SW Legal studies in Business

Arbitration Clause in Free Software Not Enforceable
Description Appeals court held that the mandatory arbitration clause contained in the license agreement that software users would click when downloading free software, which allowed the software provider to download information from the users' computers, was not enforceable because it is unlikely that many consumers read the agreement.
Topic Cyberlaw
Key Words Software License; Privacy; Arbitration
C A S E   S U M M A R Y
Facts Plaintiffs filed a class action claiming that Netscape and AOL's "plug-in" software, which facilitated Internet use and was available free for downloading, invaded privacy by secretly transmitting personal information to Netscape and AOL when used to browse the Internet. Netscape and AOL moved to force arbitration of the matter because the software license, which one had to accept to download the programs, contained an arbitration agreement. The district court denied the motion to compel arbitration. Netscape and AOL appealed.
Decision

Affirmed. The defendants' claim that the users benefited from the information that was transmitted from their computers "is simply too tenuous and speculative to justify" their position. "We agree with the district court that a reasonably prudent Internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants' invitation to download the free software, and that defendants therefore did not provide reasonable notice of the license terms. In consequence, plaintiffs' bare act of downloading the software did not unambiguously manifest assent to the arbitration provision contained in the license terms."

Citation Specht v. Netscape Communications Corp., --- F.3d --- (2002 WL 31166784, 2nd Cir., 2002)

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