My experience creating a news product prototype this semester has shown me that entrepreneurs aren’t all that different from journalists. Both job descriptions call for inquisitive people who can conduct intensive research to satisfy their queries. They have also accepted that their efforts will not be highly rewarded at first – at least not monetarily.
While finalizing the financial details of my group’s project, I realized another similarity between the professions: both can run into liability issues.
Our project, EmployEd, is an online service that would allow news organizations to hire students for freelance multimedia projects. Researching the fine print of the law didn’t top our to-do list at first because we were focused on financial concerns. But recently, we realized our prototype could never come to fruition if we couldn’t legally set it up.
One perk of working at a university is the easy access to experts in any field. I’ll miss this free advice when I enter the real world. We turned to David Ardia, UNC-Chapel Hill assistant professor of law and co-director of the Center for Media Law and Policy. Last spring, Ardia and his law students gave Reese News Lab interns a media law crash course, and it was time to consult him again.
After listening to our pitch, Ardia informed us that we had some fairly daunting legal issues. I immediately felt our project plummet to what some have described as “the trough of sorrow,” a state faced by many would-be entrepreneurs.
Ardia eased us into our problems by first explaining a “terms of service,” a contract our users must sign to use our service. He warned us if anything went wrong in the freelance process, both parties would look to us to fix it. To prevent this, he said that the terms of service should explicitly state that we were not in charge of vetting students or media professionals. We also wouldn’t want to be held responsible if students broke copyright laws, plagiarized or delivered unprofessional work. The contract must convey that the user entered an agreement at his or her own risk.
Ardia stressed that one of the most important things for us to remember was that the less involved we are in matching the news organizations to the students, the safer we are legally. If we follow this hands-off rule, the Digital Millennium Copyright Act, would protect us. This act states that third-party providers, like us, are not liable for the content our users post. The law isn’t a get-out-of-jail-free card: We still need someone to monitor offensive content, but we can’t get sued for the initial posting of the content.
Next, we needed to tackle our almost insurmountable legal issue: financial transactions. Up until this point, we planned to let users register with the website for free. A news organization would only need to pay a student once they completed a project. EmployEd would then take a 10 percent cut of the student’s payment. Ardia pointed out that by waiting to charge a company’s credit card until after the student completes the project, we insert ourselves into the transaction. This breaks the cardinal “limited involvement” rule, which could cause us to be liable for unfinished work. He said it would be almost impossible to run this high-risk business inside the School of Journalism and Mass Communication. To reduce our involvement, Ardia suggested charging a registration fee.
Whichever model we choose, we learned we would still need to create an LLC, or limited liability company. Creating this type of company would restrict our liability if we were sued.
In the end, we followed Ardia’s advice to separate the company from the university to reduce our liability. Although it could be risky, we did decide to stick with our original business model and take a cut out of the student payment. Our previous user testing suggested that professionals were wary of paying an upfront cost for an unknown service. A one-time fee also wouldn’t generate much revenue.
My experience with Ardia suggests that entrepreneurs and journalists should get legal advice before they get too bogged down with all their other questions. All the grandest ideas in the world won’t produce a viable business if it can’t be done legally.