Catching Up On Some Recent Click Fraud Rulings
After all of the excitement over click fraud a decade ago, we don’t often see click fraud cases any more. However, just in the past couple months I’ve seen 3 rulings that I wanted to share with you.
This case involves click fraud and other online marketing shenanigans. It leads to a major damages award for the plaintiff. The parties are both SEMs. Wickfire claimed that TriMax “(1) placed fraudulent advertisements on Google AdWords that falsely designated Wickfire as their origin in violation of the Lanham Act, and (2) engaged in “click fraud” and placed fraudulent advertisements to intentionally interfere with Wickfire’s current and prospective contractual and business relationships, and they did so as part of a conspiracy to harm Wickfire.” TriMax made various counterclaims.
The case proceeded to a jury trial. “The jury returned a unanimous verdict in favor of Wickfire, finding Defendants TriMax, Laura Woodruff, WREI, and Josh West (1) misrepresented Wickfire as the source of advertisements by placing advertisements containing identifying information distinctive of Wickfire in a manner that was likely to cause confusion; (2) intentionally interfered with Wickfire’s existing contracts; (3) tortiously interfered with Wickfire’s prospective business relationships; (4) were part of a conspiracy that damaged Wickfire; and (5) acted with malice or gross negligence. The jury awarded Wickfire $2,318,000.00 in compensatory damages as a result of Defendants’ intentional interference with Wickfire’s existing contracts and prospective business relationships.” TriMax’s counterclaims failed.
Regarding click fraud, the court acknowledges the semantic confusion:
Although the witnesses at trial testified to varying definitions of “click fraud,” the parties use the term in their claims to mean the practice where an individual clicks on a competitor’s ad to drive up the competitor’s cost of advertising and prematurely exhaust the budget. Once a competitor’s ads disappeared, the individual committing click fraud can then win the bid.
The court says:
the jury heard evidence Defendants clicked on Wickfire’s online advertisements for 12 to 14 hours a day over a period of months for the sole purpose of forcing Wickfire to pay for the clicks, and this clicking, which ultimately resulted in 4,080 clicks, could have run Wickfire out of business. Moreover, Wickfire has provided sufficient support for the proposition that click fraud is unlawful [citing Findwhat Investor Group v. Findwhat.com, 2011 WL 4506180 (11th Cir. Sept. 30, 2011) and Menagerie v. Citysearch].
TriMax argued in its counterclaims that Wickfire had engaged in predatory bidding. It doesn’t work:
TriMax claims Wickfire manipulated the Google AdWords auction by engaging in “predatory bidding.” Wickfire allegedly did this by (1) running indirect ads below TriMax’s direct ads that linked customers to a website called WebCrawler.com (eventually Wickfire would begin linking these indirect ads to its own website, TheCoupon.co, rather than WebCrawler.com), (2) “plac[ing] exorbitantly high bids on its Webcrawler ads” which caused TriMax’s cost-per-click to “skyrocket,” and (3) once TriMax’s budget was exhausted and its ad campaign paused, Wickfire placed its own direct ads “which easily won the auctions due to the lack of competition from TriMax.” Additionally, in support of its unclean hands defense, TriMax claims Wickfire used tracking identifiers similar to those used by TriMax to make it look like TriMax, not Wickfire, was the predatory bidder.
According to Wickfire, TriMax’s increased costs resulted from its own overbidding, not tortious interference from Wickfire. As Wickfire explains, TriMax alone controls its bids; TriMax has never been charged more than it bid, and this bidding strategy was equally open to TriMax. Wickfire therefore maintains this so-called practice of “predatory bidding” simply constitutes legitimate competition.
The facts in the opinion were a little garbled, so I couldn’t easily tell why TriMax’s predatory bidding claim failed yet Wickfire, which appeared to allege similar conduct, found success. I’m sure there are some key factual differences that persuaded the jury.
