Competitor Gets Pyrrhic Victory in False Advertising Suit Over Search Ads–Harbor Breeze v. Newport Fishing
The litigants compete in the whale watching industry in LA/Orange Counties. The plaintiffs operate out of Long Beach/San Pedro, the defendants out of Newport Beach. If you’re not familiar with the geography, Long Beach and Newport Beach are about 20 miles apart, but in LA traffic that could take days to drive.
The plaintiffs complained about two aspects of the defendants’ search ads. First, the ad copy claimed the whale watching tour cost only $10 (which indeed would be quite a bargain!), but that didn’t include a mandatory $2.50 “fuel surcharge” and 2% “wharfage fee.” (Boo for undisclosed mandatory fees). Second, “if a consumer searched on the internet for ‘Long Beach whale watching,’ the consumer would be directed to a page on Defendants’ website, which made repeated use of the phrase ‘Long Beach residents and visitors,’ suggesting that Defendants’ cruises depart from Long Beach, not Newport Beach.” This description is a little cryptic, but I assume the defendants bought “long beach” for keyword ad triggers.
The case proceeded to a jury trial. The jury found Lanham Act false advertising violations…but awarded the plaintiffs zero dollars in actual damages or disgorgement. On post-trial motions, the plaintiffs don’t do much better.
Disgorgement. The court says that willfulness is required for the Lanham Act disgorgement remedy, and the defendants lacked willfulness because of testimony that “Defendants had made changes to their websites and advertisements following state court litigation in 2012 over false advertising and afterwards, Defendants thought they were in compliance. One of those changes was to add language on every page that Defendants’ boats departed from ‘beautiful Newport Beach.'” Furthermore, the jury may have decided that there were no profits attributable to the false advertising because the defendants’ prices were actually cheaper than plaintiffs’. “Consumers might care more about getting a good deal than where the cruise departs or whether a few dollars get added to the ticket cost.” [This is an odd statement, as anyone who has ever lived in the area knows. If a customer wanted to go to Long Beach but instead has to redirect to Newport Beach, that almost certainly necessitates a drive on the 405, one of the most congested freeways in the world.] As for any location misdirection, the court says “Defendants intended to optimize their search engine results, not confuse consumers.”
Note: The willfulness predicate for disgorgement is at issue in the Romag case pending before SCOTUS.
Injunction. The court finds an injunction is appropriate, but it rejects most of the plaintiffs’ requested relief.
- Injunction. The court orders an “injunction to require the disclosure of Defendants’ location of departure for the advertising at issue—namely, webpages and advertisements that repeatedly use the name of another city, making it seem as if Defendants’ whale watching cruises depart from a city other than Newport Beach.” The court explains: “It is not misleading, for example, for Defendants to state on their website that they are about twenty miles away from Long Beach. But a repeated reference to Long Beach, without a clear disclosure regarding Defendants’ location of departure, may mislead or confuse consumers”
- Changed Metatags. The court refuses to order the defendants to include “the text “Newport Beach Cruise Operator” in the title tag or the phrase “All Cruises Depart from Newport Beach” in the description tag.” The court explains that such an order would burden too much speech and would “unfairly impair Defendants’ ability to optimize their search engine results.”
- Domain Names. The court rejects the plaintiffs’ demand that the defendants’ relinquish domain names referencing other city names. Among other reasons, the court says it would be appropriate for companies to reserve domain names for future expansion.
- AdWords Restrictions. The court declines to limit the defendants’ bidding on city names beyond Newport Beach. “there is nothing wrong with Defendants seeking to advertise their whale watching cruises in other cities in Southern California, so long as consumers understand the cruises depart from Newport Beach. There is also nothing wrong with the fact that Defendants invest heavily in pay-per-click advertising systems and outbid other operators for advertising space. Plaintiffs admit, in fact, that the purchase of AdWords of any sort is ordinarily lawful. Plaintiffs’ proposed injunction is overbroad because it seeks to bar Defendants’ from any use of other geographic terms, rather than the misleading use of geographic terms.”
- Affiliate Activities. The court declines to limit defendants’ ads from appearing in organic search results or third-party services like Groupon “to the extent it holds Defendants responsible for content created by third parties.” (That sidesteps a lurking Section 230 problem).
All told, the court indicates it will issue an injunction that meets these parameters (see the injunction’s full text):
If Defendants repeat the name of a city other than Newport Beach in an advertisement or on a webpage, they will be required to clearly disclose that their cruises depart from Newport Beach on that advertisement or webpage. In addition, Defendants must advertise a price for a ticket that is the entire final cost of the ticket, excluding any legally collected sales tax or any optional, add-on services or goods.
Attorneys’ Fees. The plaintiffs asked for $1.5M in attorneys’ fees. The court says this case isn’t exceptional and declines to award any:
Plaintiffs failed to prove that Defendants’ false advertising was willful. Plaintiffs’ lack of proof of damages also proved to be a fundamental problem. In the end, Plaintiffs’ attorneys expended over 3,300 hours on this case without recovering any damages for their client. Although the injunction confers some public benefit, stopping misleading advertising about whale watching does not ameliorate a serious public harm….The fact that Plaintiffs have spent eight years litigating related issues, both in state and federal court, does not make this an exceptional case. If anything, it undermines Plaintiffs’ claim of exceptionality, as the litigation has achieved mixed results
It’s a little unfair to say that false advertising about whale watching isn’t a “serious” public harm. All false advertising is pernicious, even if it involves recreational activities. Plus, if the result is that consumers are unwillingly required to drive on the 405, that is indeed a pretty serious harm to them. Life is too short to drive the 405.
