Defendant, Verio, Inc. ("Verio") appeals from an order of the United States District Court for the Southern District of New York (Barbara S. Jones, J.) granting the motion of plaintiff Register.com, Inc. ("Register") for a preliminary injunction. The court's order enjoined Verio from (1) using Register's trademarks; (2) representing or otherwise suggesting to third parties that Verio's services have the sponsorship, endorsement, or approval of Register; (3) accessing Register's computers by use of automated software programs performing multiple successive queries; and (4) using data obtained from Register's database of contact information of registrants of Internet domain names to solicit the registrants for the sale of web site development services by electronic mail, telephone calls, or direct mail. We affirm.
This plaintiff Register is one of over fifty companies serving as registrars for the issuance of domain names on the world wide web. As a registrar, Register issues domain names to persons and entities preparing to establish web sites on the Internet. Web sites are identified and accessed by reference to their domain names.
Register was appointed a registrar of domain names by the Internet Corporation for Assigned Names and Numbers, known by the acronym "ICANN." ICANN is a private, non-profit public benefit corporation which was established by agencies of the U.S. government to administer the Internet domain name system. To become a registrar of domain names, Register was required to enter into a standard form agreement with ICANN, designated as the ICANN Registrar Accreditation Agreement, November 1999 version (referred to herein as the "ICANN Agreement").
Applicants to register a domain name submit to the registrar contact information, including at a minimum, the applicant's name, postal address, telephone number, and electronic mail address. The ICANN Agreement, referring to this registrant contact information under the rubric "WHOIS information," requires the registrar, under terms discussed in greater detail below, to preserve it, update it daily, and provide for free public access to it through the Internet as well as through an independent access port, called port 43. See ICANN Agreement § II.F.1.
Another section of the ICANN Agreement (upon which appellee Register relies) provides as follows,
ICANN Agreement § II.S.2. Third parties could nonetheless seek enforcement of a registrar's obligations set forth in the ICANN Agreement by resort to a grievance process under ICANN's auspices.
In compliance with § II.F.1 of the ICANN Agreement, Register updated the WHOIS information on a daily basis and established Internet and port 43 service, which allowed free public query of its WHOIS information. An entity making a WHOIS query through Register's Internet site or port 43 would receive a reply furnishing the requested WHOIS information, captioned by a legend devised by Register, which stated,
The terms of that legend tracked § II.F.5 of the ICANN Agreement in specifying the restrictions Register imposed on the use of its WHOIS data. Subsequently, as explained below, Register amended the terms of this legend to impose more stringent restrictions on the use of the information gathered through such queries.
In addition to performing the function of a registrar of domain names, Register also engages in the business of selling web-related services to entities that maintain web sites. These services cover various aspects of web site development. In order to solicit business for the services it offers, Register sends out marketing communications. Among the entities it solicits for the sale of such services are entities whose domain names it registered. However, during the registration process, Register offers registrants the opportunity to elect whether or not they will receive marketing communications from it.
The defendant Verio, against whom the preliminary injunction was issued, is engaged in the business of selling a variety of web site design, development and operation services. In the sale of such services, Verio competes with Register's web site development business. To facilitate its pursuit of customers, Verio undertook to obtain daily updates of the WHOIS information relating to newly registered domain names. To achieve this, Verio devised an automated software program, or robot, which each day would submit multiple successive WHOIS queries through the port 43 accesses of various registrars. Upon acquiring the WHOIS information of new registrants, Verio would send them marketing solicitations by email, telemarketing and direct mail. To the extent that Verio's solicitations were sent by email, the practice was inconsistent with the
At first, Verio's solicitations addressed to Register's registrants made explicit reference to their recent registration through Register. This led some of the recipients of Verio's solicitations to believe the solicitation was initiated by Register (or an affiliate), and was sent in violation of the registrant's election not to receive solicitations from Register. Register began to receive complaints from registrants. Register in turn complained to Verio and demanded that Verio cease and desist from this form of marketing. Register asserted that Verio was harming Register's goodwill, and that by soliciting via email, was violating the terms to which it had agreed on submitting its queries for WHOIS information. Verio responded to the effect that it had stopped mentioning Register in its solicitation message.
In the meantime, Register changed the restrictive legend it attached to its responses to WHOIS queries. While previously the legend conformed to the terms of § II F.5, which authorized Register to prohibit use of the WHOIS information for mass solicitations "via email," its new legend undertook to bar mass solicitation "via direct mail, electronic mail, or by telephone."
Register wrote to Verio demanding that it cease using WHOIS information derived from Register not only for email marketing, but also for marketing by direct mail and telephone. Verio ceased using the information in email marketing, but refused to stop marketing by direct mail and telephone.
Register brought this suit on August 3, 2000, and moved for a temporary restraining order and a preliminary injunction. Register asserted, among other claims, that Verio was (a) causing confusion among customers, who were led to believe Verio was affiliated with Register; (b) accessing Register's computers without authorization, a violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; and, (c) trespassing on Register's chattels in a manner likely to harm Register's computer systems by the use of Verio's automated robot software programs. On December 8, 2000, the district court entered a preliminary injunction. The injunction barred Verio from the following activities:
Register.com, Inc. v. Verio, Inc., 126 F.Supp.2d 238, 255 (S.D.N.Y.2000). Verio appeals from that order.
Standard of review and preliminary injunction standard
A grant of a preliminary injunction is reviewed on appeal for abuse of discretion, see SEC v. Cavanagh, 155 F.3d 129, 132 (2d Cir.1998), which will be found if the district court "applies legal standards incorrectly or relies upon clearly erroneous findings of fact," id., or "proceed[s] on the basis of an erroneous view of the applicable law," Donovan v. Bierwirth, 680 F.2d 263, 269 (2d Cir.1982).
Verio advances a plethora of arguments why the preliminary injunction should be vacated. We find them to be without merit. We address the most substantial of Verio's arguments.
(a) Verio's enforcement of the restrictions placed on Register by the ICANN Agreement
Verio conceded that it knew of the restrictions Register placed on the use of the WHOIS data and knew that, by using Register's WHOIS data for direct mail and telemarketing solicitations, it was violating Register's restrictions. Verio's principal argument is that Register was not authorized to forbid Verio from using the data for direct mail and telemarketing solicitation because the ICANN Agreement prohibited Register from imposing any "terms and conditions" on use of WHOIS data, "except as permitted by ICANN-adopted policy," which specified that Register was required to permit "any lawful purpose, except ... mass solicitation via email."
Register does not deny that the restrictions it imposed contravened this requirement of the ICANN Agreement. Register contends, however, that the question whether it violated § II.F.5 of its Agreement with ICANN is a matter between itself and ICANN, and that Verio cannot enforce the obligations placed on Register by the ICANN Agreement. Register points to § II.S.2 of the ICANN Agreement, captioned "No Third-Party Beneficiaries," which, as noted, states that the agreement is not to be construed "to create any obligation by either ICANN or Registrar to any non-party." Register asserts that Verio, a non-party, is asking the court to construe § II.F.5 as creating an obligation owed by Register to Verio, and
ICANN intervened in the district court as an amicus curiae and strongly supports Register's position, opposing Verio's right to invoke Register's contractual promises to ICANN. ICANN explained that ICANN has established a remedial process for the resolution of such disputes through which Verio might have sought satisfaction. "If Verio had concerns regarding Register.com's conditions for access to WHOIS data, it should have raised them within the ICANN process rather [than] simply taking Register.com's data, violating the conditions [imposed by Register], and then seeking to justify its violation in this Court.... [Verio's claim was] intended to be addressed only within the ICANN process."
ICANN asserted that the No Third-Party Beneficiary provision, barring third parties from seeking to enforce promises made by a registrar to ICANN through court proceedings, was "vital to the overall scheme of [its] various agreements."
ICANN's brief went on to state:
We are persuaded by the arguments Register and ICANN advance. It is true Register incurred a contractual obligation to ICANN not to prevent the use of its WHOIS data for direct mail and telemarketing solicitation. But ICANN deliberately included in the same contract that persons aggrieved by Register's violation of such a term should seek satisfaction within the framework of ICANN's grievance policy, and should not be heard in courts of law to plead entitlement to enforce Register's promise to ICANN. As experience develops in the fast changing world of the Internet, ICANN, informed by the various constituencies in the Internet community, might well no longer consider it salutary to enforce a policy which it earlier expressed in the ICANN Agreement. For courts to undertake to enforce promises made by registrars to ICANN at the instance of third parties might therefore be harmful to ICANN's efforts to develop well-informed and sound Internet policy.
