Reducing the Risks of User-Generated Content

User-generated content (or “Participatory Media” as some call it) can be a great way to boost the value of your website, and the traffic that’s driven to it. Many website owners have already found that developing online communities greatly increases their financial bottom lines. Sometimes, as has been the case with YouTube, user-generated content can even be a great business model in itself.

But user-generated content can also be a great source of risk and exposure. Again, there’s probably no better example of this than YouTube. YouTube was sued by the Viacom studio in 2007 for $1 billion in damages, for allegedly distributing Viacom’s copyrighted materials without permission.

If you understand the risks associated with user-generated content, you can take steps to reduce your exposure and protect your online assets, while at the same time increasing the value of your website.

What is User-Generated Content?

User-generated content is a broad term that includes any material that a website user posts on the website for others to see. This can include not only blog comments, but also pictures, videos, articles, or anything else that a user might post in a forum or bulletin board section of your website, or as part of their own personal profile on the website.

What are the Risks with User-Generated Content, and How Can I Address Them?

There are a number of legal issues that you will need to become familiar with if you permit or promote user-generated content on your website.

a. Intellectual property infringement. There are two primary types of intellectual property infringement issues that you should be aware of. The first is copyright infringement. Key elements of liability include knowledge of the infringing activity, inducing or contributing the improper conduct, and attaining a direct financial benefit in the infringing activity when you have the ability to supervise the direct infringer.

Copyright holders generally try to enforce their rights by means of “takedown notices” that are sent in accordance with the requirements a particular Federal law (the Digital Millennium Copyright Act). You’ll have to decide what position to take once you receive takedown notices. Do you evaluate each and respond notice as you feel appropriate? Or do you simply honor all takedown notices immediately? It’s a balance between avoiding legal risk of a lawsuit by those who claim to hold a copyright to the material that someone else posted, versus possibly alienating your users if you aren’t giving any consideration to their “fair use” rights in that content.

Trademark law prevents the use of trademarks of others in a manner that creates a likelihood of confusion about the source of goods or services or in a manner that dilutes the value of the trademark. User-generated content sometimes falls afoul of trademark law.

b. Defamation. You should also be aware that there is potential liability for allowing users to post defamatory statements about others on your website. There is a Federal law (The Communications Decency Act) which can provide some protection against defamation claims based on what your users do on your website, but the scope of the protection is still somewhat uncertain, so you should not ignore the possibility of claims against you based on user generated content.

c. Obscenity and Child Pornography. The Federal laws that provide protections to website owners generally exclude protections for obscene materials that appear on such websites, even if the materials are posted by users themselves.

How Can I Reduce My Risks?

One common technique for a website operator to reduce their risks of legal liability for user generated content is to not actively monitor the user activities on the website. While this may seem counter-intuitive, the relevant Federal laws provide a greater degree of protection (through a so-called “safe harbor”) for passive web services that do not actively manage or supervise user content.

If your business model requires you to actively monitor user activity on your website, then you may wish to retain a third party to actually conduct the monitoring. The relationship with the third party should be properly structured as an independent contractor relationship, which will likely include giving the third party some degree of control over the user generated content, in order to avoid you being held liable for the third party’s actions.

You should also have a mechanism in place for promptly responding to legitimate complaints about user-generated content. These complaints may come from other users themselves (another reason to nurture your web-based communities; if the members are loyal to your website, they’ll be likely to flag any improper or possibly illegal user-generated content).

It is very risky to allow anonymous visitors to post content (particular pictures or video content). You should therefore plan to prepare and use comprehensive agreements that submitting users must agree to. At a minimum, these user agreements should state that users are prohibited from engaging in any conduct that is illegal or would give rise to any legal liabilities, or that otherwise interferes with the operations of the site. In order to qualify for the Federal law safe harbors, the agreement must also state that repeat offenders will have their website user accounts terminated.

Another solution may be to use a third party service for the user generated content. By this, we mean allowing users to post direct links to, or by using “plug-in” players for, videos that are hosted on YouTube, MetaCafe, Vimeo, or any of the other services available. You are less likely to receive the takedown notices – since the content isn’t actually hosted by your website, the notices would be sent to the entity actually providing the videos. But you also lose control over whether the videos are actually taken down, and you aren’t the sole source for that user generated content – people can also view it by going directly to the hosting entities website, and other people are likely to link directly to that other site as well. Again, it’s a balancing act between your business objectives and the legal risks.

Other Issues to Consider. Apart from the purely legal issues, if you make a strong push to user generated content then you’ll have to consider bandwidth issues as well. If there’s a chance that any particular post will generate a very large amount of traffic to your website, you should have a plan for what to do if the traffic crashes the server, or exceeds that bandwidth that you are paying your hosting company for. You may want to consider capping the amount each registered user can upload in a day or month.

