e-Commerce Docket Sheet

Enforcement of a 1-year noncompete provision with no geographical limitation against the founder of a law-related Internet Web site business is “reasonable in light of the national, and indeed international, nature of Internet business.” West Publishing Corp. v. Stanley, No. 03-5832 (D. Minn. Jan. 7, 2004). The court concluded that an injunction prohibiting the founder from operating a competing company for one year was justified because of the potential for irreparable harm to the company that purchased the rights to the business.

---

AOL Forum Selection Clause Unenforceable Under
Florida Consumer Law

A forum selection clause in an Internet-access subscriber agreement is unenforceable in a putative class action under Florida consumer law. America Online, Inc., v. Pasieka, Case No. 1D03-2290 (Fla. Dist. Ct. App. 1st Dist. Jan. 29, 2004). The lawsuit alleged violations of Florida consumer statutes based on difficulty in canceling America Online (AOL) service, continued billing for the service after cancellation, and deceptive and unfair practices with respect to the provider's subscription efforts. The court held that the “purpose and effectiveness” of the Florida consumer statutes would be “seriously undermined” if the Florida plaintiffs were required to bring suit in Virginia, the chosen forum in the clause.

---

FTC Requires AOL and CompuServe to Change
Subscriber Practices

The Federal Trade Commission (FTC) approved a final consent order with America Online Inc., and its subsidiary, CompuServe Interactive Services Inc., settling unfair practice charges related to the companies' subscriber practices. The companies agreed, among other things, to establish and maintain appropriate measures for ensuring that cancellations are promptly processed and that billing ceases when cancellations are requested.

---

Use of Data with Knowledge
of Database Operator's Terms of Use Constitutes Acceptance

Downloading data from an online WHOIS database of domain-name registrants, with knowledge of the database operator's terms of use, constitutes an acceptance of those terms, even if the party downloading the data has not expressly stated its acceptance. Register.com, Inc. v. Verio, Inc., No. 00-9596 (2d Cir. Jan. 23, 2004). The circuit court upheld issuance of an injunction against mass downloading of information because such use was expressly prohibited by the database operator's terms of use. The court rejected the argument that the terms were not binding because they were displayed simultaneously with information downloaded from the database rather than prior to the download, as the downloader had repeatedly accessed that database after becoming aware of the operator's restrictive terms.

---

Computer Retention is Not
Acceptance of 'In Box' Terms
Without Expressed Return Right

An arbitration clause included in an “in box” agreement shipped with a computer is unenforceable because the agreement did not include sufficient notice of the manner in which purchasers could reject the terms of the agreement. DeFontes v. Dell Computers Corp., C.A. No. PC 03-2636 (Super. Ct. R.I. Jan. 29, 2004). The court found that retention of the computer did not constitute knowing consent to the terms of the agreement, because the agreement did not contain an express provision indicating that a customer unwilling to agree to the terms and conditions could reject them by returning the computer. The court also concluded that an inconspicuous hyperlink on the vendor's Web site containing the terms of the agreement was not sufficient to place the customer on notice of the terms.

---

Fax Sig. Satisfies Fed. Procurement Law Where Accompanied by
'Additional Indicia' of Binding Intent

A federal contracting officer acted unreasonably under federal procurement law in rejecting a bid in which a document appointing a power of attorney for a required surety was executed with a mechanical, or facsimile, signature. Hawaiian Dredging Construction Co., Inc. v. The United States, No. 03-2763C (U.S. Fed. Cl. Jan. 9, 2004). The court held that the relevant provisions of the Federal Acquisition Regulation require that the bid documents establish unequivocally that the bid bond is enforceable against the surety. Because the bidder also supplied documents indicating that the surety expressly agreed to be bound by a facsimile signature on such documents, the court found that there was no ambiguity concerning the authority of the surety's agent to bind the surety. The court commented that “[m]echanical signatures require additional indicia that the surety intends to be bound,” and concluded that the statement of the surety's intent to be so bound was sufficient additional indicia.

