The right side of the law

Stephen Kuncewicz outlines the opportunities and risks associated with the use of Web 2.0 and social media tools

Assuming that the majority of the readers of this publication will be in the business sector, then an examination of the opportunities and risks of either doing business or promoting the goods or services which they supply in the online and Web 2.0 environment seems like a logical place to start.

The explosion in commercial use of the internet gave birth to a whole new way of doing business: e-commerce. The umbrella term refers to any kind of commercial activity carried out using electronic methods. We have now moved way past the original tentative steps taken in this arena which saw the rise to prominence of online retailers such as Amazon and auction sites such as eBay, through well-designed and reliable websites which prided themselves on secure payment technology, to the first real iterations of m-commerce over mobile platforms and the ability to purchase goods and services from a mobile phone with confidence that you will actually receive them.

The advent of new technology such as the iPad and the realisation of the promise of ‘internet, everywhere’ are only likely to accelerate the move towards e-commerce becoming an even larger part of our lives. Whilst there will always be room for commerce in the real-world environment, research suggests that £5.3bn was spent online by UK consumers in November 20091 and that the majority of British adults now shop online, with 76 per cent of the country having internet access.2

Businesses now have access to a number of new opportunities as a result of the rise of e-commerce, including:

Access to a huge new customer base;
Lowering overheads, rationalising a presence in physical premises and the ability to radically restructure their operation (whether or not by choice, as seen in the demise of Woolworths in 2009);
Access to cost savings (both in terms of staff costs and in distribution if working in the software or entertainment industry); and
Access to emerging marketing channels via the use of Bluetooth technology, viral campaigns and social networks.

The risks are perhaps a little less obvious. Placing a brand online means that it will become open for comment as well as misuse due to the truly open nature of Web 2.0 and social media technology. Whereas previously a brand message was delivered by a relatively small number of marketers to a much larger audience, that audience can and will make their feelings known in the event that a brand is not living up to its values online. As much as the image of a business and the use of new strategies may allow it to reach a new audience, if the ‘nuts and bolts’ operation does not live up to expectation, then stakeholders (whether customers or not) will make their opinion known to their own audience, with bad commentary having the potential to travel very quickly.

Whilst researching this article, I came across a number of cautionary tales of businesses experiencing problems after taking their operations online. The best example I found in terms of risk versus reward in terms of spending time on strategy and using Web 2.0 technology to mitigate bad publicity was that of Dell, worldwide suppliers of computer equipment. This example is referred to later against a different backdrop, so please excuse the slight duplication.

“The conversation that’s happening without you”
Dell Inc. is one of the largest technology companies in the world, holding the third largest market share of the PC market and is listed at number 38 in the 2010 Fortune 500.3 Fortune magazine describes the company as the fifth most admired in its industry. But it wasn’t always this way.

For a company which has become well-known and highly admired for its approach to e-commerce, Dell’s standing in the online community reached an all-time low in 2005 when American journalist Jeff Jarvis, author of the blog BuzzMachine wrote a post simply entitled ‘Dell lies. Dell Sucks.’4 Posts like this are nothing new in the online world, but Jarvis had a much more specific intention than venting his spleen. As Google or any other search engine can be used to measure exactly how badly any particular brand is thought of by using the right search terms, Jarvis wanted to alert others to his experience of buying a computer from Dell which he referred to as “a lemon”.

The post was noticed by a number of other bloggers and before long, Jarvis’ comment section was replete with similar tales of what he described as “Dell Hell”. Even after his machine was repaired, his experience of the company continued to be negative, leading to him several more posts in an unsuccessful attempt to engage Dell in conversation on a public forum and eventually to him writing an open letter to the company’s CEO, Michael Dell, suggesting that he read blogs, write blogs, ask customers for guidance and “join the conversation your customers are having without you”.5

The post echoed around the web, turning into what Mediapost described as “Blogger’s complaint becomes viral nightmare”, functioning as an example of how “mainstream corporations, even tech-savvy ones like Dell, still haven’t figured out how to deal with consumer complaints on the web.”6 Eventually, Jarvis’ post became the third most linked-to post on the blogosphere during one week in 2005. Sharing experiences online was only then starting to become a way of airing discontent with a business, and Dell responded in the only way that it could.

In April 2006, Dell began to address the problem by engaging with several bloggers and eventually starting its own blog, Direct2Dell. Tellingly, the blog was staffed by real people with credible approaches to problem solving, which led to a sense that comments were not only being heard but that they may actually have some influence. This theory was proven in February 2007 when Dell launched the website www.ideastorm.com to ‘crowdsource’ opinion and strategy from its customers. Jarvis’ follow-up piece in Business Week, entitled ‘Dell Learns To Listen’7, was much more complimentary and followed a day spent with the company shortly before it was written.

