December 04, 2009
Ninth Circuit Rebuffs Another CAN-SPAM Plaintiff -- Asis Internet Services v. Azoogle.com, Inc.
[Post by Venkat]
The Ninth Circuit recently rejected [pdf] two appeals brought by CAN-SPAM plaintiff Asis Internet Services. The trial court granted summary judgment in favor of Azoogle and awarded costs. See Eric's earlier blog post on that ruling. Asis has brought numerous lawsuits against different defendants. While this ruling won't necessarily be used preclusively against Asis it will definitely be cited by the defendants in those cases.
Citing Gordon v. Virtumundo, the court finds that:
the mere costs of carrying SPAM emails over Plaintiff's facilities does not constitute a harm as required by the statute. While Plaintiff argues that employee time was spent on spam-related issues, Plaintiff concedes that it has no records detailing employee time. Plaintiff also spent money on email filtering, though the cost of email filtering did not increase due to the emails at issue. Such ordinary filtering costs do not constitute a harm. [cite omitted] Thus, Plaintiff has not suffered a harm within the meaning of the statute and lacks standing.
The entire memo opinion is about two pages, and the court spends a sentence noting that Asis is not entitled to relief under the California statute (17529.5) because Azoogle "neither sent nor procured the emails at issue, and therefore did not 'advertise' within the meaning of the statute."
The big take away is that courts seem to be able to sniff out people who they view as pursuing litigation for the wrong reasons. It's unlikely that Asis was truly damaged to the extent of even a fraction of fees and resources it spent on this case.
Plaintiffs who aren't large ISPs or social networking websites haven't found a very sympathetic audience, particularly at the appellate level. We're probably left with a regime where only larger ISPs, social networking websites, and state actors are able to effectively bring anti-spam lawsuits. The scope of preemption of California's anti-spam statute is still unclear (Kleffman v. Vonage was certified to the California Supreme Court) so this is one possible option for plaintiffs, but I can't imagine they'll be spending much energy on this.
Posted by Venkat at 07:31 AM Permalink | Derivative Liability , Marketing , Spam | Printable Version
December 03, 2009
Competitive Keyword Advertiser Wins at Trial--Fair Isaac v. Experian
By Eric Goldman
Fair Isaac Corp. v. Experian Information Solutions Inc., 2009 WL 4263699 (D. Minn. Nov. 25, 2009)
This is an interesting and complicated lawsuit that hasn't gotten the attention it deserves. Fair Isaac produces the ubiquitous "FICO" credit score, which is heavily used in the financial industry to assess borrower creditworthiness. Fair Isaac launched a litigation campaign to suppress competition by rival producers of credit scores. In July, Fair Isaac mostly lost a bunch of its arguments in a complex ruling. Read Rebecca's excellent recap of that ruling. The July ruling left a few issues open for trial, which ended late last month with Fair Isaac's jury loss. See the (uninsightful) jury verdict form and this article from the St. Paul Business Journal.
Normally with a jury verdict, we don't get a lot of legal insight. However, the jury verdict led to a short post-trial ruling by the judge.
First, Fair Isaac tried to claim that its score range from "300-850" was a protectable trademark as a way of trying to thwart its competitors' range of 501-990. I've always wondered why credit scores start at 300 instead of 0, just like the SATs start at 200 or LSAT scores now start at 120. This case finally gave me a new hypothesis: maybe these services think they can claim a trademark in their score ranges...? (As Rebecca also observed, I suspect not wanting to tell people they are a "zero" is also a relevant consideration).
In any case, Fair Isaac's bid to trademark the score range "300-850" failed. As the judge recaps, "the jury returned a verdict finding that the alleged '300-850' mark was not a valid, protectable trademark because the term '300-850”'has not acquired secondary meaning." Once again, a putative trademark owner goes to court only to find out that it has fewer trademarked assets than it thought.
