Out-Law / Your Daily Need-To-Know

Netscape license agreement unenforceable

Out-Law News | 10 Jul 2001 | 12:00 am | 1 min. read

A New York Federal court has ruled that a reference to a license agreement purporting to bind users downloading free software did not create an enforceable contract. The statement inviting users to review the terms of a license agreement appeared on the Netscape web page when users went to download its SmartDownload software.

Judge Alvin K. Hellerstein ruled that because there was simply an opportunity to read the terms and conditions and the users attention was not clearly drawn towards reading them, they did not form the basis for a binding contract. Moreover, the user was not required to give express consent to the agreement and so could not be shown to have agreed to its terms.

This particular case was distinguished from click-wrap license agreements, which appear on many web sites. They are usually enforceable if they are clearly displayed for the user to read and require to indicate consent by clicking on “yes” before proceeding to download any products. The Netscape license agreement was referred to as a browse-wrap agreement because it was conceivable that a user may download the software without even being aware of the license’s existence.

The validity of the license agreement was questioned following challenges to the use of a tracking device, which was incorporated into the SmartDownload software to monitor users on-line activities. Such devices may pose a severe threat to an individual’s on-line privacy, particularly where the user is not informed of its use.

Netscape removed the tracking device from its SmartDownload software, but it argued that the license agreement obliged any users who had complained about it to participate in an arbitration process rather than filing a suit in the courts. The court finding dismisses this argument and now permits a class action to be brought against Netscape.