How to Sell Out Your Users: A Pinterest Case Study

March 21, 2012

2:30 pm

A note from guest author Matthew Levy: “This post represents my personal opinions. These opinions should not be attributed to Cloudigy Law or anyone else associated with the firm. I am solely responsible for this content.”

So you have a great idea for a new social media site. You’ve gotten your platform built, you’ve got your funding, and now you’re at the stage where you need to draft your terms of service (TOS). While it’s tempting just to hand this off to the lawyers, it’s important to stay involved in the process.

Your users are going to be your livelihood — no social media site can flourish if it doesn’t create a safe environment for users to share. We lawyers, on the other hand, are all about minimizing legal risks for our clients. If you’re not paying attention, you can easily wind up with a TOS that may give your company plenty of legal protection but can quickly alienate your user base once they realize what they’ve agreed to.

For example, let’s look at a site that’s the new hot thing: Pinterest. There’s been a bit of excitement recently around Pinterest, the website that lets people “pin” images they find around the web and share them. For example, an article in the Wall Street Journal speculated about the viability of this business model that seems to be based on copyright infringement. But the opinion piece that’s really gone viral is a blog post by (non-IP) lawyer and photographer, Kirsten Kowalski, who deleted her “inspiration boards” for fear of being held liable for copyright infringement. (In an update, Pinterest’s founder, Ben Silbermann, reached out to her.)

If you haven’t used Pinterest, there are two ways to put images up. The first is to upload them—that’s certainly a problem if you don’t have the rights to an image you upload. But the main way people pin images is by giving Pinterest the URL of the image, which Pinterest then fetches and adds to its website.

To digress for a moment, a number of people have wondered if you infringe copyright when you send a URL of an image. While I don’t want to predict what a court will say, the answer should be no. A URL identifies a location of a resource on the Internet (URL stands for “Uniform Resource Locator”). The URL itself doesn’t have any information about the resource. Under the Copyright Act, a “copy” is a “material object … from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” There is no machine or device that can take a URL and reproduce the image (or other resource) that it ultimately points to on the Internet. I won’t get into the information theory (information theory is a branch of mathematics that explores how easy it is to describe a piece of information), but there just isn’t enough information in such a short string of characters to convert it to a “copy” of a work under the Copyright Act.

So I don’t think that by giving Pinterest the URL of an image you can directly infringe a copyright in the image. Of course, a court might not agree with me, and there can still be a way that you get tagged under an indirect copyright infringement claim. But the big problem is Pinterest’s TOS.

An Offer I Can Refuse

Pinterest’s terms of service are among the most one-sided terms of service I’ve ever seen, even though Pinterest’s entire value comes from its users posting links to images.

There are a number of problems with the TOS, but I’ll focus on one. Pinterest tries to put users completely on the hook for infringement or any other legal claims that might come out of content they pin (which Pinterest then posts):

You agree to defend, indemnify, and hold Cold Brew Labs, its officers, directors, employees and agents, harmless from and against any claims, liabilities, damages, losses, and expenses, including, without limitation, reasonable legal and accounting fees, arising out of or in any way connected with (i) your access to or use of the Site, Application, Services or Site Content, (ii) your Member Content, or (iii) your violation of these Terms.

There are also clauses requiring a user to warrant that any content she pins or uploads isn’t infringing.

OK, so you might think that the safe option is to just post your own images. While that’s not forbidden, it’s discouraged by Pinterest’s “Pin Etiquette”:

Pinterest is designed to curate and share things you love. If there is a photo or project you’re proud of, pin away! However, try not to use Pinterest purely as a tool for self-promotion.

There’s no guidance on the site (at least not that I could find) advising users on how to ensure that the images they pin are licensed. So Pinterest encourages users to go find third-party content and pin it, but wants to hold users completely liable for any mistakes they might make. And it doesn’t give any guidance on how to avoid such mistakes.

The Message It Sends

Pinterest sends a pretty clear message with this provision: Pinterest’s goal is to make money off of the content its users submit, while shifting as much of the downside risk as possible to those users. Tails, Pinterest wins. Heads, the users lose.

The worst part is that this provision is probably useless to Pinterest. If Pinterest gets hit with a copyright infringement suit (maybe one of those suing Pinterest and Does 1-500), will they go after their users for their fees? A federal copyright litigation can cost well over $1 million dollars in legal fees alone. I feel confident in saying that only a tiny percentage of Pinterest users could ever pay. This means that the indemnity provision isn’t worth much to Pinterest, because they won’t be able to collect without driving users into bankruptcy. And doing that once would be enough to send people running for the door, leaving Pinterest with no business.

So why even have that provision there? It scares people (as it did Kirsten Kowalski) and it has no practical beneficial effect for Pinterest. An indemnity clause is a fairly standard thing that lawyers put in contracts, but the problem is that no one asked about the business consequences of the clause.

Stay Involved

This is why you need to stay involved in drafting the TOS.

While you need protection, keep in mind who your users are. Individuals don’t have much money and tend to overreact to threatening legal language. Ask that language be rewritten in plain English to help avoid misunderstandings.

If you’re not clear on why a provision is in the TOS, don’t just defer to your lawyer. Ask questions and make sure you understand what every clause means. Your lawyers may not be thinking beyond the legal issues, so you need to be thinking about what makes sense for your business and your relationships with your users. Push back if a provision sounds like something that could alienate the people you need to reach or if it’s something you’d never want to enforce.

And if you’re not comfortable with the product you’re getting, don’t be afraid to get a second opinion. You’d do it with a doctor’s diagnosis; you shouldn’t hesitate to do it for legal work.

Remember that it’s your business. It’s always tempting just to leave the legal stuff to the lawyers. But by involving yourself in the process, you can make sure that the TOS reflects your website in the same way that your content does.

Matt Levy is a former BIG LAW attorney who is much happier at the tech-focused IP firm, Cloudigy Law PLLC. Before law school, Matt was a software engineer with IBM, and much of his practice involves software and Internet-related copyright issues. (He loves that computery stuff.) Follow Matt on Twitter at @MattLevyIP.

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