Keyword ad case based on failure to disclose connections fails

Novation Ventures, LLC v. J.G. Wentworth Co., LLC, 2016 WL
6821110,  No. CV 15-00954 BRO (C.D. Cal.
Feb. 1, 2016)
Novation factors structured settlements: it buys the right
to receive scheduled future payments from settlement recipients who do not wish
to or cannot wait years for their annuitized payments; it has a market share of
no more than 7%. Its competitor J.G. Wentworth is, along with its subsidiaries,
“by far the largest participant in the factoring of structured settlements,” with
a market share of about 75%.  In 2011,
J.G. Wentworth bought its largest competitor, Peach Holdings, and they own and
control the “Olive Branch Funding” brand.  Given regulatory barriers to entry, there are
only a handful of companies competing in the business.
Novation alleged antitrust and Lanham Act claims based on
the idea that J.G. Wentworth “advertises and presents itself to the public
using (at least) three distinct brand names (JG Wentworth, Olive Branch
Funding, and Peachtree)” without advising consumers that those brands are “all
controlled and coordinated by the brands’ common owner and manager: The JG
Wentworth Company.” This, Novation alleged, served to “systematically corrupt
and frustrate [the] competitive bidding process.” Novation alleged that
comparison shopping was a key determinant of the price sellers received, and
that sellers typically used search engines to do this.
Novation alleged that the top three paid search listings
have “strategic importance,” because “most people ‘click through’ on slots one
through three of search results only.” 
Further, Novation alleged that most sellers get no more than two bids;
relatively few seek three or four. 
(Given the sums of money at stake, it’s interesting that the search is
so limited—each negotiation with a potential provider takes time and effort,
and that short-term cost seems to outweigh the possible long-term benefits,
which are probably unclear at the outset to the consumers.)
In addition, Novation alleged that defendants violated
Google’s internal policies against “double-serving” ads, that is, buying more
than one search result to be shown in response to any given query.  Consumers allegedly believed that they were
getting distinct results, “especially if each APPEARS to be different by virtue
of common visual cues and labels such as trademarked name, brand, phone number,
and logo.”  By coordinating their brands’
bidding, defendants allegedly “consistently grab two and often three of the top
three search listing results on many of the keywords used by consumers
searching for structured settlement buyers.” This behavior “crowds out
competitors and/or drives up the cost of being in second or third position in
any given search ranking, making it more difficult and expensive for Novation
to be found by potential customers looking for genuinely competing offers.”
The court held that Novation failed to allege antitrust
injury because they didn’t allege how the deceptive conduct prevented consumers from clicking on the
third link, e.g., the “” to Annuity that showed in
several exhibits; Novation brought no claims against Annuity.  Since consumers were free to choose whether
to click on an ad, and could also use whatever search terms they wanted, there
was no harm to consumer choice, especially since Novation could use TV ads or
radio to compete.  And other competitors
could and did bid for the top ad positions.
Novation also failed to state a false advertising claim.
There were no literal falsehoods; the only falsity came if a consumer searched
“who competes with Peachtree Financial” or “who competes with JG Wentworth.” The
real argument was that when three ads were displayed for ‘JG Wentworth’ and
‘Peachtree Financial’ and ‘Olive Branch Funding,’ reasonable consumers would
believe that these were separate companies competing to provide the service
advertised.  Though likely confusion is
often a question of fact, it isn’t always so. 
In the keyword advertising context, it turns on what the consumer saw on
the screen and reasonably believed.  The
court found that the ads were clearly labeled as ads and didn’t explicitly
describe the others as competitors.  Even
if reasonable consumers would be aware of Google’s internal advertising policy
(the court’s recitation suggests a hint of skepticism about that), there was no
plausible likelihood of deception “where the relevant reasonable consumer would
exercise a heightened degree of care and precision, where the purchase price of
the transactions range from $5,000 to $1,000,000 (or more),” and the consumer
might even have an advisor.  No
reasonable factfinder could find likely confusion.
Novation Ventures, LLC v. J.G. Wentworth Co., LLC, 2015 WL
12765467,  No. CV 15-00954 (C.D. Cal. Sept.
21, 2015)
Earlier version of the complaint, also dismissed.  Defendants’ failure to disclose common
ownership wasn’t a false statement; simple failure to disclose doesn’t violate
the Lanham Act because not saying anything “is neither ‘false’ nor a
‘representation.’ ”  Nor was it plausible
that the ads were misleading.  Toyota v. Tabari held that internet
consumers “fully expect to find some sites that aren’t what they imagine based
on a glance at the domain name or search engine summary…. [C]onsumers don’t
form any firm expectations … until they’ve seen the landing page—if then.
This is sensible agnosticism, not consumer confusion.” The “ad” label made
deception even less plausible.

Nor did the allegations support a trademark infringement
claim.  Novation argued that defendants’
use of their own marks “ ‘caused confusion,’ ‘mistake,’ and has ‘deceived’
thousands of persons … ‘as to the affiliation, connection, or association’ of
JG Wentworth with ‘Olive Branch Funding’ and ‘Peachtree Financial.’ ”  But that wasn’t a trademark infringement
claim.  Novation suggested that
defendants infringed Novation’s marks by using keyword meta tags.  However, there was no allegation that
defendants’ ads or links “incorporate plaintiff’s marks in any way discernable
to internet users and potential customers.” Thus, no reasonable factfinder
could find a likelihood of confusion here. 

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