Although Jarvis’ opinion of Dell eventually softened, his advice to Dell in his open letter to Michael Dell provides useful advice for all businesses moving into the online market:

Read blogs – Even if you don’t like or agree with the content, the chances are that it will be of use to you.
Talk with your consumers – Often, engaging with the blogosphere is the only way to repair a broken reputation.
Blog – Being part of the conversation only adds to your credibility.

It’s tempting to see bloggers who rail against the inadequacies of the suppliers of electronics as an isolated section of the market and to argue that they more than most will spend time in making their point on a blog, with the wider market not being engaged enough with social media to make a real dent in any other reputations.

Wrong. There have been various other examples of social media and Web 2.0 technology being used to name and shame other well-known businesses including Sony (as a result of an allegedly fan-made ‘viral’ video promoting the PSP which turned out be the product of an online marketing company – another technology business whose users may be more au fait with taking to the social universe to voice their discontent.

However, the issue was more recently brought home to British stationery retailer Paperchase. The retail giant spent a very contentious 24 hours in February 2010 defending itself against allegations of plagiarism from artist Hidden Eloise after news of their dispute broke on the social network Twitter.

Eloise claimed that her design ‘He Says He Can Hear The Forest Whisper’ was “stolen” and “badly traced” onto bags, notebooks and albums by Paperchase, who categorically denied any deliberate copying of her work, having purchased the artwork in question from what they described as a “well known central London design studio”8 amongst a number of others.

News of Eloise’s claims spread across the web like wildfire after a blog post which aired her frustration with not only the national chain but also the legal system, stating that “it was too expensive to even start talking with lawyers and the legal fees could break anyone with non-corporate pockets”. The post was subsequently picked up by noted English science fiction author Neil Gaiman on Twitter and before long vitriolic commentary from other users forced Paperchase to issue a public statement as well as starting up its own account on Twitter for the first time to manage the fall-out. The day ended with the products in dispute being withdrawn from sale whilst the issue was investigated for a second time.

It’s easy to see this incident as a cautionary tale and to rally behind the artist against a retail giant, but the reality is that cases like this are never as straightforward as they appear. In the age of real-time commentary over social networks, the finer details of a dispute can be distorted beyond recognition with alarming speed.

Paperchase was accused of copyright infringement by reproducing Eloise’s work without permission. This kind of allegation is a fairly common issue to deal with for retailers who buy in designs or artwork from third parties and in this case was in any event denied.

However, as ownership of copyright can only normally be proven through producing evidence of who actually created the material and when, there is always a risk in this kind of transaction that a disgruntled creator may come out of the woodwork and create a huge public relations issue.

Twitter is becoming very well-known as an easy method of both promoting uninhibited commentary on major issues on one hand, but also a method of generating a significant amount of negative commentary very quickly – especially when those making the comments are public figures forming part of the ‘Twitterati’ such as Stephen Fry or Neil Gaiman.

What Paperchase ended up having to deal with was a double-sided issue – an allegation of copyright infringement and also an exercise in reputation management. The latter was addressed very quickly by entering the discussion on Twitter through Paperchase’s own newly-minted Twitter account.

Given that the copyright infringement was been very firmly denied, Paperchase could have dealt with the issue by taking legal action against Eloise in the form of a trade libel claim on the basis that their products had been disparaged in a manner which reflects negatively upon their manufacturer.

Whatever the case, Eloise’s comments became an issue which Paperchase was forced to deal with, although it did make the point that it thought that it had done so in correspondence with Eloise in November 2009. It did seem a little opportunistic that, if this was the case, the allegations were raised again. The explanation may be in Eloise’s own claim that she couldn’t afford lawyers to deal with the dispute. Ironically, a lawyer would probably have told her to check her facts very carefully before making allegations of copyright infringement against a major retailer on a very public forum which could conceivably lead to a very large claim for damages in the event that she was wrong. To Paperchase’s credit, however, it joined the conversation rather than trying to strangle it.

In the words of Jeff Jarvis: “Now consumers don’t just consume. We spit back. We have our own printing presses.”9

Images on websites
Similarly, creating a website as a ‘shop front’ for your business can in itself lead to other risks besides reputation management. The creation of a website leads inevitably to the creation of content to populate it, which will include text, logos, other imagery, photographs and even software. If that content is worth protecting in the first place, then it may well be worth copying.

