Specht v. Netscape Communications Corp.

Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002), is a case in the United States Court of Appeals for the Second Circuit regarding the enforceability of browse-wrap software licenses. The court held that merely clicking on a download button does not show assent to license terms if those terms were not conspicuous and if it was not explicit to the consumer that clicking meant agreeing to the license. 
Case.
The plaintiffs brought suit against Netscape Communications Corporation, alleging the defendant's SmartDownload plug-in invaded the plaintiffs' privacy in violation of the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act. Netscape moved to compel arbitration and to stay court proceedings, arguing that the plaintiffs agreed to arbitration in the End User License Agreement. This means that any disputes, such as an invasion of privacy, would be settled out of court by an arbitrator. The plaintiffs allegedly accepted this EULA when they downloaded the plug-in.
The U.S. District Court for the Southern District of New York denied Netscape's motion. The United States Court of Appeals for the Second Circuit heard the appeal, and affirmed the district court's decision, finding that "plaintiffs neither received reasonable notice of the existence of the license terms nor manifested unambiguous assent to those terms before acting on the web page’s invitation to download the plug-in program".
Decision.
The crux of the issue is whether or not the plaintiff's agreed to be bound by the defendant's licensing terms when they downloaded the free plug-in, even though the plaintiffs could not have learned of the existence of the terms before downloading. The court found 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".
Claims related to SmartDownload are not covered by the license agreement for Netscape Communicator, despite the fact that SmartDownload is meant to enhance the functioning of Communicator. This means that when the plaintiffs clicked through Communicator's license agreement, they were not agreeing to the SmartDownload agreement.
Specht was not bound by the SmartDownload agreement as a non-contracting beneficiary because he had no preexisting relationship with the parties, was not an agent of any party, and received no direct benefit from users downloading files from his website.
Subsequent history.
The parties settled the case in a fortuitous manner for Netscape, which was required to stop collecting data and to delete existing data. However, the settlement explicitly denies any violation by Netscape. Because of this, the plaintiffs were unable to collect damages under the Electronic Communications Privacy Act.