Second, the court rejected Fair Isaac's trademark claim over competitive keyword advertising based on insufficient proof of consumer confusion. The court recaps:
To the extent that Fair Isaac bases its keyword advertising claims on the alleged “300-850” mark, such a claim fails in light the jury's finding that “300-850” is not a valid mark. To the extent that the keyword advertising claims are based on the “Fair Isaac” and “FICO” marks, the Court finds that the weight of the evidence adduced at trial does not support a credible inference that Experian's and Trans Union's purchases of Fair Isaac's trademarks as keyword search terms was likely to confuse consumers. The only evidence adduced at trial in support of the assertion that the keyword advertising was likely to cause confusion-the opinion testimony of Fair Isaac's expert James Berger-lacks credibility. [emphasis added]
(Bummer for Fair Isaac to see the court toss aside its expert like a rag doll. I'm guessing the expert wasn't cheap).
This is one of only a few cases reaching a definitive "final" ruling about the legitimacy of competitive keyword advertising. Most cases settle or end on some other basis (like the plaintiff's lack of a protectable trademark, as the court ruled here for the "300-850" keyword purchases). The only other similar trial outcome was the old 2004/05 GEICO v. Google case, which concluded in a poorly reasoned and difficult-to-follow opinion after trial that Google was not liable for keyword triggered ads that didn't contain the trademark in the ad copy and potentially liable for the triggered ads that did. Other than the GEICO mess, we have only a few summary judgment rulings on consumer confusion due to competitive keyword advertising:
* Finding that referencing the trademarks in the ad copy creates a likelihood of consumer confusion: Storus
* Finding that merely using the trademark to trigger keyword advertising does not create a likelihood of consumer confusion: J.G. Wentworth and Designer Skin
In light of these limited precedents reaching a final outcome on keyword triggering, this ruling is significant because it's the strongest evidence yet that keyword advertising defendants do not create actionable consumer confusion and therefore will win at trial. This is one of the reasons why I favor finding doctrinal ways for defendants to end cases earlier in the process (and well before trial) if the defendants are going to win at trial anyway.
According to the St. Paul Business Journal article, Fair Isaac plans to appeal this ruling as well as their July loss. Better to fight in court than fight in the marketplace, I guess.
Posted by Eric at 01:20 PM Permalink | Marketing , Trademark | TrackBack (0) | Printable Version
Claims Brought by Express Scripts Data Breach Plaintiffs Rejected on Standing Grounds -- Amburgy v. Express Scripts, Inc.
[Post by Venkat]
A federal court in Missouri recently rejected a class action brought by consumer plaintiffs on standing grounds. Given the long line of consumer plaintiffs who have suffered a similar fate I thought this case was somewhat unexceptional, but I think it's worth mentioning for a couple of reasons. (Amburgy v. Express Scripts, Inc., Case No. 4:09-CV705 FRB; Nov. 23, 2009 (E.D. Mo). Access a copy of the order at scribd here.)
Consumer plaintiffs who have tried to bring claims arising out of data breaches have all pretty much failed, unless they are able to show that someone actually misused their data (for example, by withdrawing money from their account). A good recent example of this is the Citizens Financial case mentioned here and here, where the court allowed plaintiffs to sue a bank which tried to hold the plaintiff liable for funds that were hacked from plaintiff's bank account. Where the plaintiff or class of plaintiffs have not had their data actually misused by the person who stole it, courts have uniformly rejected class actions trying to seek redress. Typically the company who suffered the loss of data will offer monitoring services effectively mooting the issue of whether this is something plaintiffs should be able to sue for.
Express Scripts provides "pharmacy benefit management services." It suffered a data breach coupled with an extortion attempt by someone who threatened to disclose customer information. (WSJ Health Blog [link] covered the story in 2008.) Although Express Scripts notified the FBI, a quick Google search didn't unearth any news reports of the bad actors having been caught. The Express Scripts webpage [link] which provides notice of the incident states that in August 2009 the perpetrator sent a similar letter threatening to expose consumer information. Plaintiffs sued alleging negligence, breach of contract, and state law satutory claims.
