Why you may want to reconsider that co.za domain name

If you are thinking about registering a co.za domain name, you may want to consider your possible liability to ZA Central Registry NPC (formerly called Uniforum), the organisation which administers the co.za namespace. It could be substantial.

If you are thinking about registering a co.za domain name, you may want to consider your possible liability to ZA Central Registry NPC (formerly called Uniforum), the organisation which administers the co.za namespace. It could be substantial.

The starting point are the warranties you give when you apply to ZACR to register a co.za domain:

Applicant hereby irrevocably represents, warrants and agrees that:

  1. its statements in the Application are accurate and complete;
  2. it has the right without restriction to use and register the Domain Name;
  3. it has a bona fide intention to use the Domain Name on a regular basis on the Internet;
  4. the use or registration of the Domain Name by Applicant does not or will not interfere with, nor infringe the right of any third party in any jurisdiction with respect to trade mark, service mark, trade name, company name, close corporation name, copyright or any other intellectual property right;
  5. it is not seeking to use the Domain Name for any unlawful purpose whatsoever, including, without limitation, unfair competition, defamation, passing off or for the purpose of confusing or misleading any person;
  6. at the time of the initial submission of the Application, and at all material times thereafter, it shall have an operational name service from at least two operational Internet servers for the Domain Name. Each server is and will continue to be fully connected to the Internet and be capable of receiving queries relating to the Domain Name and responding thereto;
  7. it has selected the Domain Name without any input, influence or assistance from UniForum.

Of these warranties, points 4 and 6 could be problematic:

Warranty 4

In order to comply with this warranty, you should ideally conduct an exhaustive search of all jurisdictions in order to confirm that your proposed domain name “does not or will not interfere with, nor infringe the right of any third party in any jurisdiction”, whether that right be rooted in “trade mark, service mark, trade name, company name, close corporation name, copyright or any other intellectual property right”. That is very, very broad.

You can’t possibly know every brand, company or trading name which you could possibly be stepping on when you register your domain. Trade marks tend to be somewhat geographically and thematically limited but copyright is pretty universal and “any intellectual property right” is a really broad catchall.

Every time you register a domain name, you take the chance that it may correspond with a brand, company or trading name and someone may contend that your domain name infringes his or her rights. If that happens, you are in breach of your warranty and it doesn’t matter whether you intentionally infringed anyone’s rights. The inquiry is a factual one.

Warranty 6

This warranty can be tricky because you not only require two operational name servers to register the domain (name servers map the domain name to IP addresses associated with actual servers) but you have to warrant that “[e]ach server will continue to be fully connected to the Internet and be capable of receiving queries relating to the Domain name and responding thereto”.

This is simply not in your control. You may register with an ISP, use its name servers to register your domain and your ISP’s servers could go offline temporarily or the ISP could go out of business without you being aware of it. Even if you are aware of this, you may have parked the domain for future use and you may forget to migrate it to another ISP in your rush to move all your other data off.

What could go wrong?

All this may not seem particularly problematic until you read a little further:

Pursuant to the above warranties, Applicant hereby agrees that it shall defend, indemnify and hold harmless UniForum, its directors, officers, members, employees and agents, for any loss, damage, expense or liability resulting from any claim, action or demand arising out of or related to a breach of the aforementioned warranties or the use or registration of the Domain Name, including reasonable attorneys fees on an attorney and own client basis. Such claims shall include, without limitation, those based upon trade mark infringement, copyright infringement, dilution, unfair competition, passing off, defamation or injury to reputation. UniForum agrees to give Applicant written notice of any such claim, action or demand within reasonable time of becoming aware thereof. Applicant agrees that UniForum shall be defended by attorneys of UniForum’s choice at Applicant’s expense, and that Applicant shall advance the costs incurred in such litigation, to UniForum on demand from time to time.

