Category Archives: Contracts

Forum selection clause in clickwrap agreement enforceable

Meier v. Midwest Recreational Clearninghouse, LLC, 2010 WL 2738921 (E.D. Cal. July 12, 2010)

Plaintiffs live in California and bought an RV online from a vendor in Minnesota. The vendor’s website terms of service had a provision requiring that all disputes “arising out of or related to the use” of the website be brought in state court in Minnesota.

When plaintiffs — who were unhappy about the RV — brought a lawsuit in federal court in California, defendants moved to dismiss for improper venue. The court granted the motion.

The court noted that under the Bremen case, forum selection clauses are prima facie enforceable. And the Carnival Cruise Lines case takes that notion even further, giving forum selection clauses this presumption of enforceability in preprinted agreements.

In this case, plaintiffs argued that the court shouldn’t enforce the forum selection clause because it wasn’t freely bargained for. And they claimed that enforcing it would effectively deny them their day in court.

But that did not sway the judge. The court found that there was no bad faith motive that put the forum selection clause in the clickwrap agreement. And even though litigating in Minnesota might be inconvenient for California residents, it was not enough to bar them from the judicial system.

Moreover, just like the Supreme Court noted in Carnival Cruise Lines, the presence of forum selection clauses can reduce the costs of litigation because they cut down on the number of pretrial motions arguing over venue. And they also help consumers — this cost savings should ostensibly be passed on.

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New copyright lawsuit involves Creative Commons

GateHouse Media, Inc. v. That’s Great News, LLC, No. 10-50164 (N.D. Ill. filed 6/30/2010)

A lawsuit filed this past week in the Northern District of Illinois includes a claim that the defendant violated the terms of a Creative Commons license covering the plaintiff’s copyrighted works. GateHouse Media publishes a slew of local newspapers, including the Rockford Register Star in Rockford, Illinois. The Register Star provides premium online content to its subscribers, and makes that content available under a Creative Commons Attribution-NonCommercial-NoDerivs license.

GateHouse sued a company that sells reprints of articles — including articles from the Register Star — on fancy plaques to the people who are featured in those articles. Since GateHouse has its own reprint business, it views the defendant’s work as a competitive threat.

The complaint has all the claims you’d expect under these facts — copyright infringement, trademark infringement and various claims under Illinois unfair competition law. It also has a breach of contract claim, in which GateHouse invokes the terms of the Creative Commons license, going after the defendant’s commercial use of the licensed material.

Ponder if you will why GateHouse chose to pursue a violation of the Creative Commons license as a breach of contract claim and not as copyright infringement. The license terms are written as conditions and not covenants. So it seems like the defendant’s alleged use would be outside the scope of the license and therefore infringement. Any ideas why plaintiff is proceeding this way?

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Portability policies are an intriguing innovation

One of the fundamental and inherent technical shifts that are happening as computing moves to the cloud — for enterprise functioning and for more personal things like enjoyment of social media — pertains to the location of the user data being acted upon. Just think about how many different sites and providers across the web store and process and display uploaded user information.

The utility of this information is, in general, enhanced when there are well-understood ways that the uploaded data — whether as-uploaded or as-modified by the service or through user collaboration — can be moved to other computing environments. In some circumstances, easily-moved data is a good thing (think social networking profiles). In other circumstances, a user may want to know that his or her data will securely stay put (think medical information). The contours of the ability to move information is the subject of the notion of “data portability.”

It’s getting to the point where data portability is a real, practical issue. And it’s important enough that the topic should be addressed in terms of the legal relations between user and provider. Enter “portability policies.”

A portability policy — much like a website terms of service or privacy policy — serves to specify the understandings and the legal obligations between parties to a technological transaction. PortabilityPolicy.org is a new project from the DataPortability Project to make the portability policy drafting process easier, and the end results more standardized.

It looks intriguing. Here’s more information about the project from Techdirt.

