The Software IP Report

Incorporation by Reference in a Clickwrap Agreement

By Charles Bieneman

Categories: Software Licenses, The Software IP Report

How explicit does a click-wrap agreement have to be concerning updates and revisions that may later be incorporated into the agreement?  In Noll. v. eBay, Inc., No. 5:11-CV-04585 (N.D. Cal., April 23, 2012), the court denied eBay’s motion to dismiss a breach of contract claim in a class-action complaint based on eBay’s revisions to a “Fee Schedule” which was accessible via hyperlinks included in eBay’s User Agreement.

The plaintiff alleged that he had used eBay to list items for sale since September 2010.  In September 2008, eBay had revised its pricing for “Fixed Price Listings,” i.e., listings placed “on eBay for a specified period of time at a specified price.”  At the same time, “eBay introduced a 30-day listing duration for Fixed Price listings and also introduced the Good ‘Til Canceled (‘GTC’) feature, which would automatically renew a listing every 30 days until the item sold or the listing was cancelled.”  While “eBay’s August 2008 Seller Update provided that the GTC feature would be available at ‘no extra cost,’” eBay issued a subsequent “Seller Update” under which it “charged sellers recurring Listing Fees every 30 days for GTC listings that were not cancelled.”  Further, the plaintiff alleged that eBay did not provide notice of these new recurring fees attached to the GTC feature in “the eBay Motors Fee Schedule until 2010.”  On this basis, the plaintiff alleged, among other claims, breach of contract because “eBay improperly charged Feature Fees when GTC listings were renewed every 30 days.”

After addressing specific time periods and entities concerning which the plaintiff had (or lacked) standing to sue, the court turned to the breach of contract claim.  eBay argued that the breach of contract “claim should be dismissed because the disputed fees were, in fact, disclosed to Plaintiff through the August 2008 Seller Update and a web page on eBay’s help center.”  However, this case was distinguishable from cases cited by eBay, because, in those cases, the agreements at issue had specifically stated that a customer could be liable for other, unnamed fees.  eBay’s User Agreement, in contrast, stated “that all fees charged are based on the Fee Schedule.”  Further, eBay’s monthly invoices allegedly “contained only a monthly total, without explanation of charges.”

Under California law, extrinsic documents could be incorporated into the contract executed by the parties only if the reference were clear and unequivocal.  Further, “[w]hether the document purportedly incorporated by reference was ‘readily available’ is a question of fact.”  Receipt of a physical document is sometimes enough to put a party on notice.  Here, the court cited Specht v. Netscape Comm. Corp., 306 F.3d 17, 29 (2d Cir. 2002), for the proposition that “a reference to the existence of license terms on a submerged screen was not sufficient to place consumers on inquiry or constructive notice of those terms.”  (As this blog has previously discussed, other courts have been careful when enforcing clickwrap agreements incorporating documents by reference.)

Construing the Complaint in the light most favorable to the plaintiff, the court could not, at this point, “decide as a matter of law whether the 2008 Seller Update or help center web page were incorporated by reference into the contract.”  Thus, the court denied eBay’s motion to dismiss the breach of contract claim.

The court also denied eBay’s motion to dismiss other claims, including an unjust enrichment claim and a declaratory judgment claim, and dismissed other claims, including a claim of fraud, with leave to amend.