Verio's invocation of the ICANN Agreement necessarily depends on its entitlement to enforce Register's promises to ICANN in the role of third party beneficiary.
We are not persuaded by the arguments Judge Parker advanced in his draft. Although acknowledging that Verio could not claim third party beneficiary rights to enforce Register's promises to ICANN, Judge Parker nonetheless found three reasons for enforcing Verio's claim: (i) "public policy interests at stake," (ii) Register's "indisputable obligations to ICANN as a registrar," and (iii) the equities, involving Register's "unclean hands" in imposing a restriction it was contractually bound not to impose. We respectfully disagree. As for the first argument, that Register's restriction violated public policy, it is far from clear that this is so.
As for Judge Parker's second argument, Register's "indisputable obligation to ICANN as a registrar" to permit Verio to use the WHOIS information for mass solicitation by mail and telephone, we do not see how this argument differs from Verio's claim of entitlement as a third party beneficiary, which § II.S.2 explicitly negates. The fact that Register owed a contractual obligation to ICANN not to impose certain restrictions on use of WHOIS information does not mean that it owed an obligation to Verio not to impose such restrictions. As ICANN's brief in the district court indicates, ICANN was well aware of Register's deviation from the restrictions imposed by the ICANN Agreement, but ICANN chose not to take steps to compel Register to adhere to its contract.
(b) Verio's assent to Register's contract terms
Verio's next contention assumes that Register was legally authorized to demand that takers of WHOIS data from its systems refrain from using it for mass solicitation by mail and telephone, as well as by email. Verio contends that it nonetheless never became contractually bound to the conditions imposed by Register's restrictive legend because, in the case of each query Verio made, the legend did not appear until after Verio had submitted the query and received the WHOIS data. Accordingly, Verio contends that in no instance did it receive legally enforceable notice of the conditions Register intended to impose. Verio therefore argues it should not be deemed to have taken WHOIS data from Register's systems subject to Register's conditions.
Verio's argument might well be persuasive if its queries addressed to Register's computers had been sporadic and infrequent. If Verio had submitted only one query, or even if it had submitted only a few sporadic queries, that would give considerable force to its contention that it obtained the WHOIS data without being conscious that Register intended to impose conditions, and without being deemed to have accepted Register's conditions. But Verio was daily submitting numerous queries, each of which resulted in its receiving notice of the terms Register exacted. Furthermore, Verio admits that it knew perfectly well what terms Register demanded. Verio's argument fails.
The situation might be compared to one in which plaintiff P maintains a roadside fruit stand displaying bins of apples. A visitor, defendant D, takes an apple and bites into it. As D turns to leave, D sees a sign, visible only as one turns to exit, which says "Apples — 50 cents apiece." D does not pay for the apple. D believes he has no obligation to pay because he had no notice when he bit into the apple that 50 cents was expected in return. D's view is that he never agreed to pay for the apple. Thereafter, each day, several times a day, D revisits the stand, takes an apple, and eats it. D never leaves money.
P sues D in contract for the price of the apples taken. D defends on the ground that on no occasion did he see P's price notice until after he had bitten into the apples. D may well prevail as to the first apple taken. D had no reason to understand upon taking it that P was demanding the payment. In our view, however, D cannot continue on a daily basis to take apples for free, knowing full well that P is offering them only in exchange for 50 cents in compensation, merely because the sign demanding payment is so placed that on each occasion D does not see it until he has bitten into the apple.
Verio's circumstance is effectively the same. Each day Verio repeatedly enters Register's computers and takes that day's
Verio seeks support for its position from cases that have dealt with the formation of contracts on the Internet. An excellent example, although decided subsequent to the submission of this case, is Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir.2002). The dispute was whether users of Netscape's software, who downloaded it from Netscape's web site, were bound by an agreement to arbitrate disputes with Netscape, where Netscape had posted the terms of its offer of the software (including the obligation to arbitrate disputes) on the web site from which they downloaded the software. We ruled against Netscape and in favor of the users of its software because the users would not have seen the terms Netscape exacted without scrolling down their computer screens, and there was no reason for them to do so. The evidence did not demonstrate that one who had downloaded Netscape's software had necessarily seen the terms of its offer.
Verio, however, cannot avail itself of the reasoning of Specht. In Specht, the users in whose favor we decided visited Netscape's web site one time to download its software. Netscape's posting of its terms did not compel the conclusion that its downloaders took the software subject to those terms because there was no way to determine that any downloader had seen the terms of the offer. There was no basis for imputing to the downloaders of Netscape's software knowledge of the terms on which the software was offered. This case is crucially different. Verio visited Register's computers daily to access WHOIS data and each day saw the terms of Register's offer; Verio admitted that, in entering Register's computers to get the data, it was fully aware of the terms on which Register offered the access.
We acknowledge that the Ticketmaster decision gives Verio some support, but not enough. In the first place, the Ticketmaster court was not making a definitive ruling rejecting Ticketmaster's contract claim. It was rather exercising a district
But more importantly, we are not inclined to agree with the Ticketmaster court's analysis. There is a crucial difference between the circumstances of Specht, where we declined to enforce Netscape's specified terms against a user of its software because of inadequate evidence that the user had seen the terms when downloading the software, and those of Ticketmaster, where the taker of information from Ticketmaster's site knew full well the terms on which the information was offered but was not offered an icon marked, "I agree," on which to click. Under the circumstances of Ticketmaster, we see no reason why the enforceability of the offeror's terms should depend on whether the taker states (or clicks), "I agree."
We recognize 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 commerce 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. See, e.g., Restatement (Second) of Contracts § 69(1)(a) (1981) ("[S]ilence and inaction operate as an acceptance ... [w]here an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation."); 2 Richard A. Lord, Williston on Contracts § 6:9 (4th ed. 1991) ("[T]he acceptance of the benefit of services may well be held to imply a promise to pay for them if at the time of acceptance the offeree has a reasonable opportunity to reject the service and knows or has reason to know that compensation is expected."); Arthur Linton Corbin, Corbin on Contracts § 71 (West 1 vol. ed. 1952) ("The acceptance of the benefit of the services is a promise to pay for them, if at the time of accepting the benefit the offeree has a reasonable opportunity to reject it and knows that compensation is expected."); Jones v. Brisbin, 41 Wn.2d 167, 172, 247 P.2d 891 (1952) ("Where a person, with reasonable opportunity to reject offered services, takes the benefit of them under circumstances which would indicate, to a reasonable man, that they were offered with the expectation of compensation, a contract, complete with mutual assent, results."); Markstein Bros. Millinery Co. v. J.A. White & Co., 151 Ark. 1, 235 S.W. 39 (1921) (buyer of hats was bound to pay for hats when buyer failed to return them to seller within five days of inspection as seller requested in clear and obvious notice statement).
Returning to the apple stand, the visitor, who sees apples offered for 50 cents apiece 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.
(c) Irreparable harm
Verio contends that an injunction is not appropriate to enforce the terms of a contract. It is true that specific relief is not the conventional remedy for breach of contract, but there is certainly no ironclad rule against its use. Specific relief may be awarded in certain circumstances.
If an injury can be appropriately compensated by an award of monetary damages, then an adequate remedy at law exists, and no irreparable injury may be found to justify specific relief. Borey v. Nat'l Union Fire Ins. Co., 934 F.2d 30, 34 (2d Cir.1991). But, irreparable harm may be found where damages are difficult to establish and measure. Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 69 (2d Cir.1999). We have found, for example, that injunctive relief is appropriate where it would be "very difficult to calculate monetary damages that would successfully redress the loss of a relationship with a client that would produce an indeterminate amount of business in years to come." Id. at 69.
The district court found it impossible to estimate "with any precision the amount of the monetary loss which has resulted and which would result in the future from the loss of Register.com's relationships with customers and co-brand partners," by reason of Verio's actions. Register.com, 126 F.Supp.2d at 248. In our view, the district court did not abuse its discretion in finding that, unless specific relief were granted, Verio's actions would cause Register irreparable harm through loss of reputation, good will, and business opportunities.
