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The social networking market encompasses a wide variety of legal issues. in order to run and maintain a successful social networking site, you must understand the legal issues that may arise. This briefing outlines major legal issues that may potentially occur. These topics include copyright, privacy, jurisdiction, trademark, patents and contracts. It is important to research and study each topic carefully as preparing yourself in advanced will ensure a successful future.


 * Privacy**

Social networking sites open up a platform for potential infringement on the users’ rights to privacy. Canada, the U.S. and the European Union share similar laws in regards to online privacy policies, although there still remain individual laws that may not be recognized by other nations. Dealing with minors, or children under the age of thirteen, third parties on social networking sites, widget accessibility and publicly displayed personal information will be issues that must be acknowledged and dealt with in a lawful manner.

The Children’s Online Privacy Protection Act of 1998 “protects children under age thirteen and applies to commercial operators that collect or store data containing personal identifiable information (PII) concerning children who visit or use their Web sites” (Cyberlaw 275). In order to run a social networking site, personal identifiable information will be required from the users. In order to avoid a violation against COPPA, the company must obtain parental consent before a child under the age of thirteen can access the site and contact the parent to confirm the consent via letter, e-mail or telephone. The FTC also requires that the company present an obvious link, on the same page where personal information is obtained or displayed, that directs the user to a section where the company explains what type of information is gathered, how it is gathered, and how the information will be used. If third parties are involved with the networking site, the company must also indicate what information will be provided to the third parties as well as the nature of the third party organizations.

In order to comply with COPPA, the above must be made clear and noticeable to users. The company will be responsible for receiving parental consent and acknowledging it by contacting the parents. If the company of the social networking site wishes to avoid this protocol, the company may prohibit children under the age of thirteen from registering and accessing the website by indicating this in the Terms of Agreement or in an otherwise obvious contract that will require a user to acknowledge that he or she is not under the age of thirteen and understands that the company prohibits minors from registering.

The purpose of the European Union’s Directive on Privacy Protection, which was established on October 25, 2008, is to protect online users and their personal identifiable information that may be given to the social networking site so that it may not be abused and mistreated. U.S. companies that violate the indicated elements of the EU directive on Privacy Protection can be denied access to markets that belong to the EU. In order for the U.S. to comply with the regulations of the EU directive, the US-EU Safe Harbour Agreement was released, which “establishes fixed requirements that U.S. companies must satisfy in order to meet the EU’s minimum standards of privacy protection” (Cyberlaw 303).

There are seven basic principles of the Safe Harbour Agreement. An organization must first explain to the user how personal information will be used, how it will be obtained and to what information third parties will have access. Users must be provided with a way to contact the company with any questions or complaints and the company must provide the client with information on how the display of personal identifiable information can be limited. If third parties are going to be involved with the social networking site, users must have the ability to “opt-out” of allowing the third parties to access and use personal information in a manner other than for the original purpose for which the information was provided. If the company decides to forward information that it has obtained from registered users to a third party, this transaction must be stated so that users are aware of this. The social networking site can do this if the third party agrees to adhere to the Safe Harbour principles or if a written agreement is drawn between both parties that indicates that the third party has agreed to comply with the same privacy regulations enforced by the company's social networking site.

In addition to the responsibility of the company to take necessary measures to protect the privacy and information of registered users from misuse, disclosure or unauthorized access, members of the social networking site must also be able to access the provided personal information and have the ability to modify it, unless it poses potential conflict with another person’s privacy or identity. The company must also maintain informational integrity by ensuring that all information provided on the social networking site is up-to-date and accurate, and is relevant to the purpose of the networking site. The company has to provide users with inexpensive resources where complaints and inquiries can be made as well as resolved. Procedures must be established to verify and enforce that the company adheres to the Safe Harbour principles. Finally, the company must agree to take responsibility for resolving any issues that may occur in violation of the principles (Cyberlaw 304).

A recent case arose in 2008 around Facebook’s newly-implemented Beacon system, which shared user information with advertising companies such as Blockbuster, Fandango, Hotwire, Overstock, Zappos, Gamefly and forty “doe” corporations (Binaryfreedom.info). The Beacon system also displayed the online shopping and browsing activity of users to other members on Facebook without user consent. These instances were both violations against the Facebook Privacy Policy that was in effect during that time. Users were initially unable to opt-out from participating with the Beacon program but Facebook was later forced to provide its users with the ability to deactivate the Beacon program in the account settings. “According to the suit, Facebook and its advertisers who participated in the Beacon program violated the Computer Fraud and Abuse Act, The Electronic Communications Privacy Act, the Video Privacy Protection Act, California's Consumer Legal Remedies Act, and California's Computer Crime Law” (Binaryfreedom.info). Although Facebook is now currently a recognized participant of the Safe Harbour Agreement, it would have been in violation of many of the principles that are part of the agreement.