Photo courtesy Flickr user Extra Ketchup under this Creative Commons license.

Wait just a second . . . isn’t online gambling illegal?

Wong v. Partygaming Ltd., — F.3d —, 2009 WL 4893955 (6th Cir. December 21, 2009)

The Sixth Circuit’s recent opinion in the case of Wong v. Partygaming is interesting if you’re a civil procedure wonk and care about things like which law applies to determine the enforceability of forum selection clauses in website terms and conditions and what factors a court should consider when dismissing a case on the basis of forum non conveniens.

bling

The most intriguing part of the case, however, comes from Judge Merritt’s concurrence, in which he addresses the significance of the fact that the terms of service for an online gambling website are probably illegal.

The majority opinion painstakingly analyzed whether the district court abused its discretion in dismissing, of its own will (or “sua sponte” as stodgy lawyers like to say), the plaintiffs’ suit against an online gambling website. The plaintiffs had alleged that the site fraudulently misrepresented that there was no collusion among other online gamblers, and that the site did not target people with gambling problems. The website terms of service contained a forum selection clause naming Gibraltar as the jurisdiction in which disputes were to be heard.

The appellate court affirmed the lower court’s decision that the case should be dismissed and that Gibraltar (which follows English law) would be a suitable and not-too-inconvenient forum. But the majority opinion said nothing about the legality of online gaming.

That’s where Judge Merritt picked up in the concurrence. He agreed that the matter should have been dismissed in favor of it being heard in Gibraltar — that’s why he concurred and did not dissent. His reasoning differed from that of the majority.


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Judge Merritt observed that the plaintiffs’ logic was inconsistent. They had argued that Ohio law should apply to the terms of service. But under Ohio law (and federal statutes like RICO), the subject matter of the contract would probably have been illegal and therefore void. Not to mention the fact that the conduct could send the parties to jail.

The judge wrote that something analogous to the principle of lenity — and not necessarily a rigorous analysis of the forum selection clause and the doctrine of forum non conveniens — should underlie the dismissal of the lawsuit. Lenity requires that when the question of criminal liability is ambiguous, interpretation should be made in favor of the defendant (see McNally v. United States). Since online gambling presumably was not illegal under the law of Gibraltar, the more lenient stance would be to see the matter litigated there.

Bling photo courtesy Flickr user PhotoDu.de under this Creative Commons license.

Browsewrap website terms and conditions enforceable

Major v. McAllister, — S.W.3d —, 2009 WL 4959941 (Mo. App. December 23, 2009)

The Missouri Court of Appeals has issued an opinion that reflects a realistic grasp of how people use the web, and also serves as a definitive nod to self-responsibility. The court refused to accept a website end user’s argument that she should not be bound by the website terms and conditions that were presented to her in the familiar “browsewrap” format.

Click

Ms. Major used a website called ServiceMagic to find some contractors to remodel her home in Springfield, Missouri. Each page she saw during the process had a link to the website terms and conditions. At the point where she submitted her contact information to facilitate the signup process, she was presented with a link to the website’s terms and conditions. We’ve all seen this countless times — the link read, “By submitting you agree to the Terms of Use.”

Major admitted she never clicked on the link and therefore never read the terms and conditions. But had she clicked through she would have read a forum selection clause providing that all suits against ServiceMagic would have to be brought in Denver, Colorado.

When Major sued ServiceMagic in Missouri state court, ServiceMagic moved to dismiss, citing the forum selection clause. The trial court granted the motion and Major sought review. On appeal, the court affirmed the dismissal.

Major relied heavily on Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002). The court in Specht held that end users of Netscape’s website who downloaded a certain application were not bound by the terms and conditions accompanying that download because the terms were not visible on the screen without scrolling down to see them.