(d) Trespass to chattels
Verio also attacks the grant of the preliminary injunction against its accessing Register's computers by automated software programs performing multiple successive queries. This prong of the injunction was premised on Register's claim of trespass to chattels. Verio contends the ruling was in error because Register failed to establish that Verio's conduct resulted in harm to Register's servers and because Verio's robot access to the WHOIS database through Register was "not unauthorized." We believe the district court's findings were within the range of its permissible discretion.
"A trespass to a chattel may be committed by intentionally ... using or intermeddling with a chattel in the possession of another," Restatement (Second) of Torts § 217(b) (1965), where "the chattel is impaired as to its condition, quality, or value," id. § 218(b); see also City of Amsterdam v. Goldreyer Ltd., 882 F.Supp. 1273, 1281 (E.D.N.Y.1995) (citing the Restatement definition as New York law).
The district court found that Verio's use of search robots, consisting of software programs 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 Register's 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.
Nor is there merit to Verio's contention that it cannot be engaged in trespass when Register had never instructed it not to use
(e) Lanham Act
On Register's claim for trademark infringement and unfair competition under the Lanham Act, the district court enjoined Verio from using Register's marks, including "Register.com" and "first step on the web," as well as from committing acts "calculated to or ... likely to cause third parties to believe that Verio" is sponsored, endorsed or approved by Register. By letter submitted after oral argument, Register agreed to the deletion of the prohibition concerning use of "first step on the web." See Letter from William Patry, Counsel for Register, to the U.S. Court of Appeals for the Second Circuit (May 22, 2001). We accordingly direct the district court to modify the preliminary injunction by deleting the prohibition of use of "first step on the web."
Verio contends there was no adequate basis for the portion of the injunction based on the Lanham Act. We disagree. In our view, the injunction was within the scope of the court's permitted discretion.
The district court found two bases for the injunction. The first was that in its early calls to recent registrants to solicit the sale of web site development services, Verio explicitly referred to the registrant's registration with Register. The evidence showed that a number of registrants believed the caller was affiliated with Register. The evidence further showed that Verio's marketers, calling registrants almost immediately following their registration, left messages saying they were calling "regarding your recently registered domain name," and asked to be called back. Register.com, 126 F.Supp.2d at 254. The district court found that the script was misleading. It noted that Verio in fact was not calling "regarding the recently registered domain name," but was rather calling regarding the registrant's establishment of a web site for which Verio wanted to offer services. Evidence presented to the district court showed that registrants who received such calls were prompted to call back immediately because the message led them to believe the call indicated some problem with Register's registration of the domain name, and that they assumed from the nature of the message that the entity calling was affiliated with Register.
We believe Register has shown an adequate basis to support the district court's exercise of discretion in issuing the injunction. Verio's use of Register's name alone was sufficient basis for the injunction. Notwithstanding that Verio had agreed, prior to the initiation of the suit, to cease using Register's name, Verio had previously used Register's mark in its solicitation calls. The fact that it had agreed to cease doing so was a factor that might have led the court to decline to issue the injunction, but it did not prevent the court from considering Verio's previous infringing behavior as a justification for the injunction.
The district court was also within its discretion in concluding that Verio's script for the solicitation calls was misleading. Verio's calls, while prompted by the recent registration of the domain name, were not "regarding your recently registered domain name." Verio's interest was not in the domain name but in the opportunity to offer web services to the owner of a new site. The district court was within its discretion in finding that the reference to the recently registered domain name misleadingly induced registrants to call back, believing the registration of their domain
Nor does the mere fact that Verio's representatives identified themselves as "calling from Verio" preclude a finding of misleading practice. The statement that the solicitor was "calling from Verio" did not prevent customers from assuming that Verio was connected with the registrar of their domain names. Compare Arrow Fastener Co. v. Stanley Works, 59 F.3d 384, 395 (2d Cir.1995) (presentation of a mark in conjunction with a house mark may lessen the likelihood of confusion); W.W.W. Pharmaceutical Co., v. Gillette Co., 984 F.2d 567, 573 (2d Cir.1993) (same), limited on other grounds by Deere & Co. v. MTD Prods., Inc., 41 F.3d 39, 46 (2d Cir.1994); McGregor-Doniger, Inc. v. Drizzle Inc., 599 F.2d 1126, 1133-34 (2d Cir.1979) (same), superseded by rule on other grounds as stated in Bristol-Myers Squibb, Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033 (2d Cir.1999), with A.T. Cross Co. v. Jonathan Bradley Pens, Inc., 470 F.2d 689, 692 (2d Cir.1972) (citing Menendez v. Holt, 128 U.S. 514, 521, 9 S.Ct. 143, 32 L.Ed. 526 (1888)) (the addition of a house mark or trade name may aggravate the likelihood of confusion if "a purchaser could well think [one party] had licensed [the other] as a second user").
We reject Verio's contention that the district court had no adequate basis for the Lanham Act injunction.
(f) Other claims
The rulings outlined above justify the affirmance of the preliminary injunction, without need to discuss the other contentions raised.
The ruling of the district court is hereby AFFIRMED, with the exception that the court is directed to delete the reference to "first step on the web" from paragraph one of its order.
Draft Opinion of Judge Fred I. Parker
F.I. PARKER, Circuit Judge.
Defendant-Appellant, Verio, Inc. ("Verio") appeals from the December 11, 2000 order of the United States District Court for the Southern District of New York (Barbara S. Jones, Judge) granting the motion of Plaintiff-Appellee Register.com, Inc. ("Register.com") for a preliminary injunction enjoining Verio from (1) using Register.com's trademarks; (2) representing or otherwise suggesting to third parties that Verio's services have the sponsorship, endorsement, or approval of Register.com; (3) accessing Register.com's computers in any manner, except in compliance with Register.com's terms and conditions; and (4) using data obtained from Register.com's database for marketing activities. In its complaint, Register.com alleged Lanham Act violations, Computer Fraud and Abuse Act ("CFAA") violations, and unfair competition in violation of New York statutory law, along with trespass to chattels, breach of contract, tortious interference with contract, and tortious interference with potential business relations in violation of New York common law. After extensive briefing, including an amicus brief from the Internet Corporation for Assigned Names and Numbers
We affirm the district court on the trespass to chattels claim but find that the district court committed various errors in assessing Register.com's likelihood of success on the merits of its CFAA claim and the propriety of injunctive relief on Register.com's contract claim. With respect to the contract claim, we conclude that (1) Register.com cannot demonstrate the potential for irreparable harm necessary for an injunction, (2) Register.com has not demonstrated a sufficient likelihood of success on the merits because a contract may not have been formed between Verio and Register.com, (3) granting an equitable remedy preventing Verio from using the WHOIS information under these circumstances would be inappropriate, therefore Register.com is not entitled to a preliminary injunction on its contract claim.
With respect to the CFAA claims, we find it unlikely that Register.com could show that Verio's use of Register.com's computer systems resulted in monetary damages of $5,000 or more as required to maintain a civil action under the CFAA. Finally, with respect to Register.com's trademark claims, we find moot Verio's appeal of the district court's grant of preliminary injunctive relief concerning Verio's use of Register.com's marks because (1) Verio has agreed by letter sent to Register.com not to use the "register.com" mark (or any similar mark) and (2) Register.com has agreed by letter submitted to this Court to allow the reference to the "first on the web" mark to be stricken from the first paragraph of the preliminary injunction. We also find that the
This dispute raises several thorny issues concerning the extent to which an entity such as Register.com may gain a competitive advantage over others by restricting access to and/or use of the information obtained during the registration process. The complexity of the dispute is increased by the nature of WHOIS information and the obligations imposed on Register.com by virtue of its contractual relationship with ICANN.
Basically, WHOIS information is public information that no one owns.
A. The Domain Name System ("DNS")
1. What the domain name system is and how it works
The Internet is comprised of numerous interconnected communications and computer networks connecting a wide range of end-users to each other. See Reno v. Am. Civil Liberties Union, 521 U.S. 844, 849, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997). Every end-user's computer that is connected to the Internet is assigned a unique Internet Protocol number ("IP address"), such as 123.456.78.90, that identifies its location (i.e., a particular computer-to-network connection) and serves as the routing address for email, pictures, requests to view a web page, and other data sent across the Internet from other end-users.
