Spy Phone v. spy phone: Google loses motion to dismiss TM and other claims

Spy Phone Labs LLC. v. Google Inc., No. 15-cv-03756, 2016 WL
6025469 (N.D. Cal. Oct. 14, 2016)
The plaintiff here, an app maker with a registered mark for
Spy Phone for a monitoring app, squeaks past dismissal of its trademark
secondary liability claim, and gets a win on §230(c)(2)(A) by alleging that
Google acted in bad faith—another for Eric Goldman’s tally.  Spy Phone offers its free app on Google’s
Play Store and generates revenue through AdSense ads on its website.
Spy Phone alleged that, between November 2012 and May 2013, it
discovered other monitoring apps that used or incorporated the “Spy Phone”
trademark.  It submitted trademark
infringement complaints to the Google Play Team, and Google removed the
apps.  But in May 2013, Google delayed
removal for 27 days, and then Spy Phone received an email from the developer of
the challenged “Spy Phone App” complaining about the removal.  At that point, Google allegedly began
retaliating against Spy Phone, taking actions orchestrated by the developer and
the Google Play Team. [I imagine the developer is thrilled to learn of its
power over Google.]
In June 2013, Spy Phone submitted a trademark infringement
complaint regarding the “Reptilicus.net Brutal Spy Phone” app. Google took no
action, responding that: “Google is not in a position to mediate trademark
disputes between developers and trademark owners. As a courtesy we have
considered your claim, but are unable to determine its merits at this time.”  Later that month, Google removed Spy Phone’s
app on the ground that it violated Google’s anti-spyware policy, even though Spy
Phone alleges its app was in full compliance with Google’s Developer
Distribution Agreement.  Spy Phone
alleged its belief that the complaint that triggered the removal was submitted
by the angry developer, the Google Play Team, or a Doe defendant in retaliation
for Spy Phone’s trademark infringement complaints.
After Spy Phone sued, Google clarified that the app itself
did not violate the anti-spyware policy, but that the app title was in
violation because “[a]pp titles should not be misleading or represent the
product as being spyware and/or capable of surreptitious tracking.” Spy Phone’s
counsel pointed out that other monitoring apps contained the word “spy” in the
title, and Google responded that it intended to prohibit all developers from
using the word “spy.” In October, Google reinstated Spy Phone’s developer
account, but deleted all of the consumer reviews and records for the original
“Spy Phone” app.
Spy Phone relaunched its app as “Phone Tracker,” but got
many fewer downloads and lost much advertising revenue.  Other apps allegedly continued using “spy” in
their titles.  Thus, beginning in January
2014, Spy Phone began submitting complaints about apps using the word “spy” in
their title, asserting violations of the anti-spyware policy. Google allegedly removed
only some of these apps, and many of the apps that were removed were re-listed
afterwards.  In July 2014, Spy Phone
complained about a monitoring app developed by that same angry developer, and
then Google suspended Spy Phone’s developer account and removed its app for
violating Google’s spam policy. Again, Spy Phone alleged its belief the removal
was based on a complaint submitted by the angry developer, a Google Play Team member,
and/or a Doe defendant. Spy Phone still filed complaints against other
monitoring apps to test whether the anti-spam policy was being applied
uniformly, but alleged that none of these apps were removed.  “A month after having its developer account terminated,
Plaintiff received a letter from a ‘Concerned Google Play Member,’ which
‘confirmed Plaintiff’s belief’ that Plaintiff was being singled out for
submitting trademark infringement complaints.” 
After Spy Phone sued, Google removed an app that Spy Phone identified as
an infringing app, and also removed at least five apps that infringed without
Spy Phone’s specific request.
Contributory trademark infringement: Previously, Judge Grewal
dismissed this claim because Spy Phone had not alleged Google had notice of the
specific acts of infringement because Spy Phone made spyware complaints instead
of trademark complaints.  For the
Reptilicus.net Brutal Spy Phone complaint, Google didn’t ignore the trademark
complaint but investigated and found that it could not assess the merits of the
claim.  Because “Spy Phone” could have
been a descriptor, Google didn’t have actual notice. 
Here, Spy Phone argued that Google failed to act promptly to
suspend services to known infringers, citing (1) the 27 days it took Google to
remove “Spy Phone App” after Plaintiff filed a trademark complaint on May 17,
2013, and (2) the 18 days it took Google to remove an infringing app identified
in Plaintiff’s First Amended Complaint on January 23, 2015.  This allegation wasn’t addressed by the
previous order.  Cases have found action
within three days to be sufficient to avoid liability, but six to nine months
of delay have been found sufficient to allege contributory copyright
infringement.  Here, the court found that
“whether this delay is actionable cannot be decided at the pleading stage.” 
However, the court rejected Spy Phone’s disagreement with
Judge Grewal about the Reptilicus.net app. 
Mere assertion by a trademark owner that a domain name infringes isn’t
sufficient to impute knowledge of infringement, without more knowledge of the
relevant goods and services; so too here. 
Spy Phone didn’t allege that Google knew the Reptilicus.net app was a
parental monitoring app or make factual allegations regarding the likelihood of
confusion factors.
Spy Phone also alleged willful blindness to ongoing
infringement. “Plaintiff is essentially alleging that Google had a duty to
preemptively remove apps that infringed on Plaintiff’s trademark, on the basis
that it has alleged that the Google Play Team is a small group who was put on
notice that Plaintiff possessed the ‘Spy Phone’ trademark.” Spy Phone also
alleged that Google had engaged in human review to ensure compliance with the
Google Play’s Developer Program Policies, which meant that “Google knew the
names of all infringing apps before they were listed on Google Play.” That wasn’t
enough; at most, it was generalized knowledge insufficient to impute actionable
knowledge without something more.  Spy
Phone argued that Google was like a flea market operator who has been put on
notice that a particular vendor is selling counterfeit goods, but continues to
allow that vendor to sell counterfeit goods. “Not so. Plaintiff seeks to
require the flea market operator not to just police specific vendors who it has
been put on notice of selling counterfeit goods, but to also preemptively check
over the goods of every vendor to ensure they are not also selling counterfeit
goods. This is the type of generalized notice that Tiffany rejected.”
However, Spy Phone did allege a claim as to apps from
developers that Plaintiff had previously reported to have infringed on its
trademark, such as the defendant angry developer. Thus, the motion to dismiss
was denied.

State claims and the CDA, section 230(c)(2)(A) (immunity for good faith
removals): Spy Phone argued that Google was an information content provider (of
the source code that enables apps to use Android), not an interactive computer
service. Opperman v. Path, Inc., 84 F. Supp. 3d 962, 987 (N.D. Cal. 2015), found
that Apple was an information content provider because it controlled the
development of the apps that were being challenged. But “development” means
material contribution to the alleged unlawfulness, and providing neutral tools
isn’t “development.”  Opperman involved Apple’s “iOS Human
Interface Guidelines,” which included “several suggestions that do, on their
face, appear to encourage the practices Plaintiffs complain of in this case.” Not
here.
However, the court found that it couldn’t resolve the issue
of whether Google acted in good faith at the motion to dismiss stage.  Google argued that selective enforcement of
its spyware polic was not actionable. But Spy Phone argued that Google’s claim
that Plaintiff’s app violated the spyware policy was entirely pretextual.
Google would have to return to § 230(c)(2)(A) on summary judgment.
Tortious interference with contract: Spy Phone relied on its
contract with Google through AdSense. 
Google can’t interfere with its own contract, even when the allegedly
tortious actions are committed by a different department (the Google Play Team).  Dismissed with prejudice.
Breach of contract and the covenant of good faith and fair
dealing: “[t]he general rule regarding the covenant of good faith is plainly
subject to the exception that the parties may, by express provisions of the
contract, grant the right to engage in the very acts and conduct which would
otherwise have been forbidden by an implied covenant of good faith and fair
dealing.” Google’s developer agreement says it has the right to take down
content that, among other things, “is deemed by Google to have a virus or is
deemed to be malware, spyware or have an adverse impact on Google’s or an
Authorized Carrier’s network …. Google reserves the right to suspend and/or bar
any Developer from the Market at its sole discretion.” But Spy Phone alleged
that Google failed to exercise this right in good faith and that Google didn’t
actually find the app in violation of the anti-spyware policy (as no such
policy allegedly exists).  Thus this
claim survived.
Tortious interference with prospective economic advantage: Google
argued that its developer agreement precluded recovery for consequential and
lost profits damages. Spy Phone argued that this section was unconscionable or
should be interpreted as applying only to good faith acts.  Though the contract might be procedurally
unconscionable, Spy Phone didn’t explain why the limitation on liability
provision was substantively unconscionable. 
These provisions “have long been recognized valid in California” and
“are particularly appropriate where, as here, one party is offering a service
for free.” However, the limitation of liability provision couldn’t be applied
to intentional wrongs.  Motion to dismiss
denied.
The coordinate California UCL claims based on the above also
survived.  However, the court declined to
allow Spy Phone to add a new claim for false advertising under the Lanham Act
and California’s False Advertising Law. Spy Phone wanted to argue that when
Google AdWords sold the keywords “Spy Phone” to other developers, Google was
engaging in false advertising because Google had previously told Plaintiff that
the term “spy” was misleading as it deceives people into thinking that such
apps are spyware and/or capable of surreptitiously monitoring data.  Thus, allowing others to buy priority
placement in response to a search for those keywords put Spy Phone at a
competitive disadvantage by falsely suggesting that the competing app
associated with the keywords “Spy Phone” was “capable of surreptitious tracking.”

But Spy Phone’s allegations of falsity were too clever by
half; it alleged that Google had no reason to believe its own statement that
use of “spy” is misleading.  Also, Spy
Phone didn’t allege facts that would establish materiality or injury caused by
the allegedly false statement that the apps shown in response to the search
would allow surreptitious monitoring. “In fact, the only ad listed above Plaintiff’s
app when using the ‘Spy Phone’ keyword search is an app that is clearly labeled
as the ‘Best Parental Control App,’ the same function as Plaintiff’s app.” Amendment
to allow the false advertising claim would be futile. 

from Blogger http://ift.tt/2e2Mrys

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