Monday, August 17, 2015

No winner in Cablevision v. Verizon

Cablevision Systems Corp. v. Verizon New York Inc., --- F.Supp.3d ----, 2015 WL 4758072, No. 15–CV–456 (E.D.N.Y. Aug. 7, 2015) (magistrate judge)
Cablevision and Verizon sought to enjoin each other’s comparative ads; the court denied both cross-motions for preliminary injunction. 
Verizon’s top three tiers, 150/150 upload/download Mbps, 300/300 Mbps, and 500/500 Mbps, all provide faster download speeds than Cablevision’s fastest plan, and all five FiOS plans offer faster upload speeds than any of Cablevision’s offerings, though a very small proportion of Verizon customers subscribe to the top three speed plans.  The customer’s router constrains wireless internet speed, like the nozzle on the end of a garden hose.  Verizon offers, at additional cost, the FiOS Quantum Gateway router, which can support “throughput” speeds up to the fastest FiOS tier (500/500Mbps). Thus, it advertises that FiOS provides the “fastest WiFi available from any provider.”
Initially, it predicated its claim on a 2014 router study that tested the FiOS router against another of other competing devices, but “notably” not Cablevision’s router.  In a second study, Verizon’s router outperformed Cablevision, “though in certain instances by a narrow margin.”  However, comparative router speed, standing alone, had little meaning.  After the second study, Verizon continued to advertise “Fastest WiFi,” but based the claim on “Verizon’s combination of the FiOS 500/500 Mbps Internet service tier with the FiOS Quantum Gateway router.”
FiOS did offer a faster connection once the router was connected, especially with its more expensive plans.  Cablevision contended that WiFi speed, technically speaking, “is the speed of that communication from a router to a device such as a laptop or tablet.” But internet connection “is a common, if not preeminent, WiFi application,” and may be used as a shortcut not only refer to the WiFi itself but also to a wired connection to the internet accessed via WiFi.  Verizon rejoined that consumers understand the term primarily in the context of a wireless connection to the internet, with evidence that included Cablevision’s own FAQ.
The judge found that, regardless of the technical definition, consumers commonly understand WiFi to mean a wireless connection to the internet. “[C]onsumers paying for WiFi are likely to be more concerned with the speed provided by their Internet Service Provider, which permits them to download music, movies, games and the like, rather than the theoretical capability of the supplied router under laboratory conditions.”  Thus, there was no likely success on the merits at this stage. 
Cablevision argued that Verizon’s earlier use of a router study to support its claims meant that Verizon had picked its definition of router speed and couldn’t change that definition in subsequent ads.  But the court saw these ads as distinct from the older ads, and Verizon had discontiuned the ads with an “erroneous” definition of speed, making relief as to them moot.
Meanwhile, Cablevision promoted that it offers subscribers access to a network of “1.1 million hotspots.” What this meant was 65,000 outdoor public routers, about 100,000 routers located in small and medium businesses, and roughly 1 million routers located in the homes of its residential customers. Each “smart” router installed by Cablevision includes a second channel—a “dual SSID”—which provides a public access point for all Cablevision customers, unless it’s disabled. These routers provide WiFi service at distances of 135’ or more.

Verizon argued that these hotspots weren’t truly public, because they came from private homes, and numerous ads suggested that they were in public places.  Cablevision’s website contained a claim that it maintained hotspots at “1 million public locations like train stations, restaurants, cafes and parks,” which would clearly be misleading.  Cablevision agreed to discontinue making this claim, absent a change of circumstances, “which change would presumably involve the construction of 900,000 or so hotspots in public locations.”
Cablevision also claimed to offer a “better data network” than Verizon, and stated that Verizon “two-times” it customers by charging for cellular data usage from customers that have already paid for WiFi access at home. It was undisputed that, when connected to WiFi, mobile devices can access data faster than when connected via cellular towers. But it was also beyond dispute that Verizon’s cellular towers provided far broader geographic coverage than Cablevision’s WiFi network. And Verizon did impose separate data charges on its customers, under certain circumstances, for data obtained via cellular towers.
In addition, Cablevision recently launched the Freewheel, an all-WiFi communication device. Freewheel is a Motorola Moto–G model smartphone configured to function only using WiFi connections rather than traditional cellular telephone towers. This is a relatively low-cost mobile device that can, where WiFi is available, make and receive phone calls, text and surf the Internet.  Verizon argued that references to the device as a “phone” and comparisons to cellphones and smartphones were misleading. Internal Cablevision marketing research—focus group studies of preliminary Freewheel ads—suggested that certain viewers could be confused about the nature of the device and the extent of the “coverage” of the Cablevision WiFi network.
The court turned to images to show the “gestalt” of the ads, which characterized Freewheel “as something new and different from a cellular phone.”

Cablevision argued that Verizon delayed too long to get a preliminary injunction.  The judge agreed that Verizon’s “inordinate” delay of more than six months as to all the non-Freewheel ads weighed “heavily” against a finding of irreparable harm.
1.1 million hotspots: Verizon argued literal falsity based on Cablevision’s failure to disclose that 87% of the hotspots emanate from residential locations.  But the ability to use the WiFi at distances of 135′ or more meant that “signals from residential routers can be accessed from the street or sidewalk,” which are public places.  Thus the judge found neither express nor implicit falsity.
“Better data network”: “better” did not necessarily mean geographic coverage.  A WiFi-connected consumer would get faster downloads than she’d get from a cell tower.  The multiplicity of meanings made “better” puffery.
Freewheel: Verizon argued that, to the extent that Cablevision called the Freewheel a “phone” or “smartphone,” those statements were literally false.  However, the Freewheel actually was a “Motorola Moto–G model smartphone.” The fact that it was configured only to work on WiFi didn’t change its “essence” as a telephone, just as “phone” can mean cell phones, “historical” (ouch!) landline telephones or cordless handsets. So there was no literal falsity.
The main argument was that consumers would think they were getting cellular phone service from the Freewheel.  This was an implied falsehood claim, though, and Verizon didn’t have evidence of deception.  (Claims that Freewheel was “better than cellular” were mere puffery.)  The Cablevision focus groups weren’t enough, even though the company conducting the work for Cablevision warned that “[c]omparisons to cellular in messaging exposed during the groups helped create the perception that Freewheel service (including talk/text) will be ubiquitous given respondents’ near universal coverage experience with cell service for talk/text/data[.]”  While focus group information isn’t always reliable, especially when it favors the party who conducted it, the judge didn’t need to decide here because the ads shown to the focus groups were preliminary drafts, to which substantial changes were made. 

Those changes included specific qualifications of the text to make clear that “it’s a WiFi phone” rather than a “cell phone,” and a checklist indicating people for whom the phone might be appropriate.  Thus, the focus groups didn’t show that the ads actually run were deceptive.

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