When Sun Microsystems President Jonathan Schwartz wanted to send a message that IBM wasn’t doing enough to make the two companies’ product lines compatible, he turned to a new and increasingly high-profile method of corporate communication: a corporate weblog, or “blog.” But Schwartz’s open letter to IBM, which appeared on the Sun-sponsored blog that he writes, is just the tip of the iceberg.

Corporate blogs, it seems, are everywhere. If you think of blogging as something your employees do on their own time, and shudder at what they might be saying about your company, you’re not alone. Until recently, corporate America knew blogging primarily as a difficult employment issue, one that led to several high-profile terminations when employees posted material on their personal blogs that companies deemed offensive or detrimental to the company’s interests. But now more and more businesses – including Microsoft, Google, Yahoo and Ask Jeeves, to name just a few – have realized that company-sponsored blogs offer a means of communicating with their customers and other constituencies in a direct, informal and participatory way. The basic idea is that some or all employees are allowed to post comments on company-sponsored blogs. The public can access these blogs and generally (but not always) can post their own comments too.

While corporate blogs offer novel opportunities, they also present significant legal risks. Companies that anticipate these issues and plan accordingly can reap the benefits of corporate blogging while reducing the risk of litigation. Among the legal issues raised by corporate blogging are:

• Defamation and Privacy Torts. Companies may be held liable if their employees post content to the corporate blog that defames or invades the privacy of third parties.
• Intellectual Property Infringement. Posts that include a third party’s intellectual property, such as copyrighted material or trademarks, may expose the company to liability for infringement.
• Trade Libel. False or misleading statements made on a corporate blog about the goods or services of a competitor that cause or are likely to cause the competitor harm may be grounds for a trade libel action.
• Trade Secrets. Inadvertent disclosure of company trade secrets on a company blog can destroy the “secret” status of such information, rendering it ineligible for trade secret protection, and disclosure of a third party’s trade secrets could expose the company to liability for trade secret misappropriation.
• Securities Fraud. Material misstatements made on a company blog could expose a publicly traded company to liability for securities fraud under Rule 10b-5.
• Gun-Jumping. While a company is in registration, statements made on a company blog “hyping” the company could be deemed a prohibited offer of the company’s securities, in violation of federal securities laws.
• Selective Disclosure. Disclosure of material nonpublic information on a publicly traded company’s blog could be deemed a prohibited selective disclosure under federal securities laws.
• Forward-Looking Statements. Failure to include appropriate cautionary language accompanying a forward-looking statement on a reporting company’s blog could cause the statement to fall outside the statutory safe harbor for such statements.
• Employment Issues. Companies that terminate employees for posting inappropriate content to corporate blogs may be sued for wrongful termination, with plaintiffs claiming that the employer authorized the posting is discriminating against them for exercising their right to organize, or is violating their free speech rights. (Similar issues arise when an employee is terminated based on the content of the employee’s personal blog, or the content of instant messages or email sent by the employee.)
• User Privacy. Companies that collect personal information from individuals who visit or post comments to the blog may be required to comply with state, federal and foreign privacy regulations.
• Discovery. Companies can be sanctioned in the course of discovery for failure to produce archived blog content.

Practical Guidance

To minimize the risks, companies should carefully consider their blogging strategy and take proactive steps to minimize potential exposure. Such steps may include:

• Creating a written policy for employees that sets out clear guidelines for corporate blogging and raises awareness about possible pitfalls. Companies may wish to have separate guidelines for employees’ discussion of the company in their personal blogs.
• Establishing terms of use for the corporate blog and posting appropriate disclaimers that limit the company’s liability for third-party statements and other claims.
• Regularly monitoring the corporate blog for content that violates terms of use, employee policies or applicable laws.
• Taking the steps required to qualify for the safe harbors available under the Digital Millennium Copyright Act.
• Ensuring that any personal information gathered from users via the corporate blog is handled in compliance with applicable privacy laws and the applicable privacy policy.
• Archiving corporate blog content in a well-organized and readily available form.

For assistance or additional information on these issues, please contact Raymond Haas (415.399.3090, rhaas@howardrice.com), Ron Star (415.399.3049, rstar@howardrice.com), Stephen Fronk (415.765.4626, sfronk@howardrice.com), or your usual Howard Rice attorney.

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Copyright © 2005 Howard Rice Nemerovski Canady Falk & Rabkin PC, Three Embarcadero Center, Seventh Floor, San Francisco, CA 94111.
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