If the company decides to enable the creation of widgets within the social networking platform, privacy policies must be updated and adhered to by the company itself as well as participants in the creation and modification of the widgets. In order for a member of the networking site to use a widget, personal information can be compromised and personal identifiable information becomes readily available to the creators or to those who have control over the widget.

In order to avoid infringing on the privacy of site members, users should be provided with a policy statement that indicates that by accessing the application at the individual’s own discretion, the user allows the widget to access personal information that is available on his or her social networking page. Creators of the widgets must also abide by privacy policies that prohibit the misuse of personal information that can be accessed through the code of the application. Widgets created and maintained by the company must also indicate what information will be accessed when another site member utilizes the widget. Members must be fully aware that participation with any widgets or applications provided and maintained by third parties must be done so at the discretion of the individual and that the company is not responsible for content that redirects users to a source outside the social networking site. By providing a conspicuous link to the policy statement that includes this information so that users can easily review and understand this policy, the company can avoid possible violations of privacy laws that may come in to question with the use of widgets and accessible coding to site members.


 * Copyright**

In addition to privacy complications, widgets also require preventative measures for copyright infringement. Users of the site that decide to create widgets and provide source codes for other users to modify the widgets must be aware of copyright terms of use and that by providing the code, members will not be liable for copyright infringement. In any case, the company will not be responsible for users who infringe on another member's copyrighted widget, as this would be a direct case of copyright infringement between the two users.

In the case that the company decides to create and provide a widget for the rest of the site, it may do so under the right to reproduce, sell, rent or lease the copyrighted widget. If the company decides to create and copyright a widget and does not want other members to modify it, digital locks may be used to protect the code of the widget. The Digital Millennium Copyright Act (DMCA) protects copyright owners “from the circumvention of technologies used by them to manage the control and use of the digital content of [the] copyrighted works” (Cyberlaw 101). This will provide legal protection against users who have access to the widget from copying, redistributing and selling the application, which would be a direct infringement of the DMCA.

The company will not be threatened by potential violation of copyright laws from widgets that have been created by members of the social networking site. The Infringement Liability Limitation Act, Section 512 of the Digital Millennium Copyright Act, protects online service providers or network systems providers, and gives such companies “federal immunization from claims brought against them by copyright owners based on a theory of secondary liability” (Cyberlaw 102). For example in 2008, Hasbro, the makers of the board game Scrabble, filed lawsuit against the creators of the Facebook application, Scrabulous. The game, which was created by Indian-based CEOs of the company RJ Softwares, is accessed by half a million users daily and is almost an exact replica of the original board game Scrabble. Hasbro sued to have the game shut down, and soon after the company released its own Facebook application of Scrabble, which is only played by 8 900 users daily (News.cnet.com).

The Infringement Liability Limitation Act exempts online service providers such as yourself from secondary liability such as contributory infringement and vicarious infringement as long as the provider or the company produces “proper notification of its policy regarding alleged copyright infringement and [establishes] a company agent to be notified in the event of such infringement” (Cyberlaw 102). Only companies that qualify for the DMCA safe harbour exemption, which can do so by openly providing a detailed and strict policy, will be protected.

The company of the social networking site must be cautious of infringing on existing copyrighted works during its own creation of widgets. It is responsible for assuring that all widgets copyrighted under the company’s name must be original and not directly infringe on other copyrighted works such as games, literature, or digital media, as seen in the case of Hasbro vs. RJ Softwares. However, if widgets violate copyright laws surrounding works provided by other users on the site, only users who access the widgets will be accused of direct infringement.

In the case of RIAA vs. Project Playlist in 2008, Facebook and MySpace, which are sites that use the Project Playlist application, were not seen as responsible for infringing on copyrighted works. Project Playlist embeds a music player on users’ MySpace or Facebook pages and the “Recording Industry Association of America filed suit on behalf of nine record labels,” maintaining that, “Project Playlist performs and reproduces plaintiff’s valuable works (and induces others to do so) without any authorization whatsoever” (News.cnet.com). The social networking sites would not become vicarious or contributory infringers of copyrighted works as long as the companies’ policies stated that the sites were not responsible for third party applications that were applied and accessed by members on the sites. The company can avoid possible cases of copyright infringement if thorough policies are created, strongly enforced and clearly stated to its users. As long as the company takes the necessary precautionary actions, protection can be provided by the DMCA.

