Any company with an online presence, especially one that allows users or subscribers to post content or images, should carefully consider applicable intellectual property laws and take steps to ensure that its website’s terms of service are at all times appropriately tailored to provide adequate protection for the company while simultaneously serving the specific needs of the site and its users. This is especially true in the fast-paced social media market, where constant innovation and rapid growth not only yield greater opportunities, but also demand timely adjustments to the contractual provisions governing the relationship between a site and its users. Few companies understand this notion better than Pinterest, the immensely popular social bookmarking website.

Pinterest allows users to share photos and images on a virtual pinboard by “pinning” content from the Internet or “re-pinning” other users’ shared content. The invite-only site, which was launched in 2010, has exploded onto the social networking scene during recent months, already reaching nearly 18 million users and generating more referral traffic than Google+, YouTube, and LinkedIn combined. Indeed, one study shows that Pinterest drives more referral traffic than even Twitter. It is no surprise, then, that Pinterest is rumored to be raising an investment round this year at a valuation of more than $1 billion.

In late February, one of Pinterest’s users sparked an Internet controversy by blogging about her concerns over the company’s copyright policy. The user, who is both an attorney and a photographer, claimed that while the site’s community standards, known as “Pin Etiquette,” discouraged users from engaging in self-promotion by posting their own pictures, Pinterest’s terms of service prohibited users from pinning any content that they did not own. The user was also troubled by terms-of-service language stating that users are subject to any legal action taken by copyright or trademark holders and providing for the explicit indemnification of the company from any copyright violations by its users, which, of course, is standard fare for any social networking site. After the blog post went viral and the story was eventually picked up by numerous media outlets, Pinterest was forced to confront the issue head-on in order to prevent a loss of the substantial goodwill it had cultivated with its online community.

Pinterest’s proactive response to the controversy, which included direct communications between Pinterest’s co-founder and CEO and the blogger, as well as significant adjustments to the company’s user policies, appears to have prevented much of the potential fallout. Among the changes announced by the company in late March were updates to the site’s terms of service, acceptable use policies, and privacy policies, which were intended to make them “easier to understand and better reflect the direction (Pinterest) is headed in the future.” For example, Pinterest rolled out a set of simple online tools for reporting alleged copyright or trademark infringement, which include provisions designed to fit squarely within the requirements of the Digital Millennium Copyright Act of 1998, and revised its terms of service to remove language granting Pinterest an “irrevocable” and “perpetual” license to “use,” “copy,” “license,” “sell,” or “otherwise exploit” all creative content posted by its users. In addition, Pinterest addressed concerns over the alleged contradiction between its directive to avoid self-promotion and its rules that users not pin content for which they do not possess a license by deleting the Pin Etiquette principle discouraging users from posting their own content or photos, and replacing it with a new principle to “be authentic” by using Pinterest to express “who you are.”

Companies should take heed of Pinterest’s recent challenges and take proactive steps to have appropriate counsel review their websites’ terms of service on a regular basis to identify and correct any potential intellectual property problem areas. Moreover, any company that has or is considering establishing an online presence on Pinterest or other social networking sites should carefully review that site’s terms of service and refrain from pinning or posting content that it does not own or for which it does not possess a license to use or reproduce.