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Netscape Learns a Hard Lesson

Netscape Learns a Hard Lesson

Netscape Learns a Hard Lesson

Netscape is the most recent computer software provider to learn the hazards of the world of click-wrap licenses. Click wrap is the phrase used by the courts to describe the licensing contracts offered to consumers who choose to download software products from the internet, or to use websites governed by license agreements. As Netscape learned, the lesson here is becoming clearer as the courts encounter more such agreements: a software or website provider does not have a contract if the user does not have to explicitly acknowledge his agreement before he uses the product or website.

In Specht v. Netscape Communications, 150 F. Supp. 2d 285 (S.D.N.Y. 2001), Netscape attempted to enforce an arbitration clause against plaintiffs suing for violations of their electronic privacy rights. Netscape argued that the license agreement for its web-surfing software includes a binding arbitration clause. However, the court found that Netscape?s Smart Download feature (which makes it easier for users to download the software while engaging in other tasks) only made reference to the license agreement if the user scrolled down through the page to a second screen. Users are not required to affirmatively consent to the license agreement, or even to view it, before proceeding with the download of the software. Only a visitor who chooses to click on the hyperlink to the license agreement would see the warning that the terms of the agreement are binding on anyone using the software, let alone progress to the arbitration clause.

The court did not consider this agreement to be a contract capable of binding the plaintiffs. Netscape could not prove that the plaintiffs had ever read or assented to the terms of the license agreement, and so they were not subject to the arbitration clause. The act of downloading the software is not enough to indicate assent: the primary purpose of downloading the software is to obtain a product, not assent to an agreement. Netscape should have required its users to indicate assent to its license as a specific precondition to downloading.

This recent case demonstrates that the courts are narrowly interpreting the click-wrap license. No click, no license. Anyone seeking to establish a contract with software users or website visitors must be sure that there is an affirmative acceptance of the terms to establish a contract