A "domain name" is an alphanumeric text representation (often a word) that identifies a numerical IP address, thus making it easier to remember. While every end-user's computer connected to the Internet is assigned an IP address, not every IP address has a corresponding domain name. Instead, a domain name is associated with a particular IP address (or group of IP addresses) only when an end-user registers the domain name. The primary purpose of domain names is to "mak[e] it easier for users to navigate the Internet; the real networking is done through the IP numbers." PGMedia, Inc. v. Network Solutions, Inc., 51 F.Supp.2d 389, 408 (S.D.N.Y.1999), aff'd sub nom. Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573 (2d Cir.2000). Domain names consist of various segments separated by periods, such that "[t]he left-to-right string of name components proceeds from the most specific to the most general, that is, the root of the tree, ..., is on the right." Rony & Rony, The Domain Name Handbook, at 105 (quoting Zaw-Sing Hu & Jon Postel, The Domain Naming Convention for Internet User Applications, RFC 819 (Aug.1982), available at http://www.ietf.org/rfc/rfc0819.txt?number =819). The "Top Level Domain" ("TLD") refers to the final segment of the name (i.e., the ".gov" in "www.uscourts.gov"). There are three-letter, general purpose TLDs ("gTLDs"), such as ".com," ".edu," ".gov," and ".org," as well as two-letter country-code TLDs ("ccTLDs") that are available to end-users in particular geographic/political locations. The "Second Level Domain" ("SLD") refers to the second-to-last segment of the web address (i.e., the "uscourts" in "www.uscourts.gov") and generally corresponds to an organization.
2. Privatization of the DNS
As did many other components of the Internet infrastructure, the DNS originated under government grants. See, e.g., Nat'l A-1 Adver., Inc. v. Network Solutions, Inc., 121 F.Supp.2d 156, 159 (D.N.H. 2000) (discussing "The Government's Role in the Evolution of the Internet"). In the Internet's infancy, a unique, authoritative list of IP addresses and their corresponding hosts was maintained by the late Dr. Jon Postel. Under government contract, Postel began managing the list as a graduate student at UCLA in the 1970s and continued to do so at the University of Southern California's Information Science Institute ("USC-ISI") after obtaining his Ph.D. Id. "In October 1983, Postel and his colleague, Joyce Reynolds, authored RFC 920, `an official policy statement' of the Internet Architecture Board (a private Internet standards body) and the Defense Advanced Research Projects Agency (DARPA). This official policy of the government and the Internet standards body defined most of the TLDs in use to this day." Froomkin, Wrong Turn in Cyberspace, 50 Duke L.J. at 53 (footnotes omitted). Over the next ten years, Postel and colleagues were intimately involved in the development and management of the DNS, although formal responsibility for the system was allocated to different entities through a series of government contracts. See Dep't of Commerce Policy Statement on Mgmt. of Internet Names and Addresses, 63 Fed.Reg. 31741, 31741-42 (June 10, 1998) (hereinafter, "White Paper"), available at http://www.icann.org/general/white-paper-05jun98.htm; Rony & Rony, The Domain Name Handbook, at 113-27; Froomkin, Wrong Turn in Cyberspace, 50 Duke L.J. at 53-55.
Pursuant to authority granted to it by the 1991 High-Performance Computing Act, Pub.L. No. 102-194, 105 Stat. 1594 (December 9, 1991) (codified at 15 U.S.C. § 5501 et seq.); see 15 U.S.C. § 5521, the National Science Foundation ("NSF") "assumed responsibility for coordinating and funding the management of the non-military portion of the Internet infrastructure," including responsibility for the registration
In June 1998, the United States Department of Commerce ("DOC") published a policy statement entitled "Management of Internet Names and Addresses," commonly known as the "White Paper," that proposed the creation of a private, not-for-profit entity to coordinate the technical management of the Internet's domain name system.
See id. at 31749.
Soon thereafter, ICANN was "incorporated as a non-profit public benefit corporation in California, in order to assume the management of the DNS as contemplated in the White Paper." Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 579 (2d Cir.2000). ICANN's Articles of Incorporation state that ICANN
ICANN Articles of Incorporation (As Revised Nov. 21, 1998), ¶ 3, available at http://www.icann.org/general/articles.htm. As ICANN has stated, the reason for its existence is "to carry out the Internet's central coordination functions for the public good" as part of a "public trust" established by the White Paper and resulting privatization process. ICANN, ICP-3: A Unique, Authoritative Root for the DNS, (July 9, 2001), available at http://www.icann.org/icp/icp-3.htm.
In September 1998, the DOC and the NSF entered into a "memorandum of agreement" transferring "responsibilities for the cooperative agreement with [NSI]" to the DOC. The NSI-DOC cooperative agreement was then amended "to specify that [NSI] operates the authoritative root server under the direction of the [DOC]." DOC Relationship with ICANN, GAO/OGC-00-33R, at 7-8; see Nat'l A-1 Adver., 121 F.Supp.2d at 162. Furthermore, Amendment 11 to the NSI-DOC cooperative agreement required NSI to take various steps towards the creation of a "Shared Registration System," essentially a competitive registration system for SLDs in the TLDs maintained by NSI. See Cooperative Agreement No. NCR-9218742, Amendment 11 (Oct. 7, 1998), available at http://www.icann.org/nsi/coopagmt-amend11-07oct98.htm; Name. Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 579 (2d Cir.2000) (discussing Amendment 11). Accordingly, NSI agreed with the DOC to recognize the entity created in response to the White Paper and formally recognized by DOC (deemed "NewCo" in Amendment 11), and to work with that entity to facilitate the transition from a single registrar system to a competitive system. See Amendment 11, supra; see also infra note 20.
In November 1998, ICANN received formal recognition from the DOC in a Memorandum of Understanding ("MOU") and entered into both a cooperative research and development agreement to study the root server system and a sole source contract to perform specific technical functions. See Memorandum of Understanding Between the U.S. Dep't of Commerce and Internet Corp. for Assigned Names and Numbers ("MOU"), http://www.icann.org/general/icann-mou-25nov98.htm
Despite the oversight responsibilities of the DOC, ICANN has considerable discretion and power under the MOU, which requires ICANN, inter alia, to provide expertise and advise on DNS management and, more generally, to collaborate with DOC on a series of issues. See MOU, at § V.C; see also id. § V.A (general shared obligations). The MOU can be amended only by mutual agreement and terminated by either party with 120 days written notice to the other party. Id. § VII.
Of the coordination functions performed by ICANN, perhaps the most visible and important, both generally and to this case specifically, is the registration of domain names. ICANN policies regarding domain name registrations "are mainly implemented through ICANN's entry of agreements with domain-name registries and registrars." ICANN, Second Status Report Under ICANN/US Government Memorandum of Understanding, (submitted to DOC on Jun. 30, 2000), available at http://www.icann.org/general/statusreport-30jun00.htm.
The registration process essentially works as follows:
Smith v. Network Solutions, Inc., 135 F.Supp.2d 1159, 1161-62 (N.D.Ala.2001) (footnote omitted) (emphasis added). Thus, while one goal of the privatization process was to create a competitive market in registration services, competing registrars (and registrants) must be able to determine whether a particular domain name has already been registered, which necessarily requires coordination. Accordingly, in order to obtain authorization to compete, every registrar, including Register.com, must enter into a contractual relationship with ICANN governed by a uniform Registrar Accreditation Agreement ("ICANN Agreement" or "RAA"). The ICANN Agreement resulted from extensive public comment and was approved by the Department of Commerce and NSI as part of a package of agreements.
Having provided a general overview of the manner in which the DNS operates, its privatization, and ICANN, we now narrow our focus on the particular issues central to this dispute.
3. The ICANN Agreement and WHOIS Information
Under the terms of the ICANN Agreement, each registrar must, among many other things, maintain its own on-line, interactive WHOIS database for those domain names it registers and make the database publicly available, in the way specified by the agreement. Specifically, the database must contain, inter alia, the names and contact information — postal address, telephone number, electronic mail address and in some cases facsimile number — for customers who register domain names through the registrar. ICANN Agreement, § II.F .1. Notably, neither the registrar nor the registrant has the option of prohibiting access to the registrant's
The Agreement expressly requires each registrar to make its database freely accessible to the public via its web page and through an independent access port called port 43. Id. § II.F.1 ("At its expense, Registrar shall provide an interactive web page and a port 43 Whois service providing free public query-based access to up-to-date (i.e. updated at least daily) data concerning all active SLD registrations sponsored by Registrar in the registry for the .com, .net, and .org TLDs."). These query-based channels of access to the WHOIS database allow end-users to collect registrant contact information for one domain name at a time. Section II.F.4 notes that registrars must comply with any ICANN policy requiring "registrars to cooperatively implement a distributed capability that provides query-based [WHOIS] search functionality across all registrars." Id. Section II.F.5 of the ICANN Agreement requires that:
This provision expressly permits (and may even require) registrars to impose use restrictions of type (a) and (b), and at the same time, expressly prohibits any other use restrictions.