Many start-up and existing businesses will set aside at least some of their budget to retain a third-party marketing or web design agency to start establishing a presence on the web, if for no other reason than to allow search engines to pick them up when users look for a certain service in a certain area.

One example is a search for ‘removals’ in Manchester or London, both of which are home to offices of J.A. Coles, a removals and transport contractor which was sued during 2009 by worldwide digital image providers Getty Images for copyright infringement after the use of a photograph on the J.A. Coles website which was licensed to Getty for use by a Canadian photographer.

The claim was issued in the High Court and sought damages for, amongst other heads of claim, payment of the commercial royalty for use of the image, compensation for the costs spent in uncovering the unauthorised use and “loss of credibility”.

Whilst this kind of case is nothing new, it’s a timely reminder of how even fairly anodyne imagery is protected by copyright provided that the basic requirements to allow copyright to subsist are met, and depending on how that copyright can be used to generate income and how far businesses will go to ensure that any such income continues to be generated.

Under English law, copyright in a photograph will always belong to the photographer in question unless that photographer has made other arrangements or takes it as part of his duties as an employee. Being the owner of that copyright allows the restraint of third parties from copying or using the image without permission, subject to a number of very limited exceptions. This is how professional photographers continue to generate an income.

In this case, the photographer licensed the photograph to Getty, a huge worldwide image bank. Getty will, at any time, have hundreds of thousands of images under license from their photographers, ranging from celebrities or stock pictures which will often appear in marketing materials, such as businessmen shaking hands, a cup of coffee on a boardroom table and so on. Getty will then use its massive resources to license the images for use by third-party customers and pay a royalty to the original photographer.

Licensing has become a very big and lucrative business for Getty as more and more businesses look to develop their brands through websites and often don’t have the time or skill to produce professional imagery of their own. Of course, if an image is simply cut and pasted from the web and used on another website, then Getty’s and the photographer’s revenues streams are going to be abruptly severed.

Getty has a very strict policy on the use of its imagery without a licence or permission and employs a number of in-house lawyers to take action against any infringers. Usually, cases don’t go any further than a stern letter and a payment of the appropriate royalty (which is what the Court would award in damages), but here Getty was determined to make an example of J.A. Coles as a deterrent to other businesses contemplating taking a similar short cut, eventually leading to an out-of-court settlement.

These are not the only risks. Although the internet represents an open system of communication which is free from proprietary control it is not, despite major advances in software, secure.

Hackers may look to access a business’ computer system with a view to disrupting its operations, defrauding its customers, theft or alternatively defacing or altering the contents of a website. Similarly, websites and entire systems can be infected by an increasing number of viruses and confidential e-mails can be intercepted, leading to the theft of sensitive data and potential exposure to sanctions under the Data Protection Act 1998.

These are more IT-based risks than this publication is intended to cover, but their inclusion in this brief overview is for a very good reason. Taking a business online is to lay it bare in many different respects. Entering into that environment with your eyes open from an operational, legal and reputation perspective is essential, but the rewards and opportunities in doing so can in some cases far outweigh the risks. Ask Michael Dell.

This article is adapted from an extract of the Ark report, Legal Issues of Web 2.0 and Social Media, written by Stephen Kuncewicz. For more information contact Robyn Mace at rmace@ark-group.com or by telephone on +44 (0)20 7566 8229

Stephen Kuncewicz is a solicitor in the intellectual property & media team at HBJ Gateley Wareing (Manchester) LLP. He can be contacted at skuncewicz@hbj-gw.com

References

Chacksfield, M., ‘Online shopping figures up 25%’, TechRadar, 21 December 2009.See http://www.imrg.org.
See http://money.cnn.com/magazines/fortune/fortune500/2010/snapshots/1053.html. Jarvis, J., ‘Dell lies. Dell sucks.’, BuzzMachine, 21 June 2005.
Jarvis, J., ‘Dear Mr. Dell’, BuzzMachine, 17 August 2005.
Gupta, S., ‘Jeff Jarvis vs. Dell: Blogger’s Complaint Becomes Viral Nightmare’, MediaPost, 19 August 2005.
Jarvis, J., ‘Dell Learns to Listen’, Business Week, 17 October 2007.
As reported in Green, C., ‘Paperchase forced to deny it copied artist’s work after Twitter backlash’, Independent, 11 February 2010.
Jarvis, J., ‘My Dell hell’, Guardian, 29 August 2005.