Tag: arbitration

How companies can use their trademarks to combat COVID-19-related phishing

Straightforward out-of-court domain name proceeding can provide efficient relief against fraudulent websites and email.

Google has seen a steep rise amid the Coronavirus pandemic in new websites set up to engage in phishing (i.e. fraudulent attempts to obtain sensitive information such as usernames, passwords and financial details). Companies in all industries – not just the financial sector – are at risk from this nefarious practice. But one relatively simple out-of-court proceeding may provide relief.

Varieties of Phish Species

Phishing schemes can take a variety of forms. A fraudster may register a domain name similar to the company’s legitimate domain name and use it to send email messages to the company’s customers, requesting payment and providing wire instructions. Distracted or untrained customers who receive the email may unwittingly wire funds as instructed in the fraudulent email to an account owned by the criminal. Or the phishing party may set up a legitimate looking but fake website at a domain name similar to the company’s legitimate domain name, and direct users there to purportedly log in, thereby disclosing their usernames, passwords, and perhaps additional sensitive information.

Taking Sites Down with the UDRP

Everyone who registers a domain has to agree, by contract, to have disputes over the domain name’s ownership resolved through an administrative proceeding (similar to arbitration). The Uniform Domain Name Dispute Resolution Policy (UDRP) governs disputes over .com, .net, .org and many other domain name registrations. The World Intellectual Property Organization (WIPO) provides administrative panels who decide disputes under the UDRP. These are decided “on the papers” with each party having the opportunity to submit arguments and supporting documentation. The time and expense of a UDRP proceeding is a small fraction of what one sees in typical litigation – UDRP cases usually conclude within weeks, and generally cost a few thousand dollars.

The UDRP Frowns Upon Phishing

To be successful in bringing a UDRP proceeding, a party has to prove (1) that it owns a trademark that is identical or confusingly similar to the disputed domain name, (2) that the party that registered the disputed domain name has no rights or legitimate interests in the disputed domain name, and (3) that the disputed domain name was registered and has been used in bad faith.

UDRP panels typically show little tolerance for blatant phishing efforts. Companies bringing UDRP actions against registrants of domain names registered for phishing purposes enjoy a high rate of success. A good phishing effort (that is, “good” in the sense that the fake domain name succeeds in deceiving) will require using words similar to the company’s mark. So the first element is usually a low hurdle. On the second and third elements, UDRP panels are readily persuaded that a party using a disputed domain name for phishing gains no rights or legitimate interests, and demonstrates clear bad faith. “Using the disputed domain name to send fraudulent email is a strong example of bad faith under the [UDRP].” Samaritan’s Purse v. Domains By Proxy, LLC / Christopher Orientale NA, WIPO Case No. D2019-2403 

Arbitration provision in web-based contract was not enforceable

Defendants moved to compel arbitration based upon a purported arbitration clause in an agreement between them and plaintiffs that plaintiffs electronically signed through defendants’ website.

The court found that defendants failed to meet their burden to show, by undisputed material facts, that the parties entered into an agreement to arbitrate the claims in the case. The court looked to the Ninth Circuit decision in Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014) to support the idea that courts will enforce clickwrap-type agreements where the user indicates actual notice of the terms of the agreement or was required to acknowledge the terms of the agreement before proceeding with further use of the site. Enforcement of a browsewrap-type agreement, which lacks such an acknowledgment, will depend upon whether the website’s design and content would put “a reasonably prudent user on inquiry notice of the terms of the contract.” The conspicuousness of the terms and notices, as well as the overall design of the webpage, will contribute to the determination that a user was on inquiry notice.

In this case, according to the court, defendants had not offered evidence explaining the design and content of the webpage in question, or how the agreement appeared on the website. The court could not determine whether the terms of the agreement appeared on the registration page itself, or if a user would have had to click a link to see the full terms. Likewise, the court could not determine other factors that might contribute to determining plaintiffs’ notice of the terms, such as the size of the font or other aspects of the appearance and presentation of the terms online. The declaration offered by defendant did not provide evidence to show that: (1) either of the plaintiffs had actual knowledge of the arbitration agreement; or (2) whether the agreement was a clickwrap or a browsewrap agreement, how the website was designed and where these terms appeared, and whether plaintiffs assented by clicking an “I agree” box, or were deemed to agree by continuing in the registration process.

