Contracts

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Last month, a California district court granted a web-based service’s motion to compel arbitration of a putative class action brought by a user whose personal information was allegedly accessed in a massive 2016 data breach that involved 339 million user accounts. (Gutierrez v. FriendFinder Networks Inc., No. 18-05918 (N.D. Cal. May 3, 2019)). While the opinion noted that courts in the Ninth Circuit are traditionally “reluctant to enforce browsewrap agreements against individual consumers,” the outcome of the case suggests that enforcement of website terms is not just a straight up-or-down analysis of the method used to present the terms to the user but may involve tangential, yet important interactions between the user and the site outside the initial registration process. 

On May 20, 2019, in Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), the Supreme Court resolved an area of ongoing concern for parties to trademark licenses. The court addressed a circuit split on whether a trademark licensee may continue to use a trademark for the term of the license, after the license has been rejected in bankruptcy.  In Mission, the debtor-licensor rejected a trademark license agreement and sought to terminate the licensee’s right to use the debtor’s trademark. This decision has important ramifications to parties to trademark licenses.

This month, an Illinois district court considered another in the series of web scraping disputes that have been working their way through our courts.  In this dispute, CouponCabin, Inc. v. PriceTrace, LLC, No. 18-7525 (N.D. Ill. Apr. 11, 2019), CouponCabin alleged that a competitor, PriceTrace, scraped coupon codes from CouponCabin’s website without authorization and displayed them on its own website.

After discovering PriceTrace’s scraping activities, CouponCabin sent PriceTrace a cease and desist letter demanding that PriceTrace stop scraping data from CouponCabin’s website.  CouponCabin alleged that PriceTrace continued to access and scrape data from CouponCabin’s website even after the C&D letter was sent. As a result, CouponCabin brought several causes of action against PriceTrace, including claims under the Computer Fraud and Abuse Act (CFAA), tortious interference and breach of contract.

The court found that CouponCabin’s C&D letter had revoked PriceTrace’s access to its site and that PriceTrace’s alleged continued access to the website plausibly stated a violation of the CFAA’s “unauthorized access” provision (18 U.S.C. §1030(a)(2)(C)).  Ultimately, however, the court dismissed the CFAA claims with leave to amend, due to plaintiff’s failure to plead the requisite amount of damage or loss as required to maintain a civil action under the CFAA.

“CouponCabin is simply alleging that PriceTrace was able to circumvent CouponCabin’s website security, with no allegation that such evasion impairs or harm the website. Absent allegation of impairment, CouponCabin has merely alleged that PriceTrace accessed CouponCabin’s website without authorization.”

In a recent blog post, we wrote about how the Second Circuit found the arbitration clause in a web service’s terms and conditions unenforceable because the user did not have reasonable notice of the terms that were communicated via a hyperlink in a post-sale email. In contrast, a New York district court recently upheld an arbitration clause in Coinbase’s account registration process and granted its motion to compel arbitration concerning claims brought by a user (Sultan v. Coinbase, Inc., No. 18-934 (E.D.N.Y. Jan. 24, 2019)).

This case sheds further light on the do’s and don’ts of online electronic contracting and the enforceability of app-based terms and conditions. The decision reinforces the point that for purposes of establishing a binding agreement with a user – particularly in the context of a mobile app – simplicity and clarity of the user interface is desired. And, in particular, this case reinforces the point that has been illustrated in many cases before that the design of user registration pages should be done with the input of legal analysis as to likely enforceability.

In Starke v. SquareTrade, Inc., No. 17-2474, 2019 WL 149628 (2d Cir. Jan. 10, 2019), the Second Circuit affirmed a ruling that denied a web service’s motion to compel arbitration, finding that the user did not have reasonable notice of the arbitration provision contained in the terms and conditions that were communicated via a hyperlink in a post-sale email.

File this latest opinion declining to enforce a service’s terms under Crowded Interface, Unclear Prompts and Muddled Process.

While the court recognized that a party has a duty to read a contract, it stressed that this does not morph into a duty to “ferret out contract provisions when they are contained in inconspicuous hyperlinks,” particularly where, as in this case, the user was presented with multiple documents, each containing different sets of terms. This dispute was reminiscent of a Second Circuit case we wrote about in 2012, where the court held that a buy now-agree later process did not provide sufficient notice to consumers of an arbitration provision contained in the post-sale terms.

Yesterday, Los Angeles City Attorney Mike Feuer filed an unfair competition lawsuit on behalf of the People of the State of California against the operator of the popular Weather Channel app (“TWC app”) for allegedly failing to conspicuously disclose to users that the TWC app collects and shares users’ mobile geolocation data. (People v. TWC Product and Technology, LLC (Cal. Super., L.A. County)).  In essence, the suit alleges that the TWC app mines users’ precise geolocation data after receiving permission to gather location information to provide “personalized local weather data” without also adequately disclosing that the app also packages this data trove for advertising and analytics services unrelated to weather reporting. The City is seeking injunctive relief and civil penalties under state law for this alleged unfair business practice.  Feuer held a press conference today further detailing the State’s position in this lawsuit and expressed his hope that this case would spur litigation in other jurisdictions and legislation on the issue.

This post discusses some of the contractual requirements imposed by Apple and Google regarding the collection and sharing of locational information.  What consents, if any, do Apple and Google require that app publishers obtain before collecting and using locational information?  This is a question that is being asked with increasing frequency.  In fact, a regular beat of media coverage on the issue  (see, e.g., here or here), has reached crescendo levels with a much-discussed article this past week in the New York Times. Coincidentally (or maybe not?), the NYT article was published the day before Google CEO Sundar Pichai testified before the House Judiciary Committee on Google’s privacy and data collection practices, among other things.

A recent dispute between an advertiser AXTS Inc. (“AXTS”) and a video production company GY6vids (“GY6”) produced an interesting issue involving the federal Computer Fraud and Abuse Act (CFAA) – that is, whether an entity that allegedly overloaded another company’s YouTube channel content with a flood of “dislikes” following a contractual dispute is liable under the CFAA for accessing a protected computer “without authorization.”  (AXTS Inc. v. GY6vids LLC, No. 18-00821 (D. Ore. Oct. 24, 2018)).

We have been closely monitoring the evolving state of the law regarding CFAA liability for certain commercial web scraping and related practices.  The instant case between AXTS and GY6 is a little different in that the claim did not arise from AXTS’s alleged access to video content stored on GY6’s network, but publically-accessible videos stored on a third-party’s (e.g., YouTube) servers.   

Licensors of software typically utilize software license agreements providing for their ownership of the licensed software and related IP, as well as restrictions barring licensees from reverse engineering the code at issue.  The scope of protection, of course, depends on the final language of the licensing agreement and disputes can arise when licensees decide to develop similar software in-house, or with a third party.  Indeed, a recent case, Ford Motor Co. v. Versata Software Inc., No. 15-10628 (E.D. Mich. Sept. 7, 2018), tackled some of these issues. 

A D.C. district court ruled that an eBay user did not assent to a later-added arbitration clause to the user agreement by virtue of a provision that stated eBay could amend the agreement at any time, as the user may not have received sufficient notice of the amendment. (Daniel v. eBay, Inc., No. 15-1294 (D.D.C. July 26, 2018)). Notably, the court declined to find adequate notice sufficient to demonstrate an agreement to arbitrate merely based on the fact that the amended user agreements were posted on eBay’s website (at least under Utah, Louisiana or Texas law). This case is interesting as many websites and services have added mandatory arbitration clauses to their terms in recent years, yet may have a stable of legacy users that agreed to a prior set of terms that did not contain such a provision.