But in this case the court found the terms and conditions (including the forum selection clause) to be enforceable. In contrast to Specht, the ServiceMagic site did give immediately visible notice of the existence of the terms of the agreement. Even though one would have to click through to read the terms, the presence of the link was sufficient to place the website user on reasonable notice of the terms, and subsequent use by the end user manifested assent to those terms.

Click image courtesy Flickr user smemon87 under this Creative Commons license.

Court upholds eBay forum selection clause

Tricome v. Ebay, Inc., 2009 WL 3365873 (E.D. Pa. October 19, 2009)

Everyone who signs up to use eBay has to assent to the terms of eBay’s User Agreement. Among other things, the User Agreement contains a forum selection clause that states all disputes between the user and eBay must be brought to court in Santa Clara County, California.

After eBay terminated plaintiff Tricome’s account, Tricome sued eBay in federal court in Pennsylvania. eBay moved to dismiss or to at least transfer the case, arguing that the forum selection clause required it. The court agreed and transferred the case to the U.S. District Court for the Northern District of California.

Plaintiff had argued that the court should not enforce the forum selection clause because it was procedurally and perhaps substantively unconscionable. The court found the agreement not to be procedurally unconscionable because Plaintiff did not have to enter into the agreement in the first place — he only did it to increase his online business. Furthermore, eBay did not employ any high pressure tactics to get Plaintiff to accept the User Agreement. Moreover, eBay had a legitimate interest in not being forced to litigate disputes all around the country.

The court likewise found the User Agreement was not substantively unconscionable either. It would not “shock the conscience” for a person to hear that eBay — an international company — would undertake efforts to focus litigation it is involved with into a single jurisdiction. Furthermore, having the forum selection clause would conserve judicial and litigant resources, in that parties and the courts would know in advance where the appropriate place for disputes concerning eBay would be heard. Finally (and rehashing an earlier point regarding procedural unconscionability), Plaintiff had a meaningful choice — he could have decided not to do business on eBay in the first place.

Map photo courtesy Flickr user sidewalk flying under this Creative Commons license.

Web host did not breach contract by terminating rude customer

Mehmet v. Add2net, Inc., — N.Y.S.2d —-, 2009 WL 3199876 (N.Y.A.D. 1 Dept. October 8, 2009)

Plaintiff website operator didn’t pay his monthly hosting fees on time. He called the hosting company and said he’d be sending a check, but in the meantime the web host exercised its right under the hosting agreement to suspend Plaintiff’s account for nonpayment. Plaintiff called and left a nasty voicemail, using an obscene word to threaten to sue the hosting company if his website was not reactivated.

In response to this angry voice mail, the web host terminated Plaintiff’s account. He sued for breach of contract. The web host moved to dismiss at the trial court level and the court granted the motion. Plaintiff sought review. On appeal, the court affirmed the dismissal.

Of particular importance was a provision in the hosting agreement that incorporated by reference an Acceptable Use Policy (AUP), and provided that any breach of that policy would be grounds for suspension or termination of plaintiff’s account. Under the AUP, plaintiff agreed “not to abuse whether verbally or physically or whether in person, via email or telephone or otherwise … any employee or contractor of [defendant].”

The nonpayment coupled with this violation of the web hosting acceptable use policy undercut Plaintiff’s breach of contract claim.

Do Twitter’s new terms of service forsake third party developers?

Twitter announced its new Terms of Service yesterday. One big issue deals with copyright ownership. This is one of the perennial questions in the law of social media: “who owns the user-created content?” Twitter nods to this issue when it states that “Twitter is allowed to ‘use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute’ your tweets because that’s what we do. However, they are your tweets and they belong to you.”

That’s all well and good. And by not being too grabby, Twitter avoids stirring up a brouhaha like Facebook did earlier this year for a little while when it claimed a very broad license in users’ content. In that situation, some pointed out that Facebook could use your content forever, even after you deleted your account. No doubt Twitter was motivated by an aversion to controversy of this sort when it decided to not claim a perpetual license.