This indemnity is very broad. For starters it requires you to not only cover ZACR for any costs it incurs if you breach the warranty, you are also required to “defend” ZACR from “any claim, action or demand arising out of or related to a breach of the aforesaid warranties or the use or registration of the Domain Name”. It goes on to cover “reasonable attorneys fees on an attorney and own client basis” which is not reasonable at all. The “attorney and own client” scale of legal costs is used as a punitive costs scale in court proceedings. The attorneys who would defend ZACR from the envisaged claims will be “attorneys of [ZACR’s] choice at [your] expense, and … [you] shall advance the costs incurred in such litigation, to [ZACR] on demand from time to time.” It is a lot of text but the upshot is that you will be required to pay for ZACR’s lawyers, upfront, if there is a claim flowing from –

  • breach of your warranties (which I listed above);
  • “the use or registration of the Domain Name”;
  • “without limitation, those based upon trade mark infringement, copyright infringement, dilution, unfair competition, passing off, defamation or injury to reputation”.

A relatively cheap example is a company sending ZACR a deregister a domain name and transfer it across because the company believes your domain name infringes one or more of its rights. ZACR briefs its lawyers to consider the claim and charges, say, R1 500 (very conservative, probably more) an hour to review the demand, formulate a response, discuss the response with ZACR and send it along to the company. That exercise could cost, as a guess, R4 500 if the lawyers are working very efficiently. That cost could be passed along to you to pay. There could, of course, be further costs ZACR could pay to its lawyers for follow up communications, meetings and other action down the line. This is before you take into account possible losses the company may claim from ZACR and be awarded down the line.

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p>Suddenly the domain you pay R50 to R60 could be much more expensive. What you should ask yourself is whether you can afford to take a chance (or have a truly unique domain name)?

Digital agencies that skimp on legal are negligently exposing themselves and their clients to substantial claims

Catch the highlights:

I’ve noticed an alarming trend with many digital agencies and the account managers responsible for advising their clients on their digital marketing initiatives: they view legal frameworks as something akin to the undercoat on a wall. It seems to be a good idea although it’s better to keep it thin, hidden away and forgotten about.

One of the concerns seems to be that legal content distracts from the fun and social elements of the campaign and too much emphasis on it would only upset the fans. It’s a grudge purchase and because no-one is really going to cause any real trouble the smart ORM people can’t manage, legal terms are added because, well, that’s just how it’s done. At least, this seems to be the thought process that too many marketers put into legal frameworks for their campaigns.

Nothing kills the mood of a social campaign quite like a lawyer insisting on a dizzying array of legal terms and conditions to address an unclear set of risks and using language no-one except the lawyer seems to understand, let alone appreciate the significance of. We lawyers have not been very good at conveying the importance of what we do, particularly where there are few practical examples of their value. We are in a risk management business and a lot of the work lawyers do is in anticipation of likely risks and aimed at reducing both the likelihood of those risks occurring and, if they do, the resulting fall-out.

By the time a transaction becomes the subject matter of a dispute (usually when “lawyers’ letters” are called for) or disputes go to court, lawyers are generally in damage control mode. Something has gone wrong and either there weren’t adequate protections in place to anticipate or even resolve the dispute before it went pear-shaped or there just wasn’t anything in place and the client took a leap off a cliff expecting to be caught by fluffy clouds and adoring customers, not hitting the rocks below.

Unfortunately the risks to these agencies and their clients can be very real.

What could go wrong?

You’re working for a digital agency and you’re asked to set up a Facebook Page to support a client’s campaign. You recommend “house rules” for the Facebook page and, in doing so, you implicitly advise your client (yes, this is basically what you are doing) to use the house rules on the basis that they will afford the client adequate protection from likely legal risks. In other words, when you (whether you be an account manager, copywriter or someone else) prepare those house rules and give them to your client to use on their Facebook Page, you’re telling them that these legal terms and conditions are intended to protect the client. Unless they have their own lawyers to check those house rules, they are likely to rely on your advice, assuming you’ve had those house rules checked out and approved by a competent lawyer.