The court granted the motion to dismiss brought by Express Scripts on Article III standing grounds. Language used by the court expressed some hostility to the underlying claims - in describing the hypothetical nature of the injury, the court states:
[f]or plaintiff to suffer the injury and harm he alleges here, many "if's" would have to come to pass. Assuming plaintiff's allegation of security breach to be true, plaintiff alleges that he would be injured "if" his personal information was compromised, and "if" such information was obtained by an unauthorized third party, and "if" his identity was stolen as a result, and "if" the use of his stolen identity caused the harm. These multiple "if's" squarely place plaintiff's claimed injury in the realm of the hypothetical. If a party were allowed to assert such remote and speculative claims to obtain federal court jurisdiction, the Supreme Court's standing doctrine would be meaningless.
[quotations in original]
The result is pretty typical, but two things struck me about this case. I didn't realize this at first, but the records at issue included prescription information. Medical information is subject to a higher degree of privacy and subject to specialized rules. Either the plaintiff didn't allege violations of these specific rules or the rules weren't implicated. Either way, the court only made a passing reference to the fact that the data included prescription information. Second, the bad actor is still at large. There are cases where an information breach occurs as part of another incident (such as a theft of a laptop). It's less clear in those cases whether someone just stole a laptop or whether they were focused on obtaining information. Here, there's no dispute that a bad actor has the customer information. Express Script received not one but two extortion letters which contained specific information demonstrating that the third party had access to Express Scripts information. And the person who sent the letters has not yet been caught. (On the other hand, the fact that they were seeking to extort Express Scripts tends to point in the direction that they didn't necessarily use the information. The bad actors lose leverage by using the information and using the information increases the likelihood of being caught.)
I wonder if anyone has compiled data on what actually happens to these data breach class action plaintiffs - i.e., how many of them suffer damages as a result of identity theft, etc. I would think this type of data would be useful.
[Added: see additional coverage of this case from Proskauer's Privacy Law Blog here.]
Posted by Venkat at 06:51 AM Permalink | Privacy/Security | Printable Version
December 02, 2009
Case Western “Signifiers in Cyberspace” Conference Recap
By Eric Goldman
In mid-November, I attended a conference at Case Western Reserve University School of Law in Cleveland, Ohio entitled “Signifiers in Cyberspace: Domain Names & Online Trademarks.” My notes:
David Fewer spoke about Canada’s WHOIS policy. The old Canadian registry policy published registrant information without restriction. Then, the registry proposed a new policy not to publish personal information in the WHOIS database for individual registrants and for organizations that can show harm from publication. To reveal registrant information in those situations, a warrant would be required. That policy got amended to allow warrantless access for cybercrime enforcement, registered IP infringement and ID theft. Fewer argued that the amended policy violates Canadian privacy laws (PIPEDA) because consumers are not given adequate disclosures, the exclusions from the privacy policy are arbitrary, and consumers aren’t given the required option not to participate.
Corynne McSherry of EFF discussed how TM owners are bypassing direct challenges against gripers and instead putting pressure on domain name registrars. She focused on the Yes Man spoof website of the New York Times, which included a parody ad of the De Beers diamond manufacturer. Humorless De Beers sought relief from Joker.com, the parodist’s registrar. EFF has responded to De Beers that the parody is legitimate because it has no commercial aspect, it’s nominative use, and the First Amendment applies. The EFF is also encouraging Joker.com to ignore De Beers because it (as the registrar) can’t be liable for the registered domain name. So why is Joker.com even entertaining De Beers’ complaint? Corynne notes the registrar’s revenue from any single domain name registration is less than legal cost of investigating and responding. Corynne discussed how parodists and gripers can minimize their legal risk (I blogged on these recommendations in May).
I remain very interested in situations where domain name registrars apply their own takedown policies to their customers. For example, I’ve previously mentioned GoDaddy’s “itchy trigger finger” when it comes to intervening with its registrants. I suspect there is significant heterogeneity among registrars’ interventionist tendencies. I think this is an area worth exploring. If you have other examples of domain name registrar intervention in its customers' content, please share them.
Stacey Dogan spoke about the aftermath of the Rescuecom ruling. Stacey is disappointed that courts aren't adopting her arguments to use the “trademark use in commerce” doctrine to insulate intermediaries (she calls it her “biggest failure in life”). She described three post-Rescuecom uncertainties: (1) what acts by intermediaries constitute TM infringement? (2) on what doctrinal basis? (direct v. contributory), and (3) what remedies do the intermediaries face?
