Browsewrap License Cases: Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2012)

In Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2012):

  • B&N was unsuccessful in enforcing an arbitration provision in its online Terms of Use.
    • Court found that there was no evidence of Nguyen having actual notice of the Terms of Use or acknowledgement of same.
    • Found that under circumstances a reasonably prudent user would not be on inquiry notice of the Terms of Use
    • Court said Terms of Use where hard to find and barely noticeable.
      • Said “inquiry notice” turns on “design and content of the website and agreement’s webpage.”
  • This case was followed by e.g., Long v. Provide Commerce, Inc. 245 Cal. App. 4th 855 (Cal. Ct. App. 2016) (refused to compel arbitration, stated that to put users on notice you need conspicuous hyperlink plus notice that it contains binding terms. A conspicuous notice alone is not enough).

Browsewrap License Cases: Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Dist. Ct. 2012).

In Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Dist. Ct. 2012):

–The court held that a terms of sale provision found on the “About” page of the website was not enough to enforce the forum selection clause.

  • Plaintiff ordered products ($6,000 worth of tube socks) over the Internet, and sued claiming there were defects.
  • Seller moved to dismiss claiming the forum selection clause required the dispute be heard in a Florida state court, and Plaintiff claimed he never saw clause.

–Court found the clause was not reasonably communicated where it was “buried” and “submerged” on the website, and could only be found by clicking on an “inconspicuous” link to the company’s About Us page.  Seller’s attempt to have the terms incorporated by reference in a printed contract and letter agreement were not enough for the court.

  • Court relied on Specht and Carnival Cruise Lines.

–Similar holding in Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927 (E.D. Va. 2010).

Browsewrap License Cases: Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. CA., March 7, 2003)

In Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. CA., March 7, 2003):

–Tickets.com used deep links to Ticketmaster’s interior pages, in violation of Ticketmaster’s terms of use which were on its homepage.

–Relying on Register.com and Pollstar, the court held that a contract can be formed by use of a website, provided the user, at the time of use, has knowledge of the site’s terms and conditions that provide that such use constitutes an agreement to be bound.

  • Court relied on “cruise ship” case law precedent. It analogized interior web pages to the back of a cruise ship ticket’s venue clause, where user has actual or presumptive knowledge.

–Court found that Tickets.com used Ticketmaster’s site with full knowledge of the terms, and upheld such terms in the breach of contract action.

Introduction to Blockchain and Smart Contracts

Technology is permeating all aspects of society.  Legal constructs are the latest to be infiltrated. We will discuss some of them in upcoming posts, including blockchain, smart contracts and related concepts.  First we need the building blocks to understand how the blockchain works.

Bblockchain is a form of a decentralized ledger technology.   It is decentralized, or distributed, because it operates on a peer to peer basis.  There is no centralized database of the chain or any blocks. Instead, for each blockchain there are various computers or servers which operate as “nodes” for the applicable chain.  Each node contains the entire chain, and nodes review any proposed block and it must be verified prior to it being added to the chain. Nodes can be anonymous. Read more

Browsewrap License Cases: Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. CA 2000).

In Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. CA 2000):

–Pollstar kept track of concert information on its website, which any user could download by accepting the terms of Pollstar’s license.

»License prohibited commercial use of information.

»License was not on Pollstar’s homepage, but on different page of its site.

»Visitor is alerted to existence of Pollstar’s license only by reason of a small grey print on grey background (with a link to terms, but other links on homepage were blue)

–Gigmania downloaded information from Pollstar’s site and used it on its own site for commercial purposes. Pollstar sued to enforce terms.

–The court refused to enforce the terms of the license agreement because it found that the link to the license was hard to read based on the way it was presented.

  • Notably, the court did not rule that the license agreement was unenforceable, only that the website did not give users adequate notice of it.

Browsewrap License Cases: Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004).

Below is a brief overview of Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004):

–Register.com sued Verio for violating the terms of use of its WHOIS database, which Verio used to get information on who registered domain names with Register.com to offer web services to the registrants.

  • As part of receiving the information from WHOIS, Register.com’s terms stated that the domain name registrant information, which consisted of email, phone number and mailing address, could not be used for marketing purposes. The terms of use were, however, proffered after the domain name registrant information was presented to the user of the WHOIS database.

–VERIO claimed there was no contract as it never agreed to the terms, and in any event any user of the WHOIS site could receive the information before seeing the terms.

  • The court said that this argument may only have worked if Verio used the WHOIS database once, but Verio did it every day with full knowledge of the terms.

–The Second Circuit held that Verio’s continued use of Register.com’s WHOIS database constituted consent to Verio’s terms of use, expressly  rejecting Verio’s argument that they were not enforceable because the user had not clicked an “I agree” icon.

 

Browsewrap License Cases: In re Zappos.com, Inc. Customer Data Security Breach Litigation, 893 F.Supp. 2d 1058 (Dist. Ct. Nevada 2012).

Here is a brief summary of the case In re Zappos.com, Inc. Customer Data Security Breach Litigation, 893 F.Supp. 2d 1058 (Dist. Ct. Nevada 2012):

–Users sued in multiple forums for damages due to a security breach.

  • Zappos filed a motion to compel arbitration in Las Vegas pursuant to its terms of use agreement, which was a typical browsewrap agreement which also gave Zappos the right to amend any of the terms as it saw fit.

–Zappos had a hyperlink on each page of its website to the terms but it was hard to see, being the same size and color as other insignificant links, and located ¾ of the way down the page.  The website never prompted or directed a user to the terms even when purchasing a product or opening an account.

–Court concluded that the plaintiffs may have never seen the terms, so in no way could be deemed to have actually or constructively agreed to them. No assent, no contract.

  • Sidenote: The Court also held the arbitration provision was an illusory contract (and therefore not enforceable) because Zappos was able to amend the Terms as it saw fit at any time. See Grosvenor v. Qwest Corp., 854 F. Supp. 2d 1021 (D. Colo. 2012) for this same holding.

M&A Deals: What is a “Cap” and a “Basket”?

This is a follow up post on our series of merger and acquisition issues.  If you are selling your company you’ll be faced with the prospect of indemnifying the purchaser for any damages they suffer in connection with the sale.  Now such indemnification may arise for a number of reasons, such as an unknown debt or lien that was on an asset you sold, a claim that an employee or third party made against the company or an asset which you did not inform the purchaser of, or a number of other issues.  These are usually breaches of the representations and warranties that sellers have to make to the buyers in the asset purchase agreement.   For example, the seller will represent (i.e. state as true at the time of signing or closing or both) that there are no debts owed by the company or liens on the company assets.  If the deal closes and a lender or lien of the company did exist, its a breach of that representation, and the seller is liable to the buyer for any resulting damages. Read more