If those house rules then turn out to be inadequate and the client finds itself faced with a claim of some sort that could have been avoided with adequate terms and conditions, then you really should have some sort of liability cover in place because you may need to rely on it to protect your business from a negligence claim. Well, that’s assuming your agency’s liability cover protects it from negligence claims based on bad legal advice. If the agency has professional indemnity insurance cover, it may be limited to negligence in the context of the agency’s business, namely digital marketing and communications, strategy, community management and so on. Liability for legal professional negligence is a somewhat different set of risks and the liability cover you thought was in place may not be available.

What happens next is a complex, costly and drawn out series of legal battles largely because you assumed that house rules are largely a formality and need not go much beyond a set of rules asking fans not to be rude, to play nicely together and respect the client’s brand. Odds are, those house rules didn’t cover copyright concerns, properly contextualise product or services-related information on the Page, privacy and how fans’ personal information is used (Facebook requires brands to have their own privacy policies to govern collection and processing of fans’ personal information) and a number of other considerations. This means the house rules lacked a real framework governing to what extent fans can rely on information you present them with through the campaign, whether they can use content on the site and to what extent, how you can use their personal information … you get the picture. Maybe everything will turn out just fine, perhaps not. Can you afford to take the risk?

Why are terms and conditions so important?

Terms and conditions are contracts between customers and providers. They are premised on the legal requirement that a contract can only really be binding on parties who have reached agreement that they be bound by the contract and on the contract’s terms. This is somewhat of a generalisation because the law has evolved to created exceptions on the periphery of this ideal scenario but the concept of a “meeting of the minds” is central to our contractual law.

That said, this doesn’t explain the reason why terms and conditions are contracts. The reason they are contracts is that the one party seeks to impose obligations on the other party and can only do so where the other party agrees to assume those obligations. In this case, the client wishes to establish a framework for fans to participate in, say, the Facebook Page and that framework comprises certain rights and obligations. In order for fans to be brought into a contract with the client, terms and conditions describing the parameters of this contract with a fair degree of detail are necessary. Without them, you have a lot of vagueness and uncertainty as to who can do what and with what. That is a recipe for a dispute due to mis-managed expectations, among other things.

A legal doctrine called the doctrine of “quasi-mutual assent” is what allows website and similar terms and conditions to bind parties to contracts even though they haven’t necessarily engaged in a more conventional and interactive contract negotiation process (that is, where one party is faced with standard terms and conditions and told to accept them or not take advantage of the related service).

Even with this doctrine, the terms and conditions must be detailed enough to establish an adequate framework governing the foreseeable aspects of a fan’s interaction with the Facebook Page, micro-site or some other aspect of the campaign. If the terms and conditions are vague or don’t cover important issues which they should cover, our courts have ruled that not dealing with important provisions can be pretty much the same as saying they don’t apply or should not be considered. If you, as the agency representative, have been instructed to ensure that fans are aware that, for example, product prices published on Facebook are not necessarily current purposes, are subject to verification and may be changed without notice and you don’t actually provide for this in the “house rules”, you may find that fans may be entitled to rely on and even insist on those published prices. That means you failed to comply with your client’s instructions and exposed the client to the loss being required to honour those prices resulted in. This is a relatively benign example but the potential prejudice could be more severe.

Add to this the possibility of class action lawsuits by angry consumers who feel they have been misled by inaccurate information in a marketing campaign which is not properly contextualised by adequate terms and conditions (let alone the reputational harm when the client is portrayed as a liar due to the inaccurate information), you may appreciate just how valuable these terms and conditions can be.

Here is a suggestion

Resist the temptation to cobble together house rules or other terms and conditions based on what you may have seen elsewhere online or may feel are adequate given the nature of the campaign and chat to your agency’s lawyer about the possible risks (likely risks, even if you are open to some degree of risk) and work with your lawyer to create a legal framework that adequately caters for those risks and remains consistent with your campaign’s look and feel. It is achievable and could help avoid a very messy and costly dispute.

