Laws Of .com

Court Upholds Enforceability of Clickwrap Agreement that Was Accepted Under Protest

A decision released on March 29th, 2004 from the United States District Court in Minnesota has held that acceptance by clicking through the terms of a software license agreement on a series of computer screens is binding upon the licensees notwithstanding a claim that consent was given under protest. The Court further rejected a claim by the licensees that they were unaware of the existence of a related file installed along with the software containing the terms of the said license. The Court reasoned that by clicking through the screens before using the software, they were aware, or ought to have been aware, of the license document. Moreover, numerous references to the said license agreement were in fact made in the related software development agreements as well as on the related invoices issued for the subject software product.

The case involved an action brought by i-Systems Inc. and its sole shareholder, Jeremy Kahn, against defendants Softwares Inc., Quantum Management Systems LLC, and Christ's Household of Faith, Inc. for various claims including breach of contract, copyright infringement, breach of implied covenant and misappropriation of trade secrets, among others.

i-Systems Inc. is a Quebec registered company engaged in the development of a software product named TQ Tracker. Under an agreement originally entered into in 1993, and a subsequent superseding agreement entered into in 1996, i-Systems Inc. was to develop the software product for the defendants who would act as licensees with an exclusive worldwide right to market and distribute the product. Under both agreements, i-Systems Inc. was to retain complete ownership in the software product. The software came "bundled"with a license whose terms clearly explained that the user had purchased a license to use the software, and did not have ownership of the software. Moreover, the license agreement clearly stated that the product was protected by copyright. In order to properly install the subject software, the user was required to click through a series of computer screens accepting the terms of the license before being able to use the software. The defendants argued that they did not have knowledge of the license agreements and accordingly, they did not consent to the license terms. In the alternative, they argued that even if they did consent, the consent was given under protest. The Court rejected the defendants' arguments by reasoning that the license agreement was in fact valid and binding on the defendants as they had notice of same, both when installing the product, and also at the time they received the invoices for the product where it clearly directed the recipient to "read the software license agreement ("license") carefully."Accordingly, the defendants were found liable for any breach of the terms of the license agreement.

For the complete text of the decision, please see: