Opinion ID: 784889
Heading Depth: 4
Heading Rank: 2

Heading: Success on the Merits of the Contract Claim

Text: 166 Even if Register.com could demonstrate the possibility of irreparable harm absent an injunction, to prevail in obtaining a preliminary injunction, it must also establish a likelihood of success on the merits of its claim. To form a valid contract under New York law, there must be an offer, acceptance, consideration, mutual assent and intent to be bound. 37 See e.g., Louros v. Cyr, 175 F.Supp.2d 497, 512 n. 5 (S.D.N.Y.2001). See generally Restatement (Second) of Contracts, § 17 (1981). Assent, in particular, requires special attention in our analysis. 167
168 Under New York law, [m]utual assent is essential to the formation of a contract and a party cannot be held to have contracted if there was no assent or acceptance. See, e.g., Maffea v. Ippolito, 247 A.D.2d 366, 367, 668 N.Y.S.2d 653, (2d Dep't 1998) (citing 22 N.Y. Jur 2d, Contracts, § 29). The manifestation or expression of assent necessary to form a contract may be by word, act, or conduct which evinces the intention of the parties to contract.  Id. (citing 22 N.Y. Jur 2d, Contracts, § 29) (emphasis added). See generally Restatement (Second) of Contracts, § 18 (1981) (Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.); id. at § 19(2) (The conduct of a party may manifest assent only if he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.); E. Allan Farnsworth, Farnsworth on Contracts § 3.1 (2d ed.2000). 169 In recent years, the proliferation of mass market standardized contracts ( i.e., where sellers and buyers do not bargain over terms on an individualized basis) has forced the courts to pay particular attention to the issue of assent. In particular, the case law concerning shrinkwrap licenses provides helpful guidance on the manner in which contract principles have been applied in situations analogous to this case. Despite some similarities, we nonetheless find the arrangement in this case is easily distinguished from shrinkwrap, as well as clickwrap and browsewrap, licenses. 170 A shrinkwrap license typically involves (1) notice of a license agreement on product packaging ( i.e., the shrinkwrap), (2) presentation of the full license on documents inside the package, and (3) prohibited access to the product without an express indication of acceptance. 38 Generally, in the shrinkwrap context, the consumer does not manifest assent to the shrinkwrap terms at the time of purchase; instead, the consumer manifests assent to the terms by later actions. See, e.g., Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 250-51, 676 N.Y.S.2d 569, 571-72 (1st Dep't 1998) (not seeking a refund within a specified period of time); Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir.1997) (same); ProCD, 86 F.3d at 1452 (clicking on a button indicating acceptance after forced exposure to the terms ( i.e., during the set-up process for a software program)); cf. Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91, 98, 100, 103-04 (3d Cir.1991) (concluding that (1) the parties' conduct including a telephone order followed by delivery of and payment for software products evinced the existence of a contract, (2) UCC-207 applies to determine whether shrinkwrap license terms prevail over existing contract terms agreed to by the parties, and (3) the shrinkwrap terms were not assented to by the licensee despite the licensee's use of the product); Klocek v. Gateway, Inc., 104 F.Supp.2d 1332, 1338-1341 (D.Kan.2000) (rejecting ProCD and Hill approach, applying UCC § 2-207, and finding insufficient evidence of notice of and assent to shrinkwrap terms at the time of purchase). 171 The arrangement in this case is distinguishable from a shrinkwrap license in important ways. In contrast with the shrinkwrap license, which prohibits access to the product without manifestation of assent, a person (or software robot) who submits a WHOIS query (via the web interface or port 43) is given immediate access to the product (Register.com's database). As a result of such access, the requested WHOIS information is transmitted from Register.com's computer systems to the end-user's computer system(s). Upon receipt of the information, the end-user simultaneously receives notice and presentation of the proposed terms. Besides the fact that querying Register.com's WHOIS database in not a pay now, terms later transaction or even a consumer purchase, 39 access to Register.com's database, which is the product that Register.com provides to end-users, 40 is given prior to notice of proposed terms and an opportunity to review them. 172 Notably, Register.com does not withhold access to the WHOIS information until an end-user manifests assent to the terms by means of a clickwrap license, which presents the potential licensee ( i.e., the end-user) with a message on his or her computer screen, requiring that the user manifest his or her assent to the terms of the license agreement by clicking on an icon. Specht v. Netscape Communications Corp., 150 F.Supp.2d 585, 593-94 (S.D.N.Y.2001) (footnote omitted). 41 Essentially, under a clickwrap arrangement, potential licensees are presented with the proposed license terms and forced to expressly and unambiguously manifest either assent or rejection prior to being given access to the product. This case is distinguishable from the clickwrap license cases because no such dynamic exists. 173 Finally, it has been suggested that the arrangement in this case is similar to a browsewrap license. See Specht, 150 F.Supp.2d at 594 n. 13. [A] browse wrap license is part of the web site[, e.g., license terms are posted on a site's home page or are accessible by a prominently displayed hyperlink,] and the user assents to the contract when the user visits the web site. No reported cases have ruled on the enforceability of a browse wrap license. Pollstar v. Gigmania Ltd., No. CIV-F-00-5671, 2000 WL 33266437 (E.D.Cal. Oct.17, 2000). While there are some similarities between Register.com's arrangement and a browsewrap license, we find the browsewrap label does not fit. Unlike the situation in Pollstar, no hyperlink is provided where one could view the proposed license terms. Instead, only upon receiving the WHOIS query results from Register.com's database is an end-user exposed to Register.com's proposed terms. 174