Pinterest’s amended terms still leave users exposed

Pinterest (I am going to be a little lazy in this post and refer to “Pinterest” when discussing both the site and its creator, Cold Brew Labs) has been in the spotlight quite a bit lately due to its terms of service as well as content creators’ concerns that their content is being shared without their permission on the service by its enthusiastic users. I wrote about the copyright implications in my post titled “Is Pinterest a den of copyright thieves?” and about the potential liability users face in a subsequent post titled “Pinterest’s hidden threat to its users“. Pinterest announced updates to its terms recently and the new terms go into effect next week. Unfortunately the new terms still leave users exposed to potentially substantial liability simply by using the service.”

Current terms (published on 29 March 2011)

Much of the focus on Pinterest’s new terms of service (which go into effect on 6 April) is on the original content license users grant to Pinterest which includes the right to “sell” “Member Content”. The two key clauses here are the definition of “Member Content” and the original license clause which state the following (I highlighted the problematic terms in bold):

“Member Content” means all Content that a Member posts, uploads, publishes, submits or transmits to be made available through the Site, Application or Services.

and

We may, in our sole discretion, permit Members to post, upload, publish, submit or transmit Member Content. By making available any Member Content through the Site, Application or Services, you hereby grant to Cold Brew Labs a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content only on, through or by means of the Site, Application or Services. Cold Brew Labs does not claim any ownership rights in any such Member Content and nothing in these Terms will be deemed to restrict any rights that you may have to use and exploit any such Member Content.

The effect of these provisions was to enable Pinterest to commercially exploit Member Content published on the site on the basis that users grant Pinterest. This license is granted automatically and the way Pinterest attempts to ensure that users are legally authorised to grant this license is through this acknowledgement or warranty:

You acknowledge and agree that you are solely responsible for all Member Content that you make available through the Site, Application and Services. Accordingly, you represent and warrant that: (i) you either are the sole and exclusive owner of all Member Content that you make available through the Site, Application and Services or you have all rights, licenses, consents and releases that are necessary to grant to Cold Brew Labs the rights in such Member Content, as contemplated under these Terms; and (ii) neither the Member Content nor your posting, uploading, publication, submission or transmittal of the Member Content or Cold Brew Labs’ use of the Member Content (or any portion thereof) on, through or by means of the Site, Application and the Services will infringe, misappropriate or violate a third party’s patent, copyright, trademark, trade secret, moral rights or other proprietary or intellectual property rights, or rights of publicity or privacy, or result in the violation of any applicable law or regulation.

This sort of warranty is a common mechanism in website terms and short of having each user prove they are entitled to post each item to the service (totally impractical), this is how site providers tend to protect themselves from a user submissions perspective.

One of the significant challenges in these terms is that users are potentially liable for substantial damages simply by using the service. This is as a result of the liability clauses in the terms. I won’t go into this in detail here as I have already done so in my post titled “Pinterest’s hidden threat to its users” which I recommend you read before continuing with this post.

Paul Jacobson / Pinterest

The new terms (6 April 2012)

The new terms deal with content a little differently. Firstly, the definition will change to “User Content”. This isn’t as well defined as “Member Content” is in the current terms. It is defined or framed as follows (I highlighted the relevant sections):

Your content. Pinterest allows you to pin and post content on the Service, including photos, comments, and other materials. Anything that you pin, post, display, or otherwise make available on our Service, including all Intellectual Property Rights (defined below) in such content, is referred to as “User Content.” You retain all of your rights in all of the User Content you post to our Service.

