Updating Terms of Service: What You Need to Know

It is not uncommon for websites and applications to periodically update their terms of service, as it is a way for businesses to stay diligent with their ever-growing needs as well as reduce the risk of legal disputes. Updates to terms and privacy policies are also important to keep up with evolving legal considerations and new technology, including potential use of data to train AI.

For example, as of November 15, 2024, X (formerly known as Twitter) has updated its Terms of Service and with these updates in effect, people argue X can use data to train its AI models.

Here are some key takeaways from X’s updated Terms of Service:

Intellectual Property Licensing: While the user maintains ownership to their content shared on the app, X now gains royalty-free access to all content of users for worldwide distribution on their behalf. They may therefore be allowed to modify or repurpose content without compensation or notification.

Artificial Intelligence Training: X has the right to utilize users’ data and content to improve and train their artificial intelligence models. This will arguably directly affect the growth and development of Grok, the chatbot featured on X that was launched last year. Previously, private accounts were able to opt-out of having their content used for AI development, but it is less clear in the new terms if it will still be an available option.

Reduced Post Research: Users can now only access one million posts within a 24-hour period or it will result in a $15,000 fine per one million posts.

Legal Disputes: According to the terms, action against X must be taken against them within one year of an incident occurring. All legal matters will also be only be resolved in the U.S. District Court for the Northern District of Texas. There is a waiver of the right to bring a class action.

To opt out of the terms, users must deactivate their account and halt usage of X’s services.

Some users are commenting that these updates have substantially altered the user experience; however, others view the changes as a way to tailor provisions to growing use of AI and data.

For any business, it is important to update terms and privacy policies periodically and to understand the legal risks that can come from poorly drafted end-user website terms. If your business is unprotected, it can incur significant amounts in legal actions and be bound by legal documents that do not reflect the evolving business practices. Consumers, on the other hand, are continuing to receive notices of updated legal terms and may try to attack certain provisions if they are “unconscionable” or to assert there is lacking consent to the terms.

As another example case, in Morrison vs. Yippee (S.D. Cal.), the court found that a “sign-in-wrap” terms of service process failed for a video streaming service. In particular, the court found that the terms hyperlink, while in blue font above the button, was not underlined or clear enough where there was other text also above the consent button. This means the company would not be able to invoke arbitration per its terms of service because consent was lacking. In other words, companies may want to reassess their consent mechanisms, as terms of service are only binding where there is effective consent to the terms.

Kronenberger Rosenfeld, LLP regularly assists clients with developing Terms of Service for their businesses, as well as general advertising compliance and litigation matters. Contact us today through our submission form.