Stacey thinks courts need to be more precise about the nexus between defendant behavior and TM owner harm. This should lead to better distinctions between direct and contributory infringement.
She offered a taxonomy of claims against intermediaries:
* General confusion = when the intermediary creates confusion through the blurring of ads and editorial content. Stacey thinks these aren’t TM issues. But if commingling is the problem, then the remedy should be an injunction requiring the intermediary to label the ads.
* Strict liability = when the search engine is automatically on the hook for its involvement with the ads. Stacey says courts should reject this approach due to the search engines' lack of proximate causation for consumer confusion. If a search engine faces any liability, it should be solely on the basis of contributory infringement (with its higher scienter bar).
* Failure to act = when the search engine fails to respond to TM owner’s takedown notice. She said we don’t see this in search engine cases [a point I disagree with given that the TM owner vs. search engine lawsuits all represent a failing of the search engines’ voluntary TM policies]; instead, she was thinking of the Tiffany case. Stacey thinks the failure of act prong is where the legal action should be. She wants courts to map out appropriate scienter levels. General knowledge of infringement isn’t enough, and courts should let defendants make reasonable judgments about whether the advertiser will qualify for any trademark defenses. If the advertiser is obviously infringing, and intermediary gets notice and fails to act, she thinks contributory liability could be appropriate.
Graeme Dinwoodie believes the ECJ will not follow the Advocate General’s opinion in the Google case. He explored two parallels between the AG’s opinion and Rescuecom: Both get away from trademark use of commerce, and both consider underlying policy values. Graeme thinks search engine defendants should move away from disputing the lack of harm to the trademark owner; instead, he thinks they will get more traction by showing the countervailing benefits of their advertising. For example, he thinks they should be showing how keyword advertising can facilitate investment and innovation.
Jeffrey Samuels shared his perspectives as a panelist in 200 UDRP proceedings. Since the UDRP’s implementation, there have been about 25,000 UDRP decisions. 40% are US registrations. 75% involve .com. 75% are defaults.
The UDRP isn’t designed to solve all domain name disputes. He gave an example of a domain name registration containing a celebrity child’s name. The UDRP isn't helpful because a 2 week old kid doesn’t have protectable trademark rights.
“The UDRP is hardly a model of clarity.” All cases are fact-dependent. If a UDRP proceeding has unusual facts, he recommends requesting a 3 member panel--these proceedings get more carefully evaluated opinions and minimize the effects of any one panelist’s idiosyncratic views.
Some issues that regularly arise in UDRP proceedings:
* What the TM owner has to do to establish its rights. The majority view is that a registration anywhere in the world suffices. Common law rights generally require presenting sufficient evidence validating the rights.
* There remains a split of authority on “sucks” sites.
* In the early days, panelists used to run through the multi-factor likelihood of confusion factors. That’s rarely done today. Now, most panelists just make sight and sound comparison.
Karl Auerbach discussed two interrelated issues: (1) ICANN lacks any political authority for its “Internet governance” role, and (2) technology does not require that ICANN monopolize DNS root services. He argues that we would benefit from competition among DNS root services. His argument reminds me a bit of the net neutrality debate. We can hypothesize many possible net neutrality problems, but most of them go away with vigorous competition. Similarly, ICANN’s often-ridiculous shenanigans would be less vexing in the face of bona fide competition for DNS root services.
Dan Hunter spoke about a new paper he’s writing with Mark McKenna. Their target is the fundamental trademark principle that trademark law protects against consumer confusion. They think consumer confusion is an imperfect proxy for our normative goal of protecting consumers. Some confusion is endemic in a complex society; and some methods of communication, like humor, require confusion to work. Therefore, they want to move away from trying to block consumer confusion and instead refocus trademark law on reducing errors in consumer decision-making. This seems like a fruitful endeavor, but they are also taking a swipe against the consumer search cost justification for trademark law, a move I didn't follow.
Bill McGeveran recapped his recent work on social networking sites and gave a preview of his next article. His target is fake online profiles such as the Tony La Russa fake Twitter account. He expects to see more pressure to create IP rights in personal identities.
