Register.com, Inc. v. Verio, Inc.
356 F.3d 393 (2004)
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Rule of Law:
Repeatedly accessing an online service and taking a benefit offered subject to stated conditions, with full knowledge of those conditions, constitutes acceptance of the terms and forms a binding contract. Furthermore, intentionally using automated software that consumes a significant portion of a computer system's capacity, creating a high probability of harm if imitated by others, constitutes a trespass to chattels.
Facts:
- Register.com, Inc. ('Register'), a domain name registrar, was required by its accreditation agreement with the Internet Corporation for Assigned Names and Numbers ('ICANN') to provide free public access to registrant contact information, known as WHOIS data.
- The ICANN agreement only permitted Register to prohibit use of its WHOIS data for 'mass unsolicited, commercial advertising or solicitations via e-mail (spam)'.
- Verio, Inc. ('Verio'), a competitor in the web services market, developed an automated software program, or 'robot,' to submit thousands of successive queries to Register's computers daily to harvest the WHOIS data of new registrants.
- In response to each query, Register's system returned the requested WHOIS data along with a legend stating its terms of use.
- Verio used the data to market its services to Register's customers via email, telemarketing, and direct mail, sometimes causing customers to believe Verio was affiliated with Register.
- After initial complaints, Register changed its terms of use legend to prohibit mass solicitations 'via direct mail, electronic mail, or by telephone,' a restriction broader than its ICANN agreement allowed.
- Verio ceased its email marketing but, despite knowing of Register's new, broader terms, continued to use the WHOIS data for telemarketing and direct mail campaigns.
Procedural Posture:
- Register.com, Inc. sued Verio, Inc. in the United States District Court for the Southern District of New York, alleging claims including breach of contract, trespass to chattels, and Lanham Act violations.
- Register.com moved for a temporary restraining order and a preliminary injunction to stop Verio's conduct.
- The district court granted Register.com's motion for a preliminary injunction, enjoining Verio from, among other things, accessing Register.com's computers with automated software and using the harvested data for marketing.
- Verio, as appellant, appealed the district court's order granting the preliminary injunction to the United States Court of Appeals for the Second Circuit; Register.com was the appellee.
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Issue:
Does a party's repeated, automated access of another's computer system to take data, with full knowledge of the terms and conditions restricting the data's use, constitute both a binding acceptance of those terms and a trespass to chattels?
Opinions:
Majority - Leval, Circuit Judge.
Yes. A party's repeated, automated access of another's computer system to take data with full knowledge of the terms restricting its use constitutes both a binding acceptance of those terms and a trespass to chattels. Verio's argument that it never assented to Register's terms fails because, while a single query might not establish a contract, Verio's continuous daily queries put it on notice of the terms. By repeatedly taking the benefit (the data) with full knowledge of the conditions, Verio accepted those terms. The court compared this to a person who, after learning an apple from a stand costs 50 cents, repeatedly takes an apple each day without paying; their knowledge of the offer's terms binds them. This differs from cases like Specht v. Netscape, where users might never have seen the terms. An explicit 'I agree' click is not essential when acceptance is demonstrated through conduct. Furthermore, Verio cannot use Register's violation of the ICANN agreement as a defense, because that agreement contains a 'No Third-Party Beneficiaries' clause, meaning Verio has no standing to enforce it in court. Finally, Verio's use of automated robots constituted a trespass to chattels. The district court reasonably found that these robots consumed a significant portion of Register's system capacity and that, if others were to use similar methods, it was 'highly probable' the system would be overtaxed and crash, thus impairing the value of Register's computer systems.
Analysis:
This case is a foundational decision in the realm of online contract formation, establishing that repeated use of a service with knowledge of its terms of use can create a binding agreement even without a formal clickwrap 'I agree' process. It solidifies the application of the common law tort of trespass to chattels to the digital world, holding that the unauthorized consumption of a computer system's processing capacity constitutes a legally recognizable harm. The ruling also underscores the power of 'no third-party beneficiary' clauses, effectively channeling disputes over adherence to regulatory-like agreements (such as the ICANN contract) away from the courts and toward the administrative bodies that created them.