---

Search Engine Keyword Advertising May Constitute
Trademark Infringement

The defense of nominative fair use is not applicable to an Internet search engine's use of key words containing a trademark to trigger unlabeled targeted banner advertisements. Playboy Enterprises, Inc. v. Netscape Communications Corp., No. 00-56648 (9th Cir. Jan. 14, 2004). The court found that such uses of the plaintiff's trademarks “playboy” and “playmate” as triggers for banner ads failed the first prong of the nominative fair use test, which requires that the product or service being advertised “must be one not readily identifiable without the use of the trademark.” The court pointed out that there was nothing indispensable about the plaintiff's marks, and that the defendants could have used numerous other terms to identify consumers who might be interested in adult-oriented advertisements. The court remanded the case for resolution of outstanding factual issues concerning the plaintiff's claims of trademark infringement and dilution. (For more on this and related trademark-use cases, see “Trademark Exploitation On The Internet: Don't Be Branded A Usurper,” in the February edition of e-Commerce Law & Strategy.)

---

International Trade Commission Dismisses
DMCA Allegations

The International Trade Comm-ission (ITC) terminated its investigation of unfair trade practice charges brought by a garage door system manufacturer claiming that a competitor's replacement openers violate the Digital Millennium Copyright Act (DMCA). In re Certain Universal Transmitters For Garage Door Openers, No. 337-TA-497 (International Trade Commission Jan. 14, 2004). The manufacturer sought an order barring sale and importation of the replacement openers on the ground that access to the manufacturer's copyrighted control code violated the DMCA's anti-circumvention provisions. The ITC ruled that it was obliged to give res judicata effect to a recent ruling in a federal district court case that access to the code by the replacement openers was not “unauthorized” within the meaning of the DMCA.

---

Copyright Owners Agree
Not to Sue DVR Users

A unilateral covenant by television- and movie-copyright owners not to sue the users of digital video recorders (DVRs) for direct copyright infringement deprives a federal district court of subject matter jurisdiction to adjudicate the users' action seeking a declaratory judgment on the infringement issue. Paramount Pictures Corp. v. Replay TV, No. CV 01-9358 (C.D. Cal. Jan. 10, 2004). The court concluded that there was no longer a case and controversy under federal law, despite apprehensions by users that the copyright owners, as well as nonparty record companies, might bring suit against them in the future. The court commented that mere apprehensions were not sufficient to generate a constitutionally required case and controversy. It added that: “The battle between copyright owners to protect the value of their works, and technological innovators and consumers over freedom of access to those copyrighted works, will continue to rage on in this electronic age.”

---

Julian S. Millstein Edward A. Pisacreta Jeffrey D. Neuburger

Nature of Internet Business Justifies Unlimited Geographic
Noncompete Agreement Scope

Enforcement of a 1-year noncompete provision with no geographical limitation against the founder of a law-related Internet Web site business is “reasonable in light of the national, and indeed international, nature of Internet business.” West Publishing Corp. v. Stanley, No. 03-5832 (D. Minn. Jan. 7, 2004). The court concluded that an injunction prohibiting the founder from operating a competing company for one year was justified because of the potential for irreparable harm to the company that purchased the rights to the business.

---

AOL Forum Selection Clause Unenforceable Under
Florida Consumer Law

A forum selection clause in an Internet-access subscriber agreement is unenforceable in a putative class action under Florida consumer law. America Online, Inc., v. Pasieka, Case No. 1D03-2290 (Fla. Dist. Ct. App. 1st Dist. Jan. 29, 2004). The lawsuit alleged violations of Florida consumer statutes based on difficulty in canceling America Online (AOL) service, continued billing for the service after cancellation, and deceptive and unfair practices with respect to the provider's subscription efforts. The court held that the “purpose and effectiveness” of the Florida consumer statutes would be “seriously undermined” if the Florida plaintiffs were required to bring suit in Virginia, the chosen forum in the clause.

---

FTC Requires AOL and CompuServe to Change
Subscriber Practices

The Federal Trade Commission (FTC) approved a final consent order with America Online Inc., and its subsidiary, CompuServe Interactive Services Inc., settling unfair practice charges related to the companies' subscriber practices. The companies agreed, among other things, to establish and maintain appropriate measures for ensuring that cancellations are promptly processed and that billing ceases when cancellations are requested.

---

Use of Data with Knowledge
of Database Operator's Terms of Use Constitutes Acceptance

Downloading data from an online WHOIS database of domain-name registrants, with knowledge of the database operator's terms of use, constitutes an acceptance of those terms, even if the party downloading the data has not expressly stated its acceptance. Register.com, Inc. v. Verio, Inc., No. 00-9596 (2d Cir. Jan. 23, 2004). The circuit court upheld issuance of an injunction against mass downloading of information because such use was expressly prohibited by the database operator's terms of use. The court rejected the argument that the terms were not binding because they were displayed simultaneously with information downloaded from the database rather than prior to the download, as the downloader had repeatedly accessed that database after becoming aware of the operator's restrictive terms.

