Untangling the Web - Internet Legal Issues for Associations

As associations’ reliance on the Internet and electronic communications continues to increase, association executives must keep informed not only of cutting-edge technological developments, but also the manner in which such new developments could increase association legal risks.  Just as technology continues to change and develop, so does the law governing the use of such technology.               

Association executives should not expect to know all the statutes, regulations, and case law that may be implicated when they utilize new technologies to carry out their activities.  Still, it is important that executives know generally when their activities — such as the publication of materials on their websites, the use of email listservers and electronic bulletin boards, and contracting with software providers — could raise legal “red flags.”  To that end, we will discuss below certain technology-age activities that are common to associations and will describe briefly the potential legal risks that may accompany such activities.              

Association Websites              

There’s no getting around it — an association’s website is the place where members, potential members, representatives of the media, and others all invariably turn for all types of timely information.  While at one time an association’s website was nothing more than a starting point for such individuals, it is fast becoming a starting and ending point.  Savvy association executives already have figured out that their ability to deliver more, better, and more timely information via the website can vastly improve members’ satisfaction with the association while at the same time cut down on staff time and expense related to member services.   However, in the rush to provide more, better, and more timely information, association executives should not ignore the significant legal risks that could arise.  For instance:  

• Articles and other information provided by association members, the trade press, and other sources are very likely not “owned” by the association.  Indeed, even articles and other items that were previously published by the association (say, for example, in its magazine) very well may remain the intellectual property of their authors.  In order to limit legal risk in this regard, association staff must be certain that copyright to all materials published on their websites is either owned by the association or owned by an individual or entity who has provided a valid, continuing license to the association for the material to be published on the website.  In general, materials created by association staff will be presumed to be owned by the association, even absent any written copyright transfer.  However, be careful about materials that were produced (either for a fee or on a volunteer basis) by non-employees and provided to the association for the purpose of publishing in the association’s print magazine, for distribution at an association event, or for some other purpose — it is possible that the permission to publish that was granted to the association in such instances was one of limited scope.  (And if no express written license was granted, then a court generally would construe the implied permission very narrowly.)  In order to avoid confusion, associations should routinize the practice of obtaining — in writing — broad licenses and/or copyright transfer agreements from authors and speakers.  

• In addition to obtaining copyright transfers and/or licenses from third-party authors, associations should take care that they have appropriate permission before reproducing works that were initially published in other publications (such as, in trade publications).  In order to avoid the necessity of obtaining permission in such instances, some associations will decide to merely “link” to the web page that contains those other works.  While usually there is no requirement that an association obtain permission for most such links, associations that frequently link to sites outside their website should consider doing so.  The law is still developing in this area, and organizations have been subject to litigation in the past for failure to obtain permission to link to others’ web pages.              

Email Communications              

Electronic mail has been both a blessing and a curse to the association community.  On the blessing side, associations that have integrated email as a primary form of communication with members have undoubtedly saved significant dollars on postage and printing expenses.  Further, email communication cuts down turnaround time immensely.  However, in this age of email, members now expect responses within minutes rather than days.  In addition, now that members are able to communicate with one another (such as through association listservers and membership bulletin boards) quickly and at all times of the day, there is little ability for associations to prevent legally risky communications from being broadcast.  Specific potential problem areas connected with email communications include: 

• Listservers and bulletin boards are often breeding grounds for inappropriate, offensive, and, at times, legally risky communications between association members.  Of particular concern with many associations is the potential for such communications to be cited in legal challenges involving antitrust, copyright infringement, or defamation liability.  And even though an association and its staff were not involved in making, receiving, and/or acting on a particular listserver posting, the association could find itself forced to defend a lawsuit merely by virtue of the fact that the discussion took place on an association facility.  In most associations it is impossible to screen every message that is destined for a listserver or bulletin board before it is posted to the list, and most associations are thus only able to monitor postings after they have been posted.  In order to limit liability, associations that sponsor listservers and/or electronic bulletin boards should:  (1) require that all participants follow established rules and conditions of participation (and make participants take some affirmative step (such as clicking, “I agree”) to state that they agree to comply with such rules); (2) make certain that such rules disclaim all warranties and guarantees, disclaim liability for damages, prohibit posting of defamatory and offensive material, prohibit the posting of material that infringes on another’s intellectual property rights, provide the association a license to use posted materials in other formats, prohibit all posts regarding price or price-related topics, prohibit all posts that encourage or discourage doing business with one or more entities or within one or more territories or markets, and allow the association to terminate access to members who do not follow the rules; (3) make certain that responsible staff is in charge of monitoring the postings; and (4) make certain that staff takes prompt corrective action in the event that inappropriate material is posted.  
  
