Legal Issues

Most affiliate programs focus on the money. After all, an affiliate program is all about generating revenue for both you and your affiliates. But there are several legal issues that must be addressed before the money issues are detailed in the agreement.

The first of these is your affiliate enrollment and acceptance criteria. Here are some points to keep in mind when writing this section.

Enrollment, Exclusivity Causes, and Conduct

Inform the Web site applicant that when he signs up for your program it is only provisional. His acceptance in your program depends on a number of factors that you should include in this section of your agreement. State that you must first see his Web site. That means it must be live.

The agreement should say what types of sites will be accepted and what types will not. You want to keep your affiliate network professional looking and within cultural norms, so you should reject any site with adult (sexually explicit) content or sites that promote violence, discrimination, or engage in illegal activities. You should also reject any sites that appear to be banner farms, or do not seem to provide original content or a compelling reason for people to visit. While you’re looking at their content, make sure the site is not violating any intellectual property rights.

With regards to affiliate conduct, be sure to include an anti-spam policy, as well as grounds for termination. There should also be a mention that the Web site agrees not to add content that violates this section of the agreement after they are accepted in your affiliate network. This should also be mentioned in an Indemnification Clause in your agreement that holds your company harmless against any and all claims, lawsuits, damages, and expenses that occur because of the affiliate’s content or conduct.

Finally, you might want to consider an exclusivity clause that prevents an affiliate from placing competitive programs on his site. For example, if you sell music CDs, you can stipulate that the affiliate cannot place a competitor’s links on his Web site. On the other hand, you should also mention in this section that you are not restricted from adding sites to your network that compete with your affiliates. Note that the term exclusivity clause is a dirty word to affiliates. Rather than mandate that your affiliates be exclusive, craft your program to be beneficial to affiliates so they would not want to promote the competition.

Linking Criteria

Speaking of links, your next section of the agreement should deal with affiliate responsibilities to the program. The biggest and most important one is the placing of links on their site. In general, you should insist that the affiliate place only your banner and text links on his or her site. You should not give authority to affiliates to create their own banners, buttons, or graphics. And you should prohibit their hosting of your images on their servers. If a promotion ends and the affiliate is hosting the image on his server, you will not be able to remove the expired promotion from his site. You should also prohibit affiliates from including actual price information on their Web sites to avoid problems with price fluctuations.

The only exception to this rule—and it should be stated in the agreement—is permission to add testimonial text under or near your links. Even this should be under the condition that the affiliate runs the copy by the affiliate manager to ensure that the testimonial is accurate and truthful. The affiliate also must be told that he is responsible for the proper maintenance of the links around his site. That means the affiliate should be checked periodically to make sure the links work. Your linking procedures should be detailed on your Web site—what the linking code is, where to get it, how and where to place it on the affiliate site, and so on—and your agreement should reference them. The affiliate should also be specifically prohibited from making any warranty, representation, or other statement concerning your products or services.

A good general rule of thumb here is that the main objective of your company is to restrict the involvement of your affiliates to generating revenue for your business. They should not be communicating directly with customers about order status, customer service, and product availability and pricing.

Intellectual Property and Proprietary Information

When you give permission to affiliates to display your banners on their site, you are placing your brand in their hands. It pays to add an intellectual property clause to your agreement.

It should be stated that your company is providing a limited license to the affiliate to display your logo, trademark, and promotional materials. This is your brand and you want to ensure that the affiliate displays it properly. Affiliates should use only pre-approved graphics available from your Web site or from your third-party solution provider. The affiliate should not be allowed to resize or otherwise modify your graphics. So protect your brand and trademarks with this clause.

In addition to your trademark, you will be exchanging valuable confidential and proprietary information with your affiliates. For example, your company will most likely provide affiliates with information about impending product releases to give them time to prepare for the new offers. You may also provide your affiliates with proprietary software or code to integrate with their Web site. If this is so, you should forbid affiliates from disclosing or disseminating the information to outside parties.

Customer Data and Relationships

Even though the affiliate is recruiting customers for your company, the customers and the data collected in the process belong to you. Affiliates are an extension of your sales force and as such, are sales people. Affiliates do not own the customer data anymore than your sales people would. This does not mean that your affiliates would not benefit from building a customer or prospect list off their site visitors. This can still be done, and your company can market to this database and share any revenue generated with your affiliates.

So your affiliate agreement should state that all customer data generated by the affiliate for the purpose of your affiliate program is the sole property of your company. Of course, this section should be written to allow for affiliates to maintain their own customer lists that pertain only to the affiliate Web site and not your particular program.

It would be a good idea to incorporate into your agreement a relationship of parties provision to prevent future affiliate claims about the nature of their relationship with your company. You don’t want your affiliates to give the impression that they are somehow a part of your business. Legally, they are acting on your behalf and not as a division or department of your company. The relationship of parties provision disclaims the creation of any agency, joint venture, partnership, or any other entity not stated in your agreement.

Indemnification, Disclaimers, Limitation of Liability, and Miscellaneous Issues

Your agreement should cover the boilerplate issues that are necessary in every agreement of this type. An Indemnification clause should be included, holding your company harmless against any and all claims, lawsuits, damages, and expenses that arise. The terms of agreement should be stated, including a termination clause as to when, how, and under what circumstances a relationship with an affiliate can be terminated. Any and all disclaimers should be included as clauses in the agreement, making no expressed or implied warrantees with respect to your affiliate program or any products or services sold through the program.

A limitation of liability clause should also be included, protecting your company against any indirect, special, or consequential damages or loss of revenue arising in connection with your agreement or program. And finally, your agreement should include the legalities of where the agreement will be governed and how disputes will be resolved.

So much for the legalities. Now on to really important issues.