For online terms of service, one size does not fit all

Operators of online services rely on enforceable contracts governing their relationship with website visitors. Commonly known as "terms of service," "terms of use," or "terms and conditions," these agreements, or terms, detail acceptable uses of a website, and can also mitigate risk to online operators. While it's tempting to just copy the terms available on other websites, there are good reasons to prepare your own: not only could another website's terms be outdated, but they may not adequately address the unique issues faced by your company. Remember also that each provision in your terms represents a contractual promise made to your customer, which you can be legally compelled to uphold. Here are some tips in crafting terms for your company to mitigate risks associated with the online environment.

First, consider what types of user conduct could expose your company to risk. These considerations will inform the section of your terms describing prohibited conduct. No matter your business, you will likely want to prohibit users from scraping your website, harvesting personal information, or transmitting viruses to your company. Depending on your business, there may be more specific prohibitions that should be included as well. For example, if your website allows user-generated content, you might consider specifically prohibiting the unlawful posting of copyrighted materials, as well as content that is inflammatory or otherwise constitutes harassment. You may also want to impose a minimum age requirement to mitigate risks associated with laws specific to children or minors.

Second, ensure the terms adequately protect your intellectual property. Consider the scope of the license you are granting to users, and ensure all of your intellectual property is protected - not only copyrighted materials, but also other types, such as your trademarks and general proprietary information. To the extent appropriate, your terms should also grant you a license to user-generated content. Think about what you want to do with user-generated content, whether you need (or want) to share it with others, and structure license provisions accordingly.

Third, don't forget to incorporate other agreements by reference. You may, for example, incorporate by reference a website privacy policy or acceptable use policy. Perhaps you have a separate policy governing the use of cookies, or your company's transmission of commercial text messages to users. These other agreements should be incorporated by reference into your terms, and be made easily accessible to consumers.

Fourth, consider the mechanism by which your website visitors will agree to the terms. In many instances, simply including a hyperlink at the bottom of a webpage will not suffice to create an enforceable contract, which puts your carefully considered protections at risk. Just like paper contracts, the formation of online contracts requires mutual assent. It is thus important to think about whether your assent mechanism effectively communicates to a reasonable consumer that certain conduct constitutes agreement to the terms.

For example, if users can register for an account on your website, you can require such users to agree to the terms as a condition of registration. Ask yourself whether a reasonable consumer would know that by registering, he or she is agreeing to a contract. Consider whether your terms are easily accessible to users using mobile devices or less common browsers. Keep in mind, as internet customs continue to evolve, the methods of obtaining agreement from your users will likewise evolve.

Fifth, think about whether you want to include a mandatory arbitration clause in your terms. Many online operators elect to include a mandatory arbitration clause with a class action waiver in their terms. If enforced, the provision would prevent potentially crippling class actions from being successfully levied against the company. If you do include such a provision, take extra care in drafting it. Though these provisions are enforceable under U.S. Supreme Court precedent, they are frequently attacked by litigants. California courts, for example, may elect not to enforce such provisions where they are found to be procedurally and substantively unconscionable. Accordingly, it is not advisable to draft outlandishly one-sided arbitration provisions. Consider whether fee-splitting provisions are fair, as courts may refuse to enforce arbitration clauses where a consumer is required to pay significant forum fees in arbitration. California courts in particular want to see evidence that a consumer affirmatively agreed to arbitrate disputes in an individual capacity.

Sixth, because arbitration provisions are routinely challenged, online operators should also strongly consider granting consumers the ability to opt out of the arbitration provision of the terms. Bear in mind that certain industries are subject to more onerous restrictions on arbitration. For example, a California Private Attorneys General Act claim cannot be waived before a dispute occurs, so an arbitration clause between an online operator and its employees may not be enforceable with respect to such PAGA claims. The case law surrounding the enforceability of arbitration provisions is expanding rapidly. Here especially, using an outdated arbitration provision may be tantamount to not having one at all.

Finally, online operators should review their terms (and other consumer-facing policies) regularly and update them as needed, just as is typically done with standard contracts. Doing this will ensure that your terms evolve with the law and with industry practices. A good rule of thumb is to conduct annual reviews of those terms to ensure they remain enforceable in light of changing laws, and that they adequately protect your interests as your business (and the broader industry) develops.

Perhaps the biggest takeaway here is that one size does not fit all. As with all significant contracts you enter into, care should be taken to ensure that your online terms are enforceable and adequately mitigate the unique risks faced by your company - both today and in the future.

Anna Hsia is counsel at ZwillGen, where she advises leading internet and technology companies on online legal issues.