But is Twitter being too cautious? The license it claims in the new terms of service does not specify a duration. That’s user-friendly, because such a license is probably terminable at will by the user. Under cases like Walthal v. Rusk, 172 F.3d 481 (7th Cir. 1999), Twitter would no longer have the authority to use, copy, reproduce, etc. the tweets of a user that no longer permitted such use be made. Deleting one’s account would be a good indication that such a license was being revoked. And the user could follow up with an express statement to Twitter that the license no longer exists.

Still all well and good. But let’s look at the “ecosystem” that has been nourished by the Twitter API, and which Twitter bolsters in its new terms of service. (“We encourage and permit broad re-use of Content. The Twitter API exists to enable this.”)

Third party developers can build apps that, among other things, cache users’ Tweets and make them available for mashup, organization, etc. and redisplay. These acts by the third party developer are an exercise of rights of the copyright holder, i.e., the individual Twitter user. The terms of service allow Twitter to sublicense these rights to the third party developer, so there is no problem so long as the individual Twitter user is under the terms of service.

What happens, though, in the situation we were just discussing where the individual user revokes the license to Twitter? These cached copies out there in the possession of third party developers all of a sudden become unauthorized, because Twitter no longer has the sublicensable right to allow the tweets’ copying and redistribution by others.

In such a situation, are third party developers who continue to display the content left blowing in the wind, as infringers of erstwhile Twitter users’ copyright rights?

Notice sign photo courtesy Flickr user szlea under this Creative Commons license.

Website terms of service provide basis for exercise of personal jurisdiction

CoStar Realty Information, Inc. v. Field, — F.Supp.2d —-, 2009 WL 841132 (D.Md. March 31, 2009)

Personal jurisdiction cases — even ones that involve the internet — are generally not all that interesting. But the case of CoStar Realty Information, Inc. v. Field is worth noting because of the way the personal jurisdiction analysis was tied to a provision found in online terms of service.

CoStar provides its paying customers with access to a proprietary database via the web. It claimed that certain defendants, who were residents of Texas and Florida, accessed the database using another customer’s password. So CoStar sued these defendants in federal court in Maryland.

These defendants moved to dismiss arguing, among other things, lack of personal jurisdiction. The court denied the motion.

It found that in the four or so years that the defendants accessed the database without authorization, they would have been presented with the online terms of service from time to time. Those terms of service contained a clause which provided that any litigation over use of the database would be conducted in Maryland. The court found that the defendants assented to these terms, and that the forum selection clause was valid and enforceable.

Map photo courtesy Flickr user Marxchivist under this Creative Commons license

Clickwrap binding despite claim of no opportunity to read terms

Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009)

A federal court in Texas held the clickwrap agreement between United Parcel Service and one of its customers was binding. After plaintiff Via Viente sued UPS in Texas, UPS moved to transfer venue to the Northern District of Georgia, citing to a forum selection clause in a license agreement governing Via Viente’s use of a UPS-provided software program that allowed Via Viente to print labels and manage product shipments.

Via Viente argued that the clickwrap agreement (and by extension the forum selection clause) was not binding because a UPS technician installed the application on a Via Viente computer, and therefore Via Viente never had a chance to agree to the terms. The court rejected that argument for the following three reasons:

  • Via Viente was a sophisticated company and “should have been aware that terms of service were forthcoming” after having signed the general Carrier Agreement with UPS that required the use of the software;
  • It was “difficult to believe” that Via Viente would have left the UPS technician installing the software unsupervised. Moreover, it was not UPS’s practice to install the software unsupervised;
  • Via Viente had kept the benefit of the bargain (convenience and “palatable” shipping costs) so it would have been inequitable to allow it to disavow provisions it did not like.

After finding the clickwrap agreement to be binding, the court went on to find the forum selection clause enforceable, and transferred the matter to the Northern District of Georgia.

EULA photo courtesy Flickr user johntrainor under this Creative Commons license.