3 results for terms of service:

  1. Skype’s New Terms of Use

    Over the five months that the Docracy Terms of Service Tracker has been up and running, Skype has changed its Terms of Use six times.  The most significant development between versions has been the addition (and subtraction and addition) of a binding arbitration agreement and class action waiver for Pay by Mobile customers in the US.  The TOS Tracker initially recorded Skype’s introduction of the clause on January 24th, 2013, as well as its quick retraction on January 31st, just a week later.  However, on April 10th, Skype reintroduced the clause, and it looks like it’s here to stay.

    The arbitration and class action waiver agreements are written into a new section of Skype’s Terms of Use governing Pay By Mobile accounts, an option to pay for certain Skype services via your mobile phone bill.  While both binding arbitration and class action waivers are not unusual, they do significantly affect your legal rights and remedies, and it’s well worth a minute to understand what they are.

    The Clause: Agreeing to Binding Arbitration & Class Action Waiver [Paragraph 20.3 (a-i)]

    Any dispute you may have relating to your use of Pay By Mobile services may be resolved either through informal negotiation or in small claims court (in NY, small claims may not exceed $5,000).  However, if those fail or are otherwise insufficient forums for handling your claim, you are now expressly required to resolve your dispute through binding arbitration.  The clause states this succinctly: “You are giving up the right to litigate (or participate in as a party or class member) all disputes in court before a judge or jury.”  It also provides that all claims must be filed, in small claims court or arbitration, within one year from the date on which it could first be filed.


    Arbitration clauses are common enough and, for general purposes, they’re not necessarily a bad thing: most people will not need to litigate an expensive claim arising out of Pay By Mobile.  The costs of a lawsuit in time and resources often outweigh the value of the harm to the individual.  You’ll probably get more out of a negotiation or small claims proceeding than you would if you put your claim to the test before a court of law.

    For an individual with a large enough claim, Skype’s Terms of Use require resolution through binding arbitration.  Most commercial arbitration is governed by the Federal Arbitration Act of 1925, which validates contractual agreements that mandate arbitration.  The Act also substantially limits the right to appeal an arbitration award in the courts.  Skype’s new Terms require all arbitration to be conducted by the American Arbitration Association, and provide additional arbitration procedures and details here.

    Class Action

    The class action waiver is more controversial.  The class action is one of the most effective legal options for consumers to settle disputes against large service providers.  Essentially, a class action enables consumers who have been wronged in the same way to join together in a lawsuit.  By bringing together a mass of small individual claims, consumers who have been harmed can seek redress while keeping their own, and the court’s, costs down.  

    By agreeing to Skype’s Terms of Use, you are not only giving up your right to litigate in court individually, you are also giving up your right to join with another party in any proceeding in any forum.  That is, if you and another each had the same problematic experience, you can’t join together in small claims court.  You can’t arbitrate together.  And you sure as heck can’t join in a class action.  Your only option is individual arbitration.

    The new section does contain an “opt out” by which, after agreeing to the present Terms, you can reject future changes to the Terms by sending notice to Skype through US Mail.  However, you will remain subject to the Terms to which you’ve already agreed - it’s not a true “opt out” since you have no choice but to opt into the current Terms.  

    Since these provisions are written by companies on a take-it-or-leave-it basis and significantly affect your rights, there is a risk that they could be found by courts to be unconscionable.  Other companies that have recently added binding arbitration to their Terms - like EBay, Instagram and StubHub - have provided their customers with a limited window to opt out completely.  Because Skype hasn’t offered such an opt out, they appear to be somewhat uncertain of the legality of this tactic.  They seem to have hedged their bets by adding a severance clause, which would effectively strike from the contract any clause in 20.3 that was found to be illegal or unenforceable.  It’ll certainly be interesting to see if any legal challenges arise from the the lack of an opt out clause, and whether Skype will be forced to retroactively give their customers the option.


    So, all you Skypers out there using Pay By Mobile - what say you?  How does it feel to know that if one day you discover you’ve been subjected to unreasonable or fraudulent practices, that your only remedy will be before an arbitrator who’s been exclusively retained by Skype?  There’s not much hope that lawmakers in the courts or capitals will force companies like Skype to sit its customers at the bargaining table.  For now, keep your eyes open to the effects of these provisions and let your voices carry your opinions loudly.  They can’t contract away your right to be heard - and, after all, you can always opt out completely.


