Social media for business: The legal risks of audience participation

October 1, 2010

(Editor’s note: This is the second in a series of posts on the potential legal pitfalls of social media use by businesses. Check back weekly or subscribe to our RSS feed for more tips on how to protect your company.)

In last week’s post, I outlined the risks to businesses with respect to employee-generated content published thorough social media.  Now we’ll focus on the risks associated with user-generated content and third-party use of company social media content.

Liability from user-generated content

Social media is all about conversations and engaging with readers in online dialog. However, there is some risk with this model in that the host of the social media conversation (the business) does not have complete editorial control over what the reader/participant writes or posts.

User-generated content could expose the company to liability for libel, trademark or copyright infringement, violation of privacy or publicity rights, or deceptive advertising, especially if the content is generated in connection with a promotion or other marketing campaign.   If the company is doing no more than hosting the third-party content, there may be some protection under the Digital Millennium Copyright Act (17 USCA § 1201 DCMA) safe harbor provisions.

Infringement by third parties

Businesses also need to monitor the use and reuse of company-generated social media content for potential intellectual property violations by third parties.

For example, companies use social media to promote their own brands using trademarked and copyrighted material, with the goal of having that information filtered through the networks of their audience.  Trouble arises if the trademarked or copyrighted material is misused by the third party.

Endorsements and testimonials

Participant endorsements and testimonials are another area where businesses have the potential of crossing into risky activity.  One of the most attractive benefits of social media for marketing purposes is its potential to generate unsolicited praise from satisfied customers.

The proverbial line can be crossed, however, if there is any indication that the third-party endorsement was incentivized.  The FTC Guides (16 C.F.R. §§ 255.0255.5) were amended recently to address how testimonials are used in social media.  The Guides require that if there is any “material connection” (i.e., incentive or compensation) between the host and the endorser, it must be disclosed.  This type of connection is implicated when there are contests or other promotions that are popularly used in social media to encourage viral sharing of content.

So how do companies protect themselves from the pitfalls of third-party participation?  Regular monitoring, screening, and the implementation of terms and conditions on company sites can go a long way to minimize risks in this area.  I’ll go into more detail on specific monitoring practices and DCMA and FTC compliance next week.