and Avoiding Uber Trouble via Good Terms of Service.) After a tide of unfavorable court decisions for its competitor Uber, on Tuesday, Lyft agreed to settle a California class-action lawsuit brought in 2013 by its drivers seeking reclassification from independent contractor to full-time employees and the benefits associated with employee status.

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Stories of interest this week include the doggy IDing skills of the Facebook AI, Apple looking to apply Force Touch to its keyboards, the WWE’s experiment with virtual reality, Intel’s plans for the Internet of Things, and more…

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We often espouse the value of comprehensive, up-to-date terms of service (TOS) that consistently reflect your current business. And for good reason! Plaintiffs’ attorneys will scrutinize your TOS before helping your users sue your business for “taking advantage” of them without their consent and knowledge. Wilford Raney’s attorneys did the same for Twitter’s TOS before bringing their class action lawsuit against the social media giant for allegedly invading Raney’s privacy (and the privacy of similarly situated individuals) by replacing user-provided hyperlinks with its own “t.co” short link in “private” direct messages.

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Do you consider yourself famous? If the answer is no, then you have likely never been concerned with the invasion of your right of publicity. The right of publicity is the right of a person in his or her identity—name or likeness or any other indicia of identity. This right protects persons from the taking of an identity for commercial gain without proper remuneration. For example, a cereal manufacturer could not place a picture of a celebrity on the cereal box without consent by that celebrity (and a license to use the picture, if protected by copyright law). Using such a picture would necessarily create a false association between the product—the cereal—and the celebrity. Because the celebrity has value in his or her likeness, the right of publicity allows the celebrity to protect that identity (and not have it be devalued or taken advantage of by others for commercial gain).

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A recent massive data hack of an online dating site, Ashley Madison, once again proves that what one publishes, says, or does online, even in seemingly private forums, is never completely private. It’s also a reminder that the legal recourse available in less traditional data breaches can be severely curtailed by what can be a formidable obstacle: a company’s Terms of Service.

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In a recent lawsuit, Uber Technologies Inc. is accused of violating California’s Unfair Competition Law. Specifically, the complaint alleges that Uber misleads its users by: (1) falsely advertising its services as cheaper than a typical cab company for specific routes when its services can actually be more expensive during certain peak times, and (2) presenting offers for free ride credits in exchange for referring business without notification prior to the users making the referral that the free ride credits will expire. Although the allegations in the lawsuit do not mention Uber’s terms of service, the facts alleged in the lawsuit highlight the importance of having comprehensive terms of service.

To give a little context, terms of service (also known as “terms of use” or “terms and conditions”) are rules which a user of a service must acknowledge and agree to abide by to use the service. In many instances, a company can successfully obtain early dismissal of a lawsuit by relying on its terms of service. For example, if a lawsuit is brought against a company for misleading users solely on the grounds of allegedly failing to give notice of certain limitations, but those limits are clearly set forth in the company’s terms of service (and do not violate federal or local laws or regulations), the lawsuit may usually be dismissed very early in litigation.

As of the date of the writing of this post, for instance, Starbucks’ terms and conditions for its reward program spell out the expiration period for its “free drink or food item” rewards that are credited to a user’s account after certain requirements are satisfied. Prior to becoming an authorized user of the reward program, the user must agree to the expiration period set forth in Starbucks’ terms and conditions for the rewards.

Uber users similarly must agree to Uber’s terms of service prior to becoming an authorized user of its service. As of the date of the writing of this article, however, Uber’s terms of service do not appear to explicitly describe when and how its rates may change from its advertised rates or when free ride credits will expire. While there may be other ways in which Uber can approach the recent lawsuit, it is likely that early dismissal of the lawsuit based on its terms of service may have been possible had it included the foregoing rate and free ride credit terms.

All in all, it’s just another reminder that the going rate for an ounce of prevention remains a pound of cure.

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Thank you to everyone who joined us in both New York and Washington, DC for our Social Media Week events – Game On!

Special thank you to all of our panelists: Randy Leibowitz, Mike Scafidi, Tim Ettus, Lou Kerner, Peter Corbett, Jim Gatto, Sean Kane, Lauren Lynch Flick and Tina Kearns (many featured in the picture and video below). 

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According to a recent report, Instagram lost nearly 25% of its users (as tracked by AppData) nearly overnight. The cause is believed to be due to a very unpopular change to its Terms of Service. Prior to this, Instagram was one of the most popular and fastest growing social media sites. 

Many companies overlook the importance of terms of service. They are, and always have been, critically important from a legal perspective. But so too are they important from a customer relations perspective as the Instagram incident illustrates. Many companies (and their lawyers) bank on the fact that most users do not read the terms of service.  The problem with this approach is that some users DO read them. And more frequently, consumer watchdog groups do as well.

When someone flags a problem or change as occurred here, then the issue goes viral in a hurry. Ironically, the same advantages of the virality of social media that helped Instagram with its meteoric growth, were disadvantages when this news broke and apparently lead to an immediate 25% decline in users.

This is not the first company, and likely will not be the last, to have a fiasco due to issues with its terms of service and/or privacy policy. If you want to avoid being one of these companies, do it right! Get solid legal advice on your TOS and Privacy Policy and make good business choices that do not offend your customers. Contact us for additional information.