The ICANN Agreement also obligates each registrar to provide third parties with bulk access to the same WHOIS information pursuant to a license agreement. Id. § II.F.6. The bulk access license entitles the licensee to receive weekly — in one transmission — an electronic copy of the same WHOIS information that is provided continuously through the registrar's web page and its access port 43. Id. § II.F.6.a. The registrar may charge a $10,000 yearly fee for the license. Id. § II.F.6.b. The ICANN Agreement states that each bulk license agreement between the registrar and a third party "shall require the third party to agree not to use the data to allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via e-mail (spam)." Id. § II.F.6.c. The ICANN Agreement also allows a registrar to enable individual registrants to choose not to have their WHOIS information made available through bulk access for marketing purposes by implementing an "opt-out" policy. If a registrar creates an opt-out policy, its bulk license agreements must include provisions requiring third parties to abide by the opt-out policy, and the registrar will
As the White Paper makes clear, free public access to WHOIS information, as required by the database provisions of the ICANN Agreement, has two purposes. The primary purpose is to provide necessary information in the event of domain name disputes, such as those arising from trademark infringement or cybersquatting. See White Paper, 63 Fed.Reg. at 31750. A second purpose, which the DOC felt "would also benefit domain name holders," is to "mak[e] it less expensive for new registrars and registries to identify potential customers, enhancing competition and lowering prices." Id. at 31750 n. 21.
It is important to recognize that in contrast with the registrar's computer systems (including the database housing WHOIS information), which the registrar undoubtedly owns, WHOIS information is public information that is not owned by anyone: WHOIS information cannot be copyrighted, see, e.g., Feist Publications, Inc. v. Rural Telephone Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991) ("bits of [name, address, and telephone number] information are uncopyrightable facts"), patented, see, e.g., 35 U.S.C. § 101 (listing patentable subject matter), or protected as a trade secret or confidential information under state law, see, e.g., Ivy Mar Co. v. C.R. Seasons Ltd., 907 F.Supp. 547, 556 (E.D.N.Y.1995) ("The single most important factor in determining whether particular information is a trade secret is whether the information is kept secret.") (citing Lehman v. Dow Jones & Co., 783 F.2d 285, 298 (2d Cir. 1986)).
B. The dispute between Register.com and Verio
The district court made extensive findings of fact that, for the most part, are not disputed. Accordingly, we borrow substantially from that section of the district court opinion. See Register.com. Inc. v. Verio, Inc., 126 F.Supp.2d 238, 241-45 (S.D.N.Y.2000).
a. General background
Id. at 241.
b. Submitting a WHOIS query at register.com
To register a domain name, a person need only visit Register.com's home page at www.register.com.
The process by which end-users interact with Register.com's computer systems is important. When an end-user accepts Register.com's invitation to submit a query, the end-user's computer sends a query to Register.com's servers, Register.com's computer systems "process" the query and send a response to the end-user's computer, and the end-user's computer (generally) displays the response as a web page in his or her browser.
Register.com has imposed the same mass marketing prohibition on the use of the bulk license data. In its amicus submission to the district court dated September 22, 2000, ICANN stated that:
ICANN Amicus Br. at 10-11 (footnotes omitted).
a. General background
126 F.Supp.2d at 241.
b. Verio's Project Henhouse
Id. at 243 (footnote omitted and footnote added).
c. Verio's Search Robots
3. Origins of the dispute
Id. at 243-44.
4. District court proceeding
Register.com filed its complaint on August 3, 2000. In the complaint, Register.com alleged Lanham Act violations, Computer Fraud and Abuse Act ("CFAA") violations, unfair competition in violation of New York statutory law, and trespass to chattels, breach of contract, tortious interference with contract, and tortious interference with potential business relations in violation of New York common law. Register.com moved for a temporary restraining order and preliminary injunction. On August 4, 2000, Verio sought expedited discovery and agreed on August 9, 2000 to enter into a stipulated temporary restraining order with Register.com preventing it from accessing Register.com's WHOIS database by using a search robot and from using any data obtained from Register.com to solicit Register.com's customers.
After extensive briefing and a hearing, the district court granted Register.com's motion for a preliminary injunction in a memorandum and order dated December 11, 2000, concluding that Register.com had demonstrated likelihood of success and irreparable harm with respect to its breach of contract, CFAA, trespass to chattels, and Lanham Act claims.
The court enjoined Verio from the following actions:
Id. at 255.
This appeal followed.
A. Jurisdiction and the Standard of Review
This is an interlocutory appeal from the grant of a preliminary injunction, which means that our jurisdiction derives from 28 U.S.C. § 1292(a)(1). The issue properly before us is whether the district court abused its discretion in granting preliminary injunctive relief to Register.com. See, e.g., University of Texas v. Camenisch, 451 U.S. 390, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981).
However, an injunction is an equitable remedy, and as we review the particular conclusions reached by the district court with respect to Register.com's likelihood of success on the merits of its claims and its showing of irreparable harm, we are mindful that:
Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 88 L.Ed. 754 (1944). Therefore, we consider both whether the grant of a preliminary injunction was an abuse of discretion and also whether the grant was "contrary to some rule of equity." Meccano v. Wanamaker, 253 U.S. 136, 141, 40 S.Ct. 463, 64 L.Ed. 822 (1920); see also Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 315 (2d Cir.1982).
In this review, we give significant deference to the district court's preliminary factual determinations, disturbing them only where error is clear, but give no deference to the district court's conclusions of law, which we review de novo. See, e.g., Latino Officers Ass'n v. Safir, 196 F.3d 458, 462 (2d Cir.1999), cert. denied, 528 U.S. 1159, 120 S.Ct. 1170, 145 L.Ed.2d 1079 (2000); Forest City Daly Hous., Inc. v. Town of N. Hempstead, 175 F.3d 144, 149 (2d Cir. 1999); Charette v. Town of Oyster Bay, 159 F.3d 749, 755 (2d Cir.1998); Malkentzos v. DeBuono, 102 F.3d 50, 54 (2d Cir. 1996).
In this case, the district court rendered its decision after briefing and a hearing, and, as set forth above, the court made extensive factual findings that, for the most part, are not disputed. Many of the issues presented on appeal, therefore, are pure issues of law for which de novo review is appropriate.
B. Preliminary Injunction Standard
"In order to obtain a preliminary injunction, a party must demonstrate: 1) that it is subject to irreparable harm; and 2) either a) that it will likely succeed on the merits or b) that there are sufficiently serious questions going to the merits of the case to make them a fair ground for litigation, and that a balancing of the hardships tips `decidedly' in favor of the moving party." Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d 137, 141 (2d Cir. 1997) (citing Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir.1996)). With respect to each of Register.com's claims, the district court concluded that Register.com would likely be irreparably harmed absent an injunction and was likely to succeed on the merits.
Verio argues that the district court erred by not considering the "public interest" before granting injunctive relief. Specifically, Verio asserts that the injunction is anti-competitive and in conflict with stated DOC and ICANN policy, and that, in light of these considerations, the injunction should have been denied.
Brody v. Vill. of Port Chester, 261 F.3d 288, 290 (2d Cir.2001) (quoting Time Warner Cable v. Bloomberg L.P., 118 F.3d 917, 929 (2d Cir.1997)). The language in both Standard & Poor's and Brody suggests that a district court deciding whether to grant equitable relief should consider and balance private and public interests whenever public interests are implicated. With the exception of Standard & Poor's, however, such a rule has not been applied in suits between private parties. Generally, the rule applies in situations where a plaintiff seeks a preliminary injunction against government action taken in furtherance of a regulatory or statutory scheme, which is presumed to be in the public interest; in such situations, a plaintiff must meet a "more rigorous likelihood-of-success standard."
C. Breach of contract claim
Register.com asserts a breach of contract claim against Verio, and seeks to enjoin Verio's use of WHOIS information obtained from Register.com's database. The pertinent facts are undisputed. Verio's search robot automatically made successive queries to Register.com's WHOIS database via the port 43 access channel to obtain WHOIS information for each new domain name registered.
Verio first argues that it was not bound by the restriction because it never manifested assent to Register.com's terms. In other words, Verio argues that it did not form a contract with Register.com when its search robot collected information from Register.com's WHOIS database. Verio next argues that a contract was not formed because there was no consideration exchanged between the parties. Verio also asserts that Register.com cannot be irreparably harmed by Verio's use of the WHOIS information which is not improper under the terms of the ICANN Agreement between Register.com and ICANN. Finally, Verio argues that even if it did enter into a contract with Register.com, it was not bound by the mass marketing restriction because the restriction itself was impermissible under the ICANN Agreement and against public policy.
Acknowledging that it is obligated to provide public access to its customers' contact information pursuant to § II.F.5 of the ICANN Agreement, Register.com argues that Verio assented to and is bound by the mass marketing restriction and is not entitled to rely on the ICANN Agreement in any fashion because that Agreement constitutes a contract between private parties (ICANN and Register.com) and expressly states that it is not intended to create third party beneficiary rights. See ICANN Agreement, § II.S ("No Third-Party Beneficiaries. This Agreement shall not be construed to create any obligation by either ICANN or Registrar to any non-party to this Agreement, including any SLD holder."). As ICANN's amicus brief puts it, "enforcement of these promises should be done within the ICANN process rather than through court proceedings initiated by third parties."
Register.com urges that Verio's continued violations would subject Register.com to irreparable harm, and therefore looks to the court for equitable relief enforcing the
1. Irreparable harm
In order to properly obtain the extraordinary remedy of a preliminary injunction to enforce its contract, Register.com must demonstrate that (1) Register.com will suffer irreparable harm without the injunction; and (2) Register.com will likely prevail on the merits of its contract claim. We will not need to delve too deeply into the merits of the contract claim, because we find that the district court abused its discretion when it held that without a preliminary injunction restraining Verio from continuing its solicitations, Register.com would suffer irreparable injury. However, as discussed in the next section, we also doubt that Register.com is likely to succeed on the merits of its contract claim.
As the district court acknowledged, "[t]he classic remedy for breach of contract is an action at law for monetary damages. If the injury complained of can be compensated by an award of monetary damages, then an adequate remedy at law exists and no irreparable injury may be found as a matter of law." Moreover, "when a party can be fully compensated for financial loss by a money judgment, there is simply no compelling reason why the extraordinary equitable remedy of a preliminary injunction should be granted." Borey v. National Union Fire Insurance Co., 934 F.2d 30, 34 (2d Cir.1991).
When the district court heard this case, a critical part of Register.com's complaint and alleged exposure to future harm arose from consumer confusion about whether the telemarketing and spam e-mails were sponsored by Register.com. Because Verio has agreed to stop its use of Register.com's trademarks, the confusion (and potential damage to consumer goodwill) is much less likely to arise.
Nonetheless, the court reasoned that an injunction was warranted because the damages in this case would be difficult to quantify due to the fact that the claimed harm is from the loss of potential customers. The case that the district court cited in support of this proposition, Ticor Title Ins. Co. v. Cohen, 173 F.3d 63 (2d Cir. 1999) is easily distinguishable.
In Ticor, an insurance company obtained a permanent injunction against a former vice president who had signed and then breached a non-compete covenant which specified that in the event of a such a breach, the company would be entitled to an injunction.
The district court also relied on Gulf & Western Corp. v. Craftique Productions,
By contrast, "[i]rreparable injury is one that cannot be redressed through a monetary award. Where money damages are adequate compensation a preliminary injunction should not issue." JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 78 (2d Cir.1990). The district court's finding that Register.com's potential damages were impossible to calculate constitutes clear error, and its grant of an injunction based on the possibility of irreparable harm was an abuse of discretion.
2. Success on the Merits of the Contract Claim
Even if Register.com could demonstrate the possibility of irreparable harm absent an injunction, to prevail in obtaining a preliminary injunction, it must also establish a likelihood of success on the merits of its claim. "To form a valid contract under New York law, there must be an offer, acceptance, consideration, mutual assent and intent to be bound."
a. Legal principles
Under New York law, "[m]utual assent is essential to the formation of a contract and a party cannot be held to have contracted if there was no assent or acceptance." See, e.g., Maffea v. Ippolito, 247 A.D.2d 366, 367, 668 N.Y.S.2d 653, (2d Dep't 1998) (citing 22 N.Y. Jur 2d, Contracts, § 29). "The manifestation or expression of assent necessary to form a contract may be by word, act, or conduct which evinces the intention of the parties to contract." Id. (citing 22 N.Y. Jur 2d, Contracts, § 29) (emphasis added). See generally Restatement (Second) of Contracts, § 18 (1981) ("Manifestation of mutual assent to an exchange requires that
In recent years, the proliferation of mass market standardized contracts (i.e., where sellers and buyers do not bargain over terms on an individualized basis) has forced the courts to pay particular attention to the issue of assent. In particular, the case law concerning "shrinkwrap" licenses provides helpful guidance on the manner in which contract principles have been applied in situations analogous to this case. Despite some similarities, we nonetheless find the arrangement in this case is easily distinguished from "shrinkwrap," as well as "clickwrap" and "browsewrap," licenses.
A shrinkwrap license typically involves (1) notice of a license agreement on product packaging (i.e., the shrinkwrap), (2) presentation of the full license on documents inside the package, and (3) prohibited access to the product without an express indication of acceptance.
The arrangement in this case is distinguishable from a shrinkwrap license in important ways. In contrast with the shrinkwrap
Notably, Register.com does not withhold access to the WHOIS information until an end-user manifests assent to the terms by means of a "clickwrap" license, which presents the potential licensee (i.e., the end-user) "with a message on his or her computer screen, requiring that the user manifest his or her assent to the terms of the license agreement by clicking on an icon." Specht v. Netscape Communications Corp., 150 F.Supp.2d 585, 593-94 (S.D.N.Y.2001) (footnote omitted).
Finally, it has been suggested that the arrangement in this case is similar to a "browsewrap" license. See Specht, 150 F.Supp.2d at 594 n. 13. "[A] browse wrap license is part of the web site[, e.g., license terms are posted on a site's home page or are accessible by a prominently displayed hyperlink,] and the user assents to the contract when the user visits the web site. No reported cases have ruled on the enforceability of a browse wrap license." Pollstar v. Gigmania Ltd., No. CIV-F-00-5671, 2000 WL 33266437 (E.D.Cal. Oct.17, 2000). While there are some similarities between Register.com's arrangement and
b. Bases for finding assent in this case
There are two argued bases for finding that Verio manifested assent to Register.com's terms. The first basis is the fact that the terms themselves state that an end-user agrees to be bound by Register.com's terms upon submission of a single query.
In discussing this issue, the district court wrote:
By the time Register.com presents its proposed terms, it has already given away that which it "owns" — access to its WHOIS database. (Register.com concedes, as it must, that it has no ownership right over the WHOIS information. See supra I.A.3.) Thus, in the single submission scenario, an end-user would have had no opportunity to reject Register.com's terms and would be bound to comply with them irrespective of actual assent. Therefore, we find the submission of a WHOIS query prior to the presentation of Register.com's proposed terms insufficient to constitute a manifestation of assent.
Although the first (or first few) query submissions are clearly insufficient to create a contract for the reasons discussed above, repeated exposure to the terms and conditions (via repeated submissions) would have put Verio on notice of both the general terms and the specific term stating that "By submitting this query, you agree to abide by these terms." In fact, Verio admits that it knew of Register.com's terms when it submitted queries. Register.com argues that Verio's course of conduct — repeatedly submitting queries while being aware of the proposed terms — objectively demonstrates its assent to be bound by Register.com's terms and that Verio's conduct would reasonably lead Register.com to infer Verio's assent. See Restatement (Second) of Contracts, § 19. On the other hand, Verio argues that even though it knew of the terms, it rejected them and never manifested assent. Based on the circumstances of this case, especially (1) the manner in which the WHOIS database is made accessible by Register.com, (2) Register.com's obligations under the terms of the ICANN Agreement, and (3) the public domain nature of the WHOIS information (i.e., no one owns the information), we find Verio's argument convincing.