There is also some wacky discussion about Wickfire’s unique affiliate tracking code achieving secondary meaning and becoming an enforceable trademark. Ugh.
Satmodo v. Whenever Communications, 2017 WL 1365839 (S.D. Cal. April 14, 2017).
The litigants compete in the satellite phone retailing business. The court suggests that it’s a fiercely competitive business. Both parties engage in search engine marketing. The plaintiff alleges that the defendant deliberately engaged in competitive click fraud to drain its SEM budget. “Plaintiff believes that Defendants are utilizing automated means and rotating through proxy servers in order to avoid detection.” The court discusses several claims:
CFAA 1030(a)(4): “Plaintiff asserts two theories alleging how Defendants acquired improper access: (1) violating the terms and conditions of the search engine’s advertising contracts, and (2) accessing Plaintiff’s website after Plaintiff blocked various IP addresses and asked Defendants to cease.” The court rejects the TOS prong per Power Ventures and Nosal, but the C&D letter was good enough to delimit access.
Still, the CFAA claim gets tossed because the plaintiff didn’t adequately show how the defendant accessed its computers. In a footnote, the court explains “Plaintiff’s opposition explains that clicking on the advertisements on the search engines resulted in Defendants being redirected to Plaintiff’s website, servers, and computers. However, Plaintiff fails to allege this information in its complaint.” The Cal. Penal Code 502 claim fails for the same reason.
CFAA 1030(a)(5): the court says the plaintiff didn’t show how “their data was destroyed, their computer system was harmed, or there was an inability to access their own computer data.”
California UCL: “The crux of Plaintiff’s complaint focuses on Defendants’ alleged click fraud scheme, which takes Plaintiff, “one of its main competitors, out of the marketplace for a period of time, all to the Defendants’ benefit.” These allegations, taken as true, allege unfair conduct that violates the spirit of antitrust laws and significantly threatens competition.”
Intentional Interference with Prospective Economic Relations. “Plaintiff does not allege any facts that show the existence of any specific economic relationship with identifiable third parties.”
In contrast to the Wickfire case, this plaintiff seems to be struggling to find a workable theory to challenge competitive click fraud.
Havensight Capital LLC v. Facebook, Inc., 2017 WL 1507491 (Cal. Ct. App. April 27, 2017):
On several occasions, plaintiff purchased online ads for its business on the Facebook social networking site in order to gain website visits to a single specified website address. According to plaintiff, Facebook has a tool called Ads Manager that shows customers the number of website clicks generated from the ads customers place with it. Google has a similar tool called Google Analytics, which tracks and reports website traffic. After comparing data from Facebook’s Ads Manager to similar data from Google Analytics, plaintiff observed that Ads Manager tallied a visit count to its website that was 30 percent higher than that shown by the Google Analytics data, even though the Google tool measures total visits, not just visits from Facebook, as does Ads Manager. From this disparity, plaintiff asserts defendant is deliberately over-inflating the amount of visits generated from its site. Plaintiff also alleges that defendant has charged it varying amounts per click. For example, the charges ranged from 67 cents per click to 25 cents per click on two different days in 2015. Plaintiff asserts defendant’s conduct resulted in the denial of multiple venture capital funding requests.
The appeals court upholds a dismissal of the lawsuit.
Bonus Track #1: Tropical Sails Corp. v. Yext, Inc., 2017 WL 1048086 (SDNY March 17, 2017)
Yext provides the “PowerListings” service, which enables “subscribers to track their business listing information (e.g., business name, address, and telephone number) across a number of online business directories—or internet Yellow Pages—that partner with Yext.” To drum up business, Yext offers prospective customers a free way to check how their listings are faring on existing sites. When using this tool, Yext presents a list of “Location Data Errors Detected.” The court explains:
For customers not already subscribed to Yext’s PowerListings service, the PowerListings scan reported “not standing out” under the “Special Offer” column and “unverified listing” under the “Status” column for every single online directory in the list. In addition to totaling any entry missing entirely from a directory and any discrepancy in the business name, address, or telephone number as an error, the PowerListings scan counted each “not standing out” and “unverified listing” as an error. The PowerListings scan contained between forty and sixty online directories, meaning that for all customers not subscribed to PowerListings at the time they ran the PowerListings scan, by design, the scan showed at least eighty to 120 errors.
