If you spend any time reading the legal press (or even the mainstream press) you might come away thinking that the primary function of the Internet today is to breed intellectual property litigation. It is certainly true that websites that rely on user-generated content create unique intellectual property issues, but the vast majority of these disputes never make it to the courtroom: They are settled by a Digital Millennium Copyright Act (DMCA) takedown notice or other formal or informal process between the rights-holder and the service provider.
The opinion is interesting because of its exhaustive treatment of the Facebook sign-up process and its discussion of exactly what is required to create a binding contract for a web-based service. It discusses in detail the line between enforceable and unenforceable “click-through” agreements, and as such offers a case study in the potential pitfalls inherent in creating those agreements and the supporting web structure around them. Although Facebook’s sign up procedure might seem bulletproof (even to a sophisticated practitioner in the area), Facebook came close to losing this one, and the detailed opinion is a rare look at a judge’s thought process in reaching what looks like the right result in a close case.
An Evolving Landscape
The terms “clickwrap agreement” and “browsewrap agreement” arise by analogy with so-called “shrinkwrap” agreements. A shrinkwrap agreement is one that arises when a user removes the shrinkwrap from a box of software and installs it on his or her computer, typically clicking through (or at least being presented with) a message that states that the software is sold or licensed on terms set out in an agreement to be found in the box. If those terms are not acceptable, the user is directed to remove the software and, in theory, return it. Of course few people read the insert in the box and it is unclear whether such returns would even be possible, but courts routinely uphold shrinkwrap agreements.2 Shrinkwrap agreements, though generally enforceable, do present an unusual set of circumstances: Prospective buyers must consent to the terms of a purchase or license agreement before they actually know what those terms are. They must buy the package, in essence, to find out what they are actually buying. Enforceability has therefore sometimes been found to turn on a “way out”—the ability to void the purchase once the box is open and the terms are available.
Of course, in the age of web-based services the concept of a shrink-wrapped box of software is positively quaint. Agreements on the web are commonly acknowledged by clicking a button marked something like “I Agree.” In the usual clickwrap case that button appears at the end of an agreement and the user must either scroll through the agreement to reach the button or at least click a checkbox to make it clear that he or she has read the terms. These kinds of extra indicia of assent are important, particularly in New York, because the U.S. Court of Appeals for the Second Circuit has been somewhat suspicious of clickwrap contracts.
In Specht v. Netscape Communications Corp.,3 the Second Circuit affirmed the lower court’s decision not to enforce an arbitration clause in a clickwrap license agreement for a browser plugin. Although the download page for the plugin referred to the license agreement, users would have had to scroll and click through pages of text and links to find the agreement and the relevant language. The court essentially found that there was no evidence they had done so, or could reasonably have been expected to do so, even though the download page did say (somewhere) that by clicking the “Download” button they assented to the terms of the license. The court wrote:
Mutual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract…. [A] consumer’s clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assent to those terms.4
Cases decided after Specht (including one by the Second Circuit) have enforced website terms of service—even without an explicit click-through—where there is evidence that the user actually saw the terms and understood that use of the service implied acceptance of them.5 But the case law on this remains uneven in New York and counsels an approach that makes it absolutely impossible for a user to argue that he or she did not see the terms at issue. If a website employs a click-through process that ensures that users see the agreement they are accepting, New York courts are likely to enforce that agreement.
The Rise of the “Browsewrap”
Browsewrap agreements represent the far end of the continuum in terms of indicia of user assent. In a shrinkwrap agreement, the paper contract is included in the box and the user must buy the product, install it, read an electronic warning and use the product to be deemed to have accepted the contract. In the typical clickwrap case, the user has been presented with the terms in a scrolling window and has clicked a button indicating agreement. In the browsewrap case, there is no indication at all that users have seen the terms, or even that they know they exist.
The phrase “Terms of Service” is underlined, an indication that the phrase is a hyperlink, a phrase that is “usually highlighted or underlined” and “sends users who click on it directly to a new location—usually an internet address or a program of some sort.”7
The court thus held that Fteja must have seen this second page and that by clicking the “Sign Up” button he indicated that he had read and agreed to the terms.
The court, however, did not consider this dispositive. It found that Facebook did not present “a pure-form clickwrap agreement” because the terms did not appear on the same page as the sign-up button but rather required the user to click a link to read them. The court therefore spent substantial time reviewing the law of browsewrap agreements and discussing the possibility that the Facebook signup procedure presented some kind of hybrid between the clickwrap and browsewrap cases.
Lessons From Facebook
Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex intellectual property litigation.
1. No. 11 Civ. 918 (RJH), 2012 WL 183896 (S.D.N.Y. Jan. 24, 2012).
2. The seminal shrinkwrap agreement case is probably Judge Frank H. Easterbrook’s opinion in ProCD Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). New York courts have also upheld these kinds of agreements. See, e.g., Brower v. Gateway 2000 Inc., 246 A.D.2d 246, 251, 676 N.Y.S.2d 569, 572 (1st Dept. 1998).
3. 306 F.3d 17, 29-30 (2d Cir. 2002).
4. Id. at 29-30.
5. See, e.g., Register.com Inc. v. Verio Inc., 356 F.3d 393 (2d Cir. 2004).
6. 668 F. Supp. 2d 362, 367 (E.D.N.Y. 2009) aff’d, 380 F. App’x 22 (2d Cir. 2010).
7. Fteja, 2012 WL 183896, at * 5 (quoting United States v. Hair, 178 F. App’x 879, 882 n.3 (11th Cir. 2006)).