SCN: Assent

[Steve]

x-no-archive: yes

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(Carl S. Kaplan, NY Times)---Finding that "the timeless issue of 
assent" has continuing vitality in the realm of cyberspace, a federal 
judge has ruled that Internet users who downloaded free software 
from a Web site were not bound by the terms of a software licensing 
agreement because they never consented to it.  

The ruling, which was issued on July 5th, is one of the first 
decisions to directly address whether a person's mere use of a Web 
site -- without first reading legal fine print and clicking an "I agree" 
button -- can constitute consent to an agreement governing the use 
of the site or its products.  

The decision, which may influence other courts, is a boon to some 
consumers who may have been surprised to discover that by 
downloading a software program or surfing through a Web site they, 
without knowing it, agreed to a contract.  

The decision also casts some doubt on a widespread Internet 
practice. Many Web sites state in their "Terms of Service" or 
"Conditions of Use" pages that a consumer's use of the Web site 
constitutes his acceptance of a contract. The Web sites rely on 
terms in those contracts to protect them.  

Judge Alvin K. Hellerstein of the United States District Court in 
Manhattan ruled in his decision that Netscape Communications 
Corporation, which is owned by America Online, Inc., did not form a 
contract with individuals who downloaded free software from 
Netscape's Web page. Accordingly, the court said that the users 
were not obliged to honor an arbitration clause in the software 
agreement. Judge Hellerstein ordered the parties to appear before 
him for a case status conference on July 26.  

AOL may appeal the ruling to the U.S. Court of Appeals for the 
Second Circuit, in Manhattan. Nicholas J. Graham, a spokesperson 
for AOL, said, "We disagree strongly with the decision that was 
handed down last week, and we are in the process of considering 
our options."  

Joshua Rubin, a lawyer representing the plaintiffs in the case and a 
partner at Abbey Gardy, a New York law firm, said that he thought 
the court's decision was well reasoned and correct. "It applies an 
ancient and fundamental principle in a novel context. That is, you 
can't be bound to that which you don't agree to," he said.  

In related complaints filed last year, six individuals in three cases 
alleged that Netscape's freely available software, SmartDownload, a 
service that assists in the of downloading files from the Internet, 
surreptitiously tracked private information about a user's file 
transfer activity on the Internet. The plaintiffs, who are seeking class 
action status, claim that by offering the software, Netscape and AOL 
violated two federal statutes, the Electronic Communications Privacy 
Act and the Computer Fraud and Abuse Act.  

In previous statements to the press, AOL said that the lawsuit was 
without merit. In any case, the company announced last August that 
new editions of the software program would not contain the alleged 
consumer-tracking device.  

Earlier, Netscape argued that its licensing agreement with the 
plaintiffs mandated that the case be thrown out of court and referred 
to an arbitration panel. That set the stage for the court's ruling 
whether the software licensing agreement was valid in the first 
place.  

In his decision, Hellerstein repeated the age-old rule of contract law 
that a necessary ingredient in making a promise binding between 
two people is consent, a meeting of the minds. "So it was at King's 
Bench in common law England; so it was under the common law in 
the American colonies; so it was through more than two centuries of 
jurisprudence in this country; and so it is today," he wrote.  

Consent can be indicated by any number of things, including a 
signature or a handshake, said Judge Hellerstein. Indeed, any sign, 
symbol or action, or even willful inaction, can amount to consent and 
create a contract.  

But in the Netscape case, there was no required action on the part of 
a user that could signal his consent to a licensing agreement. In 
support of his view, Hellerstein observed that when the plaintiffs 
wished to obtain SmartDownload from Netscape's Web site, they 
viewed a download page that had a tinted box, or button, labeled 
"Download." By clicking on the box, a visitor initiated the download.  

The sole reference to the existence of a licensing agreement 
appeared in text at the bottom of the download page. That text read: 
"Please review and agree to the terms of the Netscape 
SmartDownload software license agreement before downloading and 
using the software." By clicking on some words in the sentence, a 
visitor was transported to another page that warned the user to read 
and agree to a licensing agreement before acquiring the software 
product. The warning contained a link to the licensing agreement. 
Among other things, the agreement stated that by installing or using 
SmartDownload, the user "is consenting to be bound by and is 
becoming a party to this agreement."  

