Chapter 5, "Developments in Multimedia and Internet Licensing" in the treatise The Licensing Update (2009) (Aspen Publishers). By Leonard T. Nuara, Daniel A. Feuerstein, Wendy M. Mantell and Timothy T. Hsieh.
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§5.02 THE INTERNET
Millions of individuals, in every corner of the world, are logging onto the Internet each day seeking
information, communicating ideas, and transacting business. It is safe to say that today, a working knowledge of and
experience in using the Internet are essential elements in successfully conducting business.
The term “Internet” is used to describe a worldwide group of connected networks that allow the public to access
information and services.6
A computer network is a group of computers connected by communications equipment
and software for the purpose of sharing information with other participants on the network. For example, most
attorneys who have computers in the workplace use a network. While each of the networks that make up the Internet
is owned by a public or private organization, no single organization or government owns or controls the Internet.
The Internet began in 1969 as a network of four computers located at the University of California at Los
Angeles, the University of California at Santa Barbara, the University of Utah, and the Stanford Research Institute.
The U.S. Department of Defense funded the initial work through an entity known as the Advanced Research
Projects Agency, or ARPA. The ARPA Network, or “ARPANET,” was designed to be a decentralized system with
the ability to re-route and sustain communications in the event of an attack on an individual section of the network.
In the 1980s, the National Science Foundation, the scientific and technical agency of the federal government,
expanded ARPANET to connect computers around the world. The Internet, which included electronic mail,
exhibited slow but steady growth until 1994 when the World Wide Web was introduced. The World Wide Web or
“the Web,” is a graphical user interface to the Internet. The Web essentially prompted the exponential growth in
both the number of Web sites and use of the Internet. Use of the Web, once limited to military and educational
endeavors, expanded to business and residential use and stands as the doorway to the future of commerce. Even
though the “dot.com bubble” burst at the end of the 1990s, the Internet continues to play a vital role in our economy.
[A] How the Internet Works
The Internet operates by taking data, breaking it up into separate groups of data called “packets,” and sending
the packets along available routes to a destination computer. Unlike a phone line, which monopolizes a continuous
open wire (through many intermediate locations) throughout the duration of a telephone call, the packet-switched
network uses available wire space for only fragments of a second as it transfers a digital message in one direction.
The data might be an e-mail message, a Web page, a sound clip, a video stream, or a document.
Each packet contains the data, its origin, destination, and the sequence of information needed to reassemble the
data once it is received at the destination. These packets can and do travel very different routes on their way to the
ultimate destination. For example, the first packet of an e-mail message sent from a New Jersey office may travel
across the telephone line, over thousands of miles of wire, through different countries, or even into space through a
satellite, on its way to a destination in Florida, while the second packet may travel directly along the coastline over a
fiberoptic cable arriving at the same Florida destination before the first packet. Both transmissions usually occur in a
matter of seconds or almost instantaneously to the user.
To connect to the Internet, businesses and individuals contract with either Internet Service Providers (ISPs) or
Online Service Providers (OSPs). ISPs deliver access to the network in various ways. ISPs include large
telecommunications companies such as AT&T, national ISPs such as EarthLink, and cable television companies
such as Comcast. OSPs deliver access to the net and provide proprietary content organized in an easy-to-use format.
Some OSPs include America Online and MSN. All of these ISPs and OSPs own or lease a connection to the
Internet.7
Initially, most individuals connected to the Internet through the use of a local phone service and a modem. But
the speed and capacity of traditional telephone lines is limited. To provide faster access, many individuals and
businesses now connect to the Internet using digital subscriber lines (DSL), Integrated Service Digital Network
(ISDN) lines, dedicated T1 or T3 leased lines, or cable modems. Each medium varies in cost, offers different levels
of speed, and provides different amounts of data capacity, known as “bandwidth.” The greater the bandwidth, the
faster large amounts of information can be retrieved and sent. As bandwidth increases, even greater opportunities to
transact business online, particularly for multimedia content, have become available.
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[B] Locating Content on the Internet
Once connected, users can locate content supplied by content providers. To efficiently accomplish the
exchange, network users follow a common set of rules known as Internet Protocol (IP). Simply put, IP assigns every
computer on the Internet an address consisting of a series of four numbers, each of them being between 0 and 255
(i.e., 255.255.100.1). IP numbers or addresses enable a computer host to locate a remote computer. Using these
numbers also enables computers to contact and communicate with other computers on the Internet and share data.
Assignment of IP addresses to users was the responsibility of the Internet Assigned Numbers Authority
(IANA).8
IANA is a private entity affiliated with international standard-setting bodies. IANA delegates the
administration of IP address applications and registrations to both government and private commercial bodies.
The Internet Corporation for Assigned Names and Numbers (ICANN) is the non-profit corporation that was
formed to take over responsibility for IP address space allocation, protocol parameter assignment, domain name
system (DNS) management, and root server system management functions previously performed under U.S.
government contract by IANA and other entities. ICANN took over these responsibilities on November 25, 1998.9
ICANN's mandate is not to “run the Internet,” but rather to coordinate the management of only those specific
technical, managerial, and policy development tasks that require central coordination; namely, the assignment of
globally unique names, addresses and protocol parameters.10
Part of ICANN's responsibility is to address conflicts between domain names and trademarks. To this end,
ICANN created the Uniform Domain-Name Dispute-Resolution Policy (UDRP) on October 24, 1999.11
Under the
UDRP, trademark-based domain-name disputes must be resolved either by agreement, court action, or arbitration
before a registrar will cancel, suspend, or transfer a domain name.12
Disputes arising from abusive registrations of
domain names (also known as “cybersquatting”) may be addressed by accelerated administrative proceedings that
the trademark owner initiates by filing a complaint with an approved dispute-resolution service provider.13
The international addressing of networked computers on the Internet is a database known as the DNS, which
associates IP addresses with easily remembered alphanumeric symbols. These designations, known as “domain
names,” are typically based upon a four-level naming system consisting of a top-level domain, a second-level
domain, a third-level domain, and a fourth-level domain. The top-level domain consists of either a two-letter
international country code or a generic top-level domain consisting of a typically three-letter code (e.g., .com, .org,
.net, .edu, .mil, .gov). Second-level domains consist of up to 22 characters, which can include a single word, such as
“newspapers” in “www.newspapers.com” or use trademarks, like McDonalds in “mcdonalds.com.” Third-level and
fourth-level domains refer to a local network computer within an organization's Internet server. Third- and fourth-
level domains are often replaced with “www” to indicate World Wide Web. The seven generic international top-
level domains were originally intended to represent differentiated market segments.14
Currently, the .com domain is
still the most widely used generic top-level domain in the DNS.
ICANN enabled competition for domain name registrations.15
On November 25, 1998, ICANN and the
Department of Commerce entered into a Memorandum of Understanding to combine their efforts to manage the
transition from government control to private sector control.16
In the past, there was one primary provider, Network
Solutions.17
Currently there are hundreds of ICANN-accredited registrars eligible to register domain names.18
This
market competition has resulted in lowering domain registration costs by 80% and saving businesses and consumers
over $1 billion annually in registration fees.19
In November 2000, ICANN completed its first selection of global top-level domains (TLDs). These seven
TLDs are .aero, .biz, .coop, .info, .museum, .name, and .pro. Only one of the TLDs, .info, is an un-restricted TLD in
which any individual or organization can register a domain name. The other TLDs are restricted pursuant to rules
established by ICANN.20
Note that all of these TLDs are subject to ICANN's Uniform Dispute Resolution Policy.21
TLDs are divided into two types: .biz, .info, .name and .pro are relatively large “unsponsored” TLDs, while
.aero, .coop and .museum are for smaller “sponsored” TLDs. An “unsponsored” TLD operates under policies
established by the global Internet community directly through the ICANN process, while a “sponsored” TLD is a
specialized TLD that has a sponsor representing the narrower community that is most affected by the TLD. The
sponsor thus carries out delegated policy-formulation responsibilities over many matters concerning the TLD.
A sponsor is an organization to which ICANN delegates some defined ongoing policy-formulation authority
regarding the manner in which a particular sponsored TLD is operated. The sponsored TLD has a charter, which
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defines the purpose for which the sponsored TLD has been created and provides operational guidelines. The sponsor
is responsible for developing policies on the delegated topics so that the TLD is operated for the benefit of a defined
group of stakeholders, known as the “Sponsored TLD Community,” which are most directly interested in the
operation of the TLD. The sponsor is also responsible for selecting the registry operator and for establishing the
roles played by registrars and their relationship with the registry operator. The sponsor must exercise its delegated
authority according to fairness standards and in a manner that is representative of the Sponsored TLD Community.
The extent to which policy-formulation responsibilities are appropriately delegated to a sponsor depends upon
the characteristics of the organization that may make such delegation appropriate. These characteristics may include
the mechanisms the organization uses to formulate policies, its mission, guarantees of independence from the
registry operator and registrars who will be permitted to participate in the sponsor's policy-development efforts.
On June 26, 2001, .biz and .info became operational.22
Each of these TLDs has its own registry operator, a
single entity responsible for keeping the records and a directory of all the domain names registered within that
TLD.23
The registry agreement for .name is operated by Global Name Registry (www.nic.name); .aero is operated by
SITA (www.nic.aero); .biz is operated by Neulevel (www.neulevel.biz); .coop is operated by DotCooperation LLC
(www.nic.coop); .info is operated by Afilias (www.nic.info); .museum is operated by MuseDoma
(www.musedoma.museum); and .pro is operated by Registry Pro (www.nic.pro). The registry operators'
informational Web sites are accessible to all users of the Internet.
Some of the challenges that faced these TLD registry operators and sponsors included determining an allocation
method for registrations, coping with a “land rush” for desirable registrations, developing mechanisms to prevent
consumer confusion associated with cybersquatting, and handling disputes over the rights to particular strings.
