“Legally, the scope of the rights that a company has in user and/or user-generated content depends on the grant of rights provisions in its Terms of Service,” said Michael Kasdan of Amster Rothstein & Ebenstein. This means that companies must spell out clearly what their rights are for users in order to guarantee maximum monetisation of the site’s content.
Under Facebook’s proposed model for Instagram yesterday, a third-party company could pay Facebook for images it may want to use, but Facebook is under no obligation to compensate the user, said Kasdan. “Notably, there is no opt-out provision; the choice for a user is either to use Instagram and give up these rights, or to use another service,” he added.
Instagram competitors like Flickr mobile have taken a different approach, requiring the express permission of the user before sharing photos with third parties, and sharing compensation with the user.
Angry users, including Mark Zuckerberg’s wedding photographer, immediately voiced their concerns on Instagram yesterday.
“Ultimately, the market will decide” if this is a sound business decision for Facebook, said Kasdan following the announcement. “What we are seeing right now is a very strong and negative reaction among the user-base.”
Today, Instagram responded to the market’s concerns by backtracking on the changes, promising to “fix any mistakes, and eliminate the confusion”.
Kevin Systrom, co-founder of Instagram, continued in his blog post: “As we review your feedback and stories in the press, we’re going to modify specific parts of the terms to make it more clear what will happen with your photos.”
Systrom also said the site will remove the language about using users’ photos in ads.“We do not have plans for anything like this and because of that we’re going to remove the language that raised the question,” he wrote.
"The market has spoken," said Kasdan. "And [Facebook is] listening."
For more tips on writing effective Terms of Service provisions, see Kasdan's and Charles Macedo's July article on the topic for Managing IP.