Tablet Fire Sale Leads to Shrinkwrap/Clickwrap/Browsewrap Confusion

A few years back, a firestorm hit the Internet -- and by a firestorm, I mean a fire sale. A tablet, with specifications on par with the high-end Apple and Android devices of the time, priced at $499.99 to $599.99, would go on sale for as low as $99, as HP had decided to scrap its Touchpad line a mere month after it launched.

Unsurprisingly, every retailer in the world sold out of Touchpads within hours. HP's now-dead tablet was the second-best seller of the year behind the iPad. And a few disgruntled customers, who had placed orders online, were left with nothing but sadness and a cancellation email when retailers like Barnes & Noble oversold their inventory.

Well, sadness and a lawsuit, that is. And an interesting issue of shrinkwrap/clickwrap/browsewrap contracts.

You're Bound by Arbitration If You Click This Link on the Bottom of the Page and Read the Terms and Agree to Them, but Otherwise You Aren't -- We Think

A quick review of the history of "shrinkwrap" licenses: Software makers included terms under the "shrinkwrap" in the old days, and if you used it, you impliedly consented to the terms. Later, this became those terms you ignore when you click "next" during installation or website registration (the "clickwrap" license).

And then, the "browsewrap" license appeared. By going to a website that has terms buried somewhere behind some link, the user is bound by those terms -- in this case, the Barnes & Noble site required arbitration for disputes over purchases.

Or, at least, that's what Barnes & Noble was hoping the court would hold. It didn't.

People Should Probably Know What They Are Agreeing To

"Were there any evidence in the record that Nguyen had actual notice of the Terms of Use or was required to affirmatively acknowledge the Terms of Use before completing his online purchase, the outcome of this case might be different," Judge John T. Noonan wrote. "Indeed, courts have consistently enforced browsewrap agreements where the user had actual notice of the agreement."

This, however, is where the opinion goes off the rails. Judge Noonan goes on for pages about how B&N's terms, which were placed near the button that a user clicks when finalizing a purchase, weren't conspicuous enough. And he distinguished a case where, just like here, the placement, font, and colored link were conspicuous enough for constructive notice because in that case, the instruction "Review terms" was displayed to the consumer during checkout.

And yet, the holding is that "where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on -- without more -- is insufficient to give rise to constructive notice."

So, instead of a clear rule such as "clickwrap is required," we end up with some requirement that is more than passive links, but not quite at the "need to click something" level.

Businesses can always go for the full click consent if they want to be sure, but as online retailers have found out, the more clicks, the less likely the consumer is to go through with the sale. (Hence, Amazon's "1-click" purchase button which feeds impulse purchases.) And with such a vague standard, expect the Ninth Circuit's decision to lead to a lot more debate and litigation over whether a link is pretty or bold enough for constructive notice.

Related Resources:

• Nguyen v. Barnes & Noble Inc. (FindLaw's Cases & Codes)
• What's a Browsewrap? The Ninth Circuit Sure Doesn't Know-Nguyen v. Barnes & Noble (Technology & Marketing Law Blog)
• Jimi Hendrix Infringer Experiences 'Crash Landing' at 9th Cir. (FindLaw's U.S. Ninth Circuit Blog)
• Spend more time practicing and less time advertising. (FindLaw Lawyer Marketing)