Review of Specht, Et Al. v. Netscape Communications Corp. and America Online Plaintiff and Defendant

Review of Specht, et al. v. Netscape Communications Corp. and America Online Plaintiff and Defendant case.

Review of Specht, et al. v. Netscape Communications Corp. and America Online
Plaintiff and Defendant
The plaintiffs are Christopher Specht, John Gibson, Michael Fagan, Sean Kelly, Sherry Weindorf, and Mark Gruber. The defendants are Netscape Communications Corp. and America Online, Inc. Netscape is a Delaware corporation with its principal offices in California. The defendant, America Online, Inc. ("AOL"), is the defendant Netscape's corporate parent.
Facts
The plaintiffs alleged that while members of the Internet community were using Netscape's "SmartDownload" software, the software transmitted private information about the users' file activities on the Internet to Netscape. If the allegations were true, transmission of such information would have been considered a violation of the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act. The plaintiffs asked for a trial by jury, an injunction against AOL-Netscape, and statutory damages of $100 per day or $10,000 per user, whichever was greater.
In response to the lawsuit, the defendants attempted to force the plaintiffs to arbitrate. The defendants referred to a clause in the "SmartDownload" software license agreement that required users to arbitrate most of the disputes. Specht argued that he never agreed to the terms.
Legal Issues
The primary issue in the case was about "browse-wrap" licensees under contract law. Specifically, the case focused on the issue of enforcing the arbitration clause in a contract. Defendants argued that the users accepted the terms of the contract after users clicked on the download icon. In the case of Specht, who did not download the software, defendants claimed that Specht became a third-party beneficiary of the License Agreement.
Who Won
United States District Judge Alvin K. Hellerstein ruled for the plaintiff. Judge Hellerstein denied the defendants' motions to compel arbitrations. A status conference was scheduled for July 26, 2001.
Reasoning
Judge Hellerstein denied defendants' motions to force arbitration for several reasons. First, Judge Hellerstein stated that due to a design flaw in the software, a user could have downloaded the software without ever reading or agreeing to any of the terms and conditions. Judge Hellerstein compared the act of acquiring such software to the act of picking up a free neighborhood newspaper.
Additionally, in the cases of John Gibson, Sean Kelly, Sherry Weindorf, and Mark Gruber, Judge Hellerstein ruled that the language used by the defendants was more of an invitation to review the conditions. Furthermore, Judge Hellerstein ruled that the defendants failed to use broader language to construct the software agreement.
In the case of Christopher Specht, Judge Hellerstein ruled that Specht was not a direct beneficiary of the "SmartDownload" software. Internet users could have accessed files from Specht's website using other tools other than "SmartDownload" software.
What role did the principles of contract law play in the decision?
Contract Law
I believe that the Specht, et al. v. Netscape Communications Corp. and America Online case is destined for the Supreme Court. The outcome of the case will play a critical role in setting future trends in software license agreements used on web sites. I believe that the principles of contract law played a key decision in the case. The five basic elements of any contract are:
• Offer
• Acceptance
• Consideration
• Capacity of parties to contract
• A legal purpose

Netscape's Point of View
Netscape argued that all five elements of a contract were present in the case of "SmartDownload" software (See Table 1.) The defendant claimed that a valid contract was in place between the users and Netscape. The defendant also stressed that a clause in the "SmartDownload" software license agreement required that disputes were arbitrated. Netscape sought to avoid trial by jury; instead, Netscape preferred arbitration. For Netscape, the arbitration process presented several benefits "… speedy; informal; frequently with no discovery; and not bound by rules of evidence… " (Corley, Reed, Shedd, & Morehead, 1999, p. 80). Doug Isenberg (2001), a writer for news.com points out that another advantage was that "many arbitration proceedings, unlike courtroom battles, are not public."
Plaintiffs' Point of View
The plaintiffs were angry that their privacy rights were violated. In order to proceed with a class action hearing in public view, the plaintiffs requested a trial by jury. With the purpose of avoiding the arbitration hurdle required by the software license, the plaintiffs brought up an interesting point. "SmartDownload" software had a design flaw that permitted users to download the software without agreeing to the terms. Therefore, the plaintiffs maintained that there was no acceptance of the contract. Additionally, in Specht's case, the plaintiffs claimed that there was no consideration.
Reasoning
The Judge ruled for the plaintiff. I agree with the court's opinion. I believe that Netscape bungled the "SmartDownload" software matter on several levels. Initially, the development team did not do a diligent job coding the installer. Hence, the software did not function as it was intended. In addition, the Quality Assurance Team did not spend an adequate amount of effort while testing the product. Thus, the software was released with some shortcomings. Lastly, the legal team did not execute competently while preparing the legal language. As a result, Netscape was forced into a litigation process. I do not believe that Netscape teams did a good job protecting their company. However, I believe that it would be in the public's interest to have this case out in the open.

