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Register.com, Inc. v. Verio, Inc.

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

Affirming the court below, the Second Circuit holds that Register.com is likely to prevail on breach of contract claims arising out of Verio Inc.'s use of data obtained from Register.com's Whois database in violation of the database's Terms of Use, which prohibit use of that information for unsolicited advertising.  In reaching this conclusion, the Second Circuit held that Register.com's Terms of Use are likely to create a contract between Register.com and Verio, because Verio repeatedly used Register.com's Whois database with actual knowledge that the Terms provided that such use would constitute assent to be bound by the data use restrictions contained in the Terms.  Notably, the Second Circuit reached this result notwithstanding the fact that Verio did not click an "I Agree" icon indicating its agreement to be so bound.  More importantly, the Court found Register.com likely to prevail despite the fact that Verio did not see these Terms until after it had already completed the act - using the Whois database - which purportedly indicated its assent to be bound thereby. 

The Second Circuit also found both that Verio's use of a search robot to gather Whois data likely constituted a trespass to chattels, and that certain of Verio's promotional activities violated the Lanham Act.

As a result, the Second Circuit affirmed the District Court's issuance of a preliminary injunction, enjoining Verio from either utilizing a search robot to obtain information from Register.com's Whois database, or utilizing information obtained from that database to assist in the transmission of mass unsolicited advertising by telephone, direct mail or e-mail.

Terms of Use Prohibit Certain Uses Of Data Contained In Register.com's Whois Database

Register.com operates a domain name registration service.  It also provides a variety of related services, including web site hosting and electronic mail.  To be authorized to provide domain name registration services, Register.com was required to and did enter into a Registrar Accreditation Agreement with ICANN.  Pursuant to this agreement, Register.com is required to provide the public with access to a Whois database containing, inter alia, contact information by which one can reach those individuals who utilize Register.com's services to register their domain names.  This agreement with ICANN sets forth the restrictions Register.com can place on the uses made by the public of data they obtain from the Whois database.  More particularly, this agreement provides:

Registrar shall not impose terms and conditions on use of the data provided except as permitted by ICCAN-adopted policy. Unless and until ICANN adopts a different policy, Registrar shall permit use of data it provides in response to queries for any lawful purposes except to: (a) allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via e-mail (spam); or (b) enable high volume, automated, electronic processes that apply to Registrar (or its systems).

In breach of this agreement (as it then existed) Register.com imposed restrictions on the use of data obtained from its Whois database greater than permitted under its agreement with ICANN.  These restrictions, contained in the Terms of Use governing use of its Whois database, prohibited the use of data obtained from the database not only for sending unsolicited electronic mail, as provided for by ICANN, but also for sending unsolicited advertisements via regular mail and telephone.  Register.com's Terms of Use provide, in pertinent part:

[B]y submitting a Whois query, you agree that you will use this data only for lawful purposes and that, under no circumstances, will you use this data to: (1) allow, enable or otherwise support the transmission of mass unsolicited commercial advertising or solicitations via direct mail, electronic mail, or by telephone; or (2) enable high volume, automated, electronic processes that apply to Register.com (or its systems). The compilation, repackaging, dissemination or other use of this data is expressly prohibited without the prior written consent of Register.com. Register.com reserves the right to modify these terms at any time. By submitting this query, you agree to abide by these terms.

Importantly, a user of the Whois database does not see these terms until after he has submitted a Whois query.  The user is then shown the results of his query, which results are preceded by the Terms of Use cited above.  The user is not asked or required after seeing these Terms to click any icon indicating his assent to be bound thereby.

Verio Uses Whois Data In Manner Prohibited By Terms Of Use

Verio, Inc. is a company that provides a variety of internet services, including web site hosting and development.  To assist it in developing its business, Verio decided to market its services to individuals who recently registered domain names.  Verio obtained information concerning the identity and whereabouts of these individuals, in part, by using a robot to search Register.com's Whois database.  Verio then utilized this information to solicit business from these individuals via telemarketing and e-mail.

Register.com objected to these activities, sent cease and desist letters to Verio with respect thereto, and finally commenced the instant lawsuit.  In its suit, Register.com charged that these activities violated its Terms of Use, and constituted both a trespass to chattels as well as violations of the Computer Fraud and Abuse Act and Lanham Act.  The District Court, finding plaintiff likely to succeed on the merits of these claims, issued a preliminary injunction enjoining Verio from continuing these activities.  On appeal, the Second Circuit affirmed.

Violation Of ICANN Agreement

Verio argued that Register.com could not enforce the Terms of Use applicable to its Whois database because such terms violated Register.com's Registrar Accreditation Agreement with ICANN.  More particularly, Verio argued, the ICANN agreement only permitted a registrar to prohibit use of Whois data in unsolicited e-mail, whereas Register.com prohibited its use in unsolicited e-mail, direct mail and telemarketing. 

The Court rejected this argument, holding that Verio did not have standing to assert such a claim because the ICANN Registrar Accreditation Agreement expressly disclaimed any intention to vest rights in third party beneficiaries such as Verio.  Instead, the ICANN Agreement allowed third parties to seek to enforce a registrar's obligations thereunder via a grievance process under ICANN's auspices, a procedure of which Verio did not avail itself.

It should be noted that ICANN subsequently amended the Registrar Agreement so as to permit domain registrars to prohibit use of Whois data in unsolicited advertisements sent via either telephone or fax, in addition to those sent by e-mail.

