The latest season of HBO’s hit comedy Silicon Valley highlighted the very real liabilities for companies that fail to comply with the Children’s Online Privacy Protection Act (“COPPA”) by implementing online privacy safeguards for children and users under 13. In the Silicon Valley episode, a fledging startup company that specializes in video-chat faces potential COPPA fines numbering in the billions because their company, which enjoys a predominantly young user base, failed to include terms of service and privacy policies that comply with COPPA. As COPPA penalties have been set at $16,000 per child, the potential fines were devastating for the startup and ended up leading to its demise. Unfortunately, this scenario is not as farfetched as it may seem. Because COPPA fines are truly that costly, small businesses or startups are particularly vulnerable to being crippled by failing to comply with COPPA. Thus, any new businesses that wish to build a presence online should always first consult experienced intellectual property counsel before launching their new website.

COPPA is not a very complex law. The act is aimed at regulating websites and online services that are considered commercial and directed at children. A website operator’s knowledge that its users are under 13 may also trigger COPPA. And while most famous non-profit organizations are exempt from having to comply with COPPA, the Supreme Court has notably held that non-profits operated for the benefit of their members’ commercial activities are still subject to the Federal Trade Commission’s regulation, and as such, COPPA applies as well.

In a nutshell, COPPA specifically lays out how website operators must manage websites that deal with the personal information of minors. It specifically requires: that the website include a privacy policy, states when a website must procure consent from a guardian, and delineates how a website must protect children’s privacy and safety online.

Briefly summarized, these revisions require that operators must post a clear and comprehensive online privacy policy that discloses how personal information is collected from children; make reasonable efforts to provide notice to parents of the users regarding the collection and use of the personal information; obtain verifiable parental consent, provide reasonable measures for parents to be able to review the personal information collected and rescind consent; establish and maintain procedures to protect the confidentiality of the personal information; retain the personal information only for the time needed to fulfill the website’s purpose; and prohibit the conditioning of a child’s behavior online in a manner to procure or reward the disclosure of additional personal information.

While many privacy experts applaud COPPA’s aim and scope, many fear that website operators still do not do enough to honor the spirit of COPPA. For instance, many critics complain that it is exceedingly easy for children to lie about their age online. Other critics of COPPA claim that it is potentially unconstitutional because it stifles the expression of children’s’ First Amendment Rights by requiring that they obtain parental consent to engage in web surfing.

Regardless of what view is held, website operators must be mindful of following COPPA’s requirements if they operate commercial websites that are aimed at children and their participation.

For more information on this topic, please visit our Privacy Policies service page, which is part of our Internet & eCommerce Practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the Internet & eCommerce law firm and its Internet & eCommerce attorneys may be found at www.klemchuk.com.

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