Creating a social networking site that provides access to different parts of the world has the potential for legal issues pertaining to jurisdiction. It is important to understand the legal rules and issues regarding how jurisdiction comes into play and where your business will stand in the event of a legal issue rising. Firstly, it will allow you to understand “who can bring legal suits against you and in which courts and also allow you to determine where you can bring suit against others” **(Wensley Jurisdiction)**. This directly pertains to the widgets and the protection of them in the event that they are reproduced elsewhere outside of the website. In this event legal action should be brought up by you against the offender. However, you will need to be prepared and have knowledge about jurisdiction in order to succeed. Internationally, jurisdiction varies as conducting business online allows for many variables to be present. This allows for the possibility for jurisdiction to be claimed in many places such as the “internet user, the internet service provider (ISP), various communications conduits through which the data flows, content provider, and the server that hosts the content provider’s information” (Cyberlaw 36). This raises the question of which variable is the deciding power. This is only narrowed down with the specifics of additional variables that will be discussed. Furthermore, a set of principles have been established that are relevant to the jurisdiction of the internet. “The territoriality principle states that nations have the power to sanction and control conduct within the bounds of their own physical boundaries. This principle allows nations to regulate internet content and services offered from within its boundaries. The Nationality principle establishes the nationality of the parties as the key factor determining jurisdiction, not physical location and the effect principle states that a country may protect its interest by criminalizing an act that it deems harmful to its national security” (Cyberlaw 37).
 * Jurisdiction**

Be prepared for travelling in the event of legal issues arising as you will have service providers, offices, and users in Canada, the USA, and the EU.

It should be understood that in the event that legal issues should arise in the EU, your choices in whether to hold court proceedings in the comfort of your own home is lost. In the EU, the law simply states that “if you do business with any individual in any EU country they have a right to bring suit against you in their own country” (Wensley Jurisdiction)**.** It would be in your best interest in this case to establish proper contacts where your offices reside in the EU to handle such matters. Establishing a lawyer in the EU would be an ideal contingency plan as having a representative that is familiar with the environment would increase your chances of success.

In Canada, its jurisdiction principles are rooted in “real and substantial connection” which is similar to the specific jurisdiction criteria for due cause in the United States discussed below. (Wensley Jurisdiction). Since “adjudicative jurisdiction in Canada is broadly similar to that in United Sates law” it is important to understand the U.S’s jurisdiction practices (Gates 2009).

Within the U.S. the issues regarding jurisdiction is much more complex. If a legal issue is brought against you in a state that you or your offices do not reside in, adequate requirements need to be met in order for them to officially take you to court. “For a court to render a judgment against a nonresident e-business defendant and thereby deprive that company of personal interest, it must do so within traditional notions of due process” (Cyberlaw 21). Due process in relation to jurisdiction is the constitutional requirement based on whether the non-resident e-business defendant had sufficient minimum contacts in the state where the case is being tried (Cyberlaw 22)**.** This explains the fact that sufficient contact from your website to a user within the state must be established in order for due cause to apply. It is worth noting that although a website has been created by you and users access it from another state, this does not necessarily translate into due process automatically. The nature of the minimum contacts with your website and the user from the state is required to be established through either general jurisdiction or specific jurisdiction. General jurisdiction needs to satisfy the requirements of the defendant having a “continuous and systematic” contact with the state while the specific jurisdiction is based on the “out-of-state defendant performing an act of transaction with the state by “purposefully availing” itself of the privilege of doing business in the state and enjoys its benefits and protection” (Cyberlaw 22). Your social networking site gives users the ability to communicate with peers, create content, widgets, and even sell them. By doing so, it gives your social networking site the potential to create “continuous and systematic” contact with users from different states (Cyberlaw 22). This nature of contact is potentially enough to satisfy the general jurisdiction requirements for due process even if no physical part of your company may reside in this state. This opens up the ability for any state to take you to court in the event that they establish due process against your company. An example of a case that can relate to this is the case of the International Shoe Company v. Washington State, 326 U.S. 310. In this landmark case, the International Shoe Company had its main office in Missouri but held business in the state of Washington, where orders for shoes were taken. Its employees took orders in the state while only displaying one shoe. It did not have any other type of physical property. However, the court found that the type of business actions that took place in Washington established “sufficient contacts or ties with the state of fair play and substantial justice to permit the state to enforce the obligations that incurred there.” **(Cyberlaw 24)** This case can be directly related to the potential legal issues that may arise even if your company houses no physical property in another state. The relationship established between your website and its users in a consistent manner is potentially enough to establish due cause. Some recommended steps that should be taken in order to further protect your company from potential legal matter are as listed:

