Google Defeats Lawsuit Over Duplicate Content Penalty–D’Agostino v. Appliances Buy Phone

D’Agostino provided web development services to the Appliances Buy Phone (ABP) website. He wanted to sharpen his SEO skills, so he agreed in 2009 with the ABP owners to create a mirror version of ABP, called Appliances4Sale (AFS) as a test platform. D’Agostino would SEO and then share 50% in the resulting profits. In 2010, Google slapped both ABP and AFS with a duplicate content penalty. The ABP owners then shut down AFS to preserve traffic to ABP, and in August 2010, D’Agostino sued them and Google pro se. I previously blogged this lawsuit in 2011 when the court didn’t reject ABP’s counterclaim for negligent SEO services (it’s unclear from this ruling what happened to those counterclaims). Subsequently, the court rejected some of D’Agostino’s claims and a jury rejected the remainder. D’Agostino appealed, but the appellate court rejected his arguments, perhaps moving this long-running litigation a little closer to final resolution after more than a half-decade of costly fighting.

D’Agostino sued Google for breach of contract and the implied covenant of good faith and fair dealing. Google invoked its Merchant Center terms of service (TOS). The appellate court rules that the TOS is a contract of adhesion because it was presented on a take-it-or-leave-it basis, but the TOS wasn’t unconscionable:

Plaintiff was a sophisticated webmaster who had great familiarity with “click-wrap” contracts like the TOS. Further, there was no economic “compulsion” here, as plaintiff could have sought alternate comparison shopping services, rather than utilizing Google’s free product search service for merchants. Plaintiff also makes no showing that public interests would be undermined if the TOS is enforced.

The Merchant Center TOS is a business-to-business contract, and it’s much harder to get B2B clickthrough agreements tossed than B2C contracts. Plus, over the years, Google has had ample success getting its contracts enforced in court. See, e.g., CLRB Hanson, Feldman, Flowbee, Parts Geek, Person, Rojas-Lozano, Rudgayzer, TradeComet and others.

Once the contract has legal effect, it has numerous provisions that help protect Google:

the ABP and AFS websites were clearly violative of Google’s policies. Both websites were owned by [ABP] and offered the same merchandise at the same price. Enforcement by Google of the TOS under these undisputed circumstances was entirely consistent with the express language of the agreement and did not constitute a breach. Even if Google breached the TOS by its conduct, the TOS’s limitation of liability clause, which we have determined to be valid and enforceable, would preclude plaintiff from recovering damages.

That rationale also supported dismissal of the breach of the implied covenant of good faith and fair dealing. While I think Google should win lawsuits about its duplicate content penalty due to its filtering discretion per 47 USC 230(c)(2), we’ll rarely reach that far because apparently Google’s contract will be dispositive. (Plus, it avoids the ugly debates over what constitutes “good faith” filtering like we saw in Smith v. TRUSTe, also a New Jersey case).

The appellate court also upholds ABP’s win. Nevertheless, reading the opinion, I was reminded of what I wrote about the “heroic flaw” of this business relationship back in 2011:

the basic architecture of this business deal–giving the SEO financial interest in the second website but still running the first website–seemed fraught with conflicts from inception. The structure apparently put the two different websites in competition with each other (because there were different economic payoffs associated with each site), so perhaps a falling-out was inevitable

Cf. our recent discussion about website earnouts.

Case citation: D’Agostino v. Appliances Buy Phone, Inc., 2015 WL 10434721 (N.J. Super. Ct. App. Div. March 8, 2016). See the Dec. 2015 ruling in the parallel federal lawsuit.