It's almost impossible for a business to not be involved in social media.  In 2010, Facebook surpassed Google in terms of web metrics with over 700 million users as of last month.  Twitter and LinkedIn continue to grow.  Location-based services like Foursquare and GoWalla have become mainstream.  And a plethora of smaller social utilities are regularly popping up. However, the law has not been able to keep up with the rapid growth of social networks.

When the Internet began its growth in the late 1990s, government and legal entities scrambled to develop laws to govern the World Wide Web. Consequently, there are very few cases that have actually gone to litigation regarding social media and the law (many have been settled outside of court). The reason?

"Nobody wants to be made an example of," says Bradley Shear, a Washington, D.C.-based lawyer and entrepreneur who blogs about social media law.  "But there is going to need to be some major lawsuits or decisions by federal courts, appellate courts or more to decide what are acceptable practices online for a real shift to take place. There are legal ramifications for everything you do online, and many people and businesses simply don't understand that."

In this guide, we will describe why setting an employee policy is imperative, the most common legal issues faced by companies utilizing social media and provide tips to help you avoid costly lawsuits.

How to Avoid a Social Media Lawsuit: Develop a Clear Employee Social Media Policy

Whether it's in the hiring and recruitment process or when an employee is legally employed, setting a clear and specific standard for social media usage and guidance is a requirement. Defining what your employees can and cannot do, both in the workplace and at home, needs to be spelled out. If you fire an employee for something they've said on Facebook or on another social network, that needs to be spelled out in your own company's policy or you could be subject to a wrongful termination suit.

Mayer Brown, a global legal services organization, recently published The Social Media Revolution: A Legal Handbook, which provides legal guidance to help navigate these new technologies and is excerpted below:

"Because of the popularity of social media's proliferation, the law is struggling to keep pace with the legal issues this technology presents," the handbook's introduction states. "In particular, while the Internet and social media give rise to issues involving copyright, trademark, defamation and employment law (just to name a few), courts are still working to apply existing laws—many of which were enacted long before the Internet—to these unfamiliar contexts, and to interpret newly enacted laws without any precedent to guide them."

To see a list of over 100 social media employee policies laid out, read this blog post from Ralph Paglia in July 2010. And of course before your policy is laid out, run it past a proper legal counsel.

Dig Deeper:  How to Write a Social Media Policy


How to Avoid a Social Media Lawsuit: Most Common Laws Broken by Businesses in Social Media

"It's very difficult to navigate legalities in social media," says Michael Germano, founder of Carrot Creative, a Brooklyn-based new media advertising agency. "Unfortunately, laws can be interpreted in so many different ways, and we run into obstacles often where we have one lawyer telling us one thing and another lawyer saying another. Nothing is really official."

That unknown legality and "a bit of a Wild West," as it's described by John Nadolenco, editor of The Social Media Revolution, means that companies are making plenty of mistakes regularly and they may not even know it. Here are some of the most common:

Copyright/Trademark: According to the United States Copyright Office, copyright is "a form of protection grounded in the US Constitution and granted by law for original works of authorship fixed in a tangible medium of expression." In social media, users and businesses upload content (photos, videos, etc.), often including copyrighted material. Do you have a legal right to repost a photo or video without proper attribution? Just because content is online does not mean it can be reposted. Every time it happens you are open to a $150,000 violation, but it's all about self-policing at this point.

"If you don't have the rights to use somebody else's property in copyright or trademark, you're opening yourself up to major legal liability," says Shear. "That's a big problem that needs to be addressed, and Congress is trying to figure out copyrighted and trademarked property online as we speak because it's being stolen left and right. People take other people's content without even thinking about it."

Trademarks, generally, are a form of legal protection that may be obtained to protect words, names, symbols or sounds that distinguish one particular good from another. In social media, falsely identifying yourself or misrepresentation could lead to legal liability. Do you have the right to promote the Super Bowl in your Facebook contest? Probably not, as brands pay lots of money for that exclusive right with the NFL.

FTC Advertising & Full Disclosure: Properly identifying yourself and offering full disclosure is not only recommended, but required by the Federal Trade Commission. If you're a company that is paying bloggers to write about your product or if you are a blogger writing about a product you've received for free or from a client, you need to disclose that information. Failing to do so amounts to improper and false reviews. Another simple way to look at this is your Twitter account: many employees who speak publicly about the company but also about their personal lives need to make it clear that they are employed by this organization but also that their thoughts are their own and not opinions of the organization, simple additions to a Twitter profile.

Privacy: Who owns the data that lives on the web? It's a question asked over and over and it has been for years. But with the rise of social media, users have become much more willing to share personal information—birthdays, addresses and phone number on Facebook, their present location on Foursquare, what entertainment they are currently watching via apps like GetGlue—all programs which collect information on each user. Who owns that data? And can you sell it to advertisers?

"The biggest problem to me is the use, storage and collection of data that is used in social media," says Shear. "Both user-generated content and content pulled from other platforms leaves you open to potential legal issues."

Illegal Development: As Facebook continues to grow and expand their advertising platform, many brands are looking to run sweepstakes and ads on the site to reach individual and targeted consumers. But if you don't work with a Facebook-approved ad developers, not only are you not able to make money if you don't follow their rules, but you open yourself up to a potential legal issue.

"A lot of companies build Facebook ads with advertising companies that might not be approved by Facebook, and they're using wording or running contests that Facebook simply won't allow," notes Germano. "Everyone thought the Burger King Whopper Sacrifice back in 2009 was a great campaign, when in reality by Facebook rules it was illegal and eventually pulled. So dealing with an agency that knows the Facebook Platform, its nuances and the things that will send red flags to Facebook and get your app banned are huge from the start."

Dig Deeper: Social Media's Good, Bad, Ugly and Unexpected


How to Avoid a Social Media Lawsuit: Steps for Businesses to Take

At the very least, make sure that your employee social media policy is outlined clearly, that the content your business is publishing is not copyrighted or trademarked, that you use full disclosure to abide by FTC guidelines and that you don't improperly share user data. Again, it may take a large legal ruling for brands to begin paying attention to social media law, but nobody wants to be that brand made an example of.

"We're in a world where consumers have just as loud of a voice as companies, or employees have just as loud of a voice as the company that employs them," Nadolenco says. "And that's different for all of the marketing arms, who are used to controlling messages and crafting an image and a brand. In social media, that's just not the way it works anymore, and brands are going to have to learn to deal with it."

Dig Deeper: The Business Owner's Social Media Tool Kit