Specht v. Netscape

Mr. Specht & others used Netscape Communicator, a free Internet browser. He also downloaded SmartDownload, a separate plug-in to enhance Communicator's browsing functions.

Defendant (Netscape) was a provider of computer software programs, and offered a free program that facilitates mutual exclusion algorithms used in concurrent programming to avoid simultaneous use of the processor called SmartDownload. The plaintiffs (Specht) downloaded the program, and then claimed that the use of the software transmits private information which violates the Electronic Communications Privacy Act (ECPA) and the Computer Fraud and Abuse Act (“CFAA”).

Visitors were not required to indicate their assent to the license agreement, but on the download page there is a link to the agreement with the words “Please review and agree to the terms…before downloading and using the software.” The actual agreement states, “The use of each software product is governed by a license agreement…you must read terms before acquiring product. If you do not agree, do not download install or use product.” The license agreement contains a term requiring all disputes be submitted to arbitration in Santa Clara County, California.

Specht brought a suit against Netscape in federal district court in NY. He accused Netscape of privacy violations & fraud.

Defendant moved to compel arbitration and stay the proceeding due to a binding arbitration clause in the End User License Agreement.

Netscape lost at the S.D.N.Y. court.

Whether an offer of a license agreement made independently of freely offered software and not expressly accepted by the user binds the user to an arbitration clause in the agreement.

Does an offeree have inquiry notice of contractual provisions that aren't made obvious to a reasonably prudent person?

Defendant’s motion to compel arbitration denied.

An offeree doesn't have inquiry notice of contractual provisions that aren't made obvious to a reasonably prudent person.

Sonia Sotomayor wrote for the court.

Whether or not a contract was formed is state law, and there must be mutually manifested assent in the formation of a contract. Therefore an offeree is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.

The user Specht would have had to scroll down to see the arbitration provision for Netscape's browser plug-in SmartDownload. According to Sotomayor, a reasonably prudent person wouldn't have scrolled down.

Concurrence: A reasonably prudent offeree in these circumstances would not have known of the existence of license terms, and therefore cannot be bound to such license.