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Drafting Clickwrap and Browsewrap Agreements

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Drafting Clickwrap and Browsewrap Agreements Presenting a live 90-minute webinar with interactive Q&A Drafting Clickwrap and Browsewrap Agreements: Advanced Strategies for Enforceable Online Contracts Navigating Issues of Authentication, Mutual Assent, Notice, Indemnification, Unilateral Modification, and More TUESDAY, AUGUST 12, 2014 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Michael T. Stanczyk, Attorney, Mackenzie Hughes, Syracuse, N.Y. Andrew Goldstein, Partner, Freeborn & Peters, Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. 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Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: • Click on the ^ symbol next to “Conference Materials” in the middle of the left- hand column on your screen. • Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program. • Double click on the PDF and a separate page will open. • Print the slides by clicking on the printer icon. M A C K E N Z I E H U G H E S l l p Drafting Clickwrap and Browsewrap Agreements: Advanced Strategies for Enforceable Online Contracts Michael T. Stanczyk, Esq. Mackenzie Hughes LLP [email protected] – 315.233.8262 M A C K E N Z I E H U G H E S l l p A Bit of Background & Terminology Before the Case Law M A C K E N Z I E H U G H E S l l p Why Use the Term “Wrap”? • If you bought a software program in the 80’s or 90’s it came wrapped in a thin layer of cellophane. It contained the floppy disks or CDs and a copy of the software license. These licenses were deemed “shrinkwrap” licenses. • After the boom of the World Wide Web, software was delivered online and the licenses used retained the term “wrap”, becoming “browsewrap” or “clickwrap” licenses. 7 M A C K E N Z I E H U G H E S l l p Clickwrap and Browsewrap Licenses Generally M A C K E N Z I E H U G H E S l l p What are Clickwrap and Browsewrap Licenses? Clickwrap Licenses – A software license (for actual software, website, application, etc.) that requires the user to affirmatively click on a button or checkbox with a term such as “I Agree”, prior to use. – Sometimes called a “click-through” or “click-to-accept” license. – Users usually have opportunity to scroll through and review the terms prior to assent. – If the user does not agree with the terms he or she cannot proceed, their only choice then is to not click on the “I Agree” button and not use the software. – Example: – By clicking on the “I Agree” button you are agreeing to be bound by the following terms and conditions. 9 M A C K E N Z I E H U G H E S l l p What are Clickwrap and Browsewrap Licenses? (cont.) Browsewrap Licenses – Browsewrap agreements are software licenses that do not require affirmative consent other than the user’s initial or continued use of the software, website, or application. – The use combined with the knowledge of the terms and conditions of the browsewrap license are what constitutes the user’s assent. – Generally, courts will enforce browsewrap licenses only if the user had adequate and reasonable notice of the license terms. – Example: – By using this website, you are agreeing to be bound by the following terms and conditions. If you do not agree to these terms and conditions, you may discontinue use of the website at any time. 10 M A C K E N Z I E H U G H E S l l p Clickwrap and Browsewrap Licenses Generally • Clients may want these licenses small, non-invasive and out of the way so they won’t scare off potential users. You’ll want the opposite, and may need to educate your client as to why its important. • Drafting, maintaining and updating these licenses can create a perfect storm of legal, design and programming work. • To draft and maintain these licenses properly you’ll have to work closely with your client and their technical team to initially set up the license and for any updates (version 1.0, 2.0, etc.). • There is at least one company out there that can assist with implementation of these licenses (but not the legal drafting). » See PactSafe at www.pactsafe.com 11 M A C K E N Z I E H U G H E S l l p Clickwrap and Browsewrap Licenses Generally (cont.) • Like any software licenses, clickwrap and browsewrap licenses are formal contracts that contain property rights. Being contracts, traditional rules of contract law still apply. • Most cases hinge on whether there was (1) either actual or constructive notice and (2) assent by the user. Whether the user of the software actually knew, impliedly knew, or should have reasonably known, about the terms of the license before he or she clicked to agree or used the software. 12 M A C K E N Z I E H U G H E S l l p Shrinkwrap, Browsewrap & Clickwrap Case Law Overview M A C K E N Z I E H U G H E S l l p I. Shrinkwrap License Cases ProCD, Inc. v. Zeidenburg, 86 F.3d 1447 (7th Cir. 1996) – User bought a personal copy of the software, which was priced lower than the commercial version, and resold it to commercial users, in violation of the terms of the enclosed shrinkwrap license. • The license restricted sales of personal copies and gave the user the right to return the software if unsatisfied. – Court upheld enforceability of the license based on UCC Section 2-206, which provides that a purchaser of goods has the right to review a product, including the terms of the license for the product, and if they are not happy with it they can return it. • If they choose to use it and not return it they are bound by the purchase and terms of the license. 14 M A C K E N Z I E H U G H E S l l p I. Shrinkwrap License Cases (Cont.) Other shrinkwrap cases with similar facts/holding as ProCD: Hill v. Gateway 2000, Inc. 105 F.3d 1147 (7th Cir. 1997). Mortenson Co. v. Timberline Software, 93 Wn. App. 819, 828 (Wash. Ct. App. 1999). Brower v. Gateway 2000, Inc. 676 N.Y.S.2d 569 (1st Dept. 1998). Conflicting authority: Step-Saver Data Sys. v. Wyse Tech., 939 F.2d 91, 96 (3d Cir. 1991) (used historic mailbox rule to find no assent to license, finding a contract for sale of software existed through purchase orders, phone calls, and invoices prior to license terms being proffered,). Vault Corp. v. Quaid Software, Ltd., 847 F.2d 255, 256 (5th Cir. La. 1988) (finding that federal copyright law preempted terms of license). Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332 (D. Kan. 2000) (opposite holding of Brower case above). 15 M A C K E N Z I E H U G H E S l l p II. Clickwrap License Cases Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996). – Patterson, a resident of Texas, sold his own software to third parties over Compuserve’s system, pursuant to the terms of a clickwrap agreement. • Compuserve began to sell its own software that was similar to Patterson’s and Patterson demanded Compuserve pay him $100,000 as a settlement. • Compuserve filed a declaratory judgment action in Federal court in Ohio. • Patterson moved to dismiss the action due to alleged lack of personal jurisdiction, claiming he never visited, did business in, or consented to suit in Ohio.
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