Individuals who downloaded software were not bound by license agreement that was not clearly made a precondition to the download

Law Reporter, Dec 2001

Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (S.D.N.Y. 2001).

A U.S. district court held that individuals who downloaded software from a Web site were not bound by a license agreement because the agreement was not made a clear precondition to the download.

Here, a group of computer users sued Netscape Communications Corporation, alleging that software they downloaded for free from defendant's Web site transmitted private information to defendant about plaintif[s' Internet activity, in violation of federal statutes. Defendant moved to compel arbitration, arguing that all disputes relating to use of its software were subject to a binding arbitration clause in a license agreement plaintiffs reportedly accepted when they downloaded the software.

The court noted that a party must assent to the formation of a contract either through words or conduct. Consequently, offerees will not be bound by inconspicuous contractual provisions they are not aware of, the court said. In cases of Internet downloads, the court explained, courts have upheld license agreements where the products cannot be obtained or used unless an icon is clicked. In those cases, users were required to click an icon that plainly indicated their assent to the agreement.

The license agreement at issue here, the court said, is different in that it allowed users to download and use the software without taking any action that plainly indicated their assent to the terms of the license. Individuals who obtained the software were not required to view any license terms and were not made aware of the existence of a license agreement.

The only hint that a contract was being formed was contained in a small box of text referring to the license agreement. This box, the court noted, appeared below the screen for downloading and, thus, was not apparent to users before they obtained the product. Further, the text merely asked users to "please review" the terms. This reads as an invitation, not a condition, the court said, and consequently, does not provide users with adequate notice that a contract is being formed.

Moreover, the court rejected defendant's argument that the mere act of downloading indicated plaintiffs' assent. Downloading is not an unambiguous indication of assent, the court said. The primary purpose of downloading is to obtain a product, not to assent to an agreement, the court reasoned. Thus, defendant's failure to require users of its software to indicate assent to its license as a precondition to downloading the software is contrary to its argument that a contract was formed.

Accordingly, the court denied defendant's motion to compel arbitration of the dispute.

Plaintiff's Counsel

Joshua Neil Rubin, *Jill S. Abrams, Courtney E. Lynch, James V. Bashian, and Oren S. Giskan, all of New York, N.Y.

*Laurence D. Paskowitz, Forest Hills, N.Y.

*George G. Mahfood, Miami, Fla.