I spoke about trademarks and behavioral targeting, and in particular the competition among marketers for consumer preference information. For example, I believe the anti-deep packet inspection pushback wasn’t based solely on privacy concerns. Instead, destination websites fear that an IAP will disintermediate them and use its prime access to consumer preference information to steer customers to competitors. (See this blog post for more on that point). My (very brief) slides.
Posted by Eric at 07:16 AM Permalink | Derivative Liability , Domain Names , Internet History , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack (0) | Printable Version
December 01, 2009
"Spam Filter Ate My Electronic Filing Notice" Plaintiffs Get Another Chance -- Shuey v. Schwab
[Post by Venkat]
The "spam filter ate my electronic filing notice" excuse was an inevitable byproduct of the CM/ECF electronic filing system now in place in federal courts. As expected, courts have not been very sympathetic to this excuse. In an unpublished decision, the Third Circuit gave a party who advanced this excuse another chance. (The case caption is Shuey v. Schwab, Case No. 08-4727 (3rd Cir.; November 3, 2009). Here's a link to the Justia page.)
Plaintiffs brought civil rights claims against a township and certain police officers alleging excessive force. Defendants moved to dismiss. Plaintiffs failed to respond. The court issued an order directing plaintiffs to respond or "otherwise communicate with the court." Plaintiffs did not respond to this order either, and the court dismissed the action with prejudice. After the dismissal was entered, plaintiffs sought reconsideration, alleging among other things that their failure to respond was caused by "technological error." Specifically, counsel "explained that the court's electronically filed order was errantly tagged as 'spam' in counsel's email system and therefore was never delivered." The district court denied plaintiffs' request for reconsideration.
On appeal, the Third Circuit reversed, holding that before dismissing a case as a sanction the trial court must engage in some sort of merits analysis. The court's ruling doesn't directly address the "spam filter ate my CM/ECF notice" excuse, but gives the lawsuit a small dose of oxygen.
Although I'm sure we'll see parties continue to assert this excuse, I don't think courts will be very sympathetic. I guess common sense is the best advice here. Get a good spam filter and whitelist all domain names through which you are likely to receive electronic notices. When all else fails, keep track of your cases by checking PACER (or RECAP) once in a while!
Related: You can see my take on the ruling below here: "The Spam Filter Ate My CM/ECF Notice?," and posts on other cases where parties have asserted this excuse here (Russo v. Network Solutions, Inc.), here (American Boat Company, Inc. v. United States), and here (Stewart v. Avaya, Inc.).
Posted by Venkat at 10:15 AM Permalink | Spam | Printable Version
November 30, 2009
MySpace Quietly Won Goofy 230 Ruling in September--Riggs v. MySpace
By Eric Goldman
Riggs v. MySpace, Inc., 2:09-cv-03073-GHK-CT (C.D. Cal. Sept. 17, 2009)
This case has received some modest attention throughout its history (including a quick mention here when the court upheld MySpace's user agreement), but the district court's dismissal of the case appears to have been completely overlooked.
Riggs created a MySpace profile that she used to authenticate celebrities' MySpace pages to distinguish them from the many fake celebrity profiles on MySpace. Her most substantive gripe is that MySpace deleted Riggs’ profile twice, and she claims MySpace was negligent to do so. There are several reasons why MySpace should not be liable for deleting her profile, including most obviously the many self-serving provisions in MySpace's user agreement (which the court mentions as an alternative basis of its dismissal). However, 47 USC 230(c)(1) does not appear to help MySpace because it only immunizes MySpace from liability based on third party content. Nevertheless, the district court rules against Riggs on 230(c)(1) grounds, saying:
Given that both claims for negligence are based on the deletion of Plaintiff’s profiles, a decision by MySpace to effectively “remove content” created by Plaintiff from its website, MySpace’s actions are immune from liability under Section 230(c)(1) of the CDA.
After reading this sentence a couple of times, it appears that the court is treating Riggs' own content as the content that Riggs wanted to hold MySpace liable for—technically, the "information provided by another information content provider." I believe that treating a plaintiff's content as "information provided by another information content provider" is a novel reading of 230(c)(1). I also don’t think it’s the logical reading of 230(c)(1)’s grammar, especially the reference to “another.”