Pyrrhic Victory. The plaintiffs claim they spent 3,300 hours of lawyer time and $1.5M in legal fees, and for what? No damages, no attorneys’ fee shift, and a basic injunction. Was it worth it? Given that the defendants claimed they had already modified their ad campaigns regarding the geography advertising, it’s not clear how much value the injunction really conferred on the plaintiffs.
Thus, I’m going to categorize this case as yet another example that suing over keyword ads is a bad business decision. I’ve generally made that observation in the context of trademark cases, but it apparently extends to false advertising cases too.
As an aside, just how lucrative is the whale watching industry that it can support a $1.5M lawsuit between competitors? At $20/head (assuming multiple hidden mandatory fees), it will take 75,000 redirected tourists to generate enough revenue (not profit) to cover just the out-of-pocket costs of this lawsuit.
SEO/SEM Is Good. The court repeatedly endorses SEO/SEM practices as legitimate ways to source customers. It’s a far cry from the 1990s, when SEO/SEM were considered unethical attempts to deceive search engines.
Hidden Mandatory Fees SUCK. I liked the court’s injunction against hidden mandatory fees. That should be the law across the entire economy. In particular, wouldn’t it be fantastic if we could get hotels under a similar injunction? There are pending lawsuits against Marriott and Hilton, and I’m cheering for them!
Case citation: Harbor Breeze Corp. v. Newport Beach Sportfishing, Inc., 2019 WL 4570033 (C.D. Cal. Aug. 26, 2019)
More Posts About Keyword Advertising:
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* New Jersey Attorney Ethics Opinion Blesses Competitive Keyword Advertising (…or Does It?)
* Another Competitive Keyword Advertising Lawsuit Fails–Dr. Greenberg v. Perfect Body Image
* The Florida Bar Regulates, But Doesn’t Ban, Competitive Keyword Ads
* Rounding Up Three Recent Keyword Advertising Cases–Comphy v. Amazon & More
* Do Adjacent Organic Search Results Constitute Trademark Infringement? Of Course Not…But…–America CAN! v. CDF
* The Ongoing Saga of the Florida Bar’s Angst About Competitive Keyword Advertising
* Your Periodic Reminder That Keyword Ad Lawsuits Are Stupid–Passport Health v. Avance
* Restricting Competitive Keyword Ads Is Anti-Competitive–FTC v. 1-800 Contacts
* Another Failed Trademark Suit Over Competitive Keyword Advertising–JIVE v. Wine Racks America
* Negative Keywords Help Defeat Preliminary Injunction–DealDash v. ContextLogic
* The Florida Bar and Competitive Keyword Advertising: A Tragicomedy (in 3 Parts)
* Another Court Says Competitive Keyword Advertising Doesn’t Cause Confusion
* Competitive Keyword Advertising Doesn’t Show Bad Intent–ONEpul v. BagSpot
* Brief Roundup of Three Keyword Advertising Lawsuit Developments
* Interesting Tidbits From FTC’s Antitrust Win Against 1-800 Contacts’ Keyword Ad Restrictions
* 1-800 Contacts Charges Higher Prices Than Its Online Competitors, But They Are OK With That–FTC v. 1-800 Contacts
* FTC Explains Why It Thinks 1-800 Contacts’ Keyword Ad Settlements Were Anti-Competitive–FTC v. 1-800 Contacts
* Amazon Defeats Lawsuit Over Its Keyword Ad Purchases–Lasoff v. Amazon
* More Evidence Why Keyword Advertising Litigation Is Waning
* Court Dumps Crappy Trademark & Keyword Ad Case–ONEPul v. BagSpot
* AdWords Buys Using Geographic Terms Support Personal Jurisdiction–Rilley v. MoneyMutual
* FTC Sues 1-800 Contacts For Restricting Competitive Keyword Advertising
* Competitive Keyword Advertising Lawsuit Will Go To A Jury–Edible Arrangements v. Provide Commerce
* Texas Ethics Opinion Approves Competitive Keyword Ads By Lawyers
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* Keyword Ad Lawsuit Isn’t Covered By California’s Anti-SLAPP Law
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* More Defendants Win Keyword Advertising Lawsuits
* Another Keyword Advertising Lawsuit Fails Badly
* Duplicitous Competitive Keyword Advertising Lawsuits–Fareportal v. LBF (& Vice-Versa)
* Trademark Owners Just Can’t Win Keyword Advertising Cases–EarthCam v. OxBlue
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* Another Keyword Advertising Lawsuit Unceremoniously Dismissed–Infostream v. Avid
* Another Keyword Advertising Lawsuit Fails–Allied Interstate v. Kimmel & Silverman
* More Evidence That Competitive Keyword Advertising Benefits Trademark Owners
* Suing Over Keyword Advertising Is A Bad Business Decision For Trademark Owners
* Florida Proposes to Ban Competitive Keyword Advertising by Lawyers
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* Google’s Search Suggestions Don’t Violate Wisconsin Publicity Rights Law
* Amazon’s Merchandising of Its Search Results Doesn’t Violate Trademark Law
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