Given the lack of evidence of how the registration process appeared on its website, how one of the plaintiffs had declared that he did not see an arbitration agreement, and the reasonable doubts and inferences that must be drawn in that plaintiff’s favor under the applicable standard, the court found that plaintiffs had presented a genuine issue of fact concerning notice of, and assent to, the arbitration agreement here. The court could not find that plaintiffs were reasonably on notice of the agreement to arbitrate, and the accordingly the motion to compel was denied.

Chen v. Premier Financial Alliance, Inc., 2019 WL 280944 (N.D. Cal. Jan. 22, 2019)

Florida court rules that online seller’s terms and conditions were not enforceable

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Beware the browsewrap.

A Florida state appellate court recently held that an online seller’s terms and conditions, appearing in a “browsewrap” agreement linked-to from the bottom of its web pages, were not enforceable.

Plaintiff, an online purchaser of defendant’s dietary supplements, sued defendant seller over liver damage plaintiff allegedly sustained from the products. Defendant filed a motion with the trial court seeking to enforce an arbitration clause in its online terms and conditions. Plaintiff objected to that motion, arguing that he never agreed to the arbitration clause contained in the browsewrap agreement.

The lower court denied defendant’s motion to compel arbitration, finding that the terms of the browsewrap agreement were not incorporated into the sales agreement. Defendant sought review with the Florida appellate court. On appeal, the court affirmed the denial of the motion to compel.

This was a case of first impression in the Florida state courts.

The court observed that in other jurisdictions, browsewrap agreements have generally been enforced only when the hyperlink to the terms and conditions is conspicuous enough on the web page to place a user on inquiry notice of their terms. (Inquiry notice, simply stated, is, as its name suggests, notice sufficient to make the user aware enough of the terms that their natural inclination is to inquire further as to what the particular terms are.)

The court distinguished this case from the case of Hubbert v. Dell Corp., an Illinois case in which the court found a browse-wrap agreement to be enforceable.

Here, unlike in the Hubbert case, the defendant’s website allowed a purchaser to select a product and proceed to checkout without seeing the hyperlink to the terms and conditions. The website user could complete the purchase without scrolling to the bottom of the page where the link to the terms and conditions appeared.

In this situation the court found that the online seller’s website failed to advise the plaintiff that his purchase was subject to the terms and conditions of the sale, and did not put him on the required inquiry notice of the arbitration provision.

Vitacost.com, Inc. v. McCants, — So.3d — 2017 WL 608531 (Fla.Ct.App. Feb. 15, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Court holds browsewrap agreement not enforceable

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Plaintiff filed a consumer fraud class action lawsuit against defendant, the operator of an ecommerce website. Defendant moved to have the case heard by arbitration, arguing that the arbitration provision in its website’s terms of use required the dispute to be arbitrated instead of heard in court. The terms of use were in the form of a “browsewrap” agreement — viewable by a hyperlink displayed at the bottom of each page of defendant’s website.

The court denied the motion, finding that the hyperlink to the terms of use (containing the arbitration provision) was too inconspicuous to put a reasonably prudent internet consumer on inquiry notice. Since the agreement was not enforceable, plaintiffs were not bound by the arbitration provision. Defendant sought review with the California Court of Appeal. On appeal, the court affirmed the lower court.

It observed that for a browsewrap agreement to be enforceable, a court must infer that the end user assented to its terms. This may be more difficult to show than in situations involving “clickwrap” agreements, which require the user to affirmatively do something, such as check a box, to indicate his or her assent to the terms of use.

In this case, the court held that although an especially observant internet consumer could spot the defendant’s terms of use hyperlinks on some checkout flow pages without scrolling, that quality alone was not all that was required to establish the existence of an enforceable browsewrap agreement. Rather, as the Second Circuit observed in Specht v. Netscape, 306 F.3d 17 (2d Cir.2002), “[r]easonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility.”

Here, the defendant’s terms of use hyperlinks — their placement, color, size and other qualities relative to defendant’s website’s overall design — were simply too inconspicuous to meet that standard.

Long v. Provide Commerce, Inc., — Cal.Rptr.3d —, 2016 WL 1056555 (Cal Ct. App., March 17, 2016)

About the Author: Evan Brown is a Chicago attorney advising enterprises on important aspects of technology law, including software development, technology and content licensing, and general privacy issues.

Photo courtesy Flickr user Patrick Finnegan under this Creative Commons license.

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