Technology & Marketing Law Blog: Facebook’s Proposed Amended Sponsored Settlement and Instagram’s TOS Revs

Eric Goldman's - Technology & Marketing Law Blog

December 20, 2012

Facebook’s Proposed Amended Sponsored Settlement and Instagram’s TOS Revs

Fraley v. Facebook, 11-cv-196193 (N.D. Cal.) (Amended Proposed Settlement) (Motion to Approve) (Preliminary Approval) (case docs, compiled by Citizen Media)

I initially passed on blogging the amended proposed settlement agreement in Fraley v. Facebook, the Sponsored Stories class action lawsuit, but the recent changes to Instagram’s terms of service brought the issues to the fore.

The Fraley Claims: As detailed in several posts here, Fraley involved misappropriation claims based on Facebook’s Sponsored Stories initiative. Essentially, end users claimed that Facebook’s use of their posts for advertising purposes constituted an unauthorized exploitation of their publicity and personality rights. (Minors piled on separately.) Facebook couldn't easily extricate itself from the putative class action, and accordingly it settled. Its first attempt to settle the lawsuit did not meet with judicial approval—the court said that while the terms may be fair, it was not presented with sufficient information to evaluate its propriety. Facebook and the plaintiffs went back to the drawing board and made a few key changes to the proposed settlement. Not surprisingly, the second iteration met with approval.

Amended Settlement: One big change in the proposed settlement: Facebook offered up cash ($20 million settlement fund). It also supposedly offered users greater control over use of their likeness. The lawyers also made a helpful concession about the amount of requested fees that would go unchallenged.

it’s tough to assess the revised settlement in terms of the injunctive relief that it provides—it’s supposed to allow greater control over the use of end users’ likeness. However, the settlement is somewhat awkwardly worded in terms of control to end users. Facebook will create a mechanism that allows users to view their interactions that "have been" displayed in Sponsored Stories and will enable users to "control which of these interactions . . . are eligible to appear in additional Sponsored Stories." The peculiar combination of past and future tense in the phrasing should raise eyebrows. I guess a global opt-out was too much to ask for.

The Upshot: Given the majority opinion in Lane (the Beacon case), the original settlement seemed like it had a chance of being approved. As revised, I imagine it will easily receive final approval. Judge Seeborg already gave it his preliminary thumbs up.

Instagram TOS Changes: On a somewhat related note, Instagram recently unveiled changes to its terms of service. While it’s difficult to assess user reaction (Flickr was billed as the obvious beneficiary), celebrities, high profile users, and photographers all expressed their displeasure. It’s worth stopping to think about exactly what has changed. On this point, see this helpful redline from William Carleton. The big change (and one that may not be material) is the change from Instagram being able to “place . . . advertising and promotions on the Instagram Services or on, about, or in conjunction with your Content,” to the following:

You agree that a business or other entity may pay us to display your username, likeness, photos . . . and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.

I don’t see this as a significant change to what Instagram can do with your photographs. The fact that the language of the revised terms tracks relevant language from the Amended Settlement Agreement in Fraley makes me think this is just a clean up change to bring Instagram’s terms into conformity with what is required of Facebook under the revised settlement.

Unfortunately, both the previous and current version fail to answer the key question about the scope of the license users grant: will usage only occur within the Instagram ecosystem, or can Instagram license out photos to third parties to use in other media (e.g., magazine ads or television)? Could my photo of a Seattle sunset end up in a Coca Cola ad where Instagram is paid money for usage of the photo? "Very IP" makes a persuasive case that new language around transferability or sublicensability means that Instagram can under the revised terms exploit content outside the ecosystem: "The Truth About Instagram." I'm not totally persuaded. In this litigious environment, particularly in light of Facebook's experience with Beacon and Fraley, any off-line rights would be clearly called out in its license agreement. Any other approach would just be inviting a lawsuit. In light of the (still pending) AFP v. Morel dispute (where AFP allegedly took photos from Twitpic and argued that it was entitled to a broad license to distribute content elsewhere), this clarity is important to users. I have no idea why Instagram dropped the ball on addressing this.

A day after the big online meltdown, Instagram’s founder published a post acknowledging user outcry and saying that it is committed to not “selling your photos” . . . whatever this means.

This was a classic example in how not to revise a terms of service. Instagram highlighted the revised terms clearly for users, but failed to anticipate what users would care about. Eric makes a few good points below about the terms that have me scratching my head. Did Instagram really leave in the "we can amend these terms whenever we want" provision in its revised terms? Ouch.

It's easy from our perspective to nitpick about the direction Instagram chose, but overall it feels unimaginative to me. They could have taken a variety of routes, ranging from offering users an opt-out (even a paid alternative) to granular control, to a revenue share (ad/brand marketplace?), but Instagram looks like it is doing what Facebook would do. Not surprising, but sort of a bummer for users. I guess it's a good illustration that the Fraley (and the FTC) settlement notwithstanding, Facebook is ready able and willing to override user preferences. [Query as to whether these changes in any way implicate the FTC consent decree covering Facebook, or the companies' promise to stay separate?]