The court’s decision is even more puzzling because 230(c)(2), which immunizes a service provider for filtering content it subjectively deems "objectionable," seems to squarely cover MySpace’s deletion of Riggs’ account. Could the court have intended to rule for MySpace on 230(c)(2) grounds, not 230(c)(1) grounds, and just got confused? Or perhaps the court collapsed the two provisions together, which my research assistant and I found occurred with surprising regularity in our comprehensive survey of 230(c)(2) cases. So while I think the 230(c)(1) dismissal was goofy, I would support the same outcome on 230(c)(2) grounds.
Riggs also complained that MySpace should have taken more efforts to police against fake celebrity profiles. The court rejected this claim on 230(c)(1) as well (appropriately used this time).
The remainder of Riggs' arguments didn't fare any better, and the court dismissed the entire complaint without leave to amend. Riggs has appealed the case to the Ninth Circuit. It will be interesting to see what they do. Given the Ninth Circuit's apparent loathing of 230(c)(1) and the district court's goofy statutory reading, there is a non-trivial risk that the Ninth Circuit will do something crazy here.
Posted by Eric at 12:57 PM Permalink | Derivative Liability | TrackBack (0) | Printable Version
November 27, 2009
Web Host Can Terminate Customer for Abusive Call to Customer Support--Mehmet v. Add2Net
By Eric Goldman
[This is a relatively minor pro se case, which is why I've let it sit this long, but it has a couple of interesting facets that make the case worth blogging even at this late date.]
Mehmet v. Add2Net, Inc., 2009 WL 3199876 (N.Y.A.D. Oct. 8, 2009). The opinion (starting on page 39).
This case is a nice example of online providers' broad discretion to terminate their users. The dispute involves a web host and its customer. The customer stopped payment, so the host (apparently legitimately) turned off his site. In response, the customer left a nasty voicemail containing an "obscene word." The provider then wrote back to say the relationship was finis. In support of this, the provider cited a user agreement provision banning customers from "abusing" any of the web host's employees. The host took the position that the customer's voicemail breached this clause, justifying the final termination.
The user agreement's exact clause says that customers agree "not to abuse whether verbally or physically or whether in person, via email or telephone or otherwise ... any employee or contractor." Have you ever seen a clause like this? I haven't, nor would I choose to include such an amorphous clause in any contract I drafted. I do appreciate the provision's spirit, especially with all of the mania about anti-cyberbullying and providing safe employment environments, but I have a hard time imagining a covenant that would be enforced more inconsistently or arbitrarily. As a result, a clause like this is virtually tantamount to saying that the vendor can turn off customers whenever it wants.
So, should online service providers add these provisions to their online user agreements? In the wake of the Lori Drew prosecutions where the courts and prosecutors have been overinterpreting user agreements, I have argued against laundry lists of negative covenants in user agreements, but here the clause proved useful. Then again, the customer's initial failure to pay might have given the web host all of the recourse it actually needed.
For virtual world enthusiasts, I would connect the dots between this case and the recent Estavillo v. Sony case, which said that virtual worlds are not company towns. In this case, relying on the ridiculously overbroad negative covenant, the web host wiped out all of the customer's data files in the final termination. Thus, this ruling would seem to support that a virtual world provider similarly could include overbroad negative covenants in its user agreement, arbitrarily enforce a breach against a customer, wipe out the customer's online presence (and all of the digital assets stored in the virtual world), and face no recourse for the loss of those digital assets. I trust this reinforces the uneasiness of virtual world enthusiasts.
More perspectives on the lawsuit from Mehmet himself. It appears he is a serial plaintiff. That may have been material to the court's consideration.