Framing “User Content” this way does two things. It streamlines the definition of User Content and it explicitly states that users retain the rights they have in the content they post. This means that Pinterest has no ownership claim over your stuff which you post to the site or, implicitly, anyone else’s. This also addresses a very common misperception we see in media coverage of site terms of use: Pinterest doesn’t claim to own your content. In fact, I don’t recall ever seeing site terms where a provider claims ownership of user content. The problem lies more in how broad the license is that users grant these service providers. The license users grant Pinterest is the following (I’ve highlighted some interesting provisions):

  • How Pinterest and other users can use your content. Subject to any applicable account settings you select, you grant us a non-exclusive, royalty-free, transferable, sublicensable, worldwide license to use, display, reproduce, re-pin, modify (e.g., re-format), re-arrange, and distribute your User Content on Pinterest for the purposes of operating and providing the Service(s) to you and to our other Users. Nothing in these Terms shall restrict Pinterest’s rights under separate licenses to User Content. Please remember that the Pinterest Service is a public platform, and that other Users may search for, see, use, and/or re-pin any User Content that you make publicly available through the Service.
  • How long we keep your content: Following termination or deactivation of your account, or if you remove any User Content from your account or your boards, Pinterest may retain your User Content for a commercially reasonable period of time for backup, archival, or audit purposes. Furthermore, Pinterest and other Users may retain and continue to display, reproduce, re-pin, modify, re-arrange, and distribute any of your User Content that other Users have re-pinned to their own boards or which you have posted to public or semi-public areas of the Service.

What is noticeable is that the new terms omit the reference to “sell” and the new license is not irrevocable or perpetual. It is still royalty-free and “sublicenseable” so Pinterest is not liable for any royalties payable for publishing User Content and can sub-license the content to another party. This latter requirement may be intended more to enable the service to function more than a desire to move content around. Any other party that republishes the content as part of the overall service would need the right to do so. This may include Pinterest’s hosting provider, 3rd party services and so on.

A related term in the new terms is “Pinterest Content” which is framed as follows:

Pinterest Content. Except for User Content, the Service itself, all content and other subject matter included on or within the Service, and all Intellectual Property Rights in or related to the Service or any such content or other subject matter (“Pinterest Content”) are the property of Pinterest and its licensors. Except as expressly provided in these Terms, you agree not to use, modify, reproduce, distribute, sell, license, or otherwise exploit the Pinterest Content without our permission.

A big change in the new terms is the introduction of an Acceptable Use Policy which more fully addresses how users can make use of the service. Two of the prohibitions include posting any User Content that –

infringes any third party’s Intellectual Property Rights, privacy rights, publicity rights, or other personal or proprietary rights

and

contains any information or content that you do not have a right to make available under any law or under contractual or fiduciary relationships

The new terms define “Intellectual Property Rights” as follows:

Definition of Intellectual Property Rights. When we refer to “Intellectual Property Rights” in these Terms, we mean all patent rights; copyright rights; moral rights; rights of publicity; trademark, trade dress and service mark rights (and associated goodwill); trade secret rights; and all other intellectual property and proprietary rights as may now exist or hereafter come into existence, and all applications for any of these rights and registrations, renewals and extensions of any of these rights, in each case under the laws of any state, country, territory or other jurisdiction.

The new terms make it pretty clear that users are only to publish content they have the rights to publish, whether this be under a license granted by the content creator (most Creative Commons licensed content, for example, would probably be fine) or where there are copyright infringement exceptions (I wrote about this in my first post titled “Is Pinterest a den of copyright thieves?“). The terms also include fairly extensive provisions intended for content owners and which detail Pinterest’s interest in protecting their rights, preventing efforts to circumvent the so-called “no pin” tag content owners can use to block efforts to pin their content as well as to report any copyright infringement.

What Pinterest hasn’t changed much are its liability protection clauses. As with the current terms, the new terms include an indemnity clause which states the following:

You agree to indemnify and hold harmless Pinterest and its officers, directors, employees and agents, from and against any claims, suits, proceedings, disputes, demands, liabilities, damages, losses, costs and expenses, including, without limitation, reasonable legal and accounting fees (including costs of defense of claims, suits or proceedings brought by third parties), arising out of or in any way related to (i) your access to or use of the Services or Pinterest Content, (ii) your User Content, or (iii) your breach of any of these Terms.

