The opinion of the court was delivered by: Hellerstein, U.S.D.J.:
MEMORANDUM AND ORDER DENYING MOTION TO COMPEL ARBITRATION
AND STAY PROCEEDINGS
Promises become binding when there is a meeting of the minds and
consideration is exchanged. So it was at King's Bench in common law
England; so it was under the common law in the American colonies; so it
was through more than two centuries of jurisprudence in this country; and
so it is today. Assent may be registered by a signature, a handshake, or
a click of a computer mouse transmitted across the invisible ether of the
Internet. Formality is not a requisite; any sign, symbol or action, or
even willful inaction, as long as it is unequivocally referable to the
promise, may create a contract.
The three related cases*fn1 before me all involve this timeless issue
of assent, but in the context of free software offered on the Internet.
If an offeree downloads free software, and the offeror seeks a
contractual understanding limiting its uses and applications, under what
circumstances does the act of downloading create a contract? On the facts
presented here, is there the requisite assent and consideration? My
decision focuses on these issues.
In these putative class actions, Plaintiffs allege that usage of the
software transmits to Defendants private information about the user's
file transfer activity on the Internet, thereby effecting an electronic
surveillance of the user's activity in violation of two federal
statutes, the Electronic Communications Privacy Act, 18 U.S.C. § 2510
et seq., and the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.
Defendants move to compel arbitration and stay the proceedings, arguing
that the disputes reflected in the Complaint, like all others relating to
use of the software, are subject to a binding arbitration clause in the
End User License Agreement ("License Agreement"), the contract allegedly
made by the offeror of the software and the party effecting the
download. Thus, I am asked to decide if an offer of a license agreement,
made independently of freely offered software and not expressly accepted
by a user of that software, nevertheless binds the user to an arbitration
clause contained in the license.
I. Factual and Procedural Background
Defendant Netscape,*fn2 a provider of computer software programs that
enable and facilitate the use of the Internet, offers its "SmartDownload"
software free of charge on its web site to all those who visit the site
and indicate, by clicking their mouse in a designated box, that they wish
to obtain it. SmartDownload is a program that makes it easier for its
users to download files from the Internet without losing their interim
progress when they pause to engage in some other task, or if their
Internet connection is severed. Four of the six named Plaintiffs —
John Gibson, Mark Gruber, Sean Kelly and Sherry Weindorf — selected
and clicked in the box indicating a decision to obtain the software, and
proceeded to download the software on to the hard drives of their
computers. The fifth named Plaintiff, Michael Fagan, allegedly downloaded
from a "shareware"*fn3 web site operated by a third party. The
sixth named Plaintiff, Christopher Specht, never obtained or used
SmartDownload, but merely maintained a web site from which other individuals
could download files.*fn4
Visitors wishing to obtain SmartDownload from Netscape's web site
arrive at a page pertaining to the download of the software. On this
page, there appears a tinted box, or button, labeled "Download." By
clicking on the box, a visitor initiates the download. The sole reference
on this page to the License Agreement appears in text that is visible
only if a visitor scrolls down through the page to the next screen. If a
visitor does so, he or she sees the following invitation to review the
Please review and agree to the terms of the Netscape
SmartDownload software license agreement before
downloading and using the software.
Visitors are not required affirmatively to indicate their assent to the
License Agreement, or even to view the license agreement, before
proceeding with a download of the software. But if a visitor chooses to
click on the underlined text in the invitation, a hypertext link takes
the visitor to a web page entitled "License & Support Agreements." The
first paragraph on this page reads in pertinent part:
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.
Below the paragraph appears a list of license agreements, the first of
which is "License Agreement for Netscape Navigator and Netscape
Communicator Product Family (Netscape Navigator, Netscape Communicator
and Netscape SmartDownload)." If the visitor then clicks on that text, he
or she is brought to another web page, this one containing the full text
of the License Agreement.
The License Agreement, which has been unchanged throughout the period
that Netscape has made SmartDownload available to the public, grants the
user a license to use and reproduce SmartDownload, and otherwise contains
few restrictions on the use of the software. The first paragraph of the
License Agreement describes, in upper case print, the purported manner in
which a user accepts or rejects its terms.
The License Agreement also contains a term requiring that virtually all
disputes be submitted to arbitration in Santa Clara County, California.
Unless otherwise agreed in writing, all disputes
relating to this Agreement (excepting any dispute
relating to intellectual property rights) shall be
subject to final and binding arbitration in Santa
Clara County, California, under the auspices of