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Cairo, Inc. v. CrossMedia Services, Inc.

No. C04-04825 (JW) (N.D. Ca., April 1, 2005)

Browse-Wrap Contract Created By Use Of Website With Knowledge That Such Use Creates Binding Agreement

Court holds Terms of Use on defendant's websites constitute binding agreements between website operator and website user, where notices on the sites provide that the Terms  will create such an agreement if a user continues to utilize the site, and plaintiff used the sites with both actual knowledge of the Terms, and with imputed knowledge arising out of repeated use of the sites via a "robot."  Court accordingly dismisses plaintiff's declaratory judgment action for improper venue, as the Terms of Use mandated suit be brought in Illinois, and plaintiff commenced suit in California.

Notice Advises That Site's Terms Of Use Become Binding Upon Use

Both plaintiff Cairo, Inc. and defendant CrossMedia Services Inc. operate web sites which permit shoppers to search for products on sale with local retailers.  Defendant, through arrangements with various retailers, makes the retailers' promotional materials available on  websites defendant operates.  Shoppers can find these promotional materials either via links for the retailers' own sites, or through searches on defendant's Shop Local Network.

All of the web pages on defendant's web sites contain a notice which states:

By continuing past this page and/or using this site, you agree to abide by the Terms of Use for this site, which prohibit commercial use of any information on this site.

The Court, in its decision, did not state where on defendant's web pages this notice appears.  A link under the words "Terms of Use" in the Notice takes the user to the full "Terms of Use."  The Terms again advise that:

These terms of use constitute a binding legal agreement (the "Agreement") between the user and CrossMedia Services, Inc. ("CrossMedia"), the owner and operator of the website.  If you do to accept the terms stated here, do not use the Website.

The Terms further prohibit accessing the sites either for commercial purposes, or via robot, or from deep linking to the sites' interior pages.  Lastly, the Terms mandate that any suit arising out of the agreement be brought in Illinois, where defendant has its principal offices. 

Plaintiff also operates a web site which provides shoppers with information about sales at their local stores.  Plaintiff obtains some of the information on sales it provides its clientele from defendant's sites.  More particularly, plaintiff uses 'robots' to access defendant's sites for information on retailer's promotions.  Thumbnail images of promotional materials found on defendant's sites are displayed on plaintiff's site.  Deep links from some of these thumbnails take the interested shopper to interior pages of defendant's sites, where a larger, interactive version of the promotional materials contained in the thumbnail can be found.

Defendant sent plaintiff a cease and desist letter, apprising plaintiff that its conduct violated the Terms of Use of defendant's sites.  Plaintiff admittedly learned of the contents of these Terms at least one day prior to receipt of this letter.

Use Of Site With Actual And Imputed Knowledge Of Terms Creates Binding Contract

Plaintiff responded by commencing suit for declaratory relief as to the legality of its conduct.  Plaintiff brought this suit in California, where it was based, rather than in Illinois, the jurisdiction mandated by the forum selection clause contained in the Terms of Use.

Defendant moved to dismiss for improper venue.  Finding plaintiff bound by the Terms of Use, the Court granted defendant's motion.

Quoting with approval the Second Circuit's decision in Register.com Inc. v. Verio, 356 F.3d 393 (2d Cir. 2004), the Court stated:

It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes acceptance of the terms, which accordingly become binding on the offeree.

As such, defendant was permitted to condition use of its sites on an agreement to be bound by the Terms of Use, and thus to make those Terms binding if a user continued to use the  site with knowledge that its use would so bind it.  The Court held that plaintiff had both actual knowledge of the consequences of its continued use, as it admitted, as well as imputed knowledge, arising out of the repeated accessing of defendant's sites by plaintiff's 'robot.'  The Court reached this later conclusion notwithstanding plaintiff's assertion that its 'robots' could not and did not review the Terms of Use on defendant's sites.  Because plaintiff continued to use the sites with knowledge that such use would bind it, the Court held the Terms of Use constituted a binding agreement between the parties.

Court Upholds Forum Selection Clause

The Court accordingly dismissed plaintiff's complaint for improper venue.  This included both the claims plaintiff brought arising out of the Terms of Use themselves (which sought declaratory relief that plaintiff was not bound by the Terms) as well as a declaratory judgment claim that its conduct did not infringe any copyrights or trademarks held by defendant in the materials contained within the thumbnails plaintiff displayed on its own site.  These latter claims were dismissed because they were based on the same events as the contract claims, and thus, held the Court, should be litigated along with them to avoid unnecessary duplication of effort.

It should be noted that the Court denominated this decision as "not for citation."

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