Is a Web Site Protected?
Many web sites utilize the popular Internet practice that a customer's use of the Web site constitutes acceptance of the contract, pursuant to their "Terms of Service" or "Conditions of Use." Some interesting implications will arise for the web sites, as courts rule over more cases that address these issues. Currently, one of two schemes is being used by web sites to display the terms under which the user may use the web site. The first, "click-wrap," prompts users to click on the "I agree" icon or check box. If the user does not agree, he or she will not be able to access the software or information on the web site. The courts have considered click-wrap contracts valid and enforceable.
With a browse-wrap license, a link to another page that states the terms of the license is used. With a browse-wrap license, the user is not required to click on the link. Until now, the courts have not declared this kind of a license to be invalid or unenforceable. At the same time, there have not been any reported cases that the courts have ruled on enforceability of a browse wrap (Register.com v. Verio, Inc., 126 F. Supp. 2d 238 (S.D.N.Y. 2000)).
Reasoning
By implementing some straightforward programming code, I believe that it is possible to enable most web sites to fit the click-wrap schema. However, adopting such a policy would make the use of many web sites inconvenient for their users. I hope that the courts will rule that a browse-wrap agreement should be sufficient to protect the information and the web site. However, in instances whereby the web site operators prefer to be extra cautious, the click-wrap license would be a significantly safer decision.

Table 1 - Five Points of a Contract from Netscape's Point of View
Element / Action
Offer / Users can use "SmartDownload" software
Acceptance / Clicking on the download icon
Consideration / Accepting terms of the license agreement
Capacity of parties to contract / Not an issue
A legal purpose / Not an issue




References
Bowman, L. (2000, July 7). AOL/Netscape hit with privacy lawsuit. ZDNet News.
Retrieved August 5, 2001 from the World Wide Web:
http://www.zdnet.com/zdnn/stories/news/0,4586,2600180,00.html
Corley R., & Reed, O.L., & Shedd, P. J., & Morehead, J. W. (1999).
The legal and regulatory environment of business(11th ed.)
New York McGraw-Hill
Isenberg, D. (2001, July 16). The legal weakness of Web "terms and conditions."
News.com. Retrieved August 5, 2001 from the World Wide Web:
http://news.cnet.com/news/0-1276-210-6562421-1.html
McWilliams, B. (2000, July 7). Lawsuit Accuses Netscape of Eavesdropping.
InternetNews. Retrieved August 5, 2001 from the World Wide Web:
http://www.internetnews.com/bus-news/article/0,,3_410521,00.html
Original complaint in Specht v. Netscape and AOL. U.S. District Court, S.D.N.Y.
(2000, July 6). Tech Law Journal. Retrieved August 5, 2001 from the
World Wide Web:
http://www.techlawjournal.com/courts/specht/20000706.htm
United States District Court Southern District of New York. (July 3, 2001).
Memorandum and order denying motion to compel arbitration and stay proceedings. Specht, Gibson, Fagan, Kelly, Weindorf, & Gruber v. Netscape Communications Corp. & America Online, Inc.
Retrieved August 5, 2001 from the World Wide Web http://news.findlaw.com/cnn/docs/specht/specht70301ord.pdf

Alex Best