Enforceable Browse-Wrap Contracts

Sufficient notice is not a bright-line test. Rather, it has been used on a case-by-case basis. In Specht v. Netscape Communications Corp., 306 F.3d 17 (2nd Cir. 2002), the dispute was whether users of Netscape's software, who downloaded it from Netscape's Web site, were bound by an agreement to arbitrate disputes with Netscape, where Netscape had posted the terms of its offer of the software (including the obligation to arbitrate disputes) on the Web site from which the users downloaded the software. The court ruled against Netscape because the users would not have seen the terms Netscape exacted without scrolling down their computer screens, and there was no reason for them to do so.

Had plaintiffs scrolled down instead of acting on defendants' invitation to click on the “Download” button, they would have encountered the following invitation: “Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.” The court found the evidence did not demonstrate that one who had downloaded Netscape's software had necessarily seen the terms of its offer and ruled the agreement unenforceable.

As a result of this case, it is widely suggested that the icon for the terms of use agreement be placed in the upper left-hand quadrant of the homepage and that all visitors be channeled through the homepage. The reason for this suggestion is that the court will take judicial notice of the fact that all Internet pages open from the upper left-hand quadrant, thus the defendant must overcome the presumption that the icon was viewed. Without this presumption, the plaintiff has the burden of proving the defendant did see the icon.

The Second Circuit reached a different result in Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2nd Cir. 2004), where it was undisputed that the users of a Web site had actual knowledge of the terms and conditions posted on the site. Register sells Internet domain names and Verio designs and develops Web sites. Register was contractually required to make its customers' contact information available free of charge to the public for any lawful purpose. An entity making a query through Register's Internet site would receive a reply furnishing the requested information, captioned by a legend devised by Register, which stated: “By submitting a WHOIS query, you agree that you will use this data only for lawful purposes and that under no circumstances will you use this data to ' support the transmission of mass unsolicited, commercial advertising or solicitation via e-mail.”

Despite this, Verio devised an automated robot to retrieve the information and use it for marketing purposes on a regular basis. The district court granted Register's preliminary injunction, which was upheld by the Second Circuit.

On appeal, Verio had conceded that it was aware of the restrictions Register placed on the use of the contact information and that by using such information for its own marketing opportunities it was violating those restrictions. Nevertheless, Verio argued that it never became contractually bound to the conditions imposed by the legend because the legend did not appear on the screen until after Verio had made a query and received the desired information from Register.

Verio claimed that it did not receive legally enforceable notice of the terms of use. The court, noting that Verio had actual knowledge of the terms, stated: “It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree.”

The court made a point to distinguish the facts at issue there from those in Specht. The two cases were “crucially different,” the court found, because in Specht: “There was no basis for imputing to the downloaders of Netscape's software knowledge of the terms on which the software was offered,” whereas Verio had “admitted that, in entering Register's computers to get the data, it was fully aware of the terms on which Register offered the access.”

The Viero court relied on basic contract law stating:

While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract. It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree. See, e.g., Restatement (Second) of Contracts '69(1)(a) (1981) (“[S]ilence and inaction operate as an acceptance ' [w]here an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.”); 2 Richard A. Lord, Williston on Contracts Section 6:9 (4th ed. 1991).

Some cases demonstrate a trend toward enforcing browse-wrap licenses as long as Web sites provide proper notice of the license. Ticketmaster Corp. v. Tickets.com, Inc., 2000 WL 1887522 (C.D.Cal. Aug. 10, 2000), Southwest Airlines Co. v. BoardFirst, L.L.C., 2007 WL 4823761 N.D. Tex (2007). One plausible reading of the cases is that courts in browse-wrap cases show greater solicitude to consumers than to businesses, and will enforce browse-wraps primarily in business-to-business rather than business-to-consumer transactions, and perhaps only in repeat transactions as in Verio. Courts may be willing to overlook the utter absence of assent only when there are reasons to believe that the defendant is aware of the plaintiff's terms. That awareness may be more likely with corporations than individuals, perhaps because corporations are repeat players, because they themselves employ terms of use and therefore should expect that others will, or because some evidence in each individual case suggests they are in fact more aware of those terms. 91 MNLR 459, Terms of Use, December, 2006.

It should be noted that while courts will, in general, enforce browse-wrap agreements, provided they include sufficient notice of the terms and the Internet user's actions clearly manifests acceptance of the terms, there are numerous exceptions to the general rule. In particular, courts often refuse to enforce specific Internet terms of use against consumers, particularly where those terms involve class action waivers, arbitration requirements and inconvenient forum choices.

Doing business over the Internet is increasingly automated. In the past, Web sites used “terms of use” agreements which include an Internet mechanism to affirm consent to be bound by the agreement (click-wrap). Increasingly, browse-wrap agreements are replacing click-wrap agreements.