Other coverage on the Instagram Issue:

EFF (Kurt O.): Instagram's New Terms of Service to Sell Your Photos
Creative Commons: Should Instagram adopt creative commons licensing?
William Carleton: Why not share the revenue?
Verge (Nilay Patel): No, Instagram can't sell your photos
Wendy Davis: User Revolt Spurs Instagram to Backtrack on New Terms of Service
Very IP: The Truth About Instagram
__________

Comments from Eric on Instagram:

1) When Facebook bought Instagram, what did Instagram users think was going to happen? Of course Facebook was going to bring its special style of management to Instagram. The revised user agreement is part of the ongoing Facebook-ization of Instagram.
2) If you run a high-profile website, you need to run any proposed user agreement changes through a user focus group before unleashing the revisions on the public. This way, you can preview the potential pitfalls better than if only lawyers and insiders read the terms. If Instagram did run its proposals through a focus group, then it needs to do a better job of that.
3) Instagram's proposed contract revisions still contain the ability of Instagram to unilaterally amend the terms without notice. After Zappos' meltdown, that's a really bad idea from a legal standpoint.
4) Although I knew what Instagram was trying to say with its provision to let them turn Instagram content into Sponsored Stories ads, the provision was clumsily worded at best and easy to misunderstand. (As Venkat points out, Instagram should have known about the risk people will think they are turning into a stock photo agency after the Twitpic debacle). People overreacted by thinking advertisers could freely recycle their photos; even if Instagram took the copyright license, if anyone appeared in the photos, the advertisers still would need a separate publicity rights consent. Sill, it was absolutely shameful for Instagram to then blame the concerns on users misunderstanding the contract provisions. Users can misunderstand even clear contract language, but this was not clear language. The fault lies with Instagram's drafters, not the users.
5) I was particularly flummoxed by the proposed provision "You acknowledge that we may not always identify paid services, sponsored content, or commercial communications as such." Can you even do this by contract? My best guess is that this provision is legally ineffective.
6) My question to all of the unhappy Instagram users: where are you going to go? All of Instagram's competitors--indeed, all free photo hosting options--are equally likely to turn on their users. Recall my dilemmas with Scribd. Moving from one free photo hosting site to another delays the problems, at best. It doesn't solve the underlying problem.
7) Overall, the biggest "problem" here is that Instagram users unrealistically expected that a free cloud service wouldn't turn on them. Every cloud service provider goes rogue on its users inevitably; and where the business' interests diverge from users, users are going to be thrown under the bus. Instagram users must have thought Instagram was the exception; and perhaps before Facebook bought it, they could have enjoyed a cloud utopia for a while longer before the collapse. But all users should have learned by now: when it comes to cloud services, you get what you get and you don't throw a fit. In light of the burgeoning number of times cloud services have quite publicly gone rogue on users, it's becoming increasingly less reasonable for users to expect anything differently. There's only one way for users to truly control the fate of their online digital assets, and that's to host all of their content on their own website. If you don't want to do that and you're looking for a free and easy option, you get what you get.

Added (comments from Venkat): In response to the feedback, Instagram founder Kevin Systrom announced in a blog post that Instagram is "reverting" the advertising language to what had been in effect from the beginning. (Here's the blog post: "Updated Terms of Service Based on Your Feedback" and here is a link to the revised terms.) The post also explains:

Going forward, rather than obtain permission from you to introduce possible advertising products we have not yet developed, we are going to take the time to complete our plans, and then come back to our users and explain how we would like for our advertising business to work.

You also had deep concerns about whether under our new terms, Instagram had any plans to sell your content. I want to be really clear: Instagram has no intention of selling your photos, and we never did. We don’t own your photos – you do.

Finally, there was also confusion about how widely shared and distributed your photos are through our service. The distribution of your content and photos is governed by our privacy policy, and always has been. We have made a small change to our terms to make that as clear as possible.

Left in is the language saying that the license to "use" user content is "transferable, sub-licensable," subject to limitations in the privacy policy. This may be protective (or clunky) drafting, but I still can't tell if Instagram intends to exploit user content outside the ecosystem. It's awkward to use privacy preferences as the limitation on how Instagram can use the photos. (For example, language in the policy says: "[o]nce you have shared User Content or made it public, that User Content may be re-shared by others," but it's not entirely clear what this means.) For public photos, it looks like the language still gives Instagram room to freely use (outside the ecosystem) content that has been designated as "public". Again, this may not be the intent, but to me, the language is not 100% clear.

Posted by Venkat at December 20, 2012 11:19 AM | Copyright , Internet History , Licensing/Contracts , Publicity/Privacy Rights