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Facebook’s recent about-face on a unilateral change in its contractual terms with its users has cast a spotlight on content ownership in the social networking context.

Internet-based businesses that rely on user-generated content (as is the case with social networking sites like Facebook) are increasingly faced with a dilemma over who should own that content, as the value of the business is largely tied to the user base and the content available to users. Facebook claims to have over 175 million active users who upload over 850 million photos, 7 million videos and 28 million other “pieces of content” to its servers every month.

The terms of use (or terms of service) for websites are the contracts between the users and the site owner. Sites that contain user-generated material generally have terms favourable to the site owner that provide it with the necessary licences to use the user-posted content and also govern other aspects of the relationship, including access to and participation in the site.

There is often a provision that permits the service provider to change the terms and conditions of the contract at its discretion, and makes these changes become effective by simply posting the revised terms on the site. Facebook’s terms of use contains all of this language, and also states that continued use of the Facebook site after revisions to the terms of use have been posted means that the user has accepted and agreed to them. These provisions are fairly typical, but are often unread or simply glossed over by users in the rush to join a site. Many users are surprised by the breadth and scope of the licence they have so casually granted.

This brings us to the about-face. In early February, Facebook changed its terms of use without specifically notifying its users. The pre-change terms of use authorized Facebook to make such copies of user-generated content as it deemed necessary in order to facilitate the posting and storage of that content on the website. It granted a very broad license to Facebook to essentially do whatever it wanted with the content. It also provided some user rights, “You may remove your User Content from the Site at any time. If you choose to remove your User Content, the license granted above will automatically expire, however you acknowledge that the Company may retain archived copies of your User Content.” The latter provision was removed, and it seemingly went unnoticed for about two weeks until a popular blog called “Consumerist” reported on the change.

The backlash from users was immediate and unprecedented. Tens of thousands of users joined virtual protest groups on the site, and hundreds of blogs and the mainstream media reported on the content ownership debate. The argument presented on behalf of the users was that there was no clean break if a user decided to end their relationship with Facebook by deleting their profile or content on the site because some of the content (due to the way the Facebook service operates) would remain available for use by Facebook under the license granted under its terms of use.

Within days of the change being made public, Facebook responded to user concerns by reverting to its former terms of use (which included the deleted language). In defending its original change, Facebook acknowledged that its users own their content and that it was simply ensuring that it had the necessary license rights to continue to use the content, because some of that content would continue to reside on Facebook’s servers, or in the case of messages sent to another user, on that user’s account and remain available to be displayed to that user.

While the unilateral revision to the terms of use seems to have been within Facebook’s contractual right, it was an embarrassing public relations episode as users rebelled via the social network itself and actually effected change. Currently, it is the norm that a user has no choice but to agree to the terms of use of a website if they want access. In a novel and progressive approach, Facebook has now implemented a solution by creating a user group where users are given the opportunity to comment and vote on proposed terms and the general principles that will govern the Facebook universe. Perhaps other sites will follow a similar approach in an attempt to balance the rights of the site owners and the users.

The other benefit of the Facebook flap is that it has helped open the eyes of users, some of whom may even take the time read the terms of use the next time they register for an online service.

Patrick Fitzgerald is a partner with Cox & Palmer’s Technology and IP group in Halifax.