Cloud Contracts: The Impact of Common Terms of Service Provisions on Intellectual Property Rights

Many people have a great deal of digital content stored “in the cloud”, often through email, social media platforms, file storage and other related services. Whether it is the storage of user-created content, such as photos, videos or documents, or content that users pay to access, such as music and e-books, the use of such services is governed by the Terms of Service (“ToS”)[1] of the relevant company (“online service provider”).  

Despite the often monetary or emotional value of such user-created content, ToS tend to be contracts of adhesion; if a person wants to use an online service provider, they generally have no option but to agree to that online service provider’s ToS. As ToS are almost always unilaterally-generated contracts where the individual has no negotiating power vis-à-vis the online service provider, the reality is that most people usually accept ToS without actually reading them. As a result, many are unaware of how the ToS affect their rights to the accounts with these service providers and the content stored in association with them, or the rights their heirs might have in this regard after they die.[2] This is particularly the case for an individual’s copyright with respect to the content that they create through or store with the online service provider.

This post provides an overview of the findings of a study from the Cloud Legal Project at Queen Mary University of London (the “study”) on some of the most common ToS provisions across major online service providers,[3] specifically with respect to the copyright that users of such online service providers have in the content that they store and/or produce with such online service providers.

ToS Terms Relating to Copyright

According to the Canadian Intellectual Property Office:

A copyright is the sole right to produce or reproduce a work or a substantial part of it in any form. It includes the right to perform the work or any substantial part of it or, in the case of a lecture, to deliver it. If the work is unpublished, copyright includes the right to publish the work or any substantial part of it

Copyright can be created in many ways. A common example is someone taking a photograph with their smartphone. Once the person creates the photo, that person holds the copyright to the photo as an artistic work. Another example could be an .mp3 file that someone creates using audio recording and production software.

In the digital world, many people store the works that they create through cloud-based online service providers, including Facebook, Dropbox and Google Drive. In its analysis of the way the ToS of major online service providers address users’ intellectual property rights, the study distinguishes between a license of copyright, which grants a temporary right to produce or reproduce the work, and an assignment of a copyright, which is an actual transfer of the copyright such that its original owner no longer retains that copyright.

The study analyzed a total of 22 ToS for online service providers that allow users to upload files to their platforms. Some of the study’s most salient findings include:

  • only 10 of the 22 ToS explicitly acknowledged that the user retains their copyright in uploaded works;
  • however, none of the ToS indicated that the user assigns any copyright to the online service provider;
  • 19 of the 22 ToS explicitly provided that the user granted a license of the copyright in uploaded works to the online service provider; and
  • of the 19 ToS that provided such licenses, 16 allowed the online service provider to re-assign the license to a third party;

In addition, the study found that the various ToS took differing approaches to the terms of such licenses. Some granted an “irrevocable” or “perpetual” license to the online service provider, while others provided that the license is terminated when a user’s account is deleted.

Copyright Exclusivity

A question in this area remains: when a user grants licenses to their copyright through an online service provider’s ToS, do such terms encumber the copyright in a way where the user can no longer grant an exclusive right to that work? While many ToS seem to indicate that the user grants a “non-exclusive” license in this regard, the problem arises when the user hopes to grant exclusive licenses to third parties.

For example, if a food photographer has posted a photo on their Instagram page, and then looks to grant a meal delivery company an exclusive license to use that photo of their food, the photo on the Instagram page would, according to Instagram’s ToS, be licensed to Instagram such that it could “host, use, distribute, modify, run, copy, publicly perform or display, translate, and create derivative works” of the photo (subject to the photographer’s privacy settings).[4] This could impact the ability of the food photographer to offer an “exclusive” license to the photo, or, even worse, they could be violating the representations and warranties an existing “exclusive” license by virtue of the photo being on Instagram prior to such granting such license.

Although Instagram’s ToS state that such a “non-exclusive” license ends  when the user’s content is deleted from their systems (i.e. when the user deletes the content individually or deletes their account),[5] this is not the case for all online service provider’s ToS, as indicated above with “irrevocable” or “perpetual” licenses. Therefore, it is possible that certain content already hosted on certain websites may never be able to be exclusively licensable, unless the copyright owner chooses to dispute such an “irrevocable” or “perpetual” license. As we all know, such disputes might be costly to resolve (i.e. through a court).

