user-related agreements: recent cases & trends june 17, 2009
TRANSCRIPT
User-Related Agreements: User-Related Agreements: Recent Cases & Trends Recent Cases & Trends
June 17, 2009
AgendaAgenda
Creating enforceable online agreements Online agreements: lessons learned Best practices for drafting enforceable arbitration
agreements
Will Rava Alvaro Alvarez Miriam D'JaenJason HowellKirk Soderquist
Creating Enforceable Creating Enforceable Online AgreementsOnline Agreements
Kirk Soderquist
Jason Howell
The General RuleThe General Rule(Contracts 101)(Contracts 101)
Online agreements will typically be enforceable if the parties: Had reasonable notice of the terms, and Demonstrated an objective intent to enter into the
agreement
Methods of Obtaining AssentMethods of Obtaining AssentClick to Accept with Link to Terms of ServiceSecond Life
There
Second Life
There
Methods of Obtaining AssentMethods of Obtaining Assent
Pop-up window Must scroll through Must click agree
Legal LandscapeLegal Landscape
Federal Law Electronic contracts can be as valid as paper
contracts (see federal E-SIGN Act) Under E-SIGN, an electronic contract must be in a
form that can be stored and accurately reproduced by all parties
State Law State laws govern the formation and enforceability of
online contacts
CoStar v. FieldCoStar v. Field
CoStar ran an online database subscription service Subscribers had to scroll through and accept pop-up
terms of use the first time they logged on and periodically thereafter
Defendant non-subscribers obtained a subscriber's log on information and used the service for years
CoStar sued on breach of contract, fraud, copyright infringement and other grounds
Defendants filed a motion to dismiss for lack of personal jurisdiction
Does the forum clause in CoStar's online terms of use apply to defendants?
CoStar v. FieldCoStar v. Field
Court upheld forum selection clause and found defendants had notice and assented Pop-up window appeared on first log-in and users had
to scroll through and accept terms Log-in screen always noted that users must agree to
linked terms of use Users were periodically required to re-agree to terms
through a pop-up window
Other TheoriesOther Theories Supporting Enforceability Supporting Enforceability
Plaintiffs argued they did not have sufficient notice of the online terms and were therefore not bound by the forum selection clause in AOL's Member Agreement
Sub-licensee theory - Motise v. America Online, Inc. Plaintiff used stepfather's account Court found:
Forum selection clause upheld When a licensed user allows a third party to use its
account, the third party becomes a sub-licensee and is equally bound by the terms
Other TheoriesOther Theories Supporting Enforceability Supporting Enforceability
Agency theory - Abramson v. America Online, Inc. Plaintiff used account set up by son Court found:
Forum selection clause upheld Son acted as agent when plaintiff gave son
actual/apparent authority and ratified contract
In the Matter of Sears Holdings In the Matter of Sears Holdings Management Corp.Management Corp.
SHMC provided an optional, downloadable program that tracked user internet and computer use, and paid consumers $10 to participate
FTC alleged that the software could track secure online sessions (e.g., shopping and banking transactions), along with some other non-internet activity
Tracking was disclosed in the license terms
In the Matter of Sears Holdings In the Matter of Sears Holdings Management Corp.Management Corp.
Scrolling through terms was possible, but not required
Users were required to click a box to agree to the terms
Was SHMC's notice and asset procedure sufficient?
In the Matter of Sears Holdings In the Matter of Sears Holdings Management Corp.Management Corp.
FTC found SHMC's tracking disclosure insufficient and alleged deceptive practices
Under the proposed settlement: If SHMC provides tracking software in the future, it
must clearly and conspicuously disclose the Data monitored, recorded, or transmitted; Whether the data will be used by a third party
The disclosure must be made prior to installation and separate from any user license agreement, privacy policy or terms of use
Douglas v. Talk America, Inc.Douglas v. Talk America, Inc.
Changes to an online contract are unenforceable without notice to the user
Subsequent acceptance by the end-user of the new terms
Best PracticesBest Practices(Notice and Assent)(Notice and Assent)
Notice Display online terms and agreements to consumers in
a clear, conspicuous manner (e.g., via a large pop-up screen in easy-to-read font) "before" they play, participate, submit content, make a purchase, etc.
Require users to scroll through terms before they are permitted to proceed
Clearly and conspicuously state that users must agree to terms at log-in
Make terms and agreements printer-friendly
Best PracticesBest Practices(Notice and Assent)(Notice and Assent)
Assent Require users to click to agree initially and
periodically thereafter If a default I AGREE or I DISAGREE button or box is
clicked, ensure "I DISAGREE" is the default Give users sufficient time to carefully review terms
and sign (e.g., do not time them out or temporarily flash terms
Online Agreements:Online Agreements:Lessons LearnedLessons Learned
Will Rava
MDY Industries, LLC v. Blizzard Entertainment, Inc.MDY Industries, LLC v. Blizzard Entertainment, Inc., , 2008 WL 2757357 (D. Ariz. July 14, 2008)2008 WL 2757357 (D. Ariz. July 14, 2008)
MDY Industries, LLC v. MDY Industries, LLC v. Blizzard Entertainment, Inc.Blizzard Entertainment, Inc.
"Moreover, any person reading the TOU clearly would understand that a licensee is not authorized to play WOW with Glider" (at *7)
"One wonders what more could be done to make clear that the purchaser is a licensee, not an owner, of the software" (at *9)
Best Practices for Drafting Best Practices for Drafting Enforceable Online AgreementsEnforceable Online Agreements
Alvaro Alvarez
Miriam D'Jaen
To Arbitrate, or not to ArbitrateTo Arbitrate, or not to Arbitrate
Pros: Speed and flexibility Certainty Confidentiality Less formal
Cons: Recent cases and invalidation Increasing formalization and
discovery Fees add up Split the baby Less formal
Best Practices for Drafting Best Practices for Drafting Enforceable Arbitration AgreementsEnforceable Arbitration Agreements Procedural unconscionability
Provide conspicuous notice and opportunities for affirmative consent
Use clear headings, capitalized letters, and line breaks
Require consumers to initial arbitration clause or click an "I accept" button
Best Practices for Drafting Best Practices for Drafting Enforceable Arbitration AgreementsEnforceable Arbitration Agreements Substantive unconscionability
Mutuality of remedies and obligations Costs and fee-sharing Class action waiver Choice of law and venue Confidentiality
Bragg v. Linden Research, Inc.Bragg v. Linden Research, Inc.
Procedural Grounds Take-it-or-leave-it No market alternatives "GENERAL PROVISIONS" = not acceptable Obscure costs and rules
Substantive Grounds One-sided remedies No real "cost sharing" "Sole discretion" on a number of items Forced to arbitrate in California Mandatory confidentiality
Questions?Questions?
Kirk Soderquist [email protected]
Jason Howell [email protected]
Will Rava [email protected]
Alvaro Alvarez [email protected]
Miriam D'Jaen [email protected]