  2. Nobody reads your TOS.

    Foreword: this post is a follow up of the critically acclaimed: “It’s OK if you copied your Terms of Service”. Once again, we are featuring attorney Brady Kriss, and Brian Rogers as guest star.

    TOS are important. They protect your company from a series of risks that might be very costly. But what if nobody reads them? I asked Brady if this is a serious problem.

    Do you read the terms of service of the websites you use? what are the legal consequences of agreeing without reading?

    I actually do read the TOS of a lot of the sites I use, but usually just out of morbid curiosity. The legal consequences of agreeing to a TOS for a website without reading them is a really interesting question these days. There’s the basic issue that you’re basically signing a contract without knowing what’s in it, and that can have a couple of bad consequences. First, companies can seriously limit their responsibilities to you, including legal liabilities. They can also lay claim to your intellectual property, such as images, music or other content you upload to their site. More frightening, potentially, is a piece of legislation that’s in Congress right now (updates to the Computer Fraud and Abuse Act) that would make any violation of a TOS a felony - so signing up for Facebook using a fake name could get you a year or more in prison. But if you don’t read the TOS for Facebook, you won’t know that it is against the rules to use a fake name. Unfortunately, “I didn’t feel like reading them” is not a viable legal defense to a TOS violation in either criminal or civil court.

    Although courts usually uphold TOS, things might go a different way, particularly if you “materially” update them without notice.

    Brian Rogers, a lawyer who studied this problem, sympathizes with users’ laziness:

    As far as TOS, their unreadability is part of the problem. Other pieces are the fact that they change often (there’s little sense in spending time reading TOS when you’ll have to read a whole new document periodically) and they’re adhesive (the only reason to read them is to find something so bad that you’d opt out of the service altogether). Ultimately, I think the solution is for courts to prevent overreach by (1) applying the doctrine of unconscionability in all un-negotiated online consumer transactions and extending it to B2B contracts and (2) adopting the doctrine of reasonable expectations as set out in the Second Restatement [of Contracts].

    Tentative translation: in case of litigation, the judge would say that unreasonable and unfair TOS clauses are inapplicable, as well as any clause that would have prevented the user to sign-up, if he’d only knew (hypothetical: if I’d known Facebook can take my photos and sell them for a profit, I wouldn’t have used it). That sounds like a good parachute for the users, but what about companies?

    Brady answers me pointing out exactly the readability problem: if you want people to follow the rules you set out, make sure they read and understand them - which starts with drafting TOS that are readable. Few companies tried this way. The most famous case is Dropbox’s effort to rewrite its TOS in plain English and write a blog post about the changes. A noble intent that actually made users read TOS, but also had a negative drawback for the company image, making some users believe that Dropbox was taking ownership of their files and “spying” on them.

    Brady shared an interesting legal view on the story.

    I think Dropbox absolutely had the right idea in trying to draft their TOS in a way that their users would find approachable and easily understandable. The way it is presented, with the tabs for the Privacy Policy and the Security Overview, etc. along the top is a really great way to display what is really a lot of information in a clear and approachable way. However, I do still have some reservations about the wording of some parts of the TOS. I think that in an effort to be colloquial and sometimes just cute, Dropbox fell short on some of the legal things.

    The readability issue is not that easy as I thought. It’s actually a nightmare: I want to write my website’s TOS in plain English so people understand them and I’m not liable, but if I write them too clearly I can easily screw up (or maybe not? This company definitely gambled on the lazy readers). My idea of a standard TOS makes even more sense now.

    The quest for a solution is not over: a design-focused post on TOS readability will soon be showing on your screens.

  3. It’s OK if you copied your Terms of Service

    If you have a website, you likely have a page with Terms of Service that outline the relationship between you and the users (if you don’t, you probably should, even if you just have a blog). There are two huge problems surrounding Terms of Service (from now on, for brevity, “TOS”) that everybody knows, but few people try to solve:

    1. Everybody is copying TOS from other websites.

    2. Nobody reads them anyway.

    After this reality check, I tried to figure out the consequences of these practices, and see if I could find some solutions.

    Problem 1: Everybody is copying TOS from competitors.