The plaintiff, Tropical Sails, used this scanning tool and unsuccessfully tried to update the business listings manually to reduce the Yext-reported errors. Eventually it decided to subscribe to Yext after a salesperson called. The arrangement was not successful: “the PowerListings service generated ‘zero calls, zero inquiries, or zero leads from all these directories.'” Tropical Sails didn’t renew the subscription, and then it sued Yext (in a putative class action) for fraud/fraudulent inducement, unjust enrichment, and violations of N.Y. General Business Law §§ 349-50.
The court says that Tropical Sails qualifies for most elements of class formation, except that individual questions of fact predominate. Still, the outcome isn’t all good news for Yext. The court denies Yext’s summary judgment to dismiss Tropical Sails’ individual claim, plus it’s never good when a customer reports “zero calls, zero inquiries, or zero leads.” I know business directory listings are popular tools among online marketers because they are easy things to measure (see, e.g., the Kent report in the Larsen v. Larson case I blogged about), but I routinely wonder how much traffic these business directories actually get (other than from SEMs checking their positioning) and if/when it’s worth businesses investing in improving their business directory exposure.
Bonus Track #2: MacFarland v. Le-Vel Brands LLC, 2017 WL 1089684 (Tex. Ct. App. March 23, 2017)
MacFarland runs the Lazy Man and Money website, allegedly with 4M visitors (total? per month? per day?). He posted an article “Is Le-Vel Thrive aScam?” Le-Vel is a multi-level marketer. It sent a demand letter claiming defamation. MacFarland edited the letter but didn’t remove it. At issue is whether MacFarland qualifies for Texas’ anti-SLAPP law. The trial court ruled against MacFarland, but the appellate court easily reverses on all points and gives MacFarland the win and his attorneys’ fees. Let’s hear it for robust anti-SLAPP laws!
More Click Fraud Posts
* Facebook Beats Class Certification in Click Fraud Case
* Google Sued for Click Fraud for the First Time in Years–123 Lock and Key v. Google
* Facebook Gets Partial Win in Click Fraud Lawsuit
* Citysearch Click Fraud Class Certified–Menagerie v. Citysearch
* Facebook Sued for Click Fraud–RootZoo v. Facebook
* Securities Fraud Case Premised on Click Fraud Allegations Dismissed–Brodsky v. Yahoo
* Lambotte’s Click Fraud Lawsuit Against IAC Survives Motion to Dismiss
* Stockholder Derivative Action Against Yahoo Based on Click Fraud Rebuffed–Brodsky v. Yahoo
* Citysearch Sued for Click Fraud–Lambotte v. IAC
* Click Fraud Talk at SMX West
* Lead Fraud (A Cousin of Click Fraud)–NetQuote v. Byrd
* Click Fraud Resources
* Miva Securities Litigation Rejects Most Click Fraud/Syndication Fraud Claims
* Click Fraud Lawsuit Survives Motion to Dismiss–Payday Advance v. FindWhat
* Click Fraud Presentation
* Google Click Fraud Settlement Approved
* Yahoo Click Fraud Settlement Preliminary Approval
* Google Click Fraud Report
* AIT Click Fraud Lawsuit Stayed
* Lane’s Gifts Click Fraud Lawsuit Near Settlement
* Lane’s Gifts Click Fraud Lawsuit Back to State Court
* Lane’s Gift Click Fraud Complaint
* Click Fraud Lawsuit–Click Defense v. Google
* Update on Click Fraud Lawsuit
* Lostclicks.com and Click Fraud