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Dropbox seems to be trying to head off privacy lawsuits as it prepares for an IPO

Online storage company Dropbox is widely expected to emerge soon as one of the most anticipated Silicon Valley public offerings this year. And as it does, privacy worries are coming to the forefront.

Dropbox has recently made changes to its privacy policy and terms of service, which have raised eyebrows in the industry. Drawing particular scrutiny is a clause obliging Dropbox’s users to settle problems with the company via arbitration rather than allowing clients to take up legal claims in a formal court of law, unless they opt out within the first 30 days:

Resolving Disputes

Let’s Try To Sort Things Out First. We want to address your concerns without needing a formal legal case. Before filing a claim against Dropbox, you agree to try to resolve the dispute informally by contacting dispute-notice@dropbox.com. We’ll try to resolve the dispute informally by contacting you via email. If a dispute is not resolved within 15 days of submission, you or Dropbox may bring a formal proceeding.

We Both Agree To Arbitrate. You and Dropbox agree to resolve any claims relating to these Terms or the Services through final and binding arbitration, except as set forth under Exceptions to Agreement to Arbitrate below.

Opt-out of Agreement to Arbitrate. You can decline this agreement to arbitrate by clicking here and submitting the opt-out form within 30 days of first accepting these Terms

Of course, there’s nothing wrong with the arbitration route per se. There’s a long list of companies that urge clients to seek arbitration rather than seeking legal redress through the state and federal court system, which can save both sides time and money.

But in the banking world, at least, obliging customers to use arbitration has turned out to be a way for companies to avoid class-action lawsuits, which can cost them hefty legal fees. In Dropbox’s case, there have been questions about how well it guards its clients’ private data. It’s also conceivable that the company is worried about future lawsuits in case it has to provide user data to US intelligence services. The documents leaked by Edward Snowden last year said that Dropbox was “coming soon” as a participant in the US National Security Agency’s PRISM program, which gives the NSA selective access to user data from various online companies, and at least one class-action suit against one of those participants, AT&T, has already been filed.

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