Promises become binding when there is a meeting of the minds and consideration is exchanged.’ From this ancient premise Judge Hellerstein considered the timeless issue of assent in the contemporary context of free software offered on the Internet. The issue arose out of several class actions in which the plaintiffs alleged that the use by Netscape of a cookie in connection with its SmartDownload software violated their rights under two federal privacy statutes in that it was used by Netscape as a means of electronic surveillance to gather private information about a user’s file transfer activity on the Internet. Netscape sought arbitration on the basis of an arbitration clause in the ‘End User Licence Agreement’ into which users downloading the software allegedly entered.
Invitation
Netscape offered SmartDownload free on its Web site as a program that made it easier for users to download files from the Internet without losing their interim progress when they paused to engage in some other task, or if their Internet connection was severed. On the relevant page of Netscape’s Web site offering SmartDownload was a button labelled ‘Download’. Clicking on it initiated the download. The sole reference on this page to the licence agreement appeared in text visible only if the user scrolled down through the page to the next screen. The text amounted to an invitation which read as follows:
Please review and agree to the terms of the Netscape SmartDownload Software Licence Agreement before downloading and using the software.
Users were not required affirmatively to indicate their assent to the licence agreement or even to view the licence agreement before proceeding with the download. By clicking on the underlined text users were taken via a hypertext link to a Web page entitled ‘licence and support agreements’. On this appeared a statement to the effect that each Netscape software product was governed by a licence agreement. Below that appeared a list of licence agreements including one for Netscape’s SmartDownload. Clicking on that would take the user to the full text of the licence agreement. That contained the term requiring disputes to be submitted to arbitration.
Shrink Wrap
Did Netscape’s site give users sufficient notice of the existence and terms of the licence agreement and did the act of downloading the software sufficiently manifest users’ assent to be bound under the licence agreement? The efficacy of ‘shrink wrap’ licensing has been recognised by the US courts. In ProCD Inc v Zeidenberg (86 F.3d 1447 7th Cir 1996), the Court of Appeals upheld the validity of a software licence agreement ‘encoded on the CD-ROM disks as well as printed in the manual, and which appears on a user’s screen every time software runs’. This decision was based in part on the fact that the software could not be used unless and until the offeree was shown the licence and manifested assent.
Click Wrap
The US courts have also recognised click-wrap licensing, a form of software licensing that Netscape itself normally uses. For example, when a user attempts to obtain Netscape Communicator or Navigator, a Web page appears containing the full text of the Communicator/Navigator licence agreement. Accessing the software is dependent on assent to the licence agreement.
Browse Wrap
However, there is a third type of software licence, ‘browse wrap’, considered by a California federal court in Pollstar v Gigmania Ltd (ED Cal Oct 17 2000). In that case the plaintiff’s Web page offered allegedly proprietary information. Notice of a licence agreement appeared on the plaintiff’s Web site. Clicking on that notice linked the user to a separate Web page containing the licence agreement. However, the user was not required to click on an icon expressing assent to the licence, or even view its terms, before proceeding to use the information on the site. The California court expressed concern about the enforceability of the browse-wrap licence.
There for the taking
In the current case, the SmartDownload licence agreement looked more like a browse-wrap than a click-wrap licence. Whereas Netscape Navigator does not function without a prior clicking of a box constituting assent, SmartDownload allows a user to download and use the software without taking any action that plainly manifests assent to the terms of the associated licence or indicates an understanding that a contract is being formed. Judge Hellerstein did not accept that the mere act of downloading indicated assent. Netscape’s failure to require users of SmartDownload to indicate assent to the licence agreement as a precondition to downloading and using its software was fatal to its argument that a contract had been formed. Unlike the user of Netscape Navigator or other click-wrap or shrink-wrap licensees, a SmartDownload user was not made aware that he was entering into a contract; he did not need to view any licence agreement terms or even any reference to a licence agreement; and he did not need to do anything to manifest assent. SmartDownload in other words ‘is there for the taking’. The invitation to review and agree to the licence terms was just that, a mere invitation. While clearer language appeared in the licence agreement itself, the language of the invitation did not require the reading of those terms or provide adequate notice either that a contract was being created or that the terms of the licence agreement would bind the user.
Over Here
There is a dearth of judicial comment in the UK on the efficacy of shrink, click or any other kind of wrap licences, although the general practice of using shrink-wrap licences for over the counter software was recognised by the Scottish courts in the well-known case of Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd [1996] FSR 367. In the light of US case law and endorsement of shrink-wrap licences under the US Uniform Computer Information Transactions Act, UK courts are unlikely to consider click-wrap licences unenforceable in principle. However, Specht v Netscape will ensure thate-commerce lawyers will continue to advise a ‘belt and braces’ approach to the application of click-wrap agreements to online software transactions. n
Phillip Rees is Head of the IT Group in the London Office of McDermott Will & Emery. He may be contacted at prees@mwe.europe.com.