Judge Hellerstein reckoned that visitors were not required to 
affirmatively indicate their assent to the license agreement, or even 
to view the license agreement, before downloading the software. 
"Netscape's failure to require users of SmartDownload to indicate 
assent to its license as a precondition to downloading and using its 
software is fatal to its argument that a contract has been formed," he 
wrote.  

In his opinion, Judge Hellerstein acknowledged that users could 
signal their consent to software licensing agreements by a minimal 
action or willful inaction if the user has sufficient notice of the 
contract. For example, in "shrink-wrap" licenses, which have been 
upheld by some courts, software is packaged in a container or 
wrapper that advises the purchaser that the use of the software is 
subject to the terms of a license agreement tucked inside the 
package. The license agreement generally states that if the 
purchaser does not wish to enter into a contract, he must return it for 
a refund, and that his failure to return within a period of time will 
constitute assent to the license terms.  

In addition, in so-called "click-wrap" or "click-thru" licenses, which 
also have been upheld by many courts, a user is presented with a 
message on his computer screen, requiring that he signify his 
assent to the terms of an agreement by clicking on an "I agree" 
button. Generally, the product or service cannot be obtained or used 
until the button is clicked.  

In contrast to those scenarios, said Judge Hellerstein, Netscape's 
SmartDownload allowed a user to download and use the software 
"without taking any action that plainly manifests assent to the terms 
of the associated license or indicates an understanding that a 
contract has been formed."  

Sometime after the lawsuit was filed, Netscape changed its 
SmartDownload page. Now, next to the download button, reads the 
sentence: "By downloading, I agree to the terms of the following 
agreement." The licensing agreement is printed in a window next to 
the download button.  

Michael H. Sproule, a lawyer who specializes in intellectual property 
matters at Akabas & Cohen, a New York law firm, said that Judge 
Hellerstein's ruling has ramifications far beyond software licensing 
agreements. "I think this is something that Web sites have got to 
consider," he said. "Almost every Web site out there has a Terms of 
Service page. Generally it's not very prominent. It governs the use 
of the Web site and typically requires users of the site to bring suit 
or an arbitration proceeding in a land far away. It also often contains 
the famous phrase: 'If you continue to use this service you are 
bound by these terms.' At least according to the logic of Judge 
Hellerstein's decision, those Terms of Service contracts are 
dubious," said Sproule.  

The upshot, he added, is that those Web sites relying on the legality 
of a Terms of Service Use contract and the viability of an arbitration 
and forum selection clause may, in fact, be subject to lawsuits in all 
50 states and foreign jurisdictions.  

Martin H. Samson, a lawyer who specializes in Internet Law at 
Phillips, Nizer, Benjamin, Krim & Ballon, a New York law firm, said 
that he believed that Judge Hellerstein may have left open the 
possibility that a user could assent to a contract by merely using a 
site if the user had prominent notice that his use signified consent. 
"If I put a license agreement right in front of a user's face, and the 
agreement said your use of the site constitutes consent, that might 
be okay," said Samson. The problem, he said, is that the legal rules 
are not clear. "Until some judge says use-based contracts are 
enforceable, they are iffy," he said.  

Ian C. Ballon, a Palo Alto, California-based Internet lawyer and editor 
of the treatise, "E-Commerce and Internet Law" (Glasser 
LegalWorks, 2001), said it was not surprising that a judge looked at 
the issue of use-based Internet contracts and found them to be a 
problem. Other judges, however, might have reached different 
conclusions in light of the "widespread" custom of conditioning a 
person's use of a Web site to posted Terms and Conditions, he 
said.  

"The decision does underscore that it's the better practice not to 
take a chance," said Ballon. "It's prudent for Web sites to have click-
thru agreements," he said.  

That way, neither the Web site company nor the consumer would be 
in for a legal surprise.  


Copyright 2001 The New York Times Company





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