306 F.3d 17 (2d Cir. 2002)
Specht v. Netscape Communications Corp.
Are consumers who click a 'Download' button for free software bound to an arbitration clause contained in hyperlinked license terms that were not reasonably conspicuous and to which they did not affirmatively assent; and, separately, does a clickwrap license for a different Netscape product require arbitration of claims arising from SmartDownload?
Under the FAA, a court must first determine whether the parties agreed to arbitrate under applicable state contract law; the federal policy favoring arbitration does not apply until a valid agreement is shown. Contract formation requires reasonably conspicuous notice of terms and an unambiguous manifestation of assent. Online, terms presented only by a non-obvious hyperlink, without a requirement to click to accept or other clear assent, generally do not bind consumers. By contrast, clickwrap terms that require the user to indicate assent after receiving reasonably conspicuous notice are typically enforceable. A separate agreement's arbitration clause extends only to disputes that arise out of or relate to that agreement and its subject matter, as determined by standard principles of scope and interpretation.
No. The plaintiffs were not bound by SmartDownload's arbitration clause because they did not receive reasonably conspicuous notice of the license terms and did not manifest assent by their downloads. Clicking 'Download' did not constitute acceptance. Further, the clickwrap license for Netscape's Communicator product did not compel arbitration of claims concerning SmartDownload, a separate program; the dispute did not arise out of or sufficiently relate to the Communicator agreement. The order denying the motion to compel arbitration was affirmed.
Specht is a leading decision on digital assent and the enforceability of online arbitration clauses. It establishes that browsewrap terms—hyperlinked and inconspicuous—do not bind consumers absent clear notice and affirmative assent. The case guides platform and software designers to use conspicuous disclosures and unambiguous assent mechanisms (e.g., clickwrap) if they want terms enforced. It also clarifies FAA doctrine: a court must find a valid agreement under state law before any pro-arbitration presumption applies, and arbitration clauses in one contract do not automatically sweep in disputes about distinct products.