HT: Evan Brown
Posted by Eric at 01:37 PM Permalink | Licensing/Contracts , Virtual Worlds | TrackBack (0) | Printable Version
November 24, 2009
Teeth Whitening System Brings "Sue the World" Lawsuit Against Ad Agency, Competitor and Search Engines--Dazzlesmile v. Azoogle
By Eric Goldman
Dazzlesmile, LLC v. Epic Advertising, Inc., 2:09-cv-01043-PMW (D. Utah complaint filed Nov. 23, 2009)
Dazzlesmile sells a teeth whitening system. Presumably these systems generate fat profits, because Dazzlesmile has brought an expensive "sue-the-world" lawsuit against its ad agency, its competitor and the search engines.
Azoogle/Epic
The lawsuit against Azoogle/Epic is partially based on a miscalibrated cost-per-acquisition (CPA) deal. Azoogle sold Dazzlesmile on a CPA deal which pays Azoogle $43 for making a $4 sale with negative-option continuing revenue streams, i.e., the consumer has to cancel after the free trial period or he/she automatically gets shipped and charged for more whitening stuff. If the ongoing revenue stream is great enough, it can make sense to pay out big upfront commissions to get the sale. However, this payment structure creates lots of mischief possibilities.
In this case, Dazzlesmile alleges that its competitor engaged in "CPA fraud" by placing thousands of orders, coincidentally generating over $100k of commissions to Azoogle in one week. Dazzlesmile also complains that its products were being promoted by spam, fake blogs and other problematic ads in contravention to Azoogle's promises. Finally, Dazzlesmile complains that a rogue affiliate packaged two different systems into the same ad, causing consumers to order both products and then renege when they realized Dazzlesmile's terms.
The odd thing about this complaint is that Dazzlesmile tries to portray itself as the white-knight advertiser that wants to do right by consumers, while the evil Azoogle kept tempting Dazzlesmile to cut corners and take undeserved money from consumers. I understand the value of this positioning, but I find it a little hard to believe. You kind of know what to expect when you're dealing with Azoogle, and I'd be surprised if Dazzlesmile is a fully innocent naïf.
Competitor Lawsuits
Dazzlesmile also claims that its competitor slapped counterfeit "Dazzlesmile" labels on a different teeth whitening system. It further claims that Azoogle and the competitor conspired to use Dazzlesmile's advertising copy in Azoogle's network to direct teeth whitening customers to the competitor. It also claims these defendants used the Dazzlesmile trademark in a host of inappropriate ways, including in spam, as keyword ad triggers, in domain names, and in astroturfed content. Dazzlesmile claims it has received 10,000 misdirected customer support inquiries from duped customers.
Lawsuits Against the Search Engines
Dazzlesmile drags Google, Yahoo and Microsoft into the lawsuit for selling keyword advertisements despite Dazzlesmile's cease & desist letter to stop doing so. Oddly, the complaint pleads the search engine's liability as "vicarious liability," which should be DOA. Vicarious trademark infringement requires an agency relationship between the search engines and the advertisers, which the complaint doesn't (and can't) plead. If it's a non-IP form of vicarious liability, then it's preempted by 47 USC 230. So I predict Dazzlesmile will have to amend its complaint against the search engines to allege some other legal theory, or the search engines will exit this particular matter quickly.
Interestingly, the complaint alleges ripoffs of both its copyrightable ad copy and its trade secret protectable marketing plans, but the complaint does not allege either copyright infringement or trade secret misappropriation.
Conclusion
Dazzlesmile's complaint, if completely accurate, tells a story filled with legal wrongs, but I'm not sure I found it all that convincing. I will have to see the defendants' responses before I can begin to form any conclusions about its overall merit.
It does point out one troublesome spot as a good practice pointer. I know a lot of advertisers think they prefer CPA pricing over CPC or CPM pricing because they are more clearly paying for results, but this case provides a good illustration that a miscalibrated CPA price is no better at reducing unwanted spending than a miscalibrated CPC or CPM. At minimum, I’m surprised that Dazzlesmile apparently didn't include some provision in the CPA formula allowing it to avoid payment for chargebacks or immediately returned products. If you're an advertiser doing CPA deals, make sure you have robust enough exclusions to the CPA obligations so that you are truly paying for bona fide results.
AdWords Lawsuit Roster
The updated roster of pending AdWords cases:
* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
Posted by Eric at 06:05 PM Permalink | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack (0) | Printable Version