On October 14, 2002, ICANN selected the proposal submitted by the Internet Society (ISOC) for a new registry
operator of the .org top-level domain, to replace VeriSign, the central authoritative database operator for .com and
.net. ISOC established a new organization, Public Interest Registry (PIR) to be the registry operator. PIR
subcontracts with Afilias, the operator of .info, to provide operational support. PIR assumed operations of the .org
registry from VeriSign on January 1, 2003.24
ISOC, however, maintains responsibility for appointing the Board of
Directors of PIR, which will otherwise operate as a not-for-profit entity separate from ISOC. On October 20, 2003,
ISOC announced that it had selected and approved new board members for PIR. The board members took their seats
on November 1, 2003, and have sat for staggered terms of one to three years.25
Three new members were seated on
January 1, 2005 and served for a three-year period until December 31, 2007.26
The Registry Agreement between ICANN and VeriSign, Inc. was signed in May 2001. Its expiration on June
30, 2005, gave rise to a dispute between the two. On October 24, 2005, ICANN announced proposed settlement
terms between ICANN and VeriSign, including a proposed new .com agreement.27
On March 1, 2006, the boards of
both ICANN and VeriSign approved the proposed agreement, which provides for the settlement of all existing
disputes between ICANN and VeriSign, coordination of planning where appropriate, and commitment to binding
international arbitration to prevent any future disagreements from resulting in costly and disruptive litigation. An
important part of the agreement was the creation of a clearly defined process for the introduction of new registry
services, as incorporated in the new .com Registry Agreement.28
The agreement also extends the term of VeriSign's
management of the world's oldest public registry .com, and sets out better ways for ICANN and VeriSign to work
together to promote stability and innovation of the world's most important TLD.29
In 2004, ICANN was also seeking an independent third-party professional firm to manage the .net “successor”
registry operator process and to ensure a fair and independent process.30
However, on June 8, 2005, ICANN
approved entering into a new agreement with VeriSign for their continued management of the .net registry for six
additional years.31
Although no new TLDs were introduced in 2007, 2006 witnessed the introduction of two: on May 30, 2006, .tel
was introduced, and on December 6, 2006, .asia was introduced.
In June, 2008, ICAAN approved a series of resolutions , including a resolution to approve new generic TLD
naming procedures in an effort to open the domain name space to more top-level domain applications. ICAAN
expects to take applications beginning some time in 2010, allowing time to finalize an implementation plan and the
Applicant Guidebook, alerting potential applicants to the process. Several iterations of a draft gTLD Applicant
Guidebook have been made available for public comment. The current draft is available for comment at
http://icaan.org/en/topics/new-gtld-comments-en.htm. There will be a dispute resolution process to register
objections to applications, whether based on some trademark or brand confusion, or what has been termed loosely a
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“morality” objection. As of now, the following are grounds for objection to a proposed gTLD: String Confusion
Objections, Legal Rights Objections, Morality and Public Order, Community Objections.32
At the ICAAN meeting
in Cairo in November 2008, ICAAN could only confirm that the specific processes through which new gTLDs
would be allocated was still up for debate.
[C] Understanding the World Wide Web
With a system of Internet addressing in place, software was created to make the Internet easier to use by
including a graphical user interface (GUI). This model, developed by Tim Berners-Lee of Switzerland, has now
become the standard for the Web. The Web uses a system of linking or “hyperlinking” to allow a user to quickly
move from one document or Web site to another, regardless of whether the documents are located on the same
computer, on different computers, or in different countries. A Web page is a “hypertext” document that is contained
on a computer connected to the Internet known as a “Web server.” This document may contain text, graphics, video,
sound or links to other documents.
Web pages are created using Hypertext Markup Language (HTML), which is a set of special instructions called
“tags” or “markups” that determine the visual layout of each page and specify links to other documents. HTML
allows Web page developers to incorporate graphics, animation, audio, video, databases, and plug-in or helper
applications. HTML also allows for hidden commenting known as “meta tags.” Meta tags allow Web page designers
to describe the programmed code or list hidden instructions to facilitate later changes. This concept is borrowed
from the practice of including comments embedded in traditional computer programming.
Extensible Markup Language (XML) is a set of special instructions used to create common information formats
to share data on the Web. XML is similar to HTML, as both contain markup symbols to describe the contents of a
page or file. XML describes the content of a Web page in terms of what data is being described. For example,
<STADDRESS> could indicate that the data that followed it was a street address. This means that an XML file can
be processed purely as data by a program or it can be stored with similar data on another computer or, like an HTML
file, it can be displayed. HTML and XML may be used together in Web applications.
In addition to understanding the mechanics of the Internet in order to efficiently retrieve information, a user
must also learn navigation techniques. Once a connection is made, the user must communicate with the Web server
to download Web pages and view them. Web browser software (Browser) is employed to interpret and display Web
pages and enables the user to hyperlink to other Web pages. Common Browsers include Netscape Navigator and
Microsoft Internet Explorer. Browsers retrieve Web pages by using a Uniform Resource Locator (URL). A URL is
an address that points to a specific resource on the Internet. All Web page URLs begin with “http://,” which stands
for “hypertext transfer protocol,” the communications standard used to transfer documents on the Web.
[D] Surfing the WWW Using Web Browsers and Search Engines
Browsers keep track of Web pages viewed through the use of a history list,33
bookmark list,34
or Internet
“cookie.” Unlike a history list or bookmark list, which are both designed to assist the user, a cookie is used to assist
the Web servers and content providers by giving them information about the user. A cookie is a file stored on a
computer that can be accessed by Web sites that a user visits. With each visit, the Web server deposits information
in the cookie file about that visit and that information can later be used to personalize information for the user. Web
servers now have the ability both to (i) customize Web site content on a person-by-person basis and (ii) gain
valuable information about its users.35
Although a Browser cannot, alone, provide the hosting Web site with
personal information, a cookie will not only reveal that the surfer had previously visited the site, but will also reveal
the Web pages that the surfer viewed. Only if the user provides the site with personal information, such as by
answering questions or completing a form, will the site be able to obtain the user's personal information. A valuable
marketing research asset is created when this personal information is coupled with the surfer's viewing habits
obtained from cookies.
One of the tools for navigating the Web is the use of “search engines” and “Web portals.” Search engines and
Web portals provide services to web surfers in an attempt to attract masses to their Web sites. A search engine or
Web portal provides individuals who use these sites with a starting point to navigate through the vast information
available online. Common portals include www.google.com, www.aol.com, www.lycos.com, www.altavista.com,
www.yahoo.com, www.netscape.com, www.msn.com, and www.excite.com. These Web sites not only provide news
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and information, but also allow visitors to search a directory or database of internal information, as well as external
links to other Web sites indexed by keywords and topics.
When searching the Internet for content, search engines review and often analyze the HTML code of each Web
site to develop a profile of searchable keywords that they later index. Additionally, by using meta tags, Web site
creators can specify the keywords that they would like indexed by the search engine. Meta tags may include multiple
listings of the selected keyword. For example, an e-commerce site selling consumer electronics may use meta tags
such as “television, DVD, player, radio, TV, VCR, CD …” while a software distributor may use a meta tag listing
such trademarks as “Microsoft, Adobe, Netscape, Windows.…”
The computer industry epitomizes a dynamic field. As technology advances, it stresses traditional applications
of intellectual property law. It is important to recognize that there is a direct relationship between the strain on
intellectual property law and the likelihood of unpredictable litigation. As the strain increases, so does the
opportunity for capricious litigation; a reality which must be recognized when drafting license agreements.
Attorneys must also be cognizant of the emerging risks and rewards inherent in the use of intellectual property on
the Internet.
§5.03 LICENSING ONLINE
[A] Introduction
Faced with stiff competition, companies are constantly looking for ways to both (i) streamline their delivery
processes and (ii) reduce costs of manufacturing the various media on which their goods and services are delivered.
Many companies have found one solution to these challenges is to engage in e-commerce by delivering goods and
services directly to their customers over the Internet. One of the many challenges faced by companies engaged in
e-commerce (in addition to issues involving security and the accuracy of the downloading process) is to ensure that
the end-user is bound by an enforceable agreement. In a typical online licensing situation, a practitioner must assist
the client in trying to balance the competing goals of streamlining the licensing process for the end-user with
ensuring that there is a valid, enforceable end-user license agreement. A failure of the license could leave a client
exposed to liability and without rights.36
In certain instances, without an enforceable software license agreement, an
end-user could argue that the transaction was in fact not a license, but a sale under the first sale doctrine, codified at
17 U.S.C. §109. Thus, if correct, the end-user would not be bound by the terms of the license agreement and could
attempt to re-sell the subject matter of the agreement to a subsequent buyer who might not be bound by the license
limitations.
This section initially discusses a handful of important cases involving “click-wrap” agreements (i.e., the offeree
clicked a button entitled “I Accept” or “I Agree” after a display of provisions of the applicable agreement or a Web
site's Terms of Use to bind himself to same). While the E-SIGN Act and the UETA have essentially blessed and
facilitated the act of conducting electronic transactions, these cases have helped establish the baseline for an
enforceable online license. Following this section, we discuss cases passed on this year that further this instructive
line of cases and in certain instances stretch or break these established parameters. Finally, we discuss the relevance
and lessons of the Uniform Computer Information Transactions Act (UCITA).
[B] Lessons Learned: Seminal Online Contracting Cases
The established case law concerning electronic contracting stresses the importance of providing licensees with
an opportunity to review contractual terms before manifesting their assent. These cases largely focus on the extent to
which users have been put on actual or constructive notice of the contractual terms that require assent.
[1] Specht v. Netscape Communications Corp.