175 There are two argued bases for finding that Verio manifested assent to Register.com's terms. The first basis is the fact that the terms themselves state that an end-user agrees to be bound by Register.com's terms upon submission of a single query. 42 The second basis is Verio's course of conduct: Verio admits that it knew of Register.com's terms, and Verio repeatedly submitted queries to Register.com's WHOIS database. We find neither basis sufficient to sustain a likelihood of success by Register.com on this claim. 176 In discussing this issue, the district court wrote: 177 Nor can Verio argue that it has not assented to Register.com's terms of use. Register.com's terms of use are clearly posted on its website. The conclusion of the terms paragraph states [b]y submitting this query, you agree to abide by these terms. (Ex. 27 to Pl.'s Sept. 8, 2000 Motion). Verio does not argue that it was unaware of these terms, only that it was not asked to click on an icon indicating that it accepted the terms. However, in light of this sentence at the end of Register.com's terms of use, there can be no question that by proceeding to submit a WHOIS query, Verio manifested its assent to be bound by Register.com's terms of use, and a contract was formed and subsequently breached. 178 126 F.Supp.2d at 248. We note that although the district court found that Register.com's terms of use are clearly posted on its website, which, in a sense, is correct because the terms are clearly posted along with each WHOIS query result, we do not believe that fact is dispositive as to whether a party that submits a query has manifested assent to be bound by the terms. Whether a party submits a query at the Register.com website or via the port 43 access channel, the terms are not encountered prior to or at the time of submission. Instead, the terms are only provided to end-users after the query has been submitted, Register.com's database has processed and responded to the query submission, and the WHOIS information has been provided to the end-user. 179 In this case, submission of a single query does not manifest assent to be bound by the terms of use even though the terms themselves say otherwise. A party cannot manifest assent to the terms and conditions of a contract prior to having an opportunity to review them; a party must be given some opportunity to reject or assent to proposed terms and conditions prior to forming a contract. 43 An end-user who submits a WHOIS query does so without notice of the existence of terms and conditions and thus without an opportunity to reject them. Upon receipt of the WHOIS information, the end-user is presented with Register.com's terms of use, one of which suggests that the end-user has previously agreed to the proposed terms by submitting a query. Actually, there has been no prior agreement to the undisclosed terms. 180 By the time Register.com presents its proposed terms, it has already given away that which it owns — access to its WHOIS database. (Register.com concedes, as it must, that it has no ownership right over the WHOIS information. See supra I.A.3.) Thus, in the single submission scenario, an end-user would have had no opportunity to reject Register.com's terms and would be bound to comply with them irrespective of actual assent. Therefore, we find the submission of a WHOIS query prior to the presentation of Register.com's proposed terms insufficient to constitute a manifestation of assent. 181 Although the first (or first few) query submissions are clearly insufficient to create a contract for the reasons discussed above, repeated exposure to the terms and conditions (via repeated submissions) would have put Verio on notice of both the general terms and the specific term stating that By submitting this query, you agree to abide by these terms. In fact, Verio admits that it knew of Register.com's terms when it submitted queries. Register.com argues that Verio's course of conduct — repeatedly submitting queries while being aware of the proposed terms — objectively demonstrates its assent to be bound by Register.com's terms and that Verio's conduct would reasonably lead Register.com to infer Verio's assent. See Restatement (Second) of Contracts, § 19. On the other hand, Verio argues that even though it knew of the terms, it rejected them and never manifested assent. Based on the circumstances of this case, especially (1) the manner in which the WHOIS database is made accessible by Register.com, (2) Register.com's obligations under the terms of the ICANN Agreement, and (3) the public domain nature of the WHOIS information ( i.e., no one owns the information), we find Verio's argument convincing. 182 We do not believe that one can reasonably infer that Verio assented to Register.com's proposed terms simply because Verio submitted multiple queries with knowledge of those terms. Verio (and every other end-user) may repeatedly submit WHOIS queries to Register.com based on an (accurate) understanding that Register.com does not own WHOIS information and that such information must be made freely and publicly available (with two specified restrictions) pursuant to the ICANN Agreement. Viewed in this manner, Register.com's repeated proposals that terms not authorized by the ICANN Agreement be adopted could reasonably have been repeatedly rejected by Verio. There is no basis to infer that Verio in fact assented to Register.com's mass marketing restriction. Cf. Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91, 103-04 (3d Cir.1991); accord Expeditors Int'l of Washington, Inc. v. The Official Creditors Comm. (In re CFLC. Inc.), 166 F.3d 1012, 1017 (9th Cir.1999) (Course of dealing analysis is not proper in an instance where the only action taken has been the repeated delivery of a particular form by one of the parties.). 44 183 Finally, we note that Register.com's position is undercut by the fact that WHOIS information is public information owned by no one. See supra I.A.3. Register.com does not own the information, but it does own the database housing WHOIS information for domain names it has registered and hypothetically, i.e., absent the ICANN Agreement, could prohibit access to its database. 45 Register.com did not prohibit access to its database, however. Instead, when an end-user submits a WHOIS query, access is granted, the query is processed, and the WHOIS information is sent to the end-user. By the time an end-user receives the WHOIS information and Register.com's proposed terms, Register.com's WHOIS database has already been accessed and the information has already been delivered to the end-user. Absent an ownership right in the information itself, which might allow some use restrictions despite disclosure, there is nothing to prevent an end-user from simply rejecting Register.com's proposed terms and then proceeding to use the information in any desired manner. 184 In conclusion, because (1) Register.com did not condition access to its database on acceptance of its terms but instead granted access, thereby giving Verio possession of the WHOIS information, and (2) Register.com's terms were an attempt to unilaterally impose use restrictions not authorized by the ICANN Agreement on information that Register.com does not own, Register.com has failed to establish a sufficient likelihood of success on the merits of its contract claim.