Google Sued for Click Fraud for the First Time in Years–123 Lock and Key v. Google

By Eric Goldman

123 Lock and Key LLC v. Google, Inc. (Wash. Superior Ct. complaint filed May 21, 2010)

After Google and Yahoo settled their click fraud lawsuits in 2006, click fraud litigation has been fairly rare. There is a major battle brewing against Facebook (In re Facebook PPC Advertising Litigation) and only a smattering of other cases, such as the lawsuit against CitySearch (Menagerie v. CitySearch). Given the number of advertisers it has and the volume of business it does, it’s remarkable that Google has gone so long–4 years–without a new click fraud lawsuit.

This new lawsuit isn’t likely to be causing Google to be shaking in its boots. First, the lawsuit was filed in a Washington state court, so I anticipate Google will remove it to federal court and then transfer the case to the Northern District of California per its user agreement. Google has had great success invoking the mandatory venue clause in its AdWords contract recently. I’m not sure if the plaintiff actually expects to keep the case in Washington state courts, but that seems highly unrealistic.

Second, the alleged facts in the complaint didn’t exactly cause me to reach for the hankies. As 123 Lock tells the story, it happily advertised on Google from October 2009 to March 2010, getting 15 clicks a day and having an 80% conversion rate (clicks/phone calls). Note: phone calls is an odd measure of conversion, and I wonder how the calls were tracked to the clicks (i.e., was there a unique phone number only clicking consumers saw?). Then, in March 2010, 123 Lock says it started getting 100-150 clicks/day, sometimes in a flurry, and none of these clicks converted to phone calls. 123 Lock then says it presented “this irrefutable evidence, in far more detail, with far more facts, and with substantiating evidence, to Google,” who heartlessly rejected the evidence. I’d love to see the “irrefutable” evidence in its glorious detail, because there are so many explanations other than click fraud that could apply.

Third, even if 123 Lock was truly a click fraud victim and Google still charged it for those bogus clicks, it’s hard to imagine any damages large enough to justify the lawsuit given the volume of clicks we’re talking about. Google’s AdWords contract poses a formidable threat to most theories that could result in any real money.

Finally, this could be another opportunity for Google to turn the table on a plaintiff and countersue it for various claims–such as Google’s move of suing advertisers for breach of the mandatory venue clause by initially suing it in the wrong jurisdiction (see, e.g., the Flowbee counterclaim). It would not surprise me if 123 Lock ends up writing a check to Google when the litigation dust clears.

ClickZ presents a more sympathetic view of the lawsuit in its story entitled “Suit Against Google Highlights Surge in Click Fraud”.