In Specht v. Netscape Communications Corp.,37
the Second Circuit held that license agreement terms governing
the use of a downloaded software program were unenforceable because the defendant failed to (1) provide computer
users with adequate notice and (2) require computer users to manifest their consent to the license agreement. In
Specht, users who downloaded a “plug-in” program38
called SmartDownload alleged that each time a user
downloaded files, the program transmitted private information regarding the files to Netscape Communications
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Corp. (Netscape) through a “cookie” and other monitoring technology, in violation of various federal statutes
protecting consumer privacy.39
The defendant argued that the plaintiff-users were bound by a licensing agreement
requiring users to submit to arbitration in the event of a dispute. The plaintiff argued that they were not required to
arbitrate because there was no reference to a license regarding SmartDownload on the Web page from which users
downloaded the plug-in. Users could access the license terms only by scrolling below the first screen/page and then
clicking on a link that would take them to a separate Web page that contained general language warning that the use
of various Netscape products is subject to a license agreement.40
The Web page also included a list of license
agreements and an option to click on a link to any specific agreement, which would then be displayed with an
acceptance button.41
The Second Circuit affirmed the District Court's ruling that Netscape's Web page did not contain an enforceable
click-wrap agreement and that the users were therefore not bound by its terms. Rejecting Netscape's argument that
users should be bound by the terms because they should be held “to a standard of reasonable prudence,” the court
found that because “[p]laintiffs were responding to an offer that did not carry an immediately visible notice of the
existence of license terms or require unambiguous manifestation of assent to those terms,” the plaintiff-users were
not bound by the licensing agreement and did not have to submit to arbitration pursuant to its terms.42
[2] Ticketmaster Corp. v. Tickets.com, Inc.
While Specht indicates that it is important to provide users with a clear opportunity to review and agree to the
terms of agreements that concern distributing goods or services over the Internet, other courts have been less
stringent when determining what constitutes satisfactory notice to and acceptance by users and have gone so far as
to enforce the terms of browse-wrap agreements, depending on the circumstances of the cases.43
For example, in
Ticketmaster Corp. v. Tickets.com, Inc.,44
the court held that an enforceable browse-wrap agreement was created by
a notice posted on the plaintiff's Web site stating that all information found inside the site—from which information
was obtained through the use of a “spider”45
and then posted on the defendant's Web site—was not to be used for
commercial purposes. The court explained that it would have been preferable for the plaintiff to incorporate a click-
wrap agreement on its Web site, which would “make it clear that the user had called to his attention the conditions
he or she accepted when using the Web site.”46
Nevertheless, the court found that a contract was formed when a
user merely entered the interior pages of the Web site “after knowledge (or in some cases, presumptive knowledge)
of the conditions accepted when doing so.”47
Thus, the act of entering into the interior of the Web site was found to
be enough to constitute a manifestation of assent on the part of the user.
[3] Register.com, Inc. v. Verio, Inc.
The court also found a binding contract in Register.com, Inc. v. Verio, Inc.,48
which involved a dispute that
arose after the defendant refused to abide by restrictions placed on the use of information policy provided by the
plaintiff.49
Notably, the court stated that the issue in this case was the user's knowledge, not the manifestation of the
user's assent.50
Because the defendant was fully aware of the Terms of Use when it took information from the
plaintiff's Web site, its repeated use constituted acceptance of those terms.
[C] 2006, 2007 and 2008 Case Law: Licensing Online
The precedent setting cases discussed above focus on the general enforceability of online agreements and terms
of use and establish some of the basic ground rules for contracting online. Recent cases have continued to focus on
determining the parameters of an enforceable agreement. For example, courts have analyzed the significance of
where terms are placed within an online agreement, or if the terms are “hyperlinked” for convenient user access.
Courts seem fairly settled that clicking “I accept” can be a manifestation of assent to the terms of a click-wrap
agreement, particularly where click-wrap agreements are clear and unambiguous. Moreover, as browse-wrap
agreements become more common as a result of E-Commerce, courts are increasingly upholding browse-wrap
agreements in cases where it can be shown that the web-site user clearly had knowledge of its terms prior to use.
[1] Fieldtech Inc. v. Component Control.com Inc.
In Fieldtech Avionics & Instruments Inc. v. Component Control.com, Inc.,51
a software warranty disclaimer that
was buried several pages deep into a click-wrap agreement in the same font as the rest of the click-wrap agreement
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was held unenforceable and, as a matter of Texas state law, inconspicuous. “The warranty disclaimer [Defendant]
relies on appears in the clickwrap agreement” and “appears on the third page of the five-page clickwrap agreement,
is not in larger type or other contrasting font or color,” thus, the court held that the warranty disclaimer was “not
‘conspicuous’ as a matter of law and was ineffective to disclaim [any] implied warranties.”52
[2] State of N.Y. v. Direct Revenue LLC
A New York County court in State of N.Y. v. Direct Revenue LLC.53
held that users who clicked “yes” to assent
to the terms of an end user license agreement (EULA), which was hyperlinked for user access, automatically
accepted installation of pop-up advertising software that was bundled with the original software because the users
were on notice and bound by a clickwrap agreement that was formed by accepting the EULA.54
Because the
Defendant produced software that also automatically installed pop-up advertising software on user’s computers, the
users filed complaints with the New York Attorney General’s Office to probe into the Defendant’s software
distribution practices, resulting in false advertising and trespass claims to be filed against the Defendant.55
However,
Defendant’s EULA specifically informed users that the software would “collect information about websites [users]
access and will use that information to display advertising on [user] computer[s]”, display advertisements in the
form of pop-up ads, and that users may uninstall the software at any time; the EULA also provided a disclaimer of
all warranties and a limitation of liability clause.56
Thus, the court concluded that when users first clicked on the
“Yes” button on a dialog box to assent to the terms of the EULA, and the EULA was provided to users through a
hyperlink specifically referring to the agreement, this conduct created a binding “click-wrap” agreement which
barred any claims for deceptive or unlawful conduct.57
The court also held that under New York State law, click-
wrap agreements are enforceable so long as the consumer is given a sufficient opportunity to read the EULA and
assents thereto after being provided with an unambiguous method of accepting or declining the offer.58
[3] A.V. v. iParadigms LLC
The Eastern District of Virginia in an interesting turn decided to enforce a click-wrap agreement and to not
enforce browse-wrap language accessible on other portions of a website in A.V. v. iParadigms LLC.59
The court held
that the parties entered into a valid contractual agreement when Plaintiffs clicked “I Agree” to acknowledge their
acceptance of the terms of a click-wrap agreement, which included a limitation of liability clause, and a valid
contract was formed based on the terms of the click-wrap agreement.60
The iParadigms court also cited many other
instances where click-wrap agreements were found to be enforceable.61
However, the iParadigms court concluded
that the indemnification clause located in the “Usage Policy” was not enforceable because it was not incorporated
into the click-wrap agreement and instead was “browse-wrap” language that could only be accessed only by
browsing the entire website and viewing the website terms of use.62
The click-wrap agreement stated, in its terms
that “This agreement constitutes the entire agreement between the user and iParadigms” and made no reference to
the Usage Policy or the indemnification clause.63
The court also reasoned that there was no evidence that Plaintiffs
assented to the terms of the Usage Policy because there was no evidence that Plaintiffs viewed or read the Usage
Policy containing the indemnification clause or that Plaintiffs ever clicked on the link or were ever directed by
Defendant’s website to view the Usage Policy.64
The court further stated that there was no evidence to impute
knowledge of the terms of the Usage Policy to plaintiffs because in some instances such as Register.com, Inc. v.
Verio, Inc. and Fru-Con Constr. Corp. v. Country of Arlington, courts have imputed knowledge to web site users of
the terms of use of sites based on the users’ repeated use of the sites and exposure to their terms of use.65
In this
case, the Plaintiffs did not have the same level of exposure to terms of use as some of the other cases beyond the
existence of the Usage Policy link that appeared on each page.66
Thus, only the click-wrap agreement was
enforceable.
[4] Inter-Mark USA Inc. v. Intuit Inc.
The Northern District of California in Inter-Mark USA Inc. v. Intuit Inc.,67
held that a party cannot deny the
acceptance of a disclaimer of warranties located in a click-wrap agreement without first establishing that the entire
agreement was unenforceable. The Inter-Mark court also analyzed whether the “Disclaimer of Warranties” in the
Software License Agreement was “conspicuous” under California Commercial Code Section 2316(2)68
and
concluded that it was conspicuous because it was printed in all capital letters when viewed on-line in website form.69
The court also cited Specht v. Netscape and Feldman v. Google in order to reach the conclusion that the Software
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License Agreement was valid because Plaintiff brought no factual or legal allegations that the Software License
Agreement was unenforceable.70
[5] Davis v. Dell, Inc.
