News
What did you just agree to when you clicked
By: Charlie Bieneman and Angela Murch
This article originally appeared in Michigan Lawyers Weekly on August 4, 2008.
Providers of software and other copyrighted content routinely provide their wares online, or on media such as disks, according to licenses that users do not have the opportunity to negotiate, and often do not read. These licenses have more in common with the fine print on the back of your ticket to an amusement park than they do with balanced agreements that are negotiated between two consenting parties.
True, license agreements that the parties negotiate, and then execute on paper, still generally govern enterprise software that is bought and sold by corporations. However, more and more, software and other online content is licensed under agreements that are essentially adhesion contracts.
The rise of the World Wide Web has done much to foment the use of adhesion licenses, although they have been in wide use since personal computers, and hence software for consumers, came into wide use in the 1980s. Thus, adhesion licenses are sometimes referred to as end user license agreements.
What we are referring to as “adhesion licenses” (to the best of our knowledge, an unofficial, made-up term) exist in varying forms and are referred to by various names (e.g., “browse-wrap,” “click-wrap,” “shrink-wrap,” etc.).
A common theme is that a user accepts the license contract through some action (clicking on an “accept” button or the like). Sometimes, a user may accept the license contract through inaction, for example, by viewing a license agreement and then not terminating execution or installation of a software program to indicate rejection of the contract.
As one would expect, such adhesion licenses, and the various provisions that they may include, while generally held to be valid, are enforceable in varying degrees. Some of the reasons why an adhesion license might not be enforced will be discussed.
If you are a lawyer representing general business clients, you have a good chance of encountering an adhesion license. All of your clients, probably without exception, are adhesion licensees. Moreover, there is a fair chance that your client is, or will want to become, a licensor under such a license.
Even companies whose business has nothing to do with providing software have Web sites. Many companies find that they can better serve their customers by providing manuals, instructions, designs, brochures, or other copyrighted materials on a Web site.
Furthermore, there have been instances where companies whose core business has nothing at all to do with software request help with an adhesion license, having developed a software application as an outgrowth of their business and wishing to license that application to others.
Of course, in today’s high-tech world, many companies everywhere are dedicated to providing software, content such as articles, multimedia displays, and the like via the Web. Many companies, therefore, need adhesion licenses that they can provide to their customers.
Even if not a licensor, it would be almost impossible to find a computer user of any stripe, corporate or personal, who is not a licensee under an adhesion license. If you have ever surfed the Web for more than five minutes, odds are that you are an adhesion licensee.
Further, anyone who has downloaded software, installed software, or broken the seal on a shrink-wrapped software package is also an adhesion licensee. Countless individuals, whether in the course of their employment or on their own behalf, accept adhesion licenses every day.
Types of adhesion licenses
As mentioned above, adhesion licenses come in a variety of flavors. A “shrink-wrap” license is generally printed on or included on paper inside the physical packaging in which software is sold. By opening the package (e.g., breaking a shrink-wrap), the customer may accept the terms of the license.
A “browse-wrap” license is one that is accepted, so the theory goes, when a user selects a hyperlink to access software of content without expressly agreeing to license terms displayed along with the hyperlink. Sometimes – and this is not recommended if you want your browse-wrap agreement to be enforced – a browse-wrap license may even be provided by a link accompanying the link that the user must select to access the licensed content or software.
In contrast to shrink-wrap and browse-wrap licenses, a user explicitly accepts a “click-wrap” license when downloading or installing software, or accessing content. Sometimes, click-wrap agreements may be used in tandem with shrink-wrap licenses. In any case, as discussed further below, as a licensor you are well advised to implement a click-wrap agreement over other types of adhesion licenses if at all possible.
The reason for this advice should be clear: a court is most likely to find that the acceptance corner of the golden triangle of contract formation (offer, acceptance, consideration) is satisfied when the user has clearly been provided with all contract terms, and has affirmatively indicated acceptance of those terms.
Enforceability of adhesion licenses
It is fairly well established that courts will enforce adhesion licenses if they follow basic contract principles of notice, assent, and fairness.
With respect to providing notice, a licensor should prominently provide the complete license agreement as early in the user’s process of downloading and obtaining software as possible. For example, at least one court has held that, where a software update was downloaded before a license agreement was accepted, new provisions in the software provider’s license agreement might not be enforced against the licensee.
Assent is an important part of any contracting process. Thus, courts look for evidence that an adhesion license has been affirmatively accepted by the user.
Browse-wrap licenses are often disfavored because the user can browse right past the license agreement without ever noticing that it exists. Click-wrap licenses, on the other hand, generally require the user to make an affirmative indication accepting the license. Thus, click-wrap licenses are more likely to be enforceable than, say, browse-wrap licenses.
To provide a greater likelihood that a click-wrap license will be enforced, it is wise to establish a process that removes any defense by the user that the user did not actually affirmatively accept the license. Thus, as a licensor, try to implement a process for accessing the licensed product that will allow the licensor to prove either that the user actually did indicate assent, or would have had to have indicated assent, to access the product.
Licensors should scrupulously maintain records of licensees’ acceptance of adhesion licenses; the record can be crucial to prove in a dispute that an enforceable contract exists. Courts generally do not require proof that a user actually read a click-wrap license – only that the user affirmatively accepted the license.
Fairness is always a concern with adhesion licenses. License terms that fall far outside industry norms, or that appear unconscionable, are always risky. Similarly, courts generally will not enforce license terms that are against public policy, such as license terms that attempt to vary the U.S. copyright laws.
A licensor may wish to take step to ensure the users read, and individually agree to, any potentially controversial terms. Moreover, any license terms that are particularly one-sided or unusual should be carefully considered before being included in even a click-wrap license.
Courts often given particular scrutiny to forum selection, arbitration, and choice of law provisions, among others. Choice of law provisions invoking Virginia or Maryland law may be scrutinized particularly closely, because those are the only states to have adopted the Uniform Commercial Information Transactions Act, which is generally seen as anti-consumer.
In any event, standard contract principles of unconscionability, good faith, and fair dealing apply. An adhesion license will enjoy a presumption of validity. However, courts look for indication that there was an abuse of bargaining power, just as with any other adhesion contract.
To sum it all up, many different kinds of businesses now provide products via adhesion licenses. A well-crafted adhesion license is always a very good idea in the appropriate setting, just as failing to protect adequately one’s intellectual property in any setting is always a mistake. And the good news is that enforceable adhesion licenses with teeth are not that difficult to implement.
As with any contracting process, a few easy ounces of prevention can save pounds of pain later.
Charles A. Bieneman is a partner and Angela Murch is a patent agent and law clerk at Rader, Fishman & Grauer PLLC. Contact them at (248) 594-0600 or cab@raderfishman.com and adm@raderfishman.com.