Justin Castillo
Justin G. Castillo is a partner in the law firm of Levine, Blaszak, Block & Boothby, LLP ("LB3"), where he...
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Justin Castillo | January 01, 2013 |


What Enterprises Can Learn from the Consumer Backlash Against Instagram

What Enterprises Can Learn from the Consumer Backlash Against Instagram This is a "teachable moment" for enterprises regarding the dangers of online terms.

This is a "teachable moment" for enterprises regarding the dangers of online terms.

Instagram, the popular photo-sharing social media site, recently ignited a firestorm of protest from consumers during its short-lived attempt to revise its terms of service to allow it to "monetize" (if not actually sell) user content. Critics of the new terms charged that, while ownership of a photo or other content nominally remained with the user, the proposed new terms would have given Instagram broad license to profit from users' content. In the digital world, where ownership is less important than control, Instagram's assertion that it was not trying to claim ownership of users' content was, critics suggested, a distinction without a difference.

An unexpected dividend of the incident is that it is a "teachable moment" for enterprises regarding the dangers of online terms. While I've written before about the dangers that service guides pose to enterprise customers, the Instagram donnybrook provides some useful new perspectives and insights regarding on-line terms ("OLTs" for ease of reference).

Lesson One: On-line Terms are Convoluted and Complex by Design
Service providers don't like to discuss how they draft OLTs. While trying to mollify customers about the proposed new OLTs, Kevin Systrom, Instagram's CEO, provided (perhaps unintentionally) some candid insights into the drafting of OLTs. The key take-away from his comments is that service providers do not draft OLTs to be clear and unambiguous. Instead, OLTs consist of complex and confusing language precisely because they are readily available for all to see.

In a post on the company's blog, Systrom claimed that "Legal documents are easy to misinterpret." This statement is nonsense: a competent lawyer can draft documents that clearly and unambiguously state the parties' obligations. In fact, this assertion is a variation on a time-honored service provider tactic: when a customer asks you why your boilerplate is so embarrassingly overreaching or one-sided, claim that the customer is either misinterpreting it or that the language of the provision did not capture the service provider's "intent." The fact is that, when service providers draft OLTs, they know exactly what they are trying to say; there just isn't any upside in saying it clearly.

Instagram's explanation was telling in its calculated ambiguity. The post conceded that, "From the start, Instagram was created to become a business" (translation: we need to monetize this stuff). According to Systrom, Instagram's desire

"to experiment with innovative advertising" was "[mis]interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos. We are working on updated language in the terms to make sure this is clear.
(emphasis added).

Readers should note: Systrom's denial that Instagram planned to "sell" user content avoids the fact that the plan all along was to monetize content not by selling it, but by licensing it, using the broad licensing rights granted by the quickly-withdrawn new OLTs.

Bottom line: OLTs may look like innocuous boilerplate, but they require close scrutiny to understand what's really going on.

Lesson Two: When it Comes to Fighting Unreasonable Terms, Sunshine is the Best Disinfectant
Which group of users would you expect to be more vocal about changes to OLTs: Consumers who pay nothing for an entertaining social media service, or sophisticated enterprise customers who pay millions for mission-critical connectivity? The answer may surprise you.

Ironically, when service providers overreach, consumers seem more proactive about responding vocally and forcefully. Instagram is just the latest example. For example, in late 2011 Verizon tried to impose a $2 "convenience fee" for consumer customers who used credit cards to pay bills. The backlash was overwhelming; less than a day later, Verizon withdrew the charge. As Ben Rattray, founder of Change.org (which helped some consumers create on-line petitions protesting the charge) explained: "In many ways, corporations are more subject to the influence of consumers than politicians to voters.... Companies cannot tolerate being a public pariah. You have brand equity that is so fragile."

Ironically, Verizon recently rolled out a similar convenience charge in its enterprise OLTs. To the best of my knowledge, there has been no enterprise backlash, and the charge remains in place.

Consumers are also working proactively to monitor and compare OLTs. The website Terms of Service--Didn't Read works to rate and label website terms and privacy policies using a grading system ranging from Class A (very good) to E (very bad). The website's tag line is that "'I have read and agree to the [OLTs]' is the biggest lie on the web. We aim to fix that."

Carriers and other service providers will use OLTs to expand their rights and circumscribe yours whenever possible, and they will retreat only when challenged.

Lesson Three: Above all, Protect Your Content (and Your Customers' Content, Too)
The final lesson from Instagram is that tensions between service providers and customers regarding content will only increase. Leveraging Big Data to monetize content is all the rage, especially in the mobile world. And nobody is in a better position to do this than providers of network services, who happen to be on the prowl for high-margin initiatives wherever they are to be found.

The battles won't revolve just around ownership of content; the right to control and/or use that content will be just as crucial. In the enterprise space, for example, Verizon recently claimed broad rights in its OLTs to exploit customer confidential information (though savvy customers could override the provision).

There are many content-related pitfalls for unwary enterprises. Many carrier contracts are drafted so that the customer must "opt out" of default provisions that give the carrier broad rights to use and share the customer's Customer Proprietary Network Information (CPNI) for reasons other than providing service. Another troubling sign is that some carriers now claim that technical hurdles make it impossible to protect CPNI.

Well-organized consumer protests helped to turn back Instagram's proposed changes to its OLTs, at least for the time being. But this was just a skirmish in a much larger war between service providers and users over control of information that will only become more pertinent as more enterprises move to the cloud. The sooner that enterprise customers realize that this is a battle that they, too, must fight, the better off they will be.


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