Social media offers agencies numerous possible revenue streams, including license fees for the use of their proprietary technology and service fees for community management of various social media outlets. In order for firms to fully reap the benefits of social media, however, they must protect their rights in contractual negotiations with their clients. Agencies also need to familiarize themselves with the legal landscape in order to avoid regulatory pitfalls. Below, l address six key areas of concern.
1. Firms should protect their proprietary tools, methodologies, and software in negotiating their agency-client agreements. This intellectual property is crucial for agencies and researchers providing any social-measurement services for their broad array of current and potential clients. Thus, an agency should insist that any contract contains a “reservation of rights” clause, stating that the firm retains ownership of all pre-existing and independently developed intellectual property – including any subsequent modifications or upgrades – that it does not expressly grant to the client. Additionally, the contract should state that the agency is licensing this intellectual property to the client. Even if the license fee is negligible, this is still a wise tactic because the existence of a license establishes that the agency, not the client, owns this property.
2. The question of data ownership should also be considered carefully before entering into an agency-client agreement. The data that a firm collects – whether aggregated or personally identifiable information – can be quite valuable. However, bear in mind that typically the party who owns such data will be legally and contractually responsible for maintaining and securing it. Therefore, the agency must balance the potential financial benefit of owning the fruits of its labor against the potential liability – which could be significant – if anything were to happen relating to the maintenance of this data, such as a breach of data privacy or security.
3. PR firms should ensure that they protect themselves against potential liability for data breaches. Specifically, agencies should negotiate dollar limits on liability in the event of any data breach and should specifically disclaim any liability regarding the client's website policies and disclosures of any third-party websites, such as a Facebook and Twitter. Additionally, PR firms should make sure to review any data security procedures and obligations required by the client, as compliance can often be expensive – sometimes prohibitively so.
4. PR agencies should be knowledgeable about the basics of privacy, endorsements, and intellectual property law when providing social media services. This past March, the FTC issued recommendations for organizations that collect user data, including the implementation of “privacy by design” to incorporate security measures and data retention and collection policies. The FTC has also recommended that organizations disclose how data about an individual is being collected and used. Although these recommendations are not binding, they represent the FTC's view on these key issues and, as such, PR firms would be well advised to adhere to them.
5. The Federal Trade Commission has issued endorsement and testimonial guidelines. In general, bloggers and other persons providing an endorsement or testimonial about a product or service should clearly and conspicuously disclose any material connection with the marketer that would not be readily apparent to the public. In fact, the FTC has brought actions against companies for their failure to cause bloggers to make adequate disclosures when offering endorsements on the companies' behalf. One recent enforcement action involved Legacy Learning Systems, a well-known creator of instructional DVDs.
6. PR firms seeking to leverage user-generated content in social media need to insure proper consents have been secured. This step will avoid potential claims of both copyright and trademark infringement and violation of the rights of publicity and privacy from anyone who appears in the content. To avoid, or at least limit, these risks, agencies must review and manage this content and remove anything problematic if necessary consents have not been obtained.
Social media engagement has been – and should continue to be – a growing and profitable area for PR firms. This will remain true as long as firms negotiate wisely, protect their intellectual property, and learn the proverbial “legal rules of the road” to avoid a crash.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at firstname.lastname@example.org.