## Facts

- Netscape Communications Corp. and America Online, Inc. offered a free plug-in program, SmartDownload, for use with Netscape Communicator.
- Users could obtain SmartDownload from a webpage containing a prominent “Download” button visible on the initial screen.
- The SmartDownload license terms, including an arbitration clause, were placed below the “Download” button and were not visible unless a user scrolled down.
- Users were not required to click “I agree” or otherwise affirmatively indicate acceptance of the SmartDownload license terms as part of the download process.
- Plaintiffs downloaded and used SmartDownload and alleged it intercepted or transmitted information about their internet activity and file-transfer communications.
- Plaintiffs brought putative class actions alleging statutory violations including the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act.
- Netscape moved to compel arbitration based on license terms it contended governed SmartDownload and, alternatively, based on arbitration provisions associated with Netscape Communicator.
- The district court denied the motion to compel arbitration, and Netscape took an interlocutory appeal.

## Issues

1. Whether users who downloaded SmartDownload without being required to view or affirmatively accept the license terms manifested assent to those terms, including an arbitration clause.
2. Whether an arbitration clause in the Netscape Communicator license applied to disputes arising from the separate SmartDownload plug-in.
3. Whether a nonsignatory (plaintiff Specht) could be compelled to arbitrate under a direct-benefit estoppel theory based on alleged benefits tied to SmartDownload’s use by others.

## Decision

- The Second Circuit affirmed the denial of Netscape’s motion to compel arbitration and to stay the litigation.
- The court held that SmartDownload users were not bound by the SmartDownload license because Netscape did not provide reasonable notice of the terms and the download did not unambiguously manifest assent.
- The court held that the Communicator license arbitration clause did not govern claims concerning the separate SmartDownload plug-in.
- The court held that Specht could not be compelled to arbitrate as a nonsignatory because any asserted benefit from SmartDownload’s use by visitors to his website was too speculative to trigger direct-benefit estoppel.

## Legal Principles

- Online contract terms are enforceable only when the user receives reasonable notice of the terms and objectively manifests assent to them.
- Where license terms are not conspicuous and users are not clearly informed that a specific action (such as clicking “Download”) signifies agreement, a court may not infer assent from the user’s conduct alone.
- Clickwrap-style assent mechanisms (requiring an affirmative “I agree” or equivalent) more readily establish assent than arrangements where terms are available only by scrolling and are not clearly linked to the act of downloading.
- An arbitration clause governing one software product does not automatically extend to disputes involving a separate product absent an agreement covering that product and dispute.
- A nonsignatory may be compelled to arbitrate only upon a concrete, direct benefit from the contract; speculative or attenuated benefits are insufficient.

## Conclusion

The Second Circuit refused to compel arbitration because Netscape’s SmartDownload webpage did not provide reasonable notice of the license terms and did not obtain unambiguous user assent, and neither a separate product’s license nor a speculative nonsignatory-benefit theory supplied a basis to enforce arbitration.


Specht v. Netscape Commc’ns Corp., 306 F.3d 17 (2d Cir. 2002)