Terms Of Use Likely Create Binding Agreement

The Second Circuit also found that Register.com's Terms of Use were likely to create a binding contract between Verio and Register.com.  The Court reached this conclusion notwithstanding the fact that (i) the user did not see the Terms of Use until after he had performed a search on the Whois database, and (ii) the user was not asked or required, after seeing the terms, to indicate an assent thereto by clicking on an "I agree" icon. 

Central to the Court's determination was Verio's repeated use of the Whois database with actual knowledge that, under the site's Terms of Use, such use bound Verio to its Terms.  The result "might well be" different if Verio had only used the Whois database on a few sporadic occasions, without knowledge of the Terms, and their provision that they would be binding on use.  Said the Second Circuit:

We recognized that contract offers on the Internet often require the offeree to click on an "I agree" icon.  And no doubt, in many circumstances, such a statement of agreement by the offeree is essential to the formation of a contract.  But not in all circumstances.  While new coommerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract.  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 an acceptance of the terms, which accordingly become binding on the offeree.

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Returning to the apple stand, the visitor, who sees apples offered for 50 cents a piece and takes an apple, owes 50 cents, regardless whether he did or did not say, "I agree."  The choice offered in such circumstances is to take the apple on the known terms of the offer or not to take the apple.  As we see it, the defendant in Ticketmaster and Verio in this case had a similar choice.  Each was offered access to information subject to terms of which they were well aware.  Their choice was either to accept the offer of contract, taking the information subject to the terms of the offer, or if the terms were not acceptable to decline to take the benefits.

Accordingly, the Second Circuit found that plaintiff was likely to succeed on its breach of contract claim.  The Second Circuit affirmed the issuance of injunctive relief preventing such a breach because it believed the damage Register.com would sustain therefrom, which included injury to its "relationship with customers and co-brand partners," would be difficult to measure in damages.

Use Of Robot To Obtain Data From Database Likely Trespass To Chattels

The Second Circuit also found that Register.com was likely to prevail on its trespass to chattel claim as a result of Verio's use of a search robot to obtain data from Register.com's Whois database.  As stated by the Court:

"A trespass to a chattel may be committed by intentionally . . . using or intermeddling with a chattel in the possession of another," Restatement (Second) Torts § 217(b) (1965), where "the chattel is impaired as to its condition, quality, or value," id. § 218(b).

The Second Circuit held that once Register.com objected thereto, for example, by filing this suit, Verio knew that its use of a search robot exceeded the scope authorized by Register.com, and thus constructed a trespass.

The Second Circuit further held that the use by Verio of a search robot, combined with the threat of use by others if Verio's use was not prohibited, constituted sufficient injury -- in the form of consuming the Whois system's computer capacity - - to sustain the trespass claim.  Said the Court:

The district court found Verio's use of search robots, consisting of software program performing multiple automated successive queries, consumed a significant portion of the capacity of Register's computer systems.  While Verio's robots alone would not incapacitate Register's systems, the court found that if Verio were permitted to continue to access Registers computers through such robots, it was "highly probable" that other Internet service providers would devise similar programs to access Register's data and that the system would be overtaxed and would crash.  We cannot say these findings were unreasonable.

Verio's Marketing Activities Likely Violate Lanham Act

Lastly, the Second Circuit found that Verio's marketing activities would likely violate the Lanham Act.  Many individuals, shortly after they register a domain name with Register.com, received a solicitation which indicated the caller was calling from Verio "regarding a recently registered domain name" or "regarding the registration of your domain name."  This second solicitation further asked the registrant to "Please contact me at your earliest convenience ... If I don't hear from you in a couple of days I will call back."  The Court was of the opinion that such solicitations, even though they did not use the Register.com mark or name, would likely create confusion as to their source.  This conclusion was supported by evidence of actual registrant confusion submitted by Register.com.  The Court accordingly held that such conduct was likely to constitute a violation of §43(a) of the Lanham Act, and accordingly affirmed the District Court's award of injunctive relief, enjoining Verio from continuing such practices.

Judge Parker's Views

Included along with the Second Circuit's decision as an Appendix was a draft opinion prepared by Judge Parker who sat on the Panel that heard this appeal, but unfortunately died before its resolution.  Judge Parker would have voted to affirm so much of the District Court's decision that held that Register.com was likely to prevail on its trespass to chattel claim.  Judge Parker accordingly would have voted to affirm the relief granted by the District Court to remedy that wrong, an injunction enjoining Verio from continuing to use a search robot to harvest data from the Whois database.

Judge Parker, however, would have voted to reverse the balance of the District Court's decision.  Contrary to both the District Court, and his brethren on the Second Circuit, Judge Parker did not believe that Register.com was likely to prevail on its breach of contract claims.  Judge Parker rested this conclusion on his determination that Verio did not assent to be bound by the Terms of Use.  As stated above, Verio was not required to click on "I Agree" icon indicating its assent.  Rather, it was given access to the data at issue before being shown the Terms of Use, and thus before it was bound thereby.  And in the circumstances of this case, its repeated use of the Whois database, even with actual knowledge that the Terms provided that such use indicated assent to be bound, was insufficient to constitute such assent.  Such was the case because Verio contested Register.com's right, under its agreement with ICANN, to impose the advertising restrictions on use of the Whois data at issue.  As such, reasoned Judge Parker, Verio's use of the Whois database was not a manifestation of its assent to be bound.