In Davis v. Dell, Inc.,71
an arbitration clause included in the Terms and Conditions of a click-wrap agreement
was held binding and enforceable as applied to purchasers of Dell LCD televisions even though the arbitration
clause was expressly limited to the purchase of “computer systems and/or related products and/or services and
support”, not television products.72
In order to gauge whether the arbitration clause was enforceable, and to decide a
motion to compel arbitration, the court used the holding under Trippe Mfg. Co. v. Niles Audio Corp.,73
to ask (1)
whether the parties entered into a valid arbitration agreement, and if so, (2) whether the scope of that agreement
encompasses the claims at issue in this case.74
However, the court first made a threshold inquiry into whether the
arbitration clause in the Terms and Conditions applied to the Plaintiff’s purchase, whether to apply either Texas or
New Jersey law, and finally whether the arbitration clause was valid under the chosen state’s law.75
In determining
the validity of the arbitration clause under New Jersey law, the court used the definition of a “clickwrap” agreement
defined by Feldman v. Google, Inc.76
in order to conclude that under “both New Jersey and Texas law, when a party
uses his computer to click on a button signifying his acceptance of terms and conditions in connection with an online
transaction” (a “party may manifest assent to a contract by clicking on an ‘I Accept’ button in connection with an
internet transaction”), he “thereby manifests his assent to an electronic agreement.”77
Therefore, the court concluded
that the Plaintiff’s “clicking of the accept box constituted a manifest assent by Plaintiff to Dell’s Terms and
Conditions”78
and by “reading the contract in the context in which it was made”79
, the Plaintiff could not have
purchased a television without actively choosing to click the computer indicating their agreement to the Terms and
Conditions, and thus, the Terms and Conditions applied not only to the purchase of “computer systems and/or
related products and/or services and support” but also to the Plaintiff’s purchase of a television in this instance.80
[6] Adsit Co. v. Gustin
The Indiana Court of Appeals held in Adsit Co. v. Gustin that a computer user and her agent were bound by a
forum-selection clause contained in a click-wrap agreement and both the user and her agent were subject to personal
jurisdiction in Indiana because the user accepted the forum-selection clause in the click-wrap agreement by clicking
an “I Accept” button located below the company’s terms of use on the bottom of a webpage.81
The Adsit court
applied the holding in Feldman v. Google which stated that in order to “determine whether a clickwrap agreement is
enforceable, courts presented with the issue apply traditional principles of contract law and focus on whether the
plaintiffs had reasonable notice of and manifested assent to the clickwrap agreement”.82
Thus, the court concluded
that because the user had to affirmatively click the “I Accept” button, the entire policy was only three short
paragraphs and viewable on a website, and the forum selection clause was bolded and in all capital letters, the user
had reasonable notice of and manifested assent to the click-wrap agreement containing the forum selection clause.83
Therefore, the forum selection clause contained in the click-wrap agreement was valid, enforceable and binding on
the computer user.
[7] Bragg v. Linden Research Inc.
In Bragg v. Linden Research, Inc.84
, the Eastern District of Pennsylvania declared that an arbitration clause
buried deep within a take-it-or-leave-it click-wrap agreement was unconscionable as applied to a dispute over
“virtual property” acquired in the “Second Life” virtual world, where individuals possess virtual personalities and
can exist and conduct transactions on-line in an entirely virtual form.85
Before a person is permitted to participate in
the Second Life virtual world, he or she must accept the Terms of Service (“TOS”) of Second Life by clicking an
“accept” button indicating acceptance, and included in these TOS is an arbitration clause located in the fourteenth
line of the thirteenth paragraph under the heading “GENERAL PROVISIONS”.86
In analyzing whether the
arbitration clause was unconscionable under California law, the Bragg court looked at both the substantive and
procedural components of unconscionability87
and applied the holding set out in Comb v. PayPal, Inc. to conclude
that the Second Life TOS was a procedurally unconscionable contract because it was presented on a “take-it-or-
leave-it” basis without the opportunity for meaningful negotiation .88
Thus, the Second Life TOS was a take-it-or-
leave it adhesion clickwrap agreement because a “potential participant can either click ‘assent’ to the TOS, and then
gain entrance to Second Life’s virtual world, or refuse assent and be denied access.”89
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[8] ESLWorldwide.com Inc. v. Interland Inc.
The Southern District of New York in ESLWorldwide.com Inc. v. Interland Inc.90
concluded that a customer
who did not read the terms prior to clicking an “Accept” button to the Terms of Service (“TOS”) on the website of
an Internet Service Provider (“ISP”) is bound by a forum selection clause contained in the TOS, and that the TOS
was enforceable and valid. When Plaintiff entered the Support Site, he was required to “Accept” or “Decline” a new
TOS, and the text above the “Accept” and “Decline” boxes mentioned that by clicking the above “Accept” button
“you acknowledge that you have read and agree to be bound by the policies listed below, including the Terms of
Service and Acceptable Use Policy” and the new TOS was accessible by clicking on an accompanying link.91
The
Plaintiff argued that he did not remember clicking the “Accept” button and that even if he did click the button, he
did not understand he was creating a new account and adding a new TOS to his existing account. However, the court
held that these arguments were insufficient to overcome the presumption of a valid forum selection clause in a click-
wrap agreement because the Defendant had records of the Plaintiff clicking the “Accept” button and it was not
possible to access certain other sections of the site, which were accessed, without first clicking the “Accept”
button.92
The court also mentioned that there is a heavy burden associated with overcoming a forum selection
clause’s presumptive validity.93
[9] Recursion Software, Inc. v. Interactive Intelligence, Inc.
In Recursion Software, Inc. v. Interactive Intelligence, Inc.,94
the court upheld click-wrap agreement terms
associated with software. In so holding, the court observed that (1) the terms were relatively short, and (2) all
disclaimers were typed in capital letters and not deeply placed in the software license.95
In this case, both parties
were software companies.96
Plaintiff alleged that defendant improperly incorporated software developed by
plaintiff's predecessor in interest into its own products.97
Defendant did not dispute that it downloaded the software;
rather defendant argued that it never agreed to the terms of the click-wrap agreement. The court inferred assent
because it found that defendant could not have downloaded the software without clicking “yes” to accept the terms
of the click-wrap agreement.98
[10] Bar-Ayal v. Time Warner Cable, Inc.
Although the terms in a short click-wrap agreement appear to the consumer sooner and are therefore less likely
to be construed as being buried in the agreement, the enforceability of a click-wrap agreement does not necessarily
turn on its length, as there are measures that can be taken to ensure the enforceability of lengthier click-wrap
agreements. In Bar-Ayal v.Time Warner Cable, Inc.,99
for example, the court upheld an arbitration clause in a click-
wrap agreement despite its deep placement in a lengthy consumer agreement. There, the plaintiff brought suit
against Time Warner Cable, Inc. (Time Warner), his cable television and Internet provider, alleging that Time
Warner collected unlawful fees.100
Time Warner moved to compel arbitration pursuant to a lengthy click-wrap
agreement provided in its Internet software CD-ROM.101
Plaintiff did not dispute installing the software.102
Rather,
plaintiff argued that Time Warner failed to put him on “clear notice” of the customer agreement, including the
arbitration clause, which appeared toward the end of the agreement.103
The court noted that plaintiff was notified
that he would have to consent to a customer agreement when installation began, and had to click “accept” eight
times, including a final “accept” to complete the installation.104
The U.S. District Court for the Southern District of New York held that plaintiff, by installing the software,
accepted the arbitration clause.105
Therefore, despite the arbitration clause’s deep placement, plaintiff’s multiple
“acceptances” of Time-Warner’s click-wrap agreement during installation was determinative.
[11] Nazaruk v. eBay, Inc.
Similar to the Bar-Ayal case involving an arbitration clause in a click-wrap agreement, the U.S. District Court
for Utah upheld a forum selection clause in a click-wrap agreement. In Nazaruk v. eBay,106
the court upheld a forum
selection clause in eBay's click-wrap agreement where the user was required to click “I accept” to terms including
the forum selection clause during initial registration on the company Web site.107
There, eBay moved to dismiss
plaintiff's action on the ground of improper venue.108
Plaintiff conceded that in order to buy or sell on eBay,
individuals must first register with eBay.109
Plaintiff further conceded that the forum selection clause was part of the
agreement between the parties.110
The forum selection clause at issue was mandatory, providing that: “You agree
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that any claim or dispute you may have against eBay must be resolved by a court located in Santa Clara County,
California.”111
Accordingly, the court granted eBay's motion to dismiss for improper venue.112
[12] Durick v. eBay, Inc.
When a click-wrap agreement is clear and unambiguous, courts will usually enforce its terms. In Durick v.
eBay,113
Durick, an eBay user, appealed a lower court's grant of summary judgment for eBay.114
Plaintiff disputed
eBay's suspension of his user account for alleged violations of eBay's click-wrap agreement.115
The Ohio Court of
Appeals upheld the lower court's decision, finding that eBay's click-wrap agreement was clear and unambiguous.116
[13] Southwest Airlines Co. v. Boardfirst, LLC.
With respect to browse-wrap agreements, where it can shown that a web-site user had actual or constructive
knowledge of the terms of use of a web-site, the court is likely to enforce such terms. In Southwest Airlines v.
Boardfirst, LLC117
, Southwest Airlines brought a law suit against Boardfirst for breaching the terms of use posted on
the airline’s website. Boardfirst’s sole purpose in its activities was to obtain boarding passes from Southwest
Airlines’ web-site and sell them to the airline’s customers via a separate web-site. The court held that Boardfirst had
ample notice of the terms of use prohibiting any third-parties from using the web-site for commercial purposes
because (i) the link to the terms of use appeared on the homepage and (ii) Southwest had sent a cease and decease
letter to Boardfirst. The court upheld the browse-wrap agreement noting that “As browsewraps have become more
prevalent in today’s increasingly e-driven commercial landscape, the courts have been called upon to determine their
enforceability. Though the outcomes in these cases are mixed, one general principle that emerges is that the validity
of a browsewrap license turns on whether a website user has actual or constructive knowledge of a site's terms and
conditions prior to using the site.”118
[14] Feldman v. Google, Inc.
In Feldman v. Google, Inc.,119
the Second Circuit upheld a forum selection clause in a click-wrap agreement
even though the user had to scroll through the text box to read the agreement in its entirety. The plaintiff argued that
there was no "meeting of the minds" to form a contract because he did not have notice of and did not assent to the
forum selection clause. The court held that the there was an express contract because the plaintiff had reasonable
notice of the terms even if plaintiff had failed to read the agreement.120
The court noted that the text in the click-
wrap agreement was not only immediately visible to the user but there was also a prominent warning in boldface
instructing the user to read the terms carefully and to indicate assent by clicking "Yes" if the user agreed and the
user also had to click on the "Yes" button in order to proceed with the on-line registration.121
[15] Cohn v. Truebeginnings, LLC
[In an expansive, but unreported case this past year involving the enforceability of a forum selection clause, the
defendant's Web site in Cohn v. Truebeginnings, LLC122
contained both click-wrap and browse-wrap features.
