I.Lan Systems, Inc. v. Netscout Service Level Corp.

183 F. Supp. 2d 328, 68 U.S.P.Q. 2d (BNA) 1832, 46 U.C.C. Rep. Serv. 2d (West) 287, 2002 U.S. Dist. LEXIS 209, 2002 WL 15592
CourtDistrict Court, D. Massachusetts
DecidedJanuary 2, 2002
DocketCIV.A.00-11489-WGY
StatusPublished
Cited by26 cases

This text of 183 F. Supp. 2d 328 (I.Lan Systems, Inc. v. Netscout Service Level Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
I.Lan Systems, Inc. v. Netscout Service Level Corp., 183 F. Supp. 2d 328, 68 U.S.P.Q. 2d (BNA) 1832, 46 U.C.C. Rep. Serv. 2d (West) 287, 2002 U.S. Dist. LEXIS 209, 2002 WL 15592 (D. Mass. 2002).

Opinion

MEMORANDUM

YOUNG, Chief Judge.

Has this happened to you? You plunk down a pretty penny for the latest and greatest software, speed back to your computer, tear open the box, shove the CD-ROM into the computer, click on “install” and, after scrolling past a license agreement which would take at least fifteen minutes to read, find yourself staring at the following dialog box: “I agree.” Do you click on the box? You probably do not agree in your heart of hearts, but you click anyway, not about to let some pesky legalese delay the moment for which you’ve been waiting. Is that “clickwrap” license agreement enforceable? Yes, at least in the case described below.

*330 I. INTRODUCTION

The plaintiff, i.LAN Systems, Inc. (“i.LAN”), helps companies monitor their computer networks. The defendant, NetScout Service Level Corp., formerly known as NextPoint Networks, Inc. (“NextPoint”), sells sophisticated software that monitors networks. In 1998, i.LAN and NextPoint signed a detailed Value Added Reseller (“VAR”) agreement whereby i.LAN agreed to resell Next-Point’s software to customers. This dispute concerns a transaction that took place in 1999.

i.LAN claims that for $85,231.42 it purchased the unlimited right to use Next-Point’s software, replete with perpetual upgrades and support, whereby it effectively could rent, rather than sell, Next-Point’s software to customers. In support of its argument, i.LAN points to the purchase order associated with the transaction. NextPoint, in response, points to the 1998 VAR agreement and the cliekwrap license agreement contained in the software itself to reach a different conclusion.

The parties continued their relationship for several months without confronting their conflicting interpretations of the 1999 purchase order, but eventually the disagreement erupted into litigation. i.LAN filed a complaint that alleges, among other things, breach of contract and violation of Massachusetts General Laws Chapter 93A. The complaint properly invokes the Court’s diversity jurisdiction, 28 U.S.C. § 1332(a)(1). See Compl. ¶¶ 1, 2,10.

i.LAN quickly took the offensive and brought a motion for summary judgment, Fed.R.Civ.P. 56(a). i.LAN argued that it should be awarded specific performance— in particular, perpetual upgrades of Next-Point’s software and unlimited support. Pl.’s Mot. at 2-3. The Court heard oral argument on i.LAN’s motion and took the matter under advisement. Soon after, NextPoint brought a cross-motion for summary judgment, Fed.R.Civ.P. 56(b), the subject of this memorandum. NextPoint argued that even if i.LAN’s allegations were true, the cliekwrap license agreement limits NextPoint’s liability to the price paid for the software, in this case $85,231.42. Def.’s Mot. at 2. The Court heard oral arguments on NextPoint’s motion and soon after ruled in favor of NextPoint. This memorandum explains why.

II. DISCUSSION

Before turning to NextPoint’s cliekwrap license agreement, the stage must be set. First, the Court will identify the set of rules by which to judge this dispute. Next, the Court will examine what is at stake, in particular i.LAN’s claim for specific performance and NextPoint’s limitation-of-liability defense. Finally, the Court will address the enforceability of the cliekwrap license agreement.

A. What Law Governs?

1. Precedence of the 1998, 1999, and Cliekwrap Agreements

Three contracts might govern this dispute: the 1998 VAR agreement, the 1999 purchase order, and the cliekwrap license agreement to which i.LAN necessarily agreed when it installed the software at issue. The key question for purposes of this memorandum is how the 1998 and 1999 agreements affect the cliekwrap license agreement.

The cliekwrap license agreement states that it does not affect existing or subsequent written agreements or purchase orders. 1 The language might be *331 read to mean that the clickwrap license agreement is a nullity if a purchase order already exists, but that reading is not the natural one. The natural reading is that to the extent the 1998 VAR agreement and 1999 purchase order are'silent, the click-wrap license agreement fills the void.

2. Common Law vs. UCC

Two bodies of contract law might govern the clickwrap license agreement: Massachusetts common law and the Uniform Commercial Code (“UCC”) as adopted by Massachusetts. Article 2 of the UCC applies to “transactions in goods,” UCC § 2-102, Mass. Gen. Laws ch. 106, § 2-102, but “unless the context otherwise requires ‘contract’ and ‘agreement’ are limited to those relating to the present or future sale of goods,” id. § 2-106(1) (emphasis added). Indeed, the title of Article 2 is “Sales” and the definition of “goods” assumes a sale: “goods” is defined as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale ....” Id. § 2-105(1). The purchase of software might seem like an ordinary contract for the sale of goods, but in fact the purchaser merely obtains a license to use the software; never is there a “passing of title from the seller to the buyer for a price,” id. § 2-106(1). So is the purchase of software a transaction in goods? Despite Article 2’s requirement of a sale, courts in Massachusetts have assumed, without deciding, that Article 2 governs software licenses. See Novacore Techs., Inc. v. GST Communications Corp., 20 F.Supp.2d 169, 183 (D.Mass. 1998) (Saris, J.), aff'd, 229 F.3d 1133, 1999 WL 33117239 (1st Cir.1999); VMark Software, Inc. v. EMC Corp., 37 Mass.App.Ct. 610, 611 n. 1, 642 N.E.2d 587 (1994); USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass.App.Ct. 108, 119, 546 N.E.2d 888 (1989). See generally Lorin Brennan, Why Article 2 Cannot Apply to Software Transactions, 38 Duq. L.Rev. 459, 545-77 (2000); Mark A. Lemley, Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L.Rev. 1239, 1244 n. 23 (1995).

Given the cases above, and others to the same effect, i.LAN argues that the UCC should govern the 1999 purchase order and clickwrap license agreement. NextPoint does not disagree with the idea that the UCC might apply to software purchases in general, but under NextPoint’s theory of the case, the 1998 VAR agreement is most important to this dispute, and that agreement predominately concerns services, rather than the sale of goods.

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Bluebook (online)
183 F. Supp. 2d 328, 68 U.S.P.Q. 2d (BNA) 1832, 46 U.C.C. Rep. Serv. 2d (West) 287, 2002 U.S. Dist. LEXIS 209, 2002 WL 15592, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ilan-systems-inc-v-netscout-service-level-corp-mad-2002.