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User-Related Agreements: Recent Cases & Trends June 17, 2009.

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Presentation on theme: "User-Related Agreements: Recent Cases & Trends June 17, 2009."— Presentation transcript:

1 User-Related Agreements: Recent Cases & Trends June 17, 2009

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3 Agenda  Creating enforceable online agreements  Online agreements: lessons learned  Best practices for drafting enforceable arbitration agreements Will Rava Alvaro Alvarez Miriam D'Jaen Jason Howell Kirk Soderquist

4 Creating Enforceable Online Agreements Kirk Soderquist Jason Howell

5 The General Rule (Contracts 101)  Online agreements will typically be enforceable if the parties:  Had reasonable notice of the terms, and  Demonstrated an objective intent to enter into the agreement

6 Methods of Obtaining Assent Click to Accept with Link to Terms of Service Second Life There Second Life There

7 Methods of Obtaining Assent  Pop-up window  Must scroll through  Must click agree

8 Legal Landscape  Federal Law  Electronic contracts can be as valid as paper contracts (see federal E-SIGN Act)  Under E-SIGN, an electronic contract must be in a form that can be stored and accurately reproduced by all parties  State Law  State laws govern the formation and enforceability of online contacts

9 CoStar v. Field  CoStar ran an online database subscription service  Subscribers had to scroll through and accept pop-up terms of use the first time they logged on and periodically thereafter  Defendant non-subscribers obtained a subscriber's log on information and used the service for years  CoStar sued on breach of contract, fraud, copyright infringement and other grounds  Defendants filed a motion to dismiss for lack of personal jurisdiction  Does the forum clause in CoStar's online terms of use apply to defendants?

10 CoStar v. Field  Court upheld forum selection clause and found defendants had notice and assented  Pop-up window appeared on first log-in and users had to scroll through and accept terms  Log-in screen always noted that users must agree to linked terms of use  Users were periodically required to re-agree to terms through a pop-up window

11 Other Theories Supporting Enforceability  Plaintiffs argued they did not have sufficient notice of the online terms and were therefore not bound by the forum selection clause in AOL's Member Agreement  Sub-licensee theory - Motise v. America Online, Inc.  Plaintiff used stepfather's account  Court found:  Forum selection clause upheld  When a licensed user allows a third party to use its account, the third party becomes a sub-licensee and is equally bound by the terms

12 Other Theories Supporting Enforceability  Agency theory - Abramson v. America Online, Inc.  Plaintiff used account set up by son  Court found:  Forum selection clause upheld  Son acted as agent when plaintiff gave son actual/apparent authority and ratified contract

13 In the Matter of Sears Holdings Management Corp.  SHMC provided an optional, downloadable program that tracked user internet and computer use, and paid consumers $10 to participate  FTC alleged that the software could track secure online sessions (e.g., shopping and banking transactions), along with some other non-internet activity  Tracking was disclosed in the license terms

14 In the Matter of Sears Holdings Management Corp.  Scrolling through terms was possible, but not required  Users were required to click a box to agree to the terms  Was SHMC's notice and asset procedure sufficient?

15 In the Matter of Sears Holdings Management Corp.  FTC found SHMC's tracking disclosure insufficient and alleged deceptive practices  Under the proposed settlement:  If SHMC provides tracking software in the future, it must clearly and conspicuously disclose the  Data monitored, recorded, or transmitted;  Whether the data will be used by a third party  The disclosure must be made prior to installation and separate from any user license agreement, privacy policy or terms of use

16 Douglas v. Talk America, Inc.  Changes to an online contract are unenforceable without notice to the user  Subsequent acceptance by the end-user of the new terms

17 Best Practices (Notice and Assent)  Notice  Display online terms and agreements to consumers in a clear, conspicuous manner (e.g., via a large pop-up screen in easy-to-read font) "before" they play, participate, submit content, make a purchase, etc.  Require users to scroll through terms before they are permitted to proceed  Clearly and conspicuously state that users must agree to terms at log-in  Make terms and agreements printer-friendly

18 Best Practices (Notice and Assent)  Assent  Require users to click to agree initially and periodically thereafter  If a default I AGREE or I DISAGREE button or box is clicked, ensure "I DISAGREE" is the default  Give users sufficient time to carefully review terms and sign (e.g., do not time them out or temporarily flash terms

19 Online Agreements: Lessons Learned Will Rava

20 MDY Industries, LLC v. Blizzard Entertainment, Inc., 2008 WL (D. Ariz. July 14, 2008)

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26 MDY Industries, LLC v. Blizzard Entertainment, Inc.  "Moreover, any person reading the TOU clearly would understand that a licensee is not authorized to play WOW with Glider" (at *7)  "One wonders what more could be done to make clear that the purchaser is a licensee, not an owner, of the software" (at *9)

27 Best Practices for Drafting Enforceable Online Agreements Alvaro Alvarez Miriam D'Jaen

28 To Arbitrate, or not to Arbitrate  Pros:  Speed and flexibility  Certainty  Confidentiality  Less formal  Cons:  Recent cases and invalidation  Increasing formalization and discovery  Fees add up  Split the baby  Less formal

29 Best Practices for Drafting Enforceable Arbitration Agreements  Procedural unconscionability  Provide conspicuous notice and opportunities for affirmative consent  Use clear headings, capitalized letters, and line breaks  Require consumers to initial arbitration clause or click an "I accept" button

30 Best Practices for Drafting Enforceable Arbitration Agreements  Substantive unconscionability  Mutuality of remedies and obligations  Costs and fee-sharing  Class action waiver  Choice of law and venue  Confidentiality

31 Bragg v. Linden Research, Inc.  Procedural Grounds  Take-it-or-leave-it  No market alternatives  "GENERAL PROVISIONS" = not acceptable  Obscure costs and rules  Substantive Grounds  One-sided remedies  No real "cost sharing"  "Sole discretion" on a number of items  Forced to arbitrate in California  Mandatory confidentiality

32 Questions?  Kirk Soderquist   Jason Howell   Will Rava   Alvaro Alvarez   Miriam D'Jaen 


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