In Regulating Content on Social Media, Corinne Tan argues that “the ‘ownership’ conferred on a user over his or her content under the ToS is not meaningful, as it does not mirror the exclusive rights to which a copyright holder is ordinarily entitled”.[6] After considering the above example, a user may want to consider the scope of the licenses they are granting to online service providers, both with respect to the duration of such license and the capabilities it grants to the licensor (although often such capabilities are limitless).

Other Issues with ToS

The topic of licenses in ToS highlights, as I suggested earlier in this post, another major issue with ToS: they are almost always unilaterally produced and non-negotiable. Furthermore, it is often the case where an online service provider amends its ToS, for example, to reflect developments in its business or the law. The study found that, rather than seeking the consent or agreement of users to such changes, online service providers’ standard practice is to simply notify users of material changes and effect them without consent. A user’s continued use of the service will then be inferred to constitute assent to the amended terms. 

This issue is particularly magnified when considering that in most instances there is a significant power disparity between an online service provider, often as a large corporation with its own legal team, and the user, often as an individual with little to no legal experience.

However, courts have specifically mentioned and recognized these issues. In Canada, there is at least some jurisprudence to suggest that certain clauses in ToS are unenforceable as a result. In Douez v. Facebook Inc.,[7] the Supreme Court of Canada (“SCC”) determined that a “forum selection” clause in a ToS was unenforceable. In Douez, the clause at issue was a provision in Facebook’s Terms of Use that stated that any disputes between it and a user were to be resolved under California law. The plaintiff in Douez sought to sue Facebook under British Columbia privacy legislation, and thus sought to set aside this clause. The SCC sided with the plaintiff, citing, among other reasons, the inequality and unfairness that inherently exist with ToS.

Concluding Thoughts

The findings of the study highlight some of the issues that ToS may create for users. With an increasing number of people and organizations now storing some of their most important things on the cloud, particularly as remote work arrangements due to the COVID-19 pandemic have quickly pushed many to “go paperless”, some may, for example, not feel comfortable with providing a “perpetual” copyright license to an online service provider. So, with respect to the storage of particularly valuable intellectual property with an online service provider, it would be important to review its ToS to ensure that they do not contain any undesirable clauses.

I would like to thank Yvonne Mazurak, Student-at-Law at Fasken, for helping me write this post.


[1] Also sometimes referred to as “Terms of Use”.

[2] I have written specifically on issues around digital assets and estate planning. For example, please see my three-part series on All About Estates regarding the challenges executors, trustees face in accessing the digital assets of the deceased, as well as another series of posts on this site discussing estate planning considerations for individuals with intellectual property. 

[3] Johan David Michels, Christopher Millar and Srishti Joshi, “Beyond the Clouds, Part 1: What Cloud Contracts Say about Who Owns and Can Access Your Content” (May 11, 2019). Queen Mary University of London, School of Law Legal Studies Research Paper No. 315/2019.

[4] Instagram, “Terms of Use”, online: Instagram (20 December 2020) <https://help.instagram.com/1215086795543252>.

[5] Ibid.

[6] Corinne Tan, “Application of the Terms of Service” in Corinne Tan, Regulating Content on Social Media (London: UCL Press, 2018) 98 at 120.

[7] 2017 SCC 33, [2017] 1 SCR 751.

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Demetre Vasilounis assists clients with a variety of wealth management and estate and family planning issues. Demetre regularly drafts wills, powers of attorney, domestic contracts, deeds of trust, and other documents relevant to succession planning. Demetre’s practice has a specific focus on the management of digital assets, including online accounts, cryptocurrency, and various forms of intellectual property.

About Demetre Vasilounis

Demetre Vasilounis assists clients with a variety of wealth management and estate and family planning issues. Demetre regularly drafts wills, powers of attorney, domestic contracts, deeds of trust, and other documents relevant to succession planning. Demetre’s practice has a specific focus on the management of digital assets, including online accounts, cryptocurrency, and various forms of intellectual property.