There, the Web site user had to click on the "Continue" button below the sentence 'I am at least 18 years old, and I
have read and agree to the True Terms of Use and Code of Ethics.'. The 'True Terms of Use' and 'Code of Ethics'
served as hyperlinks to access the contractual terms of the Web site. The court emphasized that the only way the
user could complete the registration process was to click on the "Continue" button. The court held that the lower
court did not abuse its discretion in finding that the Plaintiff had agreed to the forum selection clause contained in
the "Terms of Use" even though the Web site did not require the user to link to the "Terms of Use" to view the
agreement. The court explained that the only way the user could complete the registration process was to click on
the "Continue" button and that the "Terms of Use" were readily available to the user noting that "where appellant
obviously had access to the Internet and was entering into a contract on the Internet, there was nothing inherently
unfair about requiring him to access contractual terms via hyperlink, which is common practice in the Internet
business.”
[16] Affinity Internet Inc. v. Consolidated Credit Counseling Svrcs.
In addressing the enforceable parameters of click-wrap agreement terms, courts have started to address whether
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print contracts can be modified by reference to terms in a click-wrap agreement. In Affinity Internet Inc. v.
Consolidated Credit Counseling Svrcs.,123
Affinity Internet, Inc. (Affinity) agreed to provide computer and Web
hosting services to Consolidated Credit Counseling Services, Inc. (Consolidated).124
The parties' contract provided
that the contract was subject to terms and conditions on Affinity's Web site. Affinity sued Consolidated for breach of
contract alleging that it violated terms and conditions on the Web site.125
Affinity sought to compel arbitration
under an arbitration provision that existed only on its Web site, arguing that the arbitration clause applied because
the print contract was subject to terms and conditions on its Web site. The Florida Court of Appeal held that mere
reference to Web terms in a print contract did not incorporate them into the parties' contract.126
[17] Wholesale Telecom Corp. v. ITC DeltaCom Comm., Inc.
By contrast to Affinity Internet Inc., where the court found mere reference to Web terms in a print contract
insufficient to incorporate such terms into the contract, the U.S. Court of Appeal for the Eleventh Circuit found that
an express provision providing for contract modification via Web terms was enforceable. In Wholesale Telecom
Corp. v. ITC DeltaCom Comm., Inc.,127
Wholesale Telecom Corp. (WTC) entered into a print contract with ITC
DeltaCom Communications, Inc. (ITC) whereby ITC agreed to transmit WTC's international long-distance calls.128
The parties executed a print contract that provided for modification of service rates via ITC's Web site.129
WTC
filed suit against ITC when ITC raised its service rates via its Web site.130
The court held that the rate could be
modified via ITC's Web site as provided by the contract.131
[D] Attempts to Codify Online Contracting
The Uniform Computer Information Transactions Act (UCITA) is a proposed uniform law created by the
National Conference of Commissioners on Uniform State Laws (NCCUSL).132
To date, only two states, Maryland
and Virginia, have enacted, albeit slightly different, versions of UCITA. Several states that have considered UCITA
have rejected it and several, such as Iowa, West Virginia and North Carolina, have enacted legislation to protect
consumers from its choice of law provisions.133
While UCITA has not enjoyed the wide acceptance many
commentators believed it would receive, it still remains relevant in those jurisdictions and to agreements subject to
the laws of the applicable jurisdictions. UCITA can also be instructive to those practitioners seeking a set of hard
and fast rules for enforceable electronic agreements.134
UCITA addresses all the standard contract issues that the
UCC addresses for the sale of goods, including provisions relating to offer and acceptance, warranties, transfer of
contract interests, the rights and obligations of the parties in the case of a breach, and applicable remedies. UCITA
applies to computer information transactions, which include computer software, multimedia products, computer data
and databases, online information, or any transaction which includes computer information and goods.135
It was
designed to (a) create a uniform commercial contract law; (b) enable and expand commercial practice in computer
information transactions by commercial usage and agreement of parties; and (c) permit the continued expansion of
commercial practices in transactions excluded from the Act, through custom, usage, and agreement of the parties.136
UCITA also applies to click-wrap licenses. Additionally, it applies to issues unique to electronic contracting.
Because the Internet is a major delivery mechanism for multimedia content, it is essential to understand how this law
makes electronic licenses enforceable.
UCITA seeks to ensure consumers engaging in online transactions have relevant information before they are
bound by the terms contained therein. Section 112 of UCITA focuses on the manifestation of assent as follows:
(a) A person manifests assent to a record or term if the person, acting with knowledge of
or after having an opportunity to review the record or term or a copy of it: (1)
authenticates the record or term with intent to adopt or accept it; or (2) intentionally
engages in conduct or makes statements with reason to know that the other party or its
electronic agent may infer from the conduct or statement that the person assents to the
record or term.137
Official Comment 2 to Section 112 states that the term “manifesting assent” comes from Section 19 of the
Restatement (Second) of Contracts.138
The Official Comment makes it clear that an “opportunity to review” the
record or term is the crucial prerequisite to assent. Furthermore, Official Comment 8 addresses the “opportunity to
review” requirement in more detail. For example, the Comment states,
“common law does not clearly establish this requirement, but the requirement of an
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opportunity to review terms reasonably made available reflects simple fairness and
establishes concepts that curtail procedural unconscionability. For a person, an
opportunity to review requires that a record be made available in a manner that ought to
call it to the attention of a reasonable person and permit review. This requirement is met if
the person knows of the record or has reason to know that the record or term exists in a
form and location that in the circumstances permit review of it or a copy of it.” 139
Manifesting assent does not require any specific language or conduct. Rather, to manifest assent to a record or
term requires meeting three conditions. First, the person must have knowledge of the record or term or an
opportunity to review it before assenting. This review requires that the record be available in a conspicuous manner
that readily permits review. It may also require a right of return to review the terms if the opportunity to review does
not occur before initial performance. Second, having had an opportunity to review, the person must manifest assent,
meaning the individual must make an affirmative action to indicate acceptance of the terms. This can include a
failure to act if the circumstances so indicate. Third, the conduct, statement, or authentication must be traceable to
the person giving consent. Authentication occurs if a party signs a record or an electronic equivalent such as
checking a box. Assent can also occur if a person acts or fails to act having reason to know his/her behavior will be
viewed by the other party as indicating assent. In other words, actions objectively indicating agreement to the terms
are deemed assent. Note also that assent does not require that a party be able to negotiate or modify terms, but the
assenting behavior must be intentional or voluntary. In addition, under Section 112(d), use of the product constitutes
assent.140
The assent provisions contained in UCITA have significant implications regarding the downloading of software
from the Internet and the use of end-user licensing agreements. As stated above, UCITA has only been enacted in
two states (and the Virgin Islands), and the NCCUSL has discharged its UCITA “Standby Committee,” thereby
ending its lobbying efforts. Although the future of UCITA seems uncertain, due to the breadth of UCITA and its
potential applicability to the enforcement of click-wrap and shrink-wrap agreements discussed in the cases below,
practitioners should, at a minimum, watch for the possibility of its introduction in the jurisdictions in which they
practice or where their clients conduct business.141
[E] Practical Guidance
By including a few preventive measures and erring on the side of caution, parties can continue to enter into
agreements over the Internet with confidence that they will be enforced by the courts.
Although courts have enforced browse-wrap agreements, practitioners would be better off advising their clients
to employ click-wrap agreements. A click-wrap agreement requires users to definitively manifest their assent before
proceeding further, usually by clicking an “Accept” button, and the precedent setting cases indicate a general
enforceability of click-wrap agreements that are clear and unambiguous. In contrast, browse-wrap agreements or
browse-wrap language only accessible by browsing other portions of a website are far more passive and the outcome
of such cases are far less predictable. Despite its shortcomings, a comprehensive study on browse-wrap agreements,
conducted by the American Bar Association determined that a browse-wrap agreement is more likely to be
enforceable if it satisfies the following four elements:
(i) The user is provided with adequate notice of the existence of the proposed terms;
(ii) The user has a meaningful opportunity to review the terms;
(iii) The user is provided with adequate notice that taking a specified action (which may be use of the Web site)
manifests assent to the terms; and
(iv) The user takes the action specified in the latter notice.142
According to recent cases and scholarship, the most important of these elements appears to be the first.
Courts are likely to uphold browse-wrap agreements if it can be shown that the web-site user had actual or
constructive knowledge of the web-site’s terms of use prior to using the web-site.143
Furthermore, as shown in the above A.V. v. iParadigms case, courts have outlined what would be
considered “sufficient” notice in terms of browse-wrap “exposure” in order to give a user actual or constructive
knowledge of web-site terms of use. Representative cases include Register.com, Inc. v. Verio, Inc. (where the user
was “daily submitting numerous queries, each of which resulted in [the user] receiving notice of the terms”)144
and
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Fru-Con Constr. Corp. v. Country of Arlington (where the user had “reviewed” and “thoroughly” understood “the
scope, terms and conditions set forth” in a separate specifically referenced document)145
. Therefore, cases like
Register.com and Fru-Con Constr. Corp. can be used to formulate a helpful limit test to aid clients in determining
how much notice is “enough” in constructing a valid browse-wrap agreement.
Notwithstanding the above, using a click-wrap agreement (as opposed to a browse-wrap agreement will make it
much easier to establish that a user had notice of the terms of the agreement when he or she manifested his or her
assent. Additionally, click-wrap agreements have withstood attacks on their validity based on allegations that such
agreements are, in actuality, contracts of adhesion because the author of the agreement has complete control of its
terms. One court stated that “it is the unfair use of, not the mere existence of, unequal bargaining power that is
determinative.”146
Consequently, practitioners should advise their clients to keep the terms of the agreement fair, in
order to safeguard against possible invalidation as a contract of adhesion.
The cases analyzed herein demonstrate several things. In Specht, the court found that there was no manifestation
of assent because there was no evidence that the user had notice of the terms of the license, as the link to those terms
was “below the fold.” Also, no assent was found in the Fieldtech case because the disclaimer was buried a couple
pages deep into the agreement, and was not “conspicuous”, being in the same font as the rest of the document.
