Encourage Social Interactions, But Check With Your Lawyer First

Attorney Mark D. Rasch is the former head of the U.S. Justice Department's computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

As retailers try and encourage customers to play with social any way they can, they run the risk of not only funding incentives that might yield little value but alienating shoppers to the point of legal violations. (That's right. You should flinch.)

The problem, then, for retailers attempting to enter the social networking space is whether they should plan their strategy and miss new opportunities or allow that strategy to be random and chaotic and to possibly create a host of potential legal problems—from copyright infringement to defamation and potential privacy law violations. How so? Let's start with copyright infringement.

Suppose a shopper opts to make a promotional video for your product, including cute graphics and music. The music, however, is subject to copyright and infringes someone else's rights. Under the Digital Millennium Copyright Act, an innocent third party that inadvertently hosts infringing material posted by someone else (think, for example, YouTube) can avoid liability for infringing if that party follows the procedures of notice and take down—that is, it agrees to remove the infringing materials.

But if a retailer actively solicits the creation of user-generated content, it may not be considered an "innocent third-party hoster" under the DMCA. Depending on the level of participation, the retailer may be considered a direct or contributory infringer, even if the infringing content is hosted on a third-party Web site (Flickr, YouTube, Twitter or Facebook).

And if that retailer provides economic incentive to the consumer to generate the content, creation of the infringing work is more likely to be considered a "commercial use" and less likely to be considered a non-infringing "fair use." In essence, the retailer may be considered as "paying" the consumer to create an infringing work.

Another issue is one of ownership of the works created by the consumer. Now, 99.9 percent of the stuff users develop will be—what's the legal term—crap. But every now and then, a user will generate a work that is brilliant, innovative and wonderful. It promotes your product or services; it's fun and creative; and it reaches the right target demographic. Indeed, that's why you created the program in the first place. That guy or gal gets 10,000 bonus points (whatever that is).

But who "owns" the work created? Is it a "work for hire?" because you "paid" the user to create it? Has the author transferred the copyright or licensed it to you?

Generally, with things like essay contests and the like, lawyers (remember lawyers?) include wording like "all submissions are the property of the company." That's all well and good when the materials are "submitted" to the company. What happens, though, when the materials are never "submitted?" but merely "posted" to a third-party social networking site?

Remember, the more the retailer "owns" the material, the more the company will be deemed liable for the content. The less the retailer "owns" the content, the less it can exploit that content. Pick your poison. The same is true for false, deceptive or fraudulent postings. Consider a company that makes Uselace, a weight-loss pill that, well, does nothing. It can't make health or diet claims about the pill, because it is effectively a placebo. If the company takes out an ad online or in print, on the radio or TV that says, "Uselace will make you lose weight," or pays a spokesmodel to say, "I lost 50 pounds with Uselace," the Federal Trade Commission would consider these actions a deceptive trade practice.

The FTC has taken the same position with respect to "paid" blogs or postings. If your spokesmodel, without disclosing the fact that she works for you and is being paid for the endorsement, blogs the same false claim about Uselace, bam! deceptive trade practice.

But what happens when you "incentivize" the public to post good things about Uselace and they post wildly inflated claims about the product. Are they then "paid" spokespeople? Are you liable for what they say? It may depend on the nature and extent of the incentives.

If you incentivize people to simply talk about the product, then you have to "reward" all the people who claim your product sucks and even those who file complaints with the FTC (as long as they post those complaints online!). If you only incentivize "good" comments, then those folks may be paid spokespeople.

Then there is defamation. First, of course, the user-generated content may end up being defamatory to the company itself. It may insult the company, its products, services, employees, staff, officers, directors, shareholders and their mothers. If, as a company, you "pay" consumers to post these things, you may in some sense "own" those postings. If you remove them (or seek to have them removed), you are exercising editorial discretion or control over the content of postings and, guess what, you may then be considered a "publisher" of the content that you allow to be maintained.

Section 230 of the Communications Decency Act notes that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." But by essentially "paying" for the creation of content, the retailer is not a "provider or user" of the service and may be held liable for the defamatory postings that it "paid" for. And you thought this would be easy.

The same problems exist with respect to privacy, clearing rights, etc. If a user generates a promotional ad on YouTube that markets your product (for which he or she gets reward points), did the people in the background consent to a use of their image to promote your product? Did they sign a model release? What if they are under age?

One of the goals of promoting user-generated content is to encourage creativity and the use of many new media. If you found out your 14-year-old daughter was being used (with or without her consent) in an online user-generated "ad" for condoms, you might have some concerns. If you found out the condom manufacturer actively incentivized the creation of that "ad," you might run to a lawyer. Finally, there's the problem of changing strategies in midstream. Many companies may have initially liked the approach of a chaotic period. That's where chains encourage people to do anything they want, and then use their creativity and see what happens. "If we don't like it, we can always change the rules." But that may not always be as easy as you think.

