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Specht v. Netscape Communications Corp.
USDCSDNY.jpg

United States District Court for the Southern District of New York

Argued 2001

Decided July 3, 2001

Full case name: Specht v. Netscape Communications Corporation
Citations:
Prior history:
Holding
The court ruled that the license agreement for the Smart Download software was not binding on the plaintiffs and thus denied to compel arbitration for plaintiff's breach of the license agreement.
Court membership
U.S. District Judge Alvin K. Hellerstein
Case opinions
Laws applied

Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (S.D.N.Y.2001), was a U.S. District Court for the Southern District of New York decision involving whether software license agreements are binding. It held that license agreements are akin to contractual agreements, thus to be binding there must be mutual consent.

Contents

Case

The plaintiffs in the case filed a suit against Netscape Communications Corporation claiming that the Smart Download software monitored their activities over the Internet. They claim that the defendant's actions to monitor their Internet usage violated the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act. Netscape moved to stay the proceedings and to compel arbitration arguing that the disputes reflected in the Complaint are subject to binding arbitration clause in Smart Download Software End User Agreement.

Facts

The defendant in this case, Netscape Communications, offers software which allows users to access the Internet. The company has a software application called "Smart Download" which helps users download files from the Internet. It has the capability to pause downloads or to resume downloading if the Internet connection is broken.

Users who want to download Smart Download can go to Netscape's website to download the application. On the website, there is a download button, which, when clicked, downloads the "Smart Download" software. The reference to a License Agreement can be found only if a user scrolls down to the bottom of the page where the following text is displayed:

Please review and agree to the terms of the Netscape Smart Download software license agreement before downloading and using the software.

If the user then clicks on the link in the text, they will be taken to a web page titled "License & Support Agreements", which contains the following text:

The use of each Netscape software product is governed by a license agreement. You must read and agree to the license agreement terms BEFORE acquiring a product. Please click on the appropriate link below to review the current license agreement for the product of interest to you before acquisition. For products available for download, you must read and agree to the license agreement terms BEFORE you install the software. If you do not agree to the license terms, do not download, install or use the software.

This page also contains a link to the full text of the Smart Download software license. This license agreement indicates that by using or installing the Smart Download software, the user agrees to be bound by the terms of the license agreement:

BY CLICKING THE ACCEPTANCE BUTTON OR INSTALLING OR USING NETSCAPE COMMUNICATOR, NETSCAPE NAVIGATOR, OR NETSCAPE SMART DOWNLOAD SOFTWARE (THE "PRODUCT"), THE INDIVIDUAL OR ENTITY LICENSING THE PRODUCT ("LICENSEE")IS CONSENTING TO BE BOUND BY AND IS BECOMING A PARTY TO THIS AGREEMENT. IF LICENSEE DOES NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, THE BUTTON INDICATING NON-ACCEPTANCE MUST BE SELECTED, AND LICENSEE MUST NOT INSTALL OR USE THE SOFTWARE.

However, a user can download and use the software without taking any action explicitly indicating consent to the License Agreement.

Decision

The court ruled that the license agreement for the Smart Download software was not binding on the plaintiffs and thus denied to compel arbitration for plaintiff's breach of the license agreement.

The court ruled that the software license agreement was not binding because a binding contract means that both parties know of the terms and agree to them. The Smart Download license agreement was not binding because 1) the user did not have to click on an icon or link to indicate assent before downloading and using the software 2) the text near where the user can download the application merely indicated an invitation to view the license agreement not a strong condition that the user must agree to the agreement before using the software 3) the full text of the license agreement was only visible if the user clicked on a text next to the download button.

The United States Court of Appeals for the Second Circuit, in a decision written by Justice Sonia Sotomayor affirmed the District Court's denial of Defendant's motion to compel arbitration and to stay court proceedings.

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