register.com, Inc. v. Verio, Inc.
356 F.3d 393, 2004 U.S. App. LEXIS 1074, 69 U.S.P.Q. 2d (BNA) 1545 (2004)
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Rule of Law:
A party's repeated action of taking a benefit from a service with actual knowledge of the provider's terms and conditions constitutes acceptance of those terms, forming a binding contract, even if the terms are presented after the benefit is received and there is no express 'I agree' click. Unauthorized, automated access to a computer system that consumes significant resources and threatens system integrity constitutes trespass to chattels.
Facts:
- Register.com, Inc. ('Register') is an ICANN-accredited registrar of internet domain names.
- Register's accreditation agreement with ICANN required it to provide free public access to registrant contact information, known as WHOIS data.
- The ICANN agreement allowed registrars to prohibit the use of WHOIS data for 'mass unsolicited, commercial advertising or solicitations via e-mail (spam)'.
- Verio, Inc. ('Verio'), a competitor in web development services, created an automated software program ('robot') to make multiple, successive queries to Register's WHOIS database each day to harvest contact information of new registrants.
- Verio used the harvested data to solicit Register's customers through email, direct mail, and telephone calls.
- In response to customer complaints and Verio's marketing, Register amended the restrictive legend attached to its WHOIS query results to prohibit mass solicitations 'via direct mail, electronic mail, or by telephone.'
- Verio admitted it was aware of Register's new, broader terms but continued its marketing by direct mail and telephone, arguing the new terms violated Register's ICANN agreement.
- Verio's automated queries consumed a significant portion of the capacity of Register's computer systems.
Procedural Posture:
- Register.com, Inc. sued Verio, Inc. in the United States District Court for the Southern District of New York.
- The complaint alleged claims for, inter alia, breach of contract, trespass to chattels, trademark infringement under the Lanham Act, and violations of the Computer Fraud and Abuse Act.
- Register.com moved for a temporary restraining order and a preliminary injunction to stop Verio's conduct.
- The district court granted the preliminary injunction in favor of Register.com.
- Verio, the defendant, appealed the grant of the preliminary injunction to the United States Court of Appeals for the Second Circuit.
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Issue:
Does a party's repeated taking of data from a computer system, with full knowledge of the provider's terms and conditions presented with each taking, constitute acceptance of those terms, even if the terms are only displayed after the data is received and there is no 'I agree' button?
Opinions:
Majority - Leval, Circuit Judge
Yes, a party's repeated taking of a benefit with knowledge of the terms on which it is offered constitutes an acceptance of those terms. Verio cannot rely on the ICANN agreement as a defense because the agreement contains a 'No Third-Party Beneficiaries' clause, which ICANN itself supported in its amicus brief to ensure it retained control over policy enforcement. As for contract formation, Verio's situation is analogous to a person who repeatedly takes an apple from a fruit stand; while they may not have seen the price sign the first time, their continued taking with full knowledge of the price constitutes an agreement to pay. Verio's daily, automated queries, each of which returned Register's terms, put Verio on notice. Unlike the users in Specht v. Netscape, who may never have seen the terms, Verio admittedly saw the terms every time it took the data. The taking of the benefit with knowledge of the terms is a valid form of acceptance under standard contract principles, and the absence of an 'I agree' button is not dispositive. The court also affirmed the injunction on trespass to chattels grounds, finding that Verio's robots consumed significant system resources, which, if replicated by others, would likely cause the system to crash, thereby impairing the chattel's value and condition.
Dissenting - Parker, Circuit Judge (draft)
No, a contract was likely not formed, and even if it were, equitable principles should prevent its enforcement. Register.com failed to show irreparable harm, as any lost profits are calculable monetary damages. More importantly, Verio did not manifest assent to Register's terms. The terms were presented only after the data was delivered, providing no opportunity to reject them before access was granted. Verio's repeated queries, with knowledge of the terms, do not constitute assent because Verio could have reasonably believed it was entitled to the public data under the ICANN agreement and was simply rejecting Register's unilaterally imposed, improper restrictions. Furthermore, Register comes to the court with 'unclean hands' by seeking to enforce terms that violate its own contractual obligations to ICANN, a quasi-public entity. The court should not use its equitable power to aid a party in violating its public-facing duties. The dissent did agree, however, that Verio's use of automated robots constituted a trespass to chattels.
Analysis:
This decision significantly clarifies the rules of contract formation for online 'terms of use' or 'browsewrap' agreements. It establishes that against sophisticated commercial users, repeated access to a service with actual knowledge of its terms is sufficient to demonstrate assent, even without an affirmative click. This lowers the bar for enforceability compared to cases involving one-time, passive users. The ruling also solidifies the application of the trespass to chattels tort to digital property, affirming that the unauthorized consumption of server capacity is a legally cognizable harm. Finally, the court’s strict enforcement of the 'no third-party beneficiary' clause reinforces the power of such provisions to control the forum and process for resolving disputes arising from complex regulatory or accreditation agreements.