The possibilities for user-generated content to boost your website are great, as are the risks. If you take steps to understand the legal issues and reduce your risks, then you be able to maximize your business gains while still protecting your online assets.

For more information on how to protect yourself & your business from the devastating financial and security risks you face every day your website is online here: http://www.ProtectYourOnlineAssets.com

Protecting Your Online Assets – Affiliate Programs

If you have an online business, or even a “bricks and mortar” business with an online presence, then there’s a good chance that you either currently have, or have thought about starting, an affiliate marketing program. There are many different types of affiliate marketing programs, ranging from simple link or banner exchanges to programs that pay the referring website a portion of sales made to customers that come from that referring website. In addition, a well-conceived affiliate program can be a great source of networking, income, publicity, etc.

But as with most other areas of running an online business, there are risks.

Affiliate partners can and sometimes do sue. It’s often hard to imagine this type of scenario, as the relationship between you and your affiliate partners will usually start off with the best of intentions, and nothing but good will.

But if expectations are not met, or opinions or business plans change, and your partners may feel slighted. And regardless of whether or not they have a well-founded claim, they can still file a lawsuit and present a significant distraction to you, and force you to incur a great deal of expense in defending against the lawsuit.

So what can you do to protect your hard earned business?

First of all, if you haven’t done so already, you should organize your business in a way that provides a certain degree of protection for your personal or non-business assets. It’s generally thought that the best time to organize your business – either as a corporation or a limited liability company (“LLC”) is when it begins (or even just before it begins) operations. Many business owners believe that the liability protections of a corporation or LLC are valuable only after the business begins to make a certain amount of money. But consider this – without the protection of a corporation or LLC your personal assets (which can include your house, your savings, and your cars) are at risk when someone sues you. A corporation or LLC is considered to be a separate legal entity under the law, an entity that it separate and distinct from you personally.

Whether you choose a corporation or LLC will depend on your tax situation, the size and type of your business, whether you have any co-owners, and what are your future plans for growth. In some situations, a might be better to have a corporation, in which case you’ll have to determine whether a “C” corporation or an “S” corporation is a better fit. Again, this will largely be driven by tax considerations.

Almost without exception, you should not be operating your business as a sole proprietorship or limited partnership. Those entities provide very little (if any) legal protection for your personal assets, and in fact, might actually expose your business to a higher degree of risk.

The cost of forming and maintaining these legal entities is not as high as you might think. The costs are especially reasonable when you consider how much they could ultimately save you if legal problems ever do arise. All it takes is a single lawsuit, with a proper corporate entity protecting your home and life savings, and you’ll be glad that you took the time to form your corporation or LLC.

It’s possible to go it alone and research and make your determination on which form of business to use, and then prepare and file the necessary papers. But most of the time it’s probably best to leave it to those who do this type of thing on a regular basis, so that you can concentrate on running your own business.

The second key piece of advice is to make sure that, if it’s appropriate for the types of products you’re selling, you’ve taken steps to give your products the strongest copyright protections available. For example, if you sell books (or ebooks) or other informational products, you should be aware that a work that you create is automatically protected by U.S. copyright. It is not actually required to include a copyright notice or symbol. However, if you do include those things, it is harder for someone who illegally copies your work to claim that they didn’t know it was protected by copyright.

Depending on how much time you spent creating your informational products, you might also take the further step of registering them for a federal copyright. The filing fee for this step is currently less than $50, and getting a federal registration will enable you to seek much stronger monetary damages from anyone who steals your work. Even if your business is online only, strong trademark protections for your products are just as important as if you sold your products through a physical store.

Finally, make sure you take the time to sign written affiliate agreements with each affiliate in your program. The purpose of this document is to make sure you and your affiliates have the proper expectations going into the relationship, and to avoid any misunderstandings or assumptions that might cause problems down the line.

There’s no magic length to the affiliate agreement. The document should be long enough to contain all of the important terms, and to set forth the key aspects of the working relationship that you hope to have with your affiliates. There are certainly some standard terms that you’ll want to include. For example, if your affiliate program is going to involve you making payments to your affiliates, your agreement should clearly spell out what the affiliate must do to earn the payment, how frequently the payments will be made, what the payment mechanism is going to be (PayPal? Checks?), and what you will do if there are disputes over whether certain activities give rise to the payment obligations.

If you follow these steps when you set up and operate your affiliate marketing programs, you’ll go a long way to reducing your financial risk and exposure to lawsuits, and give your business a strong degree of legal protection.

Discover how to protect yourself & your business from the devastating financial and security risks you face every day your website is online here: http://www.ProtectYourOnlineAssets.com

To Your Success!

Warm Regards,
Jeremy & Simon
MemberSpeed Inc

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