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Click-Wrap License Agreement Found Binding on Company Even Though It was Accepted by the Vendor

Jan 27, 20102 mins
Core Java

The threat of businesses becoming inadvertently bound by shrink-wrap and click-wrap agreements became even more significant when a federal court last year found that a company was bound by unfavorable terms in a click-wrap license agreement, even though an employee of the software vendor installed the software and click-accepted the license agreement. (Via Viente Taiwan LP v. United Parcel Service Inc., E.D. Tex., No. 08-301, 2/17/09).  In that case, the court ruled the forum selection clause in the license agreement was enforceable, and the customer-licensee was required to litigate in the vendor’s preferred location of Atlanta, rather than Texas, where the customer brought the suit. The customer had argued there was not contract because it was never able to review and affirmatively accept the license agreement.  Instead, an employee of the licensor installed the software and accepted the license agreement, without even advising the customer of the existence of the contract. The court, however, found that “click-through set up process that included terms of service would hardly be a surprise to anyone who has ever installed software on a computer, much less the employees of a sophisticated company which boasts international operations.” That is, the customer should have been aware that terms of service would be presented upon the installation of the software. The court believed the customer likely supervised the UPS’s employee during the installation process, and would have been at least generally aware that use of the software required acceptance of the license agreement.  Finally, and most importantly, the court found the customer used and derived benefit from the software.  To then allow the customer to benefit from portions of the contract while allowing it to disavow others would be inequitable. In light of this decision and the general readiness of courts to enforce even Draconian provisions in shrink-wrap and click-wrap agreements, businesses should implement measures to ensure they have been presented with and afforded the opportunity to review all relevant agreements, including shrink-wrap and click-wrap agreements, before entering into a potential vendor relationship.


Michael R. Overly is a partner and intellectual property lawyer with Foley & Lardner LLP where he focuses on drafting and negotiating technology related agreements, software licenses, hardware acquisition, development, disaster recovery, outsourcing agreements, information security agreements, e-commerce agreements, and technology use policies. He counsels clients in the areas of technology acquisition, information security, electronic commerce, and on-line law.

Mr. Overly is a member of the Technology Transactions & Outsourcing and Privacy, Security & Information Management Practices. Mr. Overly is one of the few practicing lawyers who has satisfied the rigorous requirements necessary to obtain the Certified Information System Auditor (CISA), Certified Information Privacy Professional (CIPP), Certified Information Systems Security Professional (CISSP), Information Systems Security Management Professional (ISSMP), Certified Risk and Information System Controls (CRISC) and Certified Outsourcing Professional (COP) certifications.

The opinions expressed in this blog are those of Michael R. Overly and do not necessarily represent those of IDG Communications, Inc., its parent, subsidiary or affiliated companies.

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