Why Your Website Shouldn’t Use Someone Else’s Terms of Use or Privacy Policy

The terms of use (TOU) agreement or terms of service (TOS) and the privacy policy found on most websites govern the relationship between the website operator and its customers. Although it may be tempting to copy and use TOUs and privacy policies posted on other websites to avoid the time and cost required to define your own online agreements, this approach can be risky, especially if you’re not merely running a passive website but also offer associated services. Investing in online agreements that support your business objectives can have significant benefits for your organization – and help you steer clear of multiple risks.

The risks of using someone else’s TOU or privacy policy

Your online agreements govern the sale, license, or provision of your products and services, and they will define the legal relationship between your company and your customers. The failure to include a key provision – or the breach of a term that you may not have even realized was a part of these agreements – can create business-level risk, as it may affect every online customer.

For example, consider the risks of using a privacy policy based entirely on the policy of another company in the same space. Laws in a growing number of US states, including California, require websites that collect personal information from residents of their state to develop and post privacy policies that meet certain mandated disclosure requirements, and which may impose meaningful penalties for noncompliance. In addition, federal law requires companies in certain industries to have a privacy policy.

When you copy another company’s privacy policy, you won’t know how the provisions apply to your company’s specific operations and business practices, even if the other company is in your industry. You also won’t know if the other company’s policy is legally sufficient. Even if that company is sophisticated, policies easily can fall out of compliance, given how quickly the law is in evolving in this area. Also, you can’t be sure of the provenance of that policy – perhaps that company copied its policy from another website – and that can lead to substantial liability. Getting the right advice on crafting your own policy helps you stay current and tailor your policy to mitigate risk or liability, which could save you meaningful dollars down the road.

The right TOU or privacy policy can save you money

Online agreements affect every one of your users and, as a result, even seemingly small points can be important. For example, it may seem like a good idea (particularly from a marketing or user interface perspective) to use an online agreement that your users are not required to take any action to accept, which is often referred to as a “browsewrap” agreement. However, browsewrap agreements are much less likely to be enforceable than online “clickwrap” agreements that require users to affirmatively click an “I accept” button. Companies using clickwrap have often been successful in enforcing terms where companies relying on browsewrap have failed – including with respect to arbitration provisions, which require customer disputes to be handled through arbitration instead of costly and burdensome class action lawsuits. This is just one example of how the right online agreement can limit your company’s financial exposure for future risks and claims.

The right TOU or privacy policy can provide a competitive edge

 TOU and privacy policies that are carefully drafted to address your company’s business model can prevent your competitors from engaging in certain types of competitive actions. For example:

• TOS can preclude competitive actions. Games company Blizzard Entertainment included a provision in its TOU that made it a breach for users to use third-party bots in online games they purchased from Blizzard. When Ceiling Fan developed two bots that allowed users of Blizzard’s game to automate certain aspects of that game, Blizzard recovered $7 million from Ceiling Fan on the basis that sale of the bots was a “tortious interference” with the online agreement between Blizzard and its users.
• TOS can require users to assign copyright in content. Metropolitan Regional Information Systems (MRIS) operates a multiple listing service that allows subscribers to upload their real estate listings, including photographs. MRIS included in its TOU an irrevocable assignment to MRIS of ownership of all images submitted to the website by subscribers, then successfully used this provision to prevent a competitive company from using such images found on the MRIS website.

In each of these cases, companies were able to achieve favorable results because of online agreements that were tailored for their specific business. Generic templates or repurposed policies that don’t account for your company’s products, revenue model, and target customer demographic won’t be able to provide the same level of protection.

The process of designing your TOU or privacy policy can lead to additional benefits

When you work with a lawyer to develop online agreements appropriate for your business, you will need to describe and think critically about your operations. Often, this “thought exercise” surfaces other risks to your business that may be important to address. For instance, a conversation about your product offering might reveal certain regulatory considerations, and your lawyer can then advise you on how to structure your operations in a compliant manner – or refer you to an appropriate regulatory specialist – to limit risks of significant liability in the future.

Generate TOU with Cooley GO Docs

 Use our TOU generators for the US to familiarize yourself with key provisions and to get started on building the agreements you need for your company. Note: A generated TOU provides a sample set of legal terms for a simple, information-only website. If you’re offering products or services through your website, you will need a TOU or TOS tailored to your business model and offering.