- Invest in tracking technology such as Google Analytics that allow you to track consumers interactions with your website in order keep a record of the type of transactions that occur. Through this, you will be able to prove your site does little or no business in the state where the plaintiff is bringing the lawsuit. (Cyberlaw 41) - Create a Terms of Use that specifically states that in the event of a dispute, the case will be tried in a state that will be favorable to your conditions. It would also be ideal to include a disclaimer stating that the company will not do business in certain states or countries. - Require users to consent to these terms in order to gain membership into the site.

Giving users the ability to create their own content as well as giving them the option to sell it in the form of widgets creates the potential issue of trademark infringement. Since your social networking site has a strong focus on user created content, it is not only important to protect your own company’s trademarks but of your users’ as well. This is where it is important to determine whether the content created by users within the website is owned by users who created it or it is given up to the social networking site in return for the management and opportunity of profits. If the users retain the trademark rights of their content, a policy should be established in order for the company to isolate itself from any type of legal matters that may arise in the event that the user’s content may have infringed upon another party’s’. Most importantly, the trademark of the website should be protected. The reputation of your social networking site is crucial in its success. Under the Lanham act of 1976, a trademark is defined as a “word, name, symbol, device, or other designation, or a combination of such designations, that is distinctive of a person’s goods or services and that is used in a manner that identifies and distinguishes them from the goods or services of others”. (Cyberlaw 48) In regards to your social networking site, it would be ideal to trademark certain aspects of your website that create the identity of your website. ”Company graphics, logos, designs, page headers, button icons, scripts and service names are registered trademarks, trademarks or trade dress of Company in the U.S. and/or other countries” (Terms of Use). It would also be beneficial to state that any likeness to your webpage or resemblances that may cause confusion will result in legal action taken by you upon anyone infringing your intellectual property. In the case of Walmart vs. Smith, Walmart was unsuccessful in halting the selling of merchandise that resembled their trademarks in an unfavorable light. Charles Smith was selling Walmart T-shirts and graphics that parodied familiar Walmart trademarks with Nazi and Holocausts themed images. The judge ruled that it was not possible that a person could mistake Smith’s graphics as actual Walmart trademarks and dismissed the case. Smith further enforced the protection of his website by stating on his website that he had no affiliation with Walmart and provided a link to the official Walmart webpage. (Bayard) By examining this case we are able to see the steps taken to protect ones trademarks. In this case, Smith was able to protect the intellectual property of his Walmart parodying products.
 * Trademark**

**Patents**

It is important to keep in mind patents and patent law when building your social networking site. Patents are placed on inventions to ensure that no one else creates, uses or sells that particular invention. Before one can move on, one must first understand what is meant by the term ‘invention’. “An ‘invention’ mean any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture composition of matter.”

