Specht v. Netscape Communications Corp.

Specht v. Netscape

Court	United States Court of Appeals for the Second Circuit
Full case name	Specht v. Netscape Communications Corporation
Argued	March 14 2002
Decided	October 1 2002
Citation(s)	306 F.3d 17
Case history
Procedural history	Affirmed holding from 150 F. Supp. 2d 585 (S.D.N.Y. 2001)
Holding
Licenses are not enforceable if there is not reasonable notice of the existence of a license and unambiguous consent to those terms.
Court membership
Judge(s) sitting	Circuit Judges Sonia Sotomayor, Joseph M. McLaughlin, Pierre N. Leval
Case opinions
Majority	Sotomayor, joined by McLaughlin, Leval

Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002),^[1] is a case in the United States Court of Appeals for the Second Circuit regarding the enforceability of browse-wrap software licenses. The court held that merely clicking on a download button does not show assent to license terms if those terms were not conspicuous and if it was not explicit to the consumer that clicking meant agreeing to the license.^[1]

Case

The plaintiffs brought suit against Netscape Communications Corporation, alleging the defendant's SmartDownload plug-in invaded the plaintiffs' privacy in violation of the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act.^[2] Netscape moved to compel arbitration and to stay court proceedings, arguing that the plaintiffs agreed to arbitration in the End User License Agreement. This means that any disputes, such as an invasion of privacy, would be settled out of court by an arbitrator. The plaintiffs allegedly accepted this EULA when they downloaded the plug-in.^[1]

The U.S. District Court for the Southern District of New York denied Netscape's motion.^[3] The United States Court of Appeals for the Second Circuit heard the appeal, and affirmed the district court's decision, finding that "plaintiffs neither received reasonable notice of the existence of the license terms nor manifested unambiguous assent to those terms before acting on the web page’s invitation to download the plug-in program".^[1]

Facts

The plaintiffs allege that SmartDownload transmitted to Netscape the URL of the file being downloaded along with a HTTP cookie and a "key" (similar to a cookie) that would identify the user of the computer.^[2]
Five of the six plaintiffs downloaded Netscape Communicator, which consists of Netscape Navigator and other web software, from the Netscape website, and all five of them acknowledge that they clicked "Yes", indicating assent to the terms of the click-wrap license agreement for Communicator.^[1] This is not to be confused with accepting the license agreement for SmartDownload.
When downloading SmartDownload, there was no click-wrap presentation. After downloading the software, there was no further information about the plug-in or the existence of license terms. The reference to license terms was only visible if the plaintiffs scrolled down beyond the Download button.^[1]
The SmartDownload license contained a provision requiring disputes related to the agreement to be submitted to arbitration.
Plaintiff Christopher Specht never downloaded or used SmartDownload. He operated a website that provided files for download. He alleged that the defendants intercepted information every time users downloaded files from him using SmartDownload.
The defendants alleged that Specht received a direct benefit under the SmartDownload license agreement—enough such that he should have to arbitrate his claims pursuant to the license terms. Specht claims that he never received any commission for providing files for download.^[1]

Decision

The crux of the issue is whether or not the plaintiff's agreed to be bound by the defendant's licensing terms when they downloaded the free plug-in, even though the plaintiffs could not have learned of the existence of the terms before downloading. The court found that "a reasonably prudent Internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants’ invitation to download the free software, and that defendants therefore did not provide reasonable notice of the license terms".^[1]

Claims related to SmartDownload are not covered by the license agreement for Netscape Communicator, despite the fact that SmartDownload is meant to enhance the functioning of Communicator.^[1] This means that when the plaintiffs clicked through Communicator's license agreement, they were not agreeing to the SmartDownload agreement.

Specht was not bound by the SmartDownload agreement as a non-contracting beneficiary because he had no preexisting relationship with the parties, was not an agent of any party, and received no direct benefit from users downloading files from his website.^[3]

Subsequent history

The parties settled the case in a fortuitous manner for Netscape, which was required to stop collecting data and to delete existing data. However, the settlement explicitly denies any violation by Netscape. Because of this, the plaintiffs were unable to collect damages under the Electronic Communications Privacy Act.^[4]

References

1 2 3 4 5 6 7 8 9 Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002).
1 2 "The Original Complaint in Specht v. Netscape and AOL", Tech Law Journal, accessed October 1st, 2010
1 2 Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (S.D.N.Y. 2001).
↑ Eric Goldman and Matt Goeden, "Specht v. Netscape: What Happened After the 2nd Circuit Remand?", September 13, 2005.