We do not believe that one can reasonably infer that Verio assented to Register.com's proposed terms simply because Verio submitted multiple queries with knowledge of those terms. Verio (and every other end-user) may repeatedly submit WHOIS queries to Register.com based on an (accurate) understanding that Register.com does not own WHOIS information and that such information must be made freely and publicly available (with two specified restrictions) pursuant to the ICANN Agreement. Viewed in this manner, Register.com's repeated proposals that terms not authorized by the ICANN Agreement be adopted could reasonably have been repeatedly rejected by Verio. There is no basis to infer that Verio in fact assented to Register.com's mass marketing restriction. Cf. Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91, 103-04 (3d Cir.1991); accord Expeditors Int'l of Washington, Inc. v. The Official Creditors Comm. (In re CFLC. Inc.), 166 F.3d 1012, 1017 (9th Cir.1999) ("Course of dealing analysis is not proper in an instance where the only action taken has been the repeated
Finally, we note that Register.com's position is undercut by the fact that WHOIS information is public information owned by no one. See supra I.A.3. Register.com does not "own" the information, but it does own the database housing WHOIS information for domain names it has registered and hypothetically, i.e., absent the ICANN Agreement, could prohibit access to its database.
In conclusion, because (1) Register.com did not condition access to its database on acceptance of its terms but instead granted access, thereby giving Verio possession of the WHOIS information, and (2) Register.com's terms were an attempt to unilaterally impose use restrictions not authorized by the ICANN Agreement on information that Register.com does not own, Register.com has failed to establish a sufficient likelihood of success on the merits of its contract claim.
3. Equitable Principles
Any preliminary injunction, including the one sought by Register.com, should be granted only to avoid an inequitable result. In assessing the equities of this case, we cannot ignore Register.com's agreement with the quasi-public entity of ICANN, which provides, inter alia, that (1) the information at issue is not owned by Register.com and (2) the public is entitled to access and use the WHOIS information freely, subject to specific limitations set out by ICANN in the agreement, not limitations adopted on an ad hoc basis by registrars such as Register.com. "For `several hundred years,' courts of equity have enjoyed `sound discretion' to consider the `necessities of the public interest' when fashioning injunctive relief." United States v. Oakland Cannabis Buyers' Coop., 532 U.S. 483, 496, 121 S.Ct. 1711, 149 L.Ed.2d 722 (2001)(quoting Hecht Co.
a. Implications of the ICANN Agreement
Although ICANN is a not-for-profit corporation, ICANN is not an ordinary private actor and the ICANN Agreement is not an ordinary contract between private parties. See supra I.A.2, I.A.3. The Agreement acts very much like a franchise agreement between a private corporation and a quasi-governmental entity, authorizing registrars to provide registration services to the public in exchange for, inter alia, the obligation to maintain and make publicly available at its expense the WHOIS database, which ultimately benefits the Internet community and the public generally. Although the Agreement expressly disavows any third-party beneficiary rights, it nonetheless embodies important public policies and imposes obligations on registrars for the direct benefit of third-parties and the furtherance of policy goals.
i. ICANN is not simply a private entity and the ICANN Agreement is more than a simple contract between private parties.
Register.com argued below and on appeal that the ICANN Agreement is merely an agreement between private parties, and that granting it any additional consideration would run directly counter to the entire purpose behind privatizing the DNS — getting the U.S. government out of the business of regulating the DNS.
We agree with Register.com that the U.S. government undertook the process of privatizing the DNS in order to get out of the business of regulating the DNS and to shift significant policy-making responsibilities from the U.S. government to a private organization, ICANN. See id. While the U.S. government may no longer be orchestrating DNS policy directly,
Accordingly, we reject the district court's conclusion that the ICANN Agreement simply "represents a private bargain" between private parties; instead, for the purposes of analyzing Register.com's claims and Verio's defenses, we view ICANN as a quasi-governmental entity
ii. Although the third-party beneficiary provision precludes Verio from enforcing the ICANN Agreement, equitable principles bar Register.com's attempt to impose unauthorized conditions.
The third-party beneficiary provision of the ICANN Agreement expressly states that the ICANN Agreement "shall not be construed to create any obligation by either ICANN or Registrar to any non-party to this Agreement, including any SLD holder." ICANN Agreement, at § II.S.2. Register.com and Verio debate the scope of this provision. On one hand, Verio argues that it only precludes third-parties from exercising affirmative rights under the ICANN Agreement and that the provision does not preclude third-parties from relying on the Agreement as a defense. On the other hand, Register.com argues that the third-party beneficiary
There can be little doubt that the ICANN Agreement as a whole confers significant benefits on the public, and that the WHOIS information provisions in particular primarily and directly benefit third-parties, such as trademark owners and downstream service providers (i.e., competitors of Register.com) rather than ICANN or Register.com.
Moreover, "the interference of the court by injunction being founded on pure equitable principles, a man who comes to the court must be able to show that his own conduct in the transaction has been consistent with equity." T.B. Harms & Francis, Day & Hunter v. Stern, 231 F. 645, 649 (2d Cir.1916). Register.com cannot show that it has exhibited such conduct regarding these use restrictions it has attempted to impose on public information; Register.com is contractually obligated to a quasi-governmental entity to allow most of the uses which it seeks to enjoin. The injunction sought by Register.com would prohibit Verio's use of information that Register neither owns, nor can rightfully regulate.
In the interests of equity, and because Register.com did not sufficiently demonstrate either the possibility of irreparable harm or the likelihood of success on the merits of its contract claim, we conclude that the grant of an injunction on this claim was an abuse of discretion.
None of the forgoing analysis conflicts with the third-party beneficiary disclaimer as written, because we are not construing the ICANN Agreement in a manner that "creates an obligation" owed by Register.com to Verio in a contractual sense. ICANN Agreement, at § II.S.2. Rather,
For these reasons, we reverse the district court's judgment with respect to this claim and vacate the fourth paragraph of the district court's preliminary injunction insofar as it restricts Verio from using WHOIS information obtained from Register.com for telephone and direct mail marketing.
We leave intact the portion of the injunction that enjoins Verio from transmitting unsolicited commercial electronic mail for two reasons. First, Verio appears to have conceded the point and agreed to be bound by that restriction.
D. Trespass to Chattels
Following the lead of a few courts that have breathed new life into the common law cause of action for trespass to chattels by finding it viable online,
The pertinent facts are as follows: (1) Verio intentionally employed its search robot to make successive queries to Register.com's WHOIS database; (2) the search robot "used" Register.com's computer systems and WHOIS database, and thereby consumed some capacity of those systems; (3) the systems have finite capacity;
The trespass to chattels tort action in New York is based upon principles set forth in the Restatement (Second) of Torts. "A trespass to chattel occurs when a party intentionally damages or interferes with the use of property belonging to another." City of Amsterdam v. Goldreyer, Ltd., 882 F.Supp. 1273, 1281 (E.D.N.Y. 1995) (citing Restatement (Second) of Torts, §§ 217-221 (1965)) (emphases added). Interference may be accomplished by "dispossessing another of the chattel" or "using or intermeddling with a chattel in the possession of another." Restatement (Second) of Torts, § 217. Traditionally, courts have drawn a distinction between interference by dispossession, Restatement (Second) of Torts, § 217(a), which does not require a showing of actual damages, id., § 218 cmt. d,
Here, Verio likely committed a trespass by using a search robot to access Register.com's computer systems without authorization to do so, consuming the computer systems' capacity. By virtue of its use of a software robot, coupled with the probability of like use by others, Verio could interfere with Register.com's use of its own systems. Relying on the eBay decision for the proposition that any interference with an owner's use of a portion of its property causes injury to the owner, the district court concluded that "evidence of mere possessory interference is sufficient to demonstrate the quantum of harm necessary to establish a claim for trespass to chattels." Register.com, 126 F.Supp.2d at 250 (citing eBay, 100 F.Supp.2d at 1071);
Therefore, we hold that the district court acted within its discretion in granting preliminary injunctive relief on this claim because (1) Register.com's computer systems are valuable resources of finite capacity, (2) unauthorized use of such systems depletes the capacity available to authorized end-users, (3) unauthorized use of such systems by software robot creates risks of congestion and overload that may disrupt Register.com's operations, and (4) the district court found a strong likelihood that Register.com would suffer irreparable harm absent such relief. See Register.com, 126 F.Supp.2d at 250-51; see also
Accordingly, we affirm the district court's issuance of a preliminary injunction on this claim to the extent that the injunction prohibits Verio from accessing Register.com's computer systems by unauthorized use of a software robot. On remand, we direct the district court to modify the third paragraph of its injunction to enjoin Verio only from "Accessing Register.com's computers and computer networks by unauthorized software programs performing multiple, automated, successive queries." We do not believe the trespass to chattels claim supports the broader language employed by the district court in that paragraph of the injunction.