The terms also include a liability limitation clause which reminds users that “THE ENTIRE RISK ARISING OUT OF YOUR ACCESS TO AND USE OF THE SERVICES, PINTEREST CONTENT, AND USER CONTENT REMAINS WITH YOU AND YOU USE THE SERVICES AT YOUR OWN RISK” (among other things).

Actually there is one significant change from the old indemnity clause to the new one. The old (or current) clause requires users to “defend” Pinterest. That change relieves users of the potential responsibility for filing court papers in Pinterest’s defence should it be sued. What the new indemnity clause doesn’t do is relieve users of the potential responsibility for any damages Pinterest may be ordered to pay, any costs it may incur or other penalties which flow from claims lodged against Pinterest in respect of –

  • “your access to or use of the Services or Pinterest Content”;
  • “your User Content”; or
  • “your breach of any of these Terms”.

There is one important omission in the indemnity. The indemnity doesn’t require your “use of the Services or Pinterest Content” to be unlawful or to infringe a 3rd party’s rights, necessarily. It potentially includes a situation where your use of the “Services or Pinterest Content” is legitimate and Pinterest’s isn’t. This could be possible if your use is regarded as a “fair use” (this has a specific legal context, see below) and Pinterest’s may not be because it’s a commercial service, for example.

What does this all mean for you?

The bottom line is that you should only pin stuff to Pinterest which you are licensed to pin or which you can pin under a copyright exception like “fair use” as applied in the State of California (these terms are governed by the “internal substantive laws of the State of California”). Any other publication or use of the service and content published on Pinterest could be a violation of someone Intellectual Property Rights and a breach of the terms of service. If Pinterest is sued for that and you are the unlucky user who did the infringing, you could be on the hook. This could be regardless of whether you acted lawfully when you used Pinterest.

In other words, heed the liability limitation clause’s admonition:

YOU ACKNOWLEDGE AND AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE ENTIRE RISK ARISING OUT OF YOUR ACCESS TO AND USE OF THE SERVICES, PINTEREST CONTENT, AND USER CONTENT REMAINS WITH YOU AND YOU USE THE SERVICES AT YOUR OWN RISK.

Pinterest’s hidden threat to its users

Pinterest follow screen

We recently wrote about the questionable copyright implications of using Pinterest to “pin” images and videos to the site and to share these items with other Pinterest users. What we didn’t deal with in that post is the consequential threat facing Pinterest users that has persuaded at least one photographer and lawyer to delete her boards (collections on Pinterest). The threat comes from an often overlooked clause which has potentially severe implications considering the copyright issues facing Pinterest users:

Indemnity

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.

In terms of this clause you agree to cover Pinterest’s creator, Cold Brew Labs and all the categories of people specified in the clause, in the event it is sued or suffers some sort of loss due to your use of or access to the site; if your content gives rise to a claim or you violate Pinterest’s Terms. So what does this mean? It means that if, by using Pinterest to pin photos and videos, you infringe on someone’s copyright (or even where your use is legitimate and Pinterest’s use isn’t), Pinterest can invoke its indemnity and call on you to cover its losses and costs. The way the clause is worded, Pinterest’s ability to invoke the indemnity isn’t limited to instances where you actually infringed copyright or did something to otherwise violate a 3rd party’s rights. It can be invoked if the losses simply flow from your use of or access to the site or your pins.

As with virtually any social service on the Web the question is how real the risk is that this could happen and you could find yourself dragged into court in the Northern District of California to defend yourself against a claim for losses and costs where this indemnity clause is invoked? It may seem implausible but consider that a number of content creators are pretty concerned about Pinterest users sharing their content without their permission. It may not be too long before we begin to see the first lawsuits emerge and, at that point, users will have to wait and see if the indemnity is invoked and their lives changed because of a whimsical share.