  
• A new federal anti-spam law was enacted late last year.  While the breadth of its impact on communications between associations and their members is still difficult to determine (regulations are expected to be issued shortly which should help to clarify its impact), associations should be aware that there could be a significant impact on email communications to members and nonmembers alike when such emails promote the sale of a product or service.  Space does not permit us to delve into the nuances of the law here, but you should recognize that the law has been enacted and — if you have not already done so — consult your legal adviser to determine how the law affects your association’s capability to promote products and services electronically.  On a related note, be familiar with the federal statute and related Federal Communications Commission rules on unsolicited fax advertisements as well.  
  
  
• Many associations are incorporating email into their governance activities.  For instance, associations may allow members to vote electronically and even may be considering allowing board members to act via electronic ballot on certain between-meeting issues.  Note that many states effectively prohibit nonprofit corporations from allowing such electronic membership ballots and most states prohibit boards to act via electronic ballot outside of a board meeting.  The applicable law will be determined by where the association is incorporated (not where the association is located), and is unaffected by whether the communications are intra- or interstate.  Some statutes (notably, the District of Columbia’s statute) have been revised in recent years to allow membership (but not board) votes to be conducted electronically, and others are silent as to what form of delivery would be acceptable.  Thus, association executives should consult their particular state statutes to ascertain whether an electronic membership ballot is permitted.  As for actions taken by an association’s board of directors, most state nonprofit corporation statutes only permit boards of directors (and committees of the board, such as executive committees) to act through a meeting (in-person and/or via teleconference) or through unanimous written consent (essentially, all board members vote in writing, and all vote the same way).  Mail, fax and electronic balloting is not permitted per se in most states for such board actions — unless, of course, all board members vote and all vote the same way (otherwise called “unanimous written consent”).              

Internet-Related Contracts              

From the run-of-the-mill application service provider agreements to complex joint ventures with third parties, associations often contract with companies for any number of Internet-based services.  The following is a brief list of certain key legal issues to pay special attention to when your association negotiates such agreements:   

• Conduct due diligence and ensure quality control.  Avoiding negligence in the vendor selection process — and on an ongoing basis — is a key step in avoiding liability for the errors and omissions of the vendor.
• Consider a confidentiality agreement before negotiations begin.  While not essential (particularly for agreements in which an association is only licensing software), it often is prudent for an association to enter into a confidentiality agreement with a potential vendor with which it seeks to do business prior to beginning negotiations with the vendor.  Such an agreement can help ensure that the association will not be damaged or put at a competitive disadvantage by the disclosure or improper use of sensitive information or documents.
• Consider business structure options.  While it is certainly permissible for your association to structure an Internet initiative as a partnership or joint venture, if you do, you may be liable for virtually everything that happens in connection with the venture.
• Review the agreement relative to intellectual property and links to other sites.  Be sure that the contract provides for:  the assignment (or at least perpetual, irrevocable license) to your association of all key copyright, trademark, patent, and domain name rights created under the agreement; your association’s ownership and control of the “look and feel” of the Internet site or portions of the site and all content on the site; restrictions on the use of your association’s name, logo and membership list by the vendor; the confidentiality and security of association membership data and other information; and a warranty by the vendor that it will use no infringing or otherwise illegal material in the creation or operation of the site.
• Spell out specifics of contract terms.  As in all contracts, provisions that define the initial term of the contract, whether and how the term will automatically renew, and when and how the agreement can be terminated are critical.  Associations are frequently in the position of being bound to unfavorable agreements for long periods of time.  While both parties may have the best of intentions to have a long relationship together, an association should insist on a provision that allows it to terminate the agreement relatively easily and without penalty.  Also be sure to define what rights each party has post-termination.
• Pay attention to data control.  Be sure that the contract provides that your association will be the sole owner of all data generated under the agreement (e.g., valuable information about your members and their purchasing habits) and that all such data will be subject to strict confidentiality requirements.
• Set quantifiable standards of Internet site performance and technical support.  The contract needs to be very clear about the precise obligations of both the vendor and your association under the agreement.  Err on the side of being more, rather than less, specific.
• Minimize liability risk through representations and warranties, indemnification, and insurance.  An effective contract includes sufficient representations and warranties by the vendor that its software, Internet site, and other elements that it brings to the venture do not infringe any intellectual property or other rights of third parties, do not violate any applicable laws and regulations, and will perform as promised.              

Conclusion              

The concerns raised above represent only a portion of all the legal concerns that can arise from an association’s use of technology.  There are potential tax implications with providing advertisements and sponsorship acknowledgments on websites, privacy and contractual concerns related to the use of “cookies,” employment and privacy law issues related to the monitoring of employee email and Internet use, and a host of other issues to keep in mind.  As with any association activities, there are important legal rules of the road that must be followed when associations use technology to further their missions and purposes.  Being able to implement common-sense protections and recognize potential pitfalls will serve association executives well as they continue to utilize new technologies.

For more information, contact Mr. Tenenbaum at 202/344-8138 or jstenenbaum@venable.com or Mr. Constantine at 202/344-4790 or geconstantine@venable.com.