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Terms of Service: What You Don't Read Can Hurt You

Small Business COmputing

Does this sound familiar? An online service promises to help your small business cut costs, increase productivity, make your coffee and walk your dog. So you hop online to sign up, and then you get to the page where you have to agree to the site's terms of service (TOS). If you're like oh, 99.9 percent of the rest the world's population, you click "agree" without so much as glancing at the actual terms.

And why not? Who in their right mind wants to wade through pages and pages of mind-numbingly dense legalese? For example, the TOS for the iTunes Store, Mac App Store, App Store, and iBooks Store spans 38 pages and more than 15,000 words. No one wants to read that.

It's not just Apple. Every website that offers a service—from social media platforms to cloud-based office productivity suites and data storage sites—you name it—requires you to agree to its TOS. The problem, though, is that they're notoriously (some would say deliberately) complicated and unless you read all that fine print, you could sign away your legal rights to intellectual property that you own, your business data, your customers' personal data, or even the right to sue. A very rude awakening indeed.

A Terms of Service Study

A recent New York Times article reported on a study conducted by the Georgia Institute of Technology. The study looked at 30 sites, including Craigslist, Wikipedia, LinkedIn, Pinterest, YouTube, Flickr, IMDB, Facebook, Twitter, Google Plus, Remix64 and Fanfiction.net.

The researchers noted that on Craigslist, "people who wanted to post were obliged to give the site license 'to copy, perform, display, distribute, prepare derivative works from (including, without limitation, incorporating into other works) and otherwise use any content that you post.'" It's enough to make you wonder whether TOS actually stands for Take Our Stuff.

The study found that to use 11 out of the 30 sites, you must first allow the site to license your content to a third party.

Even if you do read the TOS, it's almost impossible to know what you're giving up, because the language is so confusing. According to Engadget, that same Georgia study found:

"Of the 30 sites surveyed, an average reading level of college sophomore was required for comprehension of the TOS. To put it another way, around 60 percent of working age adults in the US (25 - 64) don't understand what they're agreeing to. 'It is likely that users may not know what rights they are granting,' the study says."

Many small businesses rely on social media sites to market their business. Did you know, for example, that by agreeing to Facebook's TOS, you let the company use your photos for any purpose it wants? That's pretty typical of other social media sites too—think Twitter, and Instagram and Google +. So much for your intellectual property rights.

And speaking of Google, if you're looking for privacy in your email communications, look somewhere else. Saying OK to the search giant's TOS means that Google can scan your email to help direct targeted ads to your inbox.

It's not just search engines and social media sites doing this. It's a widespread practice that shows no sign of slowing. Agreeing to the TOS for Prezi, an online presentation software service, gives the company cart blanch to use your content—the content you created—in any way it (or its partners) sees fit.

"With respect to Private User Content, you hereby do and shall grant to Prezi (and its successors, assigns, and third party service providers) a worldwide, non-exclusive, revocable, royalty-free, fully paid, sublicensable, and transferable license to use, host, store, reproduce, modify, create derivative works, communicate, publish, publicly perform, publicly display, distribute and transmit the content SOLELY FOR THE PURPOSE of providing you, and those with whom you have shared your presentations, with the Service."

It's not just your data they're after. You also need to consider whether online service providers will collect your customer information and use it for third-party advertising.

Another popular TOS clause takes away your right to sue and instead forces you to accept binding arbitration. AOL changed its TOS to include this, and if you agree to the TOS, you also agree to let AOL contact you through robo calls. Who doesn’t love robo calls? Bueller? Bueller?

Microsoft's Services Agreement not only requires binding arbitration, it goes a step further and adds a class action waiver—which means customers cannot be part of a class action suit against Microsoft.

Tips for Understanding Terms of Service Agreements

That's quite a litany of reasons why small businesses should pay attention to the TOS of every online service they want to use. Questions that you want to consider:

  • What, if any, rights do you waive?
  • Can you opt out of the TOS?
  • Can the service provider use your content and if so, how?
  • Can the service provider's third-party partners use your content?
  • Can the service provider use your customers' data?
  • Does the service provider's TOS include a binding arbitration clause?
  • Does the service provider force you to accept a class action waiver?

Practically speaking, reading every TOS could take days if not weeks. Fortunately, Lifehacker offers tips on how to quickly read a TOS. In addition to reading any sections written in all-caps, the article recommends:

"Before clicking 'I agree,' do a quick search (or just CTRL+F) for:

  • Third parties and affiliates.
  • Opt-out.
  • Arbitration (You will find a whole section dedicated to arbitration usually).
  • Waive or waiver.

A quick search for these terms will draw your attention to only the parts of the agreement that directly affect you."

Rating Online Service Polices

In this age of technology, you'd think someone would have come up with a way to rate online service polices. And you would be right. A site called Terms of Service Didn't Read (a twist on a common Internet slang: tl;dr, or too long; didn’t read), collects and analyzes TOS agreements from major Internet sites, lists the basic gist of each site's TOS (with a link for more detail), and awards it a grade ranging from the best (Class A) to the worst (Class E).

Currently, TOS;DR lists agreement details on 74 online services, but so far only 11 of those have received final grades. For example, a site called SeenThis received a Class A rating because users can choose their copyright license, get their data back, and have the right to leave the service. Compare that to TwitPic's Class E rating: the company can take credit for your images, TwitPic and its partners own your content, deleted images aren’t really deleted and, well, you get the idea.

TOS agreements tend to change frequently and usually without notice, a fact that makes tracking and grading them a challenge. The TOS;DR site makes it a bit easier for mere mortals to keep up.

One last fairly obvious note: Nothing can replace reading a TOS thoroughly or having your lawyer vet an online service's TOS. These tips and suggestions are not meant to replace legal counsel. They’re meant to help you gain a better understanding of what you risk by simply clicking on "I have read and agree to the Terms."


Lauren Simonds - SBC

Lauren Simonds is the managing editor of SmallBusinessComputing.com. Simonds has more than 18 years of experience covering the technology industry. In 2014, she was named one of the Top 100 Small Business Influencers in North America.


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