However, in Register.com, although the Terms of Use were not shown to the user prior to using the database, the
repetitive nature of the use in that case evidenced knowledge of the terms, and thus assent to the terms by the user.
But, Register.com also emphasizes that the practitioner should not rely on the user manifesting assent after the use.
To be safe, he/she should show the terms of use upfront and require active manifestation of assent prior to use of the
services. Ticketmaster also warns the practitioner that click-wrap agreements are preferable to browse-wrap
agreements.
When advising clients on the use of click-wrap agreements, practitioners can help to ensure that the agreement
will be enforced by keeping the following points in mind: First, users should not have the option of manifesting
assent without having been presented with the terms of the proposed agreement, which should either appear
automatically or appear when the user clicks on an icon or hyperlink that is clearly labeled and easily found. The
means of assent should be placed at the end of the agreement terms, but not separated from them, requiring the user
to at least navigate past the terms before assenting.147
Second, users should not be able to gain access to, or rights in,
the Web site, software, information, property or services governed by the proposed agreement without first assenting
to its terms.148
Third, the program operating the click-wrap agreement should give the user sufficient opportunity to
review the proposed agreement terms before proceeding. The user should be able to read the terms at his or her own
pace and even print the terms so they can be read in hard copy. If the terms occupy more than one computer screen,
the user should be able to navigate forward and backward within the terms by scrolling or changing pages, and
critical items should not be buried “below the fold.” Once the user views the terms, the user should be able to review
the terms throughout the assent process.149
In addition, the format and content of the terms must comply with
applicable laws regarding notice, disclosure language, conspicuousness, and other format requirements. The terms
should be clear and readable and appear in a legible font. Should a law require specific assent to a particular type of
term, then the format of the assent process should comply with that requirement.150
In terms of content, information provided to the user elsewhere should not contradict the agreement terms or
render the agreement ambiguous. As the court in Specht emphasized, the actual words of assent or rejection should
be clear and unambiguous. To this end, the following are examples of clear assent and rejection: “Yes,” “I agree,” “I
accept,” “I consent,” or “No,” “I disagree,” “I do not agree” or “I decline.” The assent choices should not include
words that are unclear (“continue”), vague (“next page”), or ambiguous (“submit”).151
At the end of the agreement, the user should be given a clear choice between accepting and rejecting the terms.
This may be accomplished by clicking a button or icon containing the words of acceptance or rejection.
Additionally, the user could be made to actually type the specified words “accept” or “reject.” Both of these
approaches would resolve the passive site issues raised by the courts in Specht and Register.com.152
If the user rejects the proposed agreement terms, that action should have the consequence of preventing the user
from obtaining whatever the click-through agreement is granting the user. Thus, the user should not be able to
complete the transaction without agreeing to the terms. Likewise, if the user assents to the proposed agreement
terms, the user should be granted access to whatever is promised in the agreement without having to assent to
additional terms (aside from those that the user specifies in the ordering process).153
For further clarity, immediately
preceding the place where the user signifies assent or rejection, a statement should plainly draw the user's attention
to the consequences of assent and rejection. An appropriate statement could read: “By clicking ‘Yes’ below you
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acknowledge that you have read, understand and agree to be bound by the terms above” or “These terms are a legal
contract that will bind both of us as soon as you click the following assent button” or “If you reject the proposed
terms above, you will be denied access to the [Web site, software, product, services] that we are offering to you.”154
By incorporating such straightforward statements, which address the consequences of assent or rejection, users will
know exactly what to expect and at the same time this approach will resolve any potential ambiguity which the user
may claim at a later date.
In addition, the assent process should provide a reasonable method to avoid, or to detect and correct, errors
likely to be made by the user during the assent process. One way to accomplish this is to provide the user with a
summary of his or her order with a button to click to modify any of the information.155
Practitioners who follow
these simple steps for Internet agreements will make them clear for licensees and ultimately enforceable.
§5.04 COPYRIGHT ISSUES
[A] Introduction
Copyright issues arise in the development of multimedia products, in the creation of the product, manufacture
and distribution of the finished product, and via customer use of the product. In the past, copyright law was
structured based upon the platform or specific media used to deliver the information product. Multimedia blurs these
discrete categories. Now, various entities are competing in the same multimedia marketplace; including print media,
electronic publishers, software developers, film studios, music publishers, broadcasters, cable operators, and even
electronic hardware manufacturers or semiconductor chip foundries. The convergence of all of these different
players has resulted in an expanded and extended use of infinitely divisible copyrights. The issues surround the
rights that are actually granted from one entity to another, the medium and determining what use is permissible
within the scope of the license grant. For example, license terms for multimedia can control territory, the specific
medium, the duration, royalty arrangements, and the attribution and ownership of derivative works.
[B] What Is Multimedia?
Multimedia involves the delivery of digitalized information employing mixed media. Multimedia consists of
various types of information including text, clipart, photographs, animation, sound recordings and clips containing
full motion video. These are prearranged and interrelated by a layer of indexing and “look and feel” elements.
Multimedia may also refer to Web sites with similar functionality.156
In addition, multimedia is typically interactive,
i.e., users may interact with the information stored in the multimedia product and choose their preferred method to
retrieve the information. Multimedia may be circulated through more traditional forms, by way of CD-ROMs and
diskettes, or online via cable systems, local area networks or telecommunication networks.157
Some CD-ROMs are
distributed along with the right to access updates available online. Multimedia products may contain training and
reference materials, electronic books, games, advertising, electronic brochures, presentations, and catalogs.158
Recently, copyright holders have faced a growing crisis in the form of online copyright infringement. More
specifically, the use of peer-to-peer (P2P) file-sharing programs has enabled copyright infringers to “trade”
copyrighted works at unprecedented speed. As high technology has increased the ease with which copyright law is
violated, the courts have struggled to keep up. Ultimately, practitioners whose clients own valuable copyrights must
keep abreast of the growing body of caselaw that demonstrates how the courts are resolving disputes concerning
online copyright infringement of multimedia products.
[C] The Digital Millennium Copyright Act (DMCA):
Technological Protection Measures
The DMCA, consisting of several amendments to the U.S. Copyright Act codified chiefly at 17 U.S.C. §512
and §§1201 et seq., was passed by Congress on October 12, 1998, and establishes criminal and civil liability for
certain actions that relate to copyright infringement. Through the DMCA, Congress sought to provide increased
copyright protection, thus enhancing the ability of licensors to protect their intellectual property.
First, the DMCA recognizes the various technological protection measures put in place by rights holders to
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protect their copyrighted works. Section 1201 prohibits the circumvention of technological measures “that
effectively control access to a [protected] work.” Circumvention is defined as “descrambl[ing] a scrambled work, to
decrypt[ing] an encrypted work, or otherwise…avoid[ing], bypass[ing], remov[ing], deactivat[ing], or impair[ing] a
technological measure, without the authority of the copyright owner…” 159
In addition, the DMCA prohibits trafficking in any technology, product, service, device, component, or part
thereof, which (a) is primarily designed or produced for the purpose of circumventing a technological measure that
effectively controls access to a work protected under the DMCA; (b) has only a limited commercially significant
purpose or use other than to circumvent a technological measure that effectively controls access to a work protected
under the DMCA; or (c) is marketed by that person or another acting in concert with that person and with that
person's knowledge for use in circumventing a technological measure that effectively controls access to a work
protected under the DMCA.160
Thus, the DMCA makes it illegal to sell or otherwise provide access to products or
services that are specifically marketed for the sole purpose of eluding protective technologies. Subsections (d)
through (g) of this section provide certain exceptions to liability for such purposes as research, law enforcement, and
reverse engineering for the purposes of creating interoperable works. Further, §1201(a)(1)(B)-(D) permits the
Librarian of Congress to enumerate further exceptions to liability every three years, as necessary to permit adversely
affected legitimate users to access works for non-infringing purposes.
On October 28, 2003, the Librarian of Congress announced which classes of works would be subject to an
exemption from the prohibition against circumvention of technological measures that control access to copyrighted
works. There were originally four classes of works under Section 102 of the Copyright Act in which circumvention
tools are permissible. On November 27, 2006, the Librarian of Congress increased the number of exempted classes
of works to the following six classes; which will remain in effect through October 27, 2009:
1. Audiovisual works included in the educational library of a college or university's film or media studies
department, when circumvention is accomplished for the purpose of making compilations of portions of those
works for educational use in the classroom by media studies or film professors;
2. Computer programs and video games distributed in formats that have become obsolete and which require the
original media or hardware as a condition of access, when circumvention is accomplished for the purpose of
preservation or archival reproduction of published digital works by a library or archive. A format shall be
considered obsolete if the machine or system necessary to render perceptible a work stored in that format is no
longer manufactured or is no longer reasonably available in the commercial marketplace;
3. Computer programs protected by dongles that prevent access due to malfunction or damage and which are
obsolete. A dongle shall be considered obsolete if it is no longer manufactured or if a replacement or repair is
no longer reasonably available in the commercial marketplace;
4. Literary works distributed in ebook format when all existing ebook editions of the work (including digital text
editions made available by authorized entities) contain access controls that prevent the enabling of the ebook's
read-aloud function and that prevent the enabling of screen readers to render the text into a specialized format;
5. Computer programs in the form of firmware that enables wireless telephone handsets to connect to a wireless
telephone communication network, when circumvention is accomplished for the sole purpose of lawfully
connecting to a wireless telephone communication network;
6. Sound recordings, and audiovisual works associated with those sound recordings, distributed in compact disc
format and protected by technological protection measures that control access to lawfully purchased works and
create or exploit security flaws or vulnerabilities that compromise the security of personal computers, when
circumvention is accomplished solely for the purpose of good faith testing, investigating or correcting such
security flaws or vulnerabilities.161
The following is a sampling of recent case law that addresses the circumvention of technological protection
measures.
