Citation Edit

Cairo, Inc. v. CrossMedia Services, Inc., 2005 WL 756610 (N.D. Cal. Apr. 1, 2005).

Factual Background Edit

Cairo, Inc, and Crossmedia Services (CMS) both operate websites that allow users to search for products on sale at local retailers.

CMS enters into agreements with retailers to make their promotions available on CMS's websites. Shoppers visit the website of a retailer and click on a link for sales. The shopper is directed to a CMS web page that asks her to enter her address to find sales in her area. Every web page hosted by CMS displays the CMS logo and the following notice: “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 phrase "Terms of Use" appears in an underlined and highlighted format to signal a hyperlink. Clicking on the link opens the CMS "Terms of Use." The first provision reads: "These terms of use constitute a binding legal agreement between the user and CrossMedia Services, Inc., the owner and operator of the Website. If you do not accept the terms stated here, do not use the Website." CMS's Terms of Use also contain a forum selection clause stating Chicago, Illinois as its venue.

Cairo compiles information from retailer's web pages, some of which are enabled by CMS, by means of robot computer programs which download information automatically without being aware of any end user agreements.

CMS discovered that Cairo was copying promotional materials from CMS's web pages on to the Cairo site. CMS's counsel sent a letter informing Cairo that its conduct constituted a breach of the Terms of Use and to cease and desist.

Trial Court Proceedings Edit

Cairo filed for declaratory relief against CMS to declare its website was not violating any intellectual or other property rights of CMS. CMS filed a Motion to Dismiss for improper venue under Fed. R. Civ. P. 12(b)(3), stating that Cairo must abide by the forum selection clause.

The issue was whether Cairo is bound by CMS's Terms of Use. Cairo asserts that since it never explicitly agreed to CMS's Terms of Use, it is not contractually bound by the forum selection provision. Furthermore, Cairo denies being aware of CMS's forum selection clause at the time it filed this case and that the clause must be reasonably communicated to be binding.[1]

The U.S. Supreme Court has held that to resolve motions to dismiss based on a forum selection clause, the pleadings are not accepted as true, and the court may consider facts outside the pleadings, interpreting conflicting facts in favor of the non-moving party. It also held that forum selection clauses are "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances."[2]

The court found standard contract principles still apply in the internet setting. 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.[3]

Distinguishing Netscape, Cairo admitted to having actual knowledge of CMS's terms as early as one day before the cease and desist letter was sent. The court also found that Cairo's repeated and automated use of CMS's web pages can form the basis of imputing knowledge to Cairo of the terms on which CMS's services were offered. Cairo's use of CMS's website under circumstances in which Cairo had actual or imputed knowledge of CMS's terms effectively binds Cairo to CMS's Terms of Use and the forum selection clause therein.

References Edit

  1. Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) (full-text).
  2. M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972) (full-text).
  3., Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) (full-text).

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