Web 2.0 and the Law:
Business and Legal Implications of Consumer Generated Media for Emerging and Established Companies (including Facebook, YouTube, Second Life, blogs, and others)
By: Paul H. Arne & Sandra S. Gardiner, Partners, Corporate Technology Group, Morris, Manning & Martin, LLP
The social networking and Web 2.0 phenomenon is changing the landscape of social and business communication. Not only are business models being created around Web 2.0, but non-Web 2.0 businesses are implementing these technologies. Novel legal issues arise in the Web 2.0 context because the information on a Web 2.0 website comes from multiple, and at times uncontrollable, sources. Without a consideration of the legal complexities early in the development of the usage or business model, companies may not adequately address the legal issues required to generate the anticipated revenue or benefit.
What are Web 2.0 models? According to Wikipedia, Web 2.0 is “a perceived second generation of Web-based communities and hosted services such as social networking sites, wikis and folksonomies that facilitate collaboration and sharing between users” (3). Some of these technologies are called “consumer generated media” (CGM) or “consumer generated multimedia” (CGM2).
We human animals are social and creative beings. Some of the internet-enabled technologies that implement interactions between humans and allow humans to express themselves have exploded. A few examples demonstrate this phenomenon. In April, 2007, there were 57 million users of MySpace. Facebook users have doubled in the last six months to 23 million, adding about 100,000 new members per day (4). Half of those members normally access Facebook at least once a day. On an average day, 200,000 videos are uploaded to YouTube. Also on an average day, 200 million videos are viewed (5).
Money motivates people, and there is a lot of money being thrown around in Web 2.0 technologies. In July 2005, MySpace was purchased by NewsCorp for $580 million (6). In November, 2006, YouTube was sold for $1.6 billion in Google stock (7).
(1) Paul and Sandra are partners in the Technology Group of Morris, Manning & Martin, L.L.P. This article does not create an attorney/client relationship with you and does not provide specific legal advice to you or your company. Certain legal concepts have not been fully developed and certain legal issues have been stated as fact for which arguments can be made to the contrary, due to space constraints. It is provided for educational purposes only.
(2) Copyright © Paul H. Arne and Sandra S. Gardiner, 2007. All rights reserved.
(4) Wall St. Journal, Facebook Opens Its Pages As a Way to Fuel Growth, 5/21.07.
(5) MSNBC (from the Associated Press), YouTube Founders Complacent? Just You Watch, 5/18/07.
(6) CNNMoney.com, March 29, 2006.
(7) Google press release, November 13, 2006.
Laws impacting Web 2.0
Many companies creating technologies that enable consumer generated media and users of social networking and consumer generated content sites are unaware that their activities online continue to be subject to the laws of various jurisdictions. Some of the more significant legal hurdles include issues arising from copyright law, trade secrets, trademark and unfair competition, invasion of privacy, defamation, truth in advertising, Regulation FD of the Securities and Exchange Act of 1934 and contractual violations.
Choosing a lawyer familiar with all of these laws is important to assess and minimize risk associated with your company’s use of Web 2.0 technologies.
For companies facilitating the transmission or generation of consumer generated media, “who owns the copyright in the content?” is an important issue to determine the use of such content and associated risks and revenue models. A copyright subsists in an original work of authorship fixed in any tangible medium of expression. Obviously, the content submitted or generated on the Web 2.0 sites are subject to copyright. Copyright law can provide protections for some companies depending on their relationship with the content creation or contractual agreements with content providers.
Companies using these technologies to transact business may also be concerned about the ability to protect their trademark and prevent unfair competition. A trademark is a name, logo, design or other indicia of source of origin used to distinguish products or services of a company or business. In the US, trademarks may be protected under common law by use in a geographic area or through federal registration with the US Patent and Trademark Office (or other similar office in the relevant jurisdiction). However, use of these trademarks online raises issues regarding jurisdiction and applicable laws that may protect (or not) your trademarks.
Examples of How Web 2.0 Technologies may be Used
This section identifies some of the ways traditional companies and Web 2.0 business model companies are using or may use social networking and consumer generated media their businesses. The uses for these technologies is varied, and many other models and uses are also being used and implemented. These fact patterns are designed to raise the awareness of the issues that have, and in the future may, arise in a Web 2.0 world.
A. Facebook for a Company
Several companies are contemplating implementing Facebook or a similar technology to employees and clients. Facebook allows users to post significant personal information that can be viewed by anyone with access to the account. The extent of personal information available online can facilitate identity theft, inadvertent disclosure of confidential company-client information, and publication concerning business relationships which a company may prefer remain confidential and other legal concerns.
B. Using Consumer Generated Media for Marketing and Advertising through Web 2.0
Several companies provide the capability for companies to run programs to invite consumers to generate advertisements and related collateral regarding the company products and to vote on their favorite proposed advertisements. Through these programs, consumers are enthusiastic to become heavily invested in the brands by creating the content. These technologies also enable companies to receive widespread consumer feedback by allowing very large numbers of consumers to rate the proposed advertisements. There remain legal challenges with these new models. These programs put consumers in charge of the brand and related messages, as well as create issues surrounding ownership of the various forms of content in the provided content.
C. Marketing and Sale of Products in Virtual Worlds such as Second Life
Many bricks and mortar companies and other non-Web 2.0 companies are moving into virtual worlds such as Second Life to advertise, market and sell their products. These virtual worlds are often viewed as a way to reach an alternate demographic and to further add to the product brand. In a virtual world, it remains possible for third parties to market and sell knock-offs of your products, or to take other actions that may impact your trademark and brand or ability to conduct your transactions. For instance, an unrelated party can claim to be selling your products for a discounted price, thereby impacting the brand and the company’s ability to realize any profit from the transaction. Another example is the ability of unrelated parties to disrupt the virtual location where your business is being transacted. These disruptions can be accomplished through disabling code that can impact the virtual location or its ability to conduct transactions. Legal consequences and remedies of such activities are not as easily determined when they occur in the virtual world. Companies should work with legal counsel familiar with the technologies and applicable laws before embarking on such ventures.
The importance of Web 2.0 technologies is becoming increasingly important in all businesses, whether an emerging Web 2.0 business model company or a large company incorporating these technologies in its advertising programs, business development or employee retention practices. With some forethought about the use of Web 2.0 technologies in your business, and strategies to address the legal issues sooner rather than later, you can capture the benefits of using Web 2.0 technologies in your business and generate revenue from these business models.