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Specht v. Netscape

Specht v. Netscape Communications Corp. (S.D.N.Y., 2d Cir.). In consolidated class actions involving "spyware," obtained two landmark decisions limiting the ability of a publisher of internet software to enforce the software's license agreement. Specht v. Netscape Communications Corp. and America Online, Inc., 150 F.Supp.2d 585 (S.D.N.Y. 2001), affirmed 306 F.3d 17 (2d Cir. 2002) (opinion by Sonia Sotomayor).

 

Please click here to hear excerpts from the oral argument before the Second Circuit (McLaughlin, Leval, and Sotomayor).

 

The claim (see the Amended Complaint) was that Netscape violated the Electronic Communications Privacy Act by distributing "SmartDownload," a "plug-in" that worked with Netscape's Communicator browser and Microsoft's Internet Explorer. The complaint alleged that SmartDownload surreptitiously reported back to Netscape the names and locations of certain files that a SmartDownload user downloaded from any web site, along with the user's Netscape "cookie" and a "Key" that included the serial number of the user's hard drive. Here is a demonstrative exhibit showing a SmartDownload data packet transmitting that information.

 

After the complaint was filed, Netscape publicly admitted that SmartDownload was transmitting that information. However, Netscape argued that SmartDownload users had agreed to an End User License Agreement that required that any such claim had to be arbitrated. Addressing that argument involved issues of contract formation, the scope of the licenses for SmartDownload and Netscape Communicator, and the technical relationship between a software "plugin" such as SmartDownload and its host application.

 

Defeated that argument based primarily on Netscape's design of its own web page, which it had been using to provide the software. See Brief for Plaintiffs-Appellees, at pages 1-2, 18-21, 23-24, and 40-58.

 

Also defeated Defendants' motion to dismiss, in which they argued that their actions did not violate the Electronic Communications Privacy Act. See Plaintiffs' Memorandum in Opposition and the transcript of the hearing on Defendants' motions to dismiss.

 

In the settlement of that action, Netscape agreed, among other things, to destroy the data that its software had secretly been transmitting to Netscape about its users, and to submit to periodic software audits by a qualified outside auditor over the course of four years to prevent recurrence of the violations. See Page 4 of the Settlement Notice.

 

The decisions in Specht were and continue to be pivotal in the evolving law of contract formation on the internet, as determined by both legal scholars and the courts. Click here to search Google Scholar for legal opinions and law journals citing Specht. Click here to search Google Scholar for legal articles citing Specht.

 

 

 

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