    If only a service like Docracy existed, we would have totally copy-pasted entire chunks of their TOS. Try googling a random sentence from your TOS, and see how many fellow websites use it. It’s all boilerplate, and copyright doesn’t even cover that stuff. I asked a lawyer with a lot of experience in drafting TOS, Brady Kriss:

    Most internet companies just “take inspiration” from the TOS of similar services. How good is this practice?

    Taking “inspiration” from other TOS is great. You should absolutely look around at other sites and see what TOS you like, what ones make sense to you, and what is just too confusing or badly worded. And then make sure you keep the good stuff and ditch the bad stuff for your TOS. Looking to see what sites similar to yours, and so would have similar needs in terms of a TOS, is a really smart move. But you’ve got to be wary of all the not-so-great TOS there are out there, even on sites from totally reputable companies. You definitely don’t want to just copy and paste a bad TOS into your site. The other thing you’ve got to watch out for is grabbing terms from a TOS that doesn’t match up with your site or the service you’re providing. You could easily end up including terms that you don’t need, which only makes for an even more confusing TOS, or you could end up leaving out a really important provision. The repercussions of leaving out a provision from a TOS can be severe - if you don’t have a proper DMCA provision you could be on the hook for copyright infringements your users commit on your site. Having a bad TOS for a web service can really get in the way of selling it, if that’s what you want to do down the line.

    So, just like in school, “intelligent copying” actually works! And, if everybody copies the same clauses, we might as well come up with a standard, that can be open sourced on Docracy making all this copying “guilt free”. There’s an other upside in establishing a standard TOS: if all e-commerce TOS are drafted from a standard, once I know the standard I can avoid re-reading every e-commerce site’s TOS. Two birds with one stone. On Docracy, we host one of the few open source TOS, Wordpress’ model TOS for blogs.

    Brady, What do you think of Wordpress TOS? Do you think TOS are a contract category mature enough to be standardized?

    I absolutely think that a great deal of TOS content is ripe for standardization. It would be hugely beneficial to users in general to have a baseline for what is actually contained in the TOS that they effectively sign when the use a website. It would also be great for creators of websites and web services to have a standard baseline for what needs to be in a TOS. But having a standardized baseline and having a one-size-fits-all TOS are two very different things. For sites that are generally very similar, like blogs, a standardized TOS is great. But for a new and innovative web service, you really do need something custom. Making the decision on whether or not to hire an attorney to draft a custom TOS for your site is just like making the decision to hire a professional vs doing it yourself for a lot of things. Sometimes the stakes aren’t that high, and you can just wing it. Sometimes it really matters, and you’ve got to make sure you’ve got an expert to do it for you. And sometimes you’re somewhere in between, and you can afford to spend a lot of time learning a new area and hoping you got it right.

    Docracy is a brand new service, in a delicate market: the stakes were high, so of course we hired a lawyer to fix our TOS. But let’s imagine you are in that middle ground. I asked Brady what’s a good way to draft TOS:

    I think the best way to draft a TOS - and the way I do it - is to start with a list of the point you need to get across to the users of your site, and then try to communicate the points to them in the clearest - but still legally enforceable - way you can. The list of things you need to get across start with the standard legal stuff, like who the parties to the agreement are, what the warranties and representations of the parties are, what do you have to do to agree to the contract, what the timeframe of the contract is, etc. Then, you think about what things your users need to know that are particular to your website or service. Are you allowing any user-generated content? Then you need to get a license to display the content your users provide, and you need to comply with the DMCA. Are you making a site for kids? Then you need to comply with COPPA. Are you making a cloud storage service? Then you need to make it clear to your users how you’re going to deal with their data.

    While you take notes, I asked Brady for some “inspiration”, just in case the stakes aren’t that high:

    I think Twitter has a pretty stellar TOS. Legally solid, readable, and it has some handy call out boxes to make sure users really see the important and unexpected bits. TOS can be a powerful PR tool. TwitPic and Dropbox, among others, can attest to the level of bad PR that can come from a bad TOS or a bad change to a decent TOS. A well written and well presented TOS can also lend a great deal of credibility to a website.

    You can branch Twitter’s TOS here. If you have a good standard TOS for e-commerce, don’t hesitate and upload it on Docracy. It would be good for a lot of people, including you.

    I’ll tackle the second problem in a follow-up post next week, stay tuned!