[1] Egilman v. Keller & Heckman, LLP
In Egilman v. Keller & Heckman, LLP, the plaintiff, David Egilman, was a medical doctor who in addition to
his clinical practice held an associate professorship at Brown University, and also periodically testified as an expert
in toxic tort cases.162
In a 2001 case in which Egilman testified, the court issued a gag order, prohibiting
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extrajudicial statements by the participants, including Egilman. The court subsequently found that Egilman had
violated this order by posting statements regarding the trial on his personal Web site, access to which was restricted
to password holders authorized by Egilman.
Egilman alleged that his statements on the Web site had been accessed by counsel for the opposing party in the
2001 toxic tort action without Egilman's authorization. Specifically, he alleged that opposing counsel had discovered
a password Egilman had issued to students in a course he taught at Brown, and used this password to access the Web
site without Egilman's permission.
Such non-permitted access is prohibited by the federal Computer Fraud and Abuse Act (CFAA).163
However,
Egilman's claim under the CFAA was time-barred.164
Consequently, Egilman attempted to argue that opposing
counsel's unauthorized access constituted “circumvention of a technological protection measure” as prohibited by
the DMCA.
This issue had been raised once before, in 2004, in I.M.S. Inquiry Management Systems, Ltd. v. Berkshire
Information Systems, Inc.165
The plaintiff in that case was an information service, which alleged that a competitor
had surreptitiously accessed its password-protected Web site in order to copy the plaintiff's information. The I.M.S.
court accepted that the password control did constitute a technological protection measure under the DMCA, but that
the defendant had not “circumvented” it within the meaning of the statute. Rather, “what defendant avoided and
bypassed was permission to engage and move through the technological measure from the measure's author. Unlike
the CFAA, a cause of action under the DMCA does not accrue upon unauthorized and injurious access alone; rather,
the DMCA targets the circumvention of digital walls guarding copyrighted material.” 166
Here, the court both endorsed the rationale of the I.M.S. decision and concluded that the instant case was
factually indistinguishable from I.M.S. Consequently, Egilman's claims were dismissed.
[2] Blueport Co., LLP v. United States
In Blueport Co., LLP v. United States, 167
Blueport held the rights to a computer program licensed to the U.S.
Air Force, which used it in personnel management. The program contained an automatic termination function, such
that at the expiry of the license, the program would stop working. Blueport brought suit against the U.S.
government, alleging that Air Force personnel had, without Blueport's authorization, hacked into the program and
altered or disabled the expiry function. Blueport argued that this act violated the DMCA's prohibition on the
circumvention of technological measures.168
The Court of Federal Claims never reached this question. Instead, it
was prevented from considering the government's alleged DMCA violation by its determination that it lacked
jurisdiction to hear a DMCA case against the government.
The court noted that, generally, courts lack jurisdiction to hear claims against the government absent an explicit
waiver of sovereign immunity. While there is no such explicit waiver in the text of the DMCA, Blueport strove
mightily to persuade the court to recognize an implicit waiver in the language. First, it argued that the canons of
statutory construction should lead the court to recognize a dormant waiver from Congress's explicit grant of
immunity to law enforcement officers engaged in an investigation; if, Blueport argued, Congress felt it needed to
immunize a specific segment of government agents performing government business, it must follow that Congress
intended the government generally to be susceptible to suit. The court declined to follow this line of reasoning for
the reason that Blueport's divination of the intent of Congress was not the only possible interpretation: Congress
might merely have sought to prevent construction of the Act in a way which would interfere with law enforcement.
Second, the entire endeavor proposed by Blueport—to seek an implicit waiver of sovereign immunity—was
unavailing; the waiver must be explicit.169
For this latter reason, the court also dismissed Blueport's next argument—that the language of DMCA
§1203(b)(4) permitting the recovery of costs against any party except “the United States or an officer thereof,”
despite Blueport's contention that it, too, would be without meaning unless Congress intended to permit the federal
government to be subject to suit.170
The court found that the definition of a party susceptible to suit under DMCA
§1203 as “any party” could not be interpreted to include the United States, nor could the failure of Congress to
explicitly employ the word “exclusively” in its grant of DMCA jurisdiction to the district courts be interpreted to
permit the Court of Federal Claims to exercise jurisdiction over such claims.171
Finally, Blueport's attempt to
piggyback the DMCA claim on the Copyright Act's waiver of sovereign immunity was also unsuccessful. The court
held that since “the DMCA created a new violation and not merely a new subset of infringement, plaintiff's
argument has no force.” 172
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Following the opinion issued on June 29, 2006, the Court of Federal Claims conducted a trial relating to
Blueport’s copyright infringement claim and found in favor of the United States based on lack of subject matter
jurisdiction.173
The Court of Federal Claims held that Blueport “fail[ed] to make the requisite jurisdictional showing
necessary for a copyright infringement claim”174
because it did not meet its burden in proving that the three
jurisdictional exceptions under 28 U.S.C. 1498(b) were not applicable.175
[3] Auto Inspection Services, Inc. v. Flint Auto Auction, Inc.
In this case, the plaintiff, Auto Inspection Services (AIS) developed a computer program to aid in the inspection
of leased automobiles.176
Included in the program was a feature which reported back to AIS the identity of the
licensee using the program at a given time. AIS licensed the use of the program to Flint Auto Auction (FAA),
among others, but ultimately revoked the license. AIS contended that FAA continued to use the AIS program
following the termination of FAA's license. FAA denied this and claimed that instead it had hired a software
designer to create an alternative program, which it now used in place of AIS's program. Assuming arguendo that this
was true, AIS argued that in creating the new program, FAA had accessed the source code of AIS's program.
Among AIS's claims against FAA was the assertion that FAA had circumvented the automatic identity reporting
feature of AIS's original program. Either FAA was continuing to use AIS's program and the fact that AIS no longer
received identity reports was evidence that FAA had circumvented the feature, or in creating its purported new
program, FAA had circumvented the feature to access the source code of AIS's program. In either case, AIS
contended that FAA had violated DMCA §1201, which prohibits the circumvention of technological protection
measures.
In deciding AIS's request for a preliminary injunction, the court rejected these alternative theories by
determining that the automatic reporting feature did not qualify as a technological protection measure under §1201.
A technological protection measure, the court held, only qualifies if it effectively bars access to the protected work.
Here, the reporting feature does not prevent access, it merely reports that the program has been used. Consequently,
even had FAA circumvented the reporting feature, such circumvention could not be deemed a DMCA violation.
[4] Macrovision v. Sima Products Corp.
In Macrovision v. Sima Products Corp.,177
Macrovision held patents for analog copy protection (ACP) methods.
Macrovision's ACP signals are embedded in commercially produced and distributed DVDs and prevent users from
making copies of the copyright work embodied in the DVD by harnessing the analog signal from, for example, a
DVD player to a television. Sima manufactured and sold devices which stripped out these ACP signals from the
analog signal, permitting purchasers to make analog copies of the material embodied on the DVD. Macrovision filed
suit against Sima for patent and DMCA violations, and sought a preliminary injunction against Sima's continued
manufacture and sale of the devices.
Macrovision's DMCA claims centered on §1201(a)(2), which prohibits the manufacture, import, or sale of
devices primarily designed and knowingly marketed for the circumvention of a technological protection measure,
and which has limited legitimate use. Sima countered that its devices were intended to enable “fair use” copying by
DVD consumers seeking to make backup copies. The court, however, rejected this defense, ruling that the DMCA,
while containing limited fair use provisions for users of copyright works, does not so provide for manufacturers of
such devices as Sima produced.178
Further, the court was not aware of any authority which supported the
proposition that fair use guarantees the right of users to make backup copies.179
The court granted Macrovision's request for a preliminary injunction. The defendant subsequently filed a
motion for reconsideration which was denied by the court.180
The defendant appealed the decision to the Court of
Appeals, but the appeal was voluntarily dismissed.181
[5] Coxcom, Inc. v. Chafee
In Coxcom, Inc. v. Chafee,182
the defendant manufactured and sold “cable filters” which permitted cable
television customers to receive scrambled “pay-per-view” cable/satellite television content, and effectively blocked
communications from customers' cable provider-issued cable boxes to the providers' billing computers, such that
cable providers were not informed for billing purposes that the scrambled content had been accessed. Coxcom, a
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cable provider, brought this action alleging, inter alia, violation of §1201 of the DMCA.
Although the plaintiff did not hold the rights to the copyrighted works to which defendant’s devices provided
access, the court determined that it had standing to bring the action against the defendant, as it was the party which
controlled access to the work.183
Defendant argued, without much elaboration, that its device did not circumvent the
scrambling technology. The court summarily rejected this argument and asserted that circumvention was self-
evident on the facts stipulated by both parties. Therefore, the court granted the plaintiff’s motion for summary
judgment. A hearing on the issue of damages and costs was scheduled for November 15, 2006 but the court granted
defendant’s motion to stay all proceedings until the Court of Appeals considered defendant’s request for
interlocutory appeal.184
As of the date of this publication, the defendant’s request for interlocutory appeal is still
pending.
[6] Ticketmaster L.L.C. v. RMG Technologies, Inc.
