Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Partner

Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Lose Your Illusion: District Court Holds that Unilateral Modification Clause Makes ToS Unenforceable | Socially Aware

Lawrence W. Gallick

Tricia Matibag

On August 8, 2024, the U.S. District Court for the Eastern District of Virginia in <a href="https://scholar.google.com/scholar_case?case=17363838191298839802&q=Lovinfosse+v.+Lowe%27s+Home+Centers,+LLP&hl=en&as_sdt=20006&as_vis=1" target="_blank">Lovinfosse v. Lowe’s Home Centers, LLP</a> addressed the enforceability of an arbitration clause in Lowe’s terms of service, serving as a reminder of the problems that may arise from terms of service (TOS) language allowing unilateral modifications. The plaintiff, Eleanor Lovinfosse, alleged that the retailer’s use of <a href="https://www.gov.uk/government/publications/online-choice-architecture-how-digital-design-can-harm-competition-and-consumers" target="_blank">Online Choice Architecture (OCA)</a> led her to purchase a water hose labeled as “Required for Use” while buying a washing machine online. Lovinfosse later discovered the washing machine came with all necessary parts, rendering the additional purchase unnecessary. She subsequently filed a class action lawsuit against the retailer, alleging deceptive practices.Lowe’s maintained the dispute is subject to the arbitration requirement in its TOS; arguing that Lovinfosse agreed to the terms by clicking the “Place Order” button during checkout.Directly below the “Place Order” button, hyperlinked text states: “By placing an order, I agree to Lowe’s Terms and Privacy Statement.” This allows users to reference the <a href="https://www.lowes.com/l/about/terms-and-conditions-of-use" target="_blank">full text of the terms</a> if they click the link. Lovinfosse did not click on the hyperlinked terms and asserted that she was not aware of their contents, including the arbitration clause.The court agreed with the defendant on this point, reasoning that based on the layout and language of the website, Lovinfosse had constructive notice of the terms and had manifested assent by moving forward with the order.The court then turned its analysis to the unilateral modification clause within the TOS, which stated:“You agree that Lowe’s may change, terminate, modify, add, end or delete any of these terms and conditions (including, without limitation, the Terms) under which the Site is offered at any time and without notice to you. Lowe’s, in its sole and absolute discretion, reserves the right to update, change, terminate, suspend, modify, add, end or delete any of these Terms . . . , in whole or in part, at any time with or without notice.”Although the arbitration clause existed as part of the TOS at the time Lovinfosse agreed to them, the unilateral modification clause purported to allow the retailer to change its terms at any time and without notice. The court concluded that, while Lovinfosse may have agreed to the TOS, the unrestricted ability to modify the terms without notice made the arbitration clause illusory and unenforceable.The court further reasoned that a customer who makes a single transaction would have no way of knowing if the terms had changed unless they constantly checked the website, highlighting that the lack of required notice distinguished this case from others where unilateral modification clauses were upheld.The court’s reasoning in Lovinfosse is reminiscent of the conclusions drawn in <a href="https://casetext.com/case/harris-v-blockbuster-inc" target="_blank">Harris v. Blockbuster Inc.</a>, a Northern District of Texas decision from 2009. In that case, the court similarly held that the unilateral modification clause in Blockbuster’s online terms of use rendered the arbitration clause illusory and unenforceable. The court reasoned that Blockbuster could, in theory, unilaterally modify the arbitration provisions and apply those modified provisions to earlier disputes.The case law regarding unilateral modification in online terms has shifted over the years. After Harris, unilateral modification requirements appeared to loosen, as evidenced by the 2014 San Francisco Supreme Court decision in <a href="https://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1656&context=historical" target="_blank">Rodriguez v. Instagram</a>. In Rodriguez, Instagram’s terms stated that users would be notified of material changes to the terms, and the meaning of “material change” would be determined at Instagram’s sole discretion.Though Instagram had sole discretion to determine when to give notice of a change in its terms, the court upheld the unilateral modification of its terms of use – noting that Instagram had in fact provided reasonable advance notice via email and that continued use of the service constituted Rodriguez’s acceptance of the new terms.More recently, decisions like <a href="https://casetext.com/case/sifuentes-v-dropbox-inc-1" target="_blank">Sifuentes v. Dropbox</a> have permitted unilateral modification but made it much harder to meet the requirement for giving notice. In Sifuentes, the United States District Court for the Northern District of California reviewed Dropbox’s ability to enforce amendments to its terms, which contained a notice provision that was similar to Instagram’s. The court held that Dropbox could not enforce its amended TOS because it failed to show that the plaintiff’s continued use of the service was conditioned on agreement to the amendments.The court found that the plaintiff also didn’t have actual notice of the modified terms because Dropbox did not show that the plaintiff had read the email notifications of the amendments. The Sifuentes court further characterized the provision as “essentially disavow[ing] any obligation to alert [users] to changes.” This decision underscored practical challenges of meeting the necessary notice standard, but these cases did not focus on or require the Harris standard of only enforcing unilateral amendment provisions where the terms themselves required the provider to give notice (presumably in addition to such notice being given where applicable to the case’s facts).Lovinfosse appears to mark a return to the stricter stance seen in Harris, serving as a reminder of the limitations and potential pitfalls of unilateral modification clauses in TOS. While the court acknowledged that the plaintiff had agreed to the terms, the ability to change those terms without notice made the arbitration clause illusory and unenforceable.In many ways, this is a frustrating standard for companies that have followed best practices when implementing enforceable terms, only to face the risk that agreed upon contractual terms which have not changed might be declared unenforceable simply because they could change. As companies navigate the complexities of digital contracts, Lovinfosse underscores the necessity of transparency in consumer agreements.

Lose Your Illusion: District Court Holds that Unilateral Modification Clause Makes ToS Unenforceable