The rules are essentially a contract, and customers will rely on your promises of rewards and representations for changing their behavior. Think about the problems airlines have when they try to change the rules regarding their frequent-flyer programs. If you collect information from a customer under a certain set of rules (like a privacy policy or rewards program) and then change those rules, do you have to give customers their information back? It's not really clear.

This is why any new rewards program, and virtually any new entrée to the Internet that creates a public face for the retailer, should be reviewed by legal counsel and by any appropriate risk committee to see not only the benefits of the new program but the legal, regulatory, privacy and risk profile it entails. Even though it's the wild, wild West, we still need to have some basic rules. And hey, let's be careful out there.

Because social networking is such a new field, retailers are not sure exactly what type of customer behavior to reward. Thus, retailers will reward customers simply for "interacting" with them (or their agent) without considering the nature, scope and extent of that interaction.

This would be like rewarding customers for interacting with salespeople, even if that interaction is threatening, abusive or not productive. Just because it is happening electronically, does not mean it is helpful to business. Moreover, not every "page hit" is good for business.

The trick, therefore, for retailers is to find a way to incentivize "good" behavior while, if not punishing, at least not rewarding "bad" behavior. Retailers that reward any contact may actually be encouraging customers to engage in flame wars, criticism or simply juvenile activities in return for certain reward points or other incentives. And if retailers reward customers for every mention of their name in a blog post, enterprising consumers will simply automate the process of injecting the name, often inappropriately, into content as a non sequitur. The retailer then will be forced to pay out the rewards and will achieve little, if any, benefit.

On the other hand, if retailers are too restrictive in what they reward, or if they only reward the type of activity they think in advance will be helpful, then they have failed to incentivize innovation and new thoughts. The goal here is to get creative and entrepreneurial people to use their own time, energy and resources to come up with new ways to help market a retailer's products.

Thus, if retailers reward only Twitter postings and blogs, they won't capture the guy who makes a brilliant YouTube video or posts a photomontage promoting the company on Flickr. Conversely, what does a retailer do about the customer who posts a picture of his drunken cousin passed out on a picnic table wearing a T-shirt with its corporate logo? Is this good publicity or bad? Frankly, I'm not sure. So, obviously, the first step in designing a social networking program is to define what type of behavior is "good" and what type of behavior is "bad." This is not always easy to do.

Some good behavior is easy to spot. Customers purchasing products, recommending them to others, giving good product reviews, promoting the product itself and providing constructive feedback that helps improve the product are all examples of good behavior by customers. Some types of bad behavior are also easy to spot, things like hacking Web pages and destroying content.

But a lot of the behavior that may occur online is in a broad, gray area. For example, a customer criticizing a retailer or its products on a social networking site and encouraging other customers to do the same may be good or bad, depending on how the retailer reacts. If the retailer uses social networking sites to constructively engage those who criticize, by investigating their allegations and responding appropriately to them, the retailer can demonstrate that it cares about customer satisfaction.

If, on the other hand, the retailer engages in a flame war with its customers—particularly its disgruntled customers—or, worse, uses a heavy-handed manner or tries to take down the Web site, that retailer may generate more bad publicity than good.

The trick to having a good social networking policy, from a legal standpoint, is for a retailer to have a thick skin, a good sense of humor and a commitment to customer service. Then, and only then, should it show a willingness to take legal action.

Trying to plan for innovation and creativity is difficult. Two examples illustrate this point. The first involves a university in the United Kingdom that, after having students for years walk across the lawns and damage them, chose to replant new sod throughout the campus. The university tore up all of the paths and roads that had been carefully designed and left the entire campus with newly planted sod. Then it simply waited to see where students actually walked to get from building to building. The more heavily trodden the path, the more students had traveled it. After a year, the university was able to determine where students actually walked, and to then lay down paths along those routes. Sounds great, and innovative.

Then there's the case of downtown Boston. Three hundred years ago, the area around Boston Common was mainly farmland. People would come to the Common to graze their sheep. Naturally, the routes sheep, goats and countless other animals used became the most heavily worn paths. When farmers went to market, they traveled the same routes as their animals, creating primitive roads. As the city grew, these primitive roads were paved over, creating permanent roads. Shops, houses and other buildings eventually were built on these roads. This is why the streets of downtown Boston—unlike the streets of Manhattan, Washington, D.C., or other "planned" cities—are narrow, haphazard and crowded. What worked for 17th Century Boston may not work for the 21st Century hub.

If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.