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Netscape ruling bolsters privacy efforts

A federal judge clears the way for plaintiffs to sue Netscape Communications for software that eavesdrops on consumer habits.

People who downloaded Netscape Communications' SmartDownload software are not bound by an online contract because they did not specifically agree to it, a federal judge has ruled.

The decision, which touches on the validity of commonly used Web contracts known as click-wrap licenses, clears the way for the plaintiffs to sue Netscape for tinkering with their computers without their consent.

In a ruling last week, New York federal Judge Alvin Hellerstein said the plaintiffs do not have to go through arbitration to solve the dispute--as required by the online agreement--because Netscape never required SmartDownload users to indicate their consent. When downloading the software, people saw only a small box of text asking them to "please review the licensing agreement." They were not required to click on any link indicating they had done so.

"Before downloading the software, the user need not view any license agreement terms or even any reference to a license agreement," Hellerstein wrote. "From the user's vantage point, SmartDownload could be analogized to a free neighborhood newspaper, readily obtained from a sidewalk box or supermarket counter without any exchange with a seller or vendor. It is there for the taking."

Hellerstein said he will allow the plaintiffs to seek class-action status at a hearing July 26.

Courts so far have mostly upheld click-wrap agreements, provided that a customer actively agrees to the contract. However, the Netscape case differs from traditional click-wrap cases because people who obtained SmartDownload were never asked to indicate their agreement to a license order to obtain the software.

In a suit filed last year against the AOL Time Warner division, customers alleged that SmartDownload allows the company to monitor people's activities after they've downloaded the software, violating federal laws prohibiting electronic surveillance.

After the suit was filed, AOL said it was scrapping the tracking feature.

AOL spokesman Nicholas Graham said the company didn't have any comment on the ruling. "We're still in the process of reviewing the decision," he said.