E. Computer Fraud and Abuse Act Claims
Register.com also brought claims under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. ("CFAA"), arguing that both Verio's use of software robots to access Register.com's WHOIS database and its use of the information obtained with those robots for marketing purposes violated 18 U.S.C. §§ 1030(a)(2)(C) and (a)(5)(C).
126 F.Supp.2d at 251 (emphases removed). The district court concluded that Register.com was likely to succeed on the merits of both claims. We disagree.
Register.com has not shown that it is likely to satisfy the $5,000 injury threshold for maintaining a civil action under the CFAA. Specifically, to succeed on the merits of a CFAA claim, Register.com must prove "damage or loss" of at least $ 5,000 attributable to an alleged violation of the CFAA. See 18 U.S.C. § 1030(g)("[A]ny person who suffers damage or loss ... may maintain a civil action ... for compensatory damages and injunctive relief or other equitable relief."); id. § 1030(e)(8) (defining "damage" as "any impairment to the integrity or availability of data, a program, a system, or information that ... causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals...."). We agree with the (near) unanimous view that any civil action under the CFAA involving "damage or loss," id. § 1030(g), must satisfy the $ 5,000 threshold, id. § 1030(e)(8)(A). See In re DoubleClick Inc. Privacy Litig., 154 F.Supp.2d 497, 520-23 (S.D.N.Y.2001) (excellent
The district court only addressed this threshold with respect to Register.com's 1030(a)(5)(C) claim.
Taking the district court's assessment of the record as accurate, injunctive relief is nevertheless unavailable. To maintain a cause of action under the CFAA against Verio, Register.com must demonstrate the Verio violated the CFAA in a manner that has caused Register.com damages or losses of at least $5,000. There is nothing in the record to suggest that this has occurred. To obtain preliminary injunctive relief on the basis of a CFAA claim, Register.com must demonstrate that it will likely be able to make such a showing. Therefore, accepting the facts as found by the district court, we find it unlikely that Register.com will be successful in showing that it has suffered $ 5,000 in actual damages or losses as a result of an alleged CFAA violation by Verio.
F. Lanham Act Claims
Section 43(a) of the Lanham Act creates civil liability for certain commercial actions that are likely "to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association" of the defendant with the plaintiff, "or as to the origin, sponsorship, or approval" of the defendant's "goods, services, or commercial activities" by the plaintiff. See 15 U.S.C. § 1125(a)(1). In this case, the district court concluded "on the current record that Register.com is likely to succeed on the merits" of (1) its unfair competition
1. Use of marks
We find that Verio's appeal of the first paragraph of the district court's injunction is moot for two reasons. First, by a letter dated May 9, 2000, Verio agreed not to refer to the Register.com mark or any other similar mark in its future solicitations. Enjoining Verio from using the Register.com mark or any other similar mark simply gives effect to Verio's promise and need not be based on the Lanham Act.
Second, at oral argument, we asked counsel for Register.com whether the company would be amenable to agreeing to the deletion of the part of the preliminary injunction referring to the "first step on the web" mark. In a letter submitted by Register.com's counsel the day after oral argument, Register.com agreed to the proposed amendment. Letter from William Patry, Counsel for Register.com, to the Honorable Pierre N. Leval, U.S. Court of Appeals for the Second Circuit (May 22, 2001).
Accordingly, we need not and therefore do not address the district court's preliminary assessment of Register.com's Lanham Act claims insofar as the claims pertain to the use of the "Register.com," "first step on the web" or similar marks. We dismiss this part of Verio's appeal and remand for modification the first paragraph of the injunction by deleting the reference to the "first step on the web" mark.
2. Actionable conduct not involving marks
Verio used the information it acquired from Register.com's WHOIS database to call up and offer its services to newly registered persons; when a person was not home, the telemarketer would leave a message referring to the person's recent registration and indicating that the caller would call back. Putting aside the questions addressed elsewhere in this opinion concerning how Verio obtained the information and whether its marketing efforts constituted a breach of contract, we must determine whether the district court abused its discretion in concluding that Verio's solicitations likely violate the Lanham Act.
To be successful on its Lanham Act claims based on Verio's phone calls, Register.com must demonstrate first that Verio engages in actionable conduct, either (1) the use in commerce of a word, term, name, symbol, or device, or any combination thereof; (2) false designation of origin; (3) false or misleading description of fact; or (4) false or misleading representation of fact, see 15 U.S.C. § 1125(a)(1); and second, that such conduct gives rise to a likelihood of confusion, defined as a "`likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question,' or ...
The allegedly actionable conduct involves Verio's telemarketing practices. In their briefs, both parties provide the following representative example of a telemarketing script used by Verio when leaving a voice message:
To be actionable, Verio's solicitations must have included misleading descriptions or representations of fact that are "calculated to be misunderstood" in a manner that causes a likelihood of confusion as to whether Verio was in some way affiliated with Register.com.
Am. Home Prods. Corp. v. Johnson & Johnson, 577 F.2d 160, 165 (2d Cir.1978) (citations omitted). Register.com argues that the telemarketing script was designed to falsely lead customers to think that
In our view, the district court erroneously applied section 43(a) in a manner that eliminates "false" and "misleading" from the statutory text, such that generic statements likely to cause (some) confusion would give rise to civil liability and entitle a plaintiff to injunctive relief. Based on the record before us and giving as much deference as possible to the district court's factual determinations, we conclude that Verio's telemarketing script is devoid of "clever use of innuendo, indirect intimations, ... ambiguous suggestions," and other forms of deception designed to cause confusion as to an affiliation between Register.com and Verio; the limited evidence of actual confusion does not indicate otherwise. Therefore, because Verio's telemarketing script did not contain a misleading description or representation of fact, that constituted actionable conduct under the Lanham Act, and because Register.com did not demonstrate a likelihood of success on the merits of this claim, we find no adequate basis for the court's order and vacate the second paragraph of the injunction.
III. MODIFICATIONS TO THE INJUNCTION
As a result of the conclusions in this decision, the terms of the preliminary injunction as issued by the district court, see supra, will have to be modified in the following ways on remand.
Register.com has agreed to striking the part of paragraph one which prohibits Verio's use of the term "first on the web," and the injunction should reflect this concession. The prohibition in paragraph one of Verio's use of the "Register.com" mark may stand, since Verio has agreed in a letter to Register.com to cease any use of the mark and thus mooted its appeal of that provision. Because we find that Register.com failed to demonstrate a likelihood of success on its Lanham Act claims, paragraph two is vacated. In regard to the trespass to chattels claim, we direct the district court to modify the third paragraph of its injunction to enjoin Verio only from "Accessing Register.com's computers and computer networks by unauthorized software programs performing multiple, automated, successive queries." With respect to our reversal of the district court's judgment regarding Register.com's contract claim, we vacate the fourth paragraph of the district court's preliminary injunction insofar as it restricts Verio from using WHOIS information obtained from Register.com for telephone and direct mail marketing, but leave intact the portion enjoining Verio from using the information to
For the forgoing reasons, we (1) affirm the district court judgment with respect to the trespass to chattels claim, (2) reverse the judgment with respect to the breach of contract and CFAA claims as well as the Lanham Act claim not involving the use of marks, (3) dismiss as moot Verio's appeal of the Lanham Act claim involving marks, (4) vacate the second paragraph of the district court's preliminary injunction, (5) remand for modification of the first, third, and fourth paragraphs of the district court's preliminary injunction (as set forth above), and (6) remand to the district court for further proceedings consistent with this opinion. The parties shall bear their own costs.
End of Draft Opinion of Judge Fred. I. Parker
We attach Judge Parker's draft opinion as an Appendix. We do so for two reasons: One is to expose Judge Parker's views, which would have been set forth in a dissenting opinion, but for his death; the second is because his opinion contains an exceptionally thorough, detailed and useful statement of facts, including a comprehensive description of the functioning of the domain name system. We have stated the facts more briefly, mentioning only those points necessary to the arguments discussed, inviting the reader to consult Judge Parker's very thorough fact statement for a more detailed account.
In re CFLC, Inc., 166 F.3d at 1017.
Id. § 218 cmt. e.