Social media law part two

In my first social media law post I looked at social media clauses in legal agreements.

This time the topic is more specific:- due diligence on social media "assets".

Not everyone who reads this blog is a lawyer so let me explain what this actually means (if this is too basic for you then please skip the next couple of paragraphs!)

Due diligence is what lawyers and other professionals call the investigations that a buyer makes (or should make!) before buying a company or a business. Basically it is legalese for "kicking the tyres".

It will usually include financial due diligence (do the numbers stack up?) and legal issues (does the business have contracts in place, is it being sued?). For large or complex deals it will involve a whole raft of professionals looking at everything from pension scheme funding to market research.

Incidentally, it also gives rise to one of my least favourite manglings of the English language... the use of "to due diligence" as a verb. As in:

Bob. Get on the phone and tell the lawyers we need to due diligence the crap out of these contracts...

If you are guilty of this then please, please stop it right now!

This post is really about legal due diligence rather than the other kinds.

There are always hot topics in the field. When I started out as a corporate lawyer in 1999, the vogue was to include questions to ensure that a company's software and hardware were likely to survive the dreaded Millennium Bug (amazingly, I still sometimes see due diligence enquiries from law firms which include these).

Over the next couple of years I expect a similar rush to include due diligence on social media and Web 2.0 issues. I predict that a lot of these enquiries will be drafted by large law firms without any real grasp of how social media works or what it means... and I predict that they will be pretty lame.

Still, it is easy to criticise. What do I think buyers (or their lawyers) should be looking at?

As I wrote in my first social media law post, there is no special "social media law". Many legal issues and problems will be covered in standard due diligence enquiries anyway.

If the company has infringed someone's copyright or posted defamatory material on a blog then this should be picked up by the enquiries a prudent firm would always make.

There are a few specific legal issues which do need to be covered:-

• what social media policy does the company have in place for employees?


• is there a social media clause in any contracts where this is relevant?


• does the company own the copyright in any social media content (in the same way as you might ask the question about content on its web site)?


• are there any compliance issues arising from its social media use (e.g. a law firm offering legal advice over Twitter)?

If the business or company is an active user of social media then there will be other questions to ask. These actually fall somewhere between legal and operational due diligence (so it may not be the lawyers dealing with this)... they are more like "social media due diligence" in the true form:-

• what services does the company use? What for and who produces the content or operates the account?


• what platforms does the company use? Does it have control of all user accounts and passwords... how are these going to be handed over at completion without the risk of a disgruntled employee going "rogue"?


• are there any key social media assets which are likely to be disputed? This could include LinkedIn, Twitter or Facebook accounts which employees might claim are personal, rather than company, property.


• does the company have an archive or record of all the updates which have been published? Does the buyer want to review these in detail?


• is all valuable content (blogs etc.) securely backed up? There may be a bulletproof backup policy on in-house servers, but with an external blog hosted on wordpress.com or blogger. Have these posts been backed-up?

The scope will obviously vary depending on how heavily the company uses social media, but most businesses will merit some level of enquiry. Even if the lawyers don't carry out this due dilligence, they will need to understand it so they can incorporate any necessary warranties and other provisions into the sale contract.

How quickly will law firms will realise the importance of these social media assets to their clients?

I suspect that this may be another area where small firms have an advantage. They are more likely to be using social media effectively themselves (rather than just banning it) so it should be easier for them to understand the questions which need to be asked... rather than treating it as just another "Millenium Bug question".