Online Click Doesn’t Always Mean Agree: Appeals Court

A customer of an online background check service wasn’t bound by additional terms and conditions accessed by a link even though he clicked a “yes” box, a U.S. appeals court said in a ruling that may affect the way Internet giants seek consent to use personal data.

The consumer, Donovan Lee, sued report provider Intelius Inc. in a 2009 class action after finding he had been charged $19.95 a month for a report he hadn’t purchased, by a separate company. The company, Adaptive Marketing, was sued by Intelius in turn and appealed a federal judge’s ruling refusing to force arbitration on Lee and Intelius. The U.S. Court of Appeals in San Francisco upheld the lower-court decision on Dec. 16.

At the heart of the case was a click-and-agree system similar to those used by companies such as Google Inc. (GOOG) and Facebook Inc. (FB) to obtain customers’ consent to their online policies and use of personal data. By clicking on a “yes” button, Lee was assenting to Intelius’ terms for the background research, not to Adaptive’s terms for products it sold on the site, the district judge ruled.

“The fact that there were additional hyperlinks on a webpage Lee reviewed does not establish assent to the terms embedded in those hyperlinks,” U.S. District Judge Robert Lasnik in Seattle wrote in his September 2011 ruling.

Some of the biggest Internet service companies may be first to feel the effect of the appeals court ruling, as it applies to district courts in California, said lawyer David Straite of Kaplan Fox & Kilsheimer LLP, whose clients include users of Menlo Park, California-based Facebook and Yahoo! Inc. (YHOO), based in Sunnyvale, California.

‘Under Threat’

“The click-and-agree regime is under threat,” he said. “Just because additional terms of service are incorporated by reference or hyperlink, it’s no longer a given in court that the document is automatically consented to.”

The three-judge appeals panel concluded that Lee had no contract with Adaptive either to buy the additional report or submit to arbitration.

The case is Lee v. Intelius Inc., 11-35810, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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