Facebook was trying to solve a legitimate problem: People who deleted their accounts did not realize that information that they shared with other users would persist on their Facebook friends' accounts. Thus, they needed some way of telling users that the information might remain. The proposed change in the contract noted that:

You hereby grant Facebook an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to (a) use, copy, publish, stream, store, retain, publicly perform or display, transmit, scan, reformat, modify, edit, frame, translate, excerpt, adapt, create derivative works and distribute (through multiple tiers), any User Content you (i) Post on or in connection with the Facebook Service or the promotion thereof subject only to your privacy settings or (ii) enable a user to Post, including by offering a Share Link on your website and (b) to use your name, likeness and image for any purpose, including commercial or advertising, each of (a) and (b) on or in connection with the Facebook Service or the promotion thereof. You represent and warrant that you have all rights and permissions to grant the foregoing licenses.

Essentially, according to these new terms, if you created a Facebook page, posted content on one, created a link from one, or allowed someone else to do so, you had transferred the intellectual property rights to the content to the company, subject to your privacy settings.

The change set off a firestorm, with customers worrying that Facebook was laying claim to every little thought, dialog and memo that the user posted to the company's service. Many people organized and threatened to leave the social networking service.

Facebook executives quickly disavowed any nefarious intent. The CEO pointed out that the language change was merely made to reflect the reality that, when a user deleted a Facebook account, links to the account and comments made about them remained active on the website and accessible. He explained:

Our philosophy is that people own their information and control who they share it with. When a person shares information on Facebook, they first need to grant Facebook a license to use that information so that we can show it to the other people they've asked us to share it with. Without this license, we couldn't help people share that information.

In fact, the grant of license is subject to the user’s own privacy settings, which can limit who has access to the content they post. In other words, what Facebook is saying is "trust what we tell you, not what we wrote."

The Facebook privacy kerfuffle — and it is merely a kerfuffle — reflects a more significant problem concerning privacy, ownership and online contracts. The essential balance between a user's rights and those of the corporation or Internet site are described in a contract. There is generally no statutory right to privacy, particularly in the social networking arena where the information is usually posted for any or all to see. Even person-to-person communications on such a site — the equivalent of e-mail — is not really "private" or "secure" since it is subject to the recipient’s discretion, the potential for electronic discovery as well as disclosure under the terms of use.

These privacy rights by contract are in turn dependent upon the precise words of the the terms of service. The lawyers who draft them are charged with protecting the rights and interests of the company that employs them, and therefore use broad and expansive language. This is why you get language like "irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license…" rather than, "if you post something on Facebook, others can see it and use it as you intended."

Lawyers are paid to think of the worst-case scenario and to protect the company from that possibility. That is why, among other things, by using Facebook you agree not to "do anything that . . .could expose . . . Facebook . . . users to . . . liability," even if that liability is justified. In fact, as the Facebook CEO pointed out: "Our philosophy that people own their information and control who they share it with has remained constant. A lot of the language in our terms is overly formal and protective of the rights we need to provide this service to you."

Unfortunately, what the lawyers write becomes essentially the law, and that has consequences. There is no doubt that the newly abandoned Facebook terms were intended to reflect the actual practices of Facebook, and that there was no real change in privacy policy. However, by licensing everything to Facebook in perpetuity, there was a genuine risk that, for example, some future executive for some company that acquires Facebook generations from now may decide to sell your poetry, your photograph, your comments, or anything you have written. After all, the words of the terms of service granted a perpetual license.

Many companies and some ISP’s have privacy policies that dictate that "all e-mails are the property of the company." It is a fairly standard policy and is intended to allow an employer to read the contents of inbound and outbound emails and prevent a departing employee from taking "files" sent through electronic communications with them.

But the policy doesn’t merely say "we can read your e-mail and you can’t take it with you." It says that e-mail is the property of the company or the Internet service provider. This creates implications that there is a transfer of intellectual property rights by virtue of the fact that a particular medium is used for communication. If I write the Great American Novel and e-mail it to a buddy who works for a company with such a policy (assuming they are not a literary agent and that I am aware of their internal policy) is my e-mail now the "property" of the recipient? May the company now publish – under their own name – my novel because I used e-mail to transmit it? What does it really mean to own e-mail? What does it mean to grant a perpetual license to Facebook postings?

We intend to create a limited right, but in doing so open a Pandora’s box.

The problem is exacerbated by recent rulings interpreting and expanding the scope of terms of use or terms of service. Most recently, in the criminal prosecution of Lori Drew — the so-called "MySpace suicide case" — a jury convicted a Missouri mother for creating a MySpace account in the name of a fictional 16-year-old boy as this violated MySpace’s online contract terms that all information provided to MySpace would be accurate. Thus, technical violations of online agreements can be the basis for litigation not only for breach of contract, but also for civil or criminal trespass, trespass to chattels, interference with business relationships, or even computer fraud or computer crime.

In other words, words matter in contract law. When writing online contracts, say what you really mean and keep it simple. Hopefully, this will put an end to the kerfuffle.