Specht v. Netscape Communications Corp

Brief Fact Summary.

Internet users (Plaintiff) brought suit against Netscape Communications (Defendant) over the ambiguous terms in an online contract to download a variety of Internet programs.

Synopsis of Rule of Law.

When a computer user is invited to download “free” products, when the terms of the contract are not reasonably clear to the user, the user cannot be bound by the terms of the contract.

Facts.

Netscape Communications Corp. (Netscape) (Defendant), an Internet browser provider, offers software programs that include Communicator and SmartDownload.  Specht (Plaintiff) and other plaintiffs claimed that when these software programs were downloaded, they collectively allow unlawful “eavesdropping” of the customers’ use of those programs and other websites.  Defendant argued that Plaintiff had consented to the terms of the licenses, which allowed Defendant to “eavesdrop” and, more importantly here, compelled this dispute to be settled by arbitration, since Plaintiff agreed to an arbitration clause in the license agreement.  When downloading the programs, Specht (Plaintiff) had to “click” on several agreements to effectively perform the actual downloads.

Issue.

If an Internet browser webpage does not adequately alert users to the existence of the license terms of software and does not require users to manifestly and clearly agree to the terms as a condition of downloading the software, is a user bound by the terms of the license contract?

Held.

(Sotomayor, J.)  No.  If an Internet browser webpage does not adequately alert users to the existence of the license terms of software and does not require users to manifestly and clearly agree to the terms as a condition of downloading the software, a user is not bound by the terms of the license contract.  The Communicator license agreement that Plaintiff viewed did not mention SmartDownload or the other plug-in programs.  Also, if a user had scrolled down to the download button, something Plaintiff did not do, SmartDownload’s license agreement was not immediately displayed.  Rather, the user was taken to another link, which, when “clicked,” led to an additional webpage that contained the arbitration clause agreement.  The existence of SmartDownload’s full license agreement was not, then, readily available to Plaintiff.  Whether under the Uniform Commercial Code (UCC) or under common law, a contract requires “a manifestation of agreement between the parties.”  The argument of Netscape (Defendant) is that Plaintiff was on “inquiry notice” as to the terms of the agreement, and that Plaintiff used reasonable prudence, the license terms would have been apparent.  However, there is an exception when the written terms do not appear in the contract and the terms are then not made apparent to the signer; if so, a contract is not formed since there would be no “manifest agreement” by both parties.  The court is not persuaded by Defendant’s argument that a prudent offeree would have been aware of the license terms.  A reasonably prudent offeree in plaintiffs’ position would not have known or learned before acting on the invitation to download, of the reference to SmartDownload’s license terms hidden below the “Download” button on the next screen.  Therefore, the district court’s decision that the plaintiffs are not bound by the arbitration clause in the terms of the contract is affirmed.

Discussion.

The court seems to recognize that in the “pop-up” world of the Internet, forming a contract must involve a more explicit wording of the terms than used in the circumstances here.  The court alludes to the fact that contract law has changed along with the new technology of the Internet.  Just because someone “clicks” an assent to a contract does not necessarily mean that a person has manifestly agreed to the terms of that contract.