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Monday, October 29, 2007

Court Rules That Cease and Desist Letter Confirms Notice of Website Terms of Use

Written by: Dino Tsibouris and Mehmet Munur

A federal trial court in Texas held that cease and desist letters explaining infringing conduct created knowledge of website terms of use and further use of the website after this knowledge was a breach of contract. Therefore, a corporation wishing to stop another party from violating its website terms of use should consider sending a cease and desist letter before litigation to enhance their position in trial.

Southwest Airlines is a Dallas based airline carrier that subscribes to a first come, first served seating policy. Southwest divides the plane into three sections—A, B, and C— with class A being the most in demand. Southwest allows its customers to check in at www.southwest.com within 24 hours of the flight, which dramatically increases their chances being awarded the coveted A class.

On the other hand, BoardFirst assists customers with getting class A seating at Southwest flights. A Southwest ticket holder can supply BoardFirst with his name, flight information, credit card number, and make BoardFirst his agent to obtain class A seating for a fee of $5. Then, BoardFirst’s employees log onto the Southwest website at the appropriate time, obtain a pass, and allow customers to print their boarding pass at the airport. BoardFirst has been in operation since 2005 and serves less than 100 customers per day.

In court, Southwest argued that BoardFirst’s circumvention of Southwest’s first come, first served policy is a breach of contract. The terms of this contract were posted on Southwest’s website under a link titled “Terms and Conditions.” These terms specifically prohibited commercial use of the Southwest’s website—unless the user was an approved travel agent. Furthermore, Southwest specifically prohibited the services that BoardFirst provided, stating: “third parties may not use the Southwest web sites for the purpose of checking Customers in online or attempting to obtain for them a boarding pass in any certain boarding group.”

Clearly, if Southwest could prove that there was a contract between Southwest and BoardFirst, then it should be entitled to relief. In order for a contract to exist, parties must mutually agree to its terms, either through spoken or written terms or actions. Southwest’s website terms of use—in plain and very common terms—stated that “use of the Southwest web sites and our Company Information is subject to these terms and conditions, and by using our web site, you agree to these terms and conditions.” Therefore, Southwest argued that BoardFirst was aware of the website terms of use, and agreed to its conditions by using the website.

In similar circumstances, defendants have argued that they had no knowledge of these terms and that the small hyperlink at the bottom of the website gave insufficient notice. However, BoardFirst did not raise these arguments because Southwest sent two cease and desist letters before starting this lawsuit. The court held that a contract between BoardFirst and Southwest formed at least as early as when BoardFirst received the first cease and desist letter and then continued the use of Southwest’s website.

Southwest then had to prove breach of contract and damages to prevail in this lawsuit. The court held that BoardFirst breached this contract because the activities were specifically prohibited by the website terms of use. Southwest’s damages were difficult to calculate, but nevertheless tangible. Southwest argued that the customers that paid BoardFirst did not visit Southwest’s website, where they would have viewed advertisements and possibly made hotel or rental car reservations. The difficulty of proving these damages; however, allowed Southwest to get an injunction stopping BoardFirst’s breaching activities.

The case is interesting because the court correctly compared BoardFirst’s activities to landmark terms of use cases to come to the conclusion that BoardFirst’s activities formed a contract. While the case certainly reaches the correct conclusions, it does so a conservative fashion. One could argue—as Southwest did—that a contract between the parties existed long before the cease and desist letters, as early as BoardFirst’s first use of the Southwest website in early 2005. The court’s willingness to take the easy road to enforce the contract between the parties demonstrates at least one lesson. Corporations wishing to enforce their website terms of use are encouraged to send at least one cease and desist letter before litigation.

The case is Southwest Airlines Co., v. BoardFirst, L.L.C., No. 3: 06-CV-0891-B (N.D. Tex., Sept. 12, 2007).


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