Under this definition of invention, what is meant by the term “machine” is engine, appliance, and computer. What is meant by “composition of matter” is molecules, chemical compounds, life forms. What is meant by the term “process” is chemical production, business methods, and software in some cases. The term “process” can be applied to your social networking site. The widgets on your social networking site cannot be patented because they will most likely be similar to widgets on other social networking sites but you could patent the social networking site as a whole. It is important for you and your company to file for a patent once you have created these widgets. In Canada, patents are granted by the Canadian Patent Office, which is apart of the Canadian Intellectual Property office. Do not assume that what you invent with respect to your social networking site is patented but instead file for a patent as soon as you can. When filing, provide a detailed description of the invention that you wish to patent, in your case provide a detailed description of the widget and the function that it serves to your social networking site. The Canadian Patent Office will check for prior art and test your patent application to see if it fulfills the standards of a patent. In order to receive a patent on ones invention, ones invention must be tested for patentability. In the United States, they test for novelty, obviousness, and utility. In order for your patent to pass the novelty test it must not have been invented or patented or published in the past. In other words, they are looking for how “new” your invention is. The second test, obviousness, tests to see if the invention is not obvious to a person having ordinary skill in that area of invention. This means that a mere substitution will not suffice but rather there has to be an innovative step so that it is not obvious to anyone else who is making social networking sites. Your site must be innovative and different from social networking sites that are already in the public. The final text, utility, tests to see how useful and practical your invention is. Canada performs a similar series of tests but instead the test is for novelty, utility and ingenuity. Ingenuity refers to the cleverness and originality of the work. When filing for a patent there is a charge. In Canada, the filing fee is $150 dollars, the examination fees are $200, the patent fee is $150, and the yearly maintenance charge is $50 or more. When paying these fees you are getting an international agreement that gives you, the patentee, rights for a 20-year period starting from the time you filed for your patent. In Europe, once you have published your invention it cannot be patented but in the U.S. and Canada you have one year from the date of publication to patent your invention. However, this may change and it would be safer to patent your widgets before you publish them through your social networking site. After you have gotten your patent, you and your company can sell the widget and tell others how to use it. It is important to do a lot of research before filing your patent to make sure that it will not infringe upon another patent. Recently, Microsoft was found to have infringed on Uniloc’s patent for their privacy software. Microsoft was charged 558 million dollars in damages. Microsoft has been accused of knowing of Uniloc’s software and taking the idea and using it as their own. To ensure that your social networking site maintains a successful and secure future, plan ahead and make sure your invention will be free of patent infringement.


 * Contracts**

One of the most important things to remember when creating your social networking site is to have legal contracts. A contract can be defined as “an agreement that is legally enforceable”. A type of contract that should be presented to people wishing to be a part of your social networking site should be a valid contract. A valid contract will ensure that the rules and guidelines that are listed within in the contract of your social networking site are enforced. There are several requirements that must be met before you can enter into a valid contract with your potential members. The first requirement is mutual assent. Mutual assent states that both parties must be clear that they wish to enter into a contract and this is usually done by one party making an offer. The second requirement is consideration. Consideration states that each party must be exchanging something of value. The third requirement is capacity. Capacity states that each party must be legally able to agree and enter into the contract. This means that underage youths have limited capacity and usually need a signature by a parent or guardian. The fourth and final requirement is legality. Legality states that the contract must be accepted by society and cannot contain anything that goes against the law. It is important to follow these procedures when forming the contract for your social networking site. It is key for your contract to feature a “terms of use” or a “terms of agreement”. This is where you will list the rules of your website, describe your privacy statement and anything else that members of your site should be aware of. The terms of agreement must be clearly stated and must be easily seen by potential members. Your company should be aware of the Clickwrap agreements. The Clickwrap agreement states that the terms of agreement must be clearly visible, terms must be easy to understand, and unusual terms must be emphasized. It is important to make your potential members scroll through the entire terms of agreement before they are able to accept. Postential members must be given the choice of being able to accept or reject the terms of agreement. The terms of agreement is also important for maintaining privacy and protecting your members from one another. It is important to recognize that as you build an online community you must treat it like any other community and rules need to be enforced. The terms of agreement is where you should state the rules for defamation and libel on your social network. To ensure a successful networking site you must be able to let your members know that their content can be protected and if defamation were to occur, that it would be dealt with according to the terms specified in the terms of use. With the capability of your social networking reaching all corners of the Earth, you should take notice to the UN Comission in Internation Trade Law (UNCITRAL). This act deals with electronic documents. An important case to note in dealing with contracts and licensing is ProCD, Inc. vs. Zeidenberg. Matthew Zeidenberg purchased SelectPhone, a large telephone directory stored into a computer database, from ProCD. Zeidengberg then ignored the license and resold the information that was held within SelectPhone. ProCD took Zeidenberg to court claiming that he had gone against the rules of the license. Zeinberg claimed that the license was on the inside of the box and was not made readily available to him. This case is important when specifying your terms of agreement. Your rules and terms of agreement must be made clear to potential members of your social networking site so that such conflicts and confusion with regards to your website policies do not occur.

The market of communications is a vast and complex field that incorporates a mixture of established laws as well as newly developed ones. Issues pertaining to privacy, copyright and trademark are becoming an increasingly common problem in the arena of online communications. The rise in popularity of online social networking sites continues to produce cases that introduce new aspects of the law that may not have been considered problematic in previous years, and call in to question the current established laws that govern society. You must be fully aware of the implications that may arise in each area that is encompassed in this arena of social networking sites. Knowing the law will only work to your advantage in order to create and successfully run social networking website.