website traffic quality assessment isn’t advertising, or defamatory as to site

Young Hollywood LLC v.
White Ops, Inc., No. CV 20-03334 PA (RAOx), 2020 WL 6162795 (C.D. Cal. Aug. 6,

Plaintiff is a
“publisher and distributor of exclusive, premium celebrity and lifestyle
content.” Its revenue comes exclusively from advertising and licensing content.
It worked with Telaria to sell ads and Prodege to advertise/drive traffic.
Prodege is an online marketing company that uses “incentivized” or “rewarded”
traffic in exchange for viewing ads in order to drive traffic to a client’s

Defendant White Ops
is a “cybersecurity company that claims to provide fraud detection services.” It
offers “MediaGuard pre-bid prevention,” which is a “ ‘pre-bid filter’ intended
to prevent fraud before [a] publisher’s [like Plaintiff’s] advertising
inventory is offered to advertisers for bidding.” The pre-bid filter “evaluates
every request for a bid and blocks fraudulent website traffic – known as
invalid traffic or IVT – from being seen or offered to advertisers.” White Ops
then publishes a “ ‘taxonomy’ list that categorizes [what Defendant] considers
to be IVT.” It allegedly maintains a domain blacklist, and distributes that to

Telaria became a
White Ops client, and then Prodege did. After that, White Ops allegedly “began
classifying a significant portion of [Plaintiff’s] traffic as [invalid] and
[began] blocking [Plaintiff’s] inventory from Telaria’s exchange.” Young
Hollywood “learned Telaria was rejecting [65-70%] of [Plaintiff’s] advertising
due to [Defendant’s] pre-bid filter,” meaning that [65-70%] of the advertising
opportunities [Plaintiff] sought to sell were not being shown to advertisers.” Young
Hollywood’s sites were also allegedly placed on the White Ops blacklist, and
White Ops allegedly blocked 99% of its traffic, even though its algorithms
couldn’t distinguish between “invalid traffic” and “incentivized” or “rewarded”
traffic such as the traffic Prodege brought. Young Hollywood allegedly lost its
main source of income as a result, and suffered harm to its reputation as a
digital media provider.”

When Young Hollywood
tried to fix the problem, White Ops allegedly “made it clear that becoming a
client of [Defendant] is what it would take to resolve [Plaintiff’s] problem.” In
2020, the president/cofounder of White Ops allegedly acknowledged that its
updated algorithm could not differentiate between incentivized traffic and IVT,
which was likely the reason White Ops was flagging Young Hollywood’s
inventory.” Although he allegedly promised a technical solution, none

White Ops allegedly
falsely labeled Young Hollywood’s advertising space offerings as invalid in
reports disseminated to all of its clients,” including divisions of AT&T
and Verizon. Telaria allegedly “ended its over a decade long relationship with
[Plaintiff] after it was unsuccessful in helping remove [Defendant’s] blocks,” causing
a “direct loss of millions of dollars in advertising revenue.”

Young Hollywood sued
for (1) defamation, (2) trade libel, (3) product disparagement, (4) unfair
competition, (5) intentional interference with prospective economic advantage,
(6) negligent interference with prospective economic advantage, and (7)
negligence. The court granted a partial motion to dismiss.

Defamation: the
statements at issue didn’t call into question Young Hollywood’s “honesty,
integrity or competence,” as required for defamation.  The statements were about the quality of the
traffic to its site, not about its site itself or even whether Young Hollywood
knew about the supposed problems.

Lanham Act false
advertising: The court wrongly applied a competition requirement as an element
of whether the statements at issue were commercial advertising or promotion.
But it’s harmless error because the court also pointed out that the alleged
statements “were made to existing customers of Defendant, not to induce new
customers to purchase Defendant’s goods or services.” Such “private
communications to already existing customers of Defendant” weren’t advertising
[though I note it could be if it served customer retention purposes; still,
just listing Young Hollywood’s sites in itself isn’t obviously done to keep
customers buying.

from Blogger

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