In Ticketmaster L.L.C. v. RMG Technologies, Inc.185
, the plaintiff, Ticketmaster, the owner of the copyrighted
website, ticketmaster.com, moved for a preliminary injunction against the defendant, RMG, alleging, among other
things, violation of the anticircumvention provisions of the DMCA. RMG had developed and marketed an
application called Ticket Broker Acquisition Tool (“TBAT”), which Ticketmaster claimed was an “automated
device” that allowed users to bypass certain technological measures put in place by Ticketmaster, namely the
security feature known as CAPTCHA.186
CAPTCHA, is a technological measure designed to distinguish between
human users and automated devices, and therefore used by Ticketmaster to prevent purchasers from using
automated devices to buy large quantities of tickets at one time, which would have the detrimental effect of barring
access to its website by ordinary consumers.187
Ticketmaster’s DMCA claims were based on alleged violations by RMG of DMCA §1201(a)(2), which “makes
it wrongful to traffic in devices that circumvent technological measures that control access to protected works” and
DMCA Section 1201(b)(1), which “makes it wrongful to traffic in devices that circumvent technological measures
that protect rights of a copyright owner in a work.”188
The defendant argued that CAPTCHA was merely an image,
and not a technological measure, and that CAPTCHA was designed to control ticket sales and not to control access
to copyrighted work.189
The court rejected defendant’s argument, pointing to language in the DMCA that states that “a technological
measure 'effectively controls access to a work' if the measure, in the ordinary course of its operation, requires the
application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to
the work."190
When a user accesses ticketmaster.com to purchase tickets, it encounters CAPTCHA, which requires
the user to type in the random, partially obscured characters which appear in the hash box in order to proceed to the
copyrighted ticket purchase webpage.191
Most automated devices or systems would not be able to decipher and type
the random characters, and therefore would be prevented from accessing the copyrighted ticket purchase
webpage.192
Therefore, the court found that CAPTCHA qualified as a technological measure because in the
ordinary course of its operation, it required the application of information to gain access to the copyrighted ticketed
purchase page.193
In addition, CAPTCHA controls access to copyrighted work by preventing automatic access to
the copyrighted ticket purchase webpage, thereby preventing unauthorized copying of such webpage.194
Based on
the foregoing, the court found that Ticketmaster was likely to prevail on the DMCA claims, and granted
Ticketmaster’s request for a preliminary injunction.
[7] Coupons Inc. v. Stottlemire
In Coupons Inc. v. Stottlemire,195
the Northern District of California suggested that security software keys used
by an on-line coupon distributor may qualify as both an access and a user control, which would violate Section
1201(a) of the DMCA, which prevents the circumvention of technological measures that effectively control access
to a copyrighted work, and 1201(b) of the DMCA, which prohibits circumvention of technological measures that
imposes limitations on the use of protected works. The Defendant posted on a website a “hack” that allowed coupon
patrons to print multiple coupons with unique and functioning serial codes, thereby circumventing the imposed
maximum number of coupons. 196
Plaintiff, Coupons Inc., claimed that the distribution of this hack effectively
“offered to the public” a technology “primarily designed for circumventing technological measures that effectively
control[s] access to Plaintiff’s works.” 197
Defendant denied this allegation and sought a motion to dismiss the claim
on the grounds that his posting did not qualify as “hacking” or a circumvention of an access/user control under the
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DMCA. He instead argued that his technique merely exploited the Plaintiff’s faulty software. 198
The court denied
this motion, and only concluded that the Plaintiff alleged sufficient facts to support Defendant’s violation of the
DMCA. 199
Therefore, even though the court only ruled on a motion to dismiss, the court suggested that distribution
of software hacks for on-line coupons could qualify as a DMCA violation.
[8] MDY Industries LLC v. Blizzard Entertainment Inc.
The District of Arizona In MDY Indus. LLC v. Blizzard Entm’t Inc.,200
concluded that a user who has ordinary
access to software code on a computer for the on-line game “World of Warcraft” does not violate the DMCA by
copying that software code for the creation of an application used for the purpose of circumventing protective
technology located elsewhere on the computer game software application.201
Specifically, the court focused its
DMCA analysis around the issue of access. Under 17 U.S.C. 1201(a)(2), the DMCA prohibits the manufacture of
technology that circumvents “access controls” to software and other protected works. Thus,if users already have
unrestricted access, then circumventing other protective measures is not a violation of the “access control” language
of the DMCA.202
[D] The Digital Millennium Copyright Act (DMCA): Copyright
Management Information
The DMCA grants new protection for copyright management information (data identifying works, their
creators, copyright owners, and other key facts, including licensing information). Under §1202, copyright
management information may not be falsified, altered or deleted. Such information may, however, be affixed or
linked to the copyrighted work. It may also be used to facilitate detection of unauthorized uses and promote the
payment of royalties. Further, §1202(b)(3) prohibits trafficking in copies of works linked with copyright
management information that has been falsified, altered, or removed, if the offending party knew or should have
known that its actions would facilitate infringement.
Additionally, §§1203 and 1204 provide for both civil and criminal enforcement of the anti-circumvention and
copyright management information provisions. However, the DMCA exempts non-profit libraries, archives, and
schools from criminal prosecution. These entities may also be exempt from an award of monetary damages if they
can prove they committed “innocent” violations. Innocent violations are violations committed without knowledge or
reason to know that the challenged conduct constituted a violation.203
Otherwise, a full range of civil remedies,
including attorney's fees, injunctions, and impoundment, are available to enforce the DMCA. The causes of action
for violation of the anti-circumvention and copyright management information provisions of the DMCA are in
addition to any other cause of action that might be available for copyright infringement, including infringement
actions brought under theories of contributory infringement or vicarious liability.
The following is a sampling of recent case law that address the anti-circumvention and copyright management
information provisions of the DMCA.
[1] IQ Group, Ltd. v. Wiesner Publishing L.L.C.
In IQ Group, Ltd. v. Wiesner Publishing L.L.C.,204
plaintiff IQ Group and defendant Wiesner were competitors
in advertising for insurance carriers, e-mailing advertisements to service providers. At the behest of two client
insurers, IQ Group initially distributed advertisements—the authorship of which was claimed by both IQ Group and
by the insurers—featuring its own logo, hyperlinked to IQ Group's own Web site, where it alleges copyright notices
were displayed. Subsequently, this same insurer hired Wiesner to distribute the same advertisements. Wiesner did
so, first removing the IQ Group logo and hyperlink from the advertisements.
IQ Group brought suit against Wiesner for, among other claims, violation of §1202 of the DMCA, which
prohibits the removal of copyright management information. Section 1202's definition of “copyright management
information” includes eight categories of information, into several of which IQ Group claims the advertisement fell.
As to the logo, the court quickly determined that its removal did not implicate DMCA §1202. It reasoned that,
following the Supreme Court's ruling in Dastar Corp. v. Twentieth Century Fox Film Corp.,205
rights holders must
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§5.02 THE INTERNET
Millions of individuals, in every corner of the world, are logging onto the Internet each day seeking
information, communicating ideas, and transacting business. It is safe to say that today, a working knowledge of and
experience in using the Internet are essential elements in successfully conducting business.
The term “Internet” is used to describe a worldwide group of connected networks that allow the public to access
information and services.6
A computer network is a group of computers connected by communications equipment
and software for the purpose of sharing information with other participants on the network. For example, most
attorneys who have computers in the workplace use a network. While each of the networks that make up the Internet
is owned by a public or private organization, no single organization or government owns or controls the Internet.
The Internet began in 1969 as a network of four computers located at the University of California at Los
Angeles, the University of California at Santa Barbara, the University of Utah, and the Stanford Research Institute.
The U.S. Department of Defense funded the initial work through an entity known as the Advanced Research
Projects Agency, or ARPA. The ARPA Network, or “ARPANET,” was designed to be a decentralized system with
the ability to re-route and sustain communications in the event of an attack on an individual section of the network.
In the 1980s, the National Science Foundation, the scientific and technical agency of the federal government,
expanded ARPANET to connect computers around the world. The Internet, which included electronic mail,
exhibited slow but steady growth until 1994 when the World Wide Web was introduced. The World Wide Web or
“the Web,” is a graphical user interface to the Internet. The Web essentially prompted the exponential growth in
both the number of Web sites and use of the Internet. Use of the Web, once limited to military and educational
endeavors, expanded to business and residential use and stands as the doorway to the future of commerce. Even
though the “dot.com bubble” burst at the end of the 1990s, the Internet continues to play a vital role in our economy.
[A] How the Internet Works
The Internet operates by taking data, breaking it up into separate groups of data called “packets,” and sending
the packets along available routes to a destination computer. Unlike a phone line, which monopolizes a continuous
open wire (through many intermediate locations) throughout the duration of a telephone call, the packet-switched
network uses available wire space for only fragments of a second as it transfers a digital message in one direction.
The data might be an e-mail message, a Web page, a sound clip, a video stream, or a document.
Each packet contains the data, its origin, destination, and the sequence of information needed to reassemble the
data once it is received at the destination. These packets can and do travel very different routes on their way to the
ultimate destination. For example, the first packet of an e-mail message sent from a New Jersey office may travel
across the telephone line, over thousands of miles of wire, through different countries, or even into space through a
satellite, on its way to a destination in Florida, while the second packet may travel directly along the coastline over a
fiberoptic cable arriving at the same Florida destination before the first packet. Both transmissions usually occur in a
matter of seconds or almost instantaneously to the user.
To connect to the Internet, businesses and individuals contract with either Internet Service Providers (ISPs) or
Online Service Providers (OSPs). ISPs deliver access to the network in various ways. ISPs include large
telecommunications companies such as AT&T, national ISPs such as EarthLink, and cable television companies
such as Comcast. OSPs deliver access to the net and provide proprietary content organized in an easy-to-use format.
Some OSPs include America Online and MSN. All of these ISPs and OSPs own or lease a connection to the
Internet.7
Initially, most individuals connected to the Internet through the use of a local phone service and a modem. But
the speed and capacity of traditional telephone lines is limited. To provide faster access, many individuals and
businesses now connect to the Internet using digital subscriber lines (DSL), Integrated Service Digital Network
(ISDN) lines, dedicated T1 or T3 leased lines, or cable modems. Each medium varies in cost, offers different levels
of speed, and provides different amounts of data capacity, known as “bandwidth.” The greater the bandwidth, the
faster large amounts of information can be retrieved and sent. As bandwidth increases, even greater opportunities to
transact business online, particularly for multimedia content, have become available.](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)