---

Computer Retention is Not
Acceptance of 'In Box' Terms
Without Expressed Return Right

An arbitration clause included in an “in box” agreement shipped with a computer is unenforceable because the agreement did not include sufficient notice of the manner in which purchasers could reject the terms of the agreement. DeFontes v. Dell Computers Corp., C.A. No. PC 03-2636 (Super. Ct. R.I. Jan. 29, 2004). The court found that retention of the computer did not constitute knowing consent to the terms of the agreement, because the agreement did not contain an express provision indicating that a customer unwilling to agree to the terms and conditions could reject them by returning the computer. The court also concluded that an inconspicuous hyperlink on the vendor's Web site containing the terms of the agreement was not sufficient to place the customer on notice of the terms.

---

Fax Sig. Satisfies Fed. Procurement Law Where Accompanied by
'Additional Indicia' of Binding Intent

A federal contracting officer acted unreasonably under federal procurement law in rejecting a bid in which a document appointing a power of attorney for a required surety was executed with a mechanical, or facsimile, signature. Hawaiian Dredging Construction Co., Inc. v. The United States, No. 03-2763C (U.S. Fed. Cl. Jan. 9, 2004). The court held that the relevant provisions of the Federal Acquisition Regulation require that the bid documents establish unequivocally that the bid bond is enforceable against the surety. Because the bidder also supplied documents indicating that the surety expressly agreed to be bound by a facsimile signature on such documents, the court found that there was no ambiguity concerning the authority of the surety's agent to bind the surety. The court commented that “[m]echanical signatures require additional indicia that the surety intends to be bound,” and concluded that the statement of the surety's intent to be so bound was sufficient additional indicia.

---

Search Engine Keyword Advertising May Constitute
Trademark Infringement

The defense of nominative fair use is not applicable to an Internet search engine's use of key words containing a trademark to trigger unlabeled targeted banner advertisements. Playboy Enterprises, Inc. v. Netscape Communications Corp., No. 00-56648 (9th Cir. Jan. 14, 2004). The court found that such uses of the plaintiff's trademarks “playboy” and “playmate” as triggers for banner ads failed the first prong of the nominative fair use test, which requires that the product or service being advertised “must be one not readily identifiable without the use of the trademark.” The court pointed out that there was nothing indispensable about the plaintiff's marks, and that the defendants could have used numerous other terms to identify consumers who might be interested in adult-oriented advertisements. The court remanded the case for resolution of outstanding factual issues concerning the plaintiff's claims of trademark infringement and dilution. (For more on this and related trademark-use cases, see “Trademark Exploitation On The Internet: Don't Be Branded A Usurper,” in the February edition of e-Commerce Law & Strategy.)

---

International Trade Commission Dismisses
DMCA Allegations

The International Trade Comm-ission (ITC) terminated its investigation of unfair trade practice charges brought by a garage door system manufacturer claiming that a competitor's replacement openers violate the Digital Millennium Copyright Act (DMCA). In re Certain Universal Transmitters For Garage Door Openers, No. 337-TA-497 (International Trade Commission Jan. 14, 2004). The manufacturer sought an order barring sale and importation of the replacement openers on the ground that access to the manufacturer's copyrighted control code violated the DMCA's anti-circumvention provisions. The ITC ruled that it was obliged to give res judicata effect to a recent ruling in a federal district court case that access to the code by the replacement openers was not “unauthorized” within the meaning of the DMCA.

---

Copyright Owners Agree
Not to Sue DVR Users

A unilateral covenant by television- and movie-copyright owners not to sue the users of digital video recorders (DVRs) for direct copyright infringement deprives a federal district court of subject matter jurisdiction to adjudicate the users' action seeking a declaratory judgment on the infringement issue. Paramount Pictures Corp. v. Replay TV, No. CV 01-9358 (C.D. Cal. Jan. 10, 2004). The court concluded that there was no longer a case and controversy under federal law, despite apprehensions by users that the copyright owners, as well as nonparty record companies, might bring suit against them in the future. The court commented that mere apprehensions were not sufficient to generate a constitutionally required case and controversy. It added that: “The battle between copyright owners to protect the value of their works, and technological innovators and consumers over freedom of access to those copyrighted works, will continue to rage on in this electronic age.”

---

Julian S. Millstein Edward A. Pisacreta Jeffrey D. Neuburger New York Brown Raysman Millstein Felder & Steiner LLP