Notice and Acceptance

Enforceable browse-wrap agreements have two factors in common. First, they include sufficient notice of the terms. Second, the actions of the Internet user clearly manifest acceptance of the terms.

Sufficient notice is not a bright-line test. Rather, it has been used on a case-by-case basis. In Specht v. Netscape Communications Corp. , 306 F.3d 17 (2nd Cir. 2002), the dispute was whether users of Netscape's software, who downloaded it from Netscape's Web site, were bound by an agreement to arbitrate disputes with Netscape, where Netscape had posted the terms of its offer of the software (including the obligation to arbitrate disputes) on the Web site from which the users downloaded the software. The court ruled against Netscape because the users would not have seen the terms Netscape exacted without scrolling down their computer screens, and there was no reason for them to do so.

Had plaintiffs scrolled down instead of acting on defendants' invitation to click on the “Download” button, they would have encountered the following invitation: “Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.” The court found the evidence did not demonstrate that one who had downloaded Netscape's software had necessarily seen the terms of its offer and ruled the agreement unenforceable.

As a result of this case, it is widely suggested that the icon for the terms of use agreement be placed in the upper left-hand quadrant of the homepage and that all visitors be channeled through the homepage. The reason for this suggestion is that the court will take judicial notice of the fact that all Internet pages open from the upper left-hand quadrant, thus the defendant must overcome the presumption that the icon was viewed. Without this presumption, the plaintiff has the burden of proving the defendant did see the icon.

The Second Circuit reached a different result in Register.com, Inc. v. Verio, Inc. , 356 F.3d 393 (2nd Cir. 2004), where it was undisputed that the users of a Web site had actual knowledge of the terms and conditions posted on the site. Register sells Internet domain names and Verio designs and develops Web sites. Register was contractually required to make its customers' contact information available free of charge to the public for any lawful purpose. An entity making a query through Register's Internet site would receive a reply furnishing the requested information, captioned by a legend devised by Register, which stated: “By submitting a WHOIS query, you agree that you will use this data only for lawful purposes and that under no circumstances will you use this data to ' support the transmission of mass unsolicited, commercial advertising or solicitation via e-mail.”

Despite this, Verio devised an automated robot to retrieve the information and use it for marketing purposes on a regular basis. The district court granted Register's preliminary injunction, which was upheld by the Second Circuit.

On appeal, Verio had conceded that it was aware of the restrictions Register placed on the use of the contact information and that by using such information for its own marketing opportunities it was violating those restrictions. Nevertheless, Verio argued that it never became contractually bound to the conditions imposed by the legend because the legend did not appear on the screen until after Verio had made a query and received the desired information from Register.

Verio claimed that it did not receive legally enforceable notice of the terms of use. The court, noting that Verio had actual knowledge of the terms, stated: “It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree.”

The court made a point to distinguish the facts at issue there from those in Specht. The two cases were “crucially different,” the court found, because in Specht: “There was no basis for imputing to the downloaders of Netscape's software knowledge of the terms on which the software was offered,” whereas Verio had “admitted that, in entering Register's computers to get the data, it was fully aware of the terms on which Register offered the access.”

The Viero court relied on basic contract law stating:

While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract. It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree. See, e.g., Restatement (Second) of Contracts '69(1)(a) (1981) (“[S]ilence and inaction operate as an acceptance ' [w]here an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.”); 2 Richard A. Lord, Williston on Contracts Section 6:9 (4th ed. 1991).

Some cases demonstrate a trend toward enforcing browse-wrap licenses as long as Web sites provide proper notice of the license. Ticketmaster Corp. v. Tickets.com, Inc., 2000 WL 1887522 (C.D.Cal. Aug. 10, 2000), Southwest Airlines Co. v. BoardFirst, L.L.C., 2007 WL 4823761 N.D. Tex (2007). One plausible reading of the cases is that courts in browse-wrap cases show greater solicitude to consumers than to businesses, and will enforce browse-wraps primarily in business-to-business rather than business-to-consumer transactions, and perhaps only in repeat transactions as in Verio. Courts may be willing to overlook the utter absence of assent only when there are reasons to believe that the defendant is aware of the plaintiff's terms. That awareness may be more likely with corporations than individuals, perhaps because corporations are repeat players, because they themselves employ terms of use and therefore should expect that others will, or because some evidence in each individual case suggests they are in fact more aware of those terms. 91 MNLR 459, Terms of Use, December, 2006.

It should be noted that while courts will, in general, enforce browse-wrap agreements, provided they include sufficient notice of the terms and the Internet user's actions clearly manifests acceptance of the terms, there are numerous exceptions to the general rule. In particular, courts often refuse to enforce specific Internet terms of use against consumers, particularly where those terms involve class action waivers, arbitration requirements and inconvenient forum choices.