Faegin v. LivingSocial, Inc., 2015 WL 1198654, No. 14cv00418
(S.D. Cal. Mar. 16, 2015)
After
losing its attempt to mandate arbitration, LivingSocial gets a terrible
§230 ruling in this trademark infringement etc. case involving vouchers it
sold.
The plaintiffs were joint owners of A.T. Your Service
Cleaning and Janitorial. LivingSocial is a “‘strategic business marketing
partner, creating online promotions,’ in other words, a marketplace that
partners with vendors to advertise and offer deals and discounts to potential
customers.” The other defendants owned At Your Service Housekeeping, a
competing service also operating in San Diego County. From March through April
2012, plaintiffs partnered with LivingSocial to advertise A.T. Your Service in
San Diego County. Then in May to July
2012, the At Your Service defendants partnered with LivingSocial to do the same
thing. They allegedly failed almost
uniformly to honor vouchers bought on LivingSocial’s website, and consumers
were confused about the two services, at least in part because the vouchers
failed to contain a phone number for At Your Service, and consumers searched
for the phone numbers online and found A.T. Your Service. This allegedly led to
“unwarranted negative reviews of Plaintiffs’ services on popular review
websites such as Yelp, Google+, Facebook, etc.”
The complaint asserted trademark infringement, false
advertising, and unfair business practices (as well as a fraud claim against
the non-LivingSocial defendants).
LivingSocial moved to dismiss all claims against it.
LivingSocial claimed CDA immunity, reasoning that it wasn’t
alleged to have played any role in the codefendants’ adoption and use of the
name. Since none of the claims would
exist without the name, LivingSocial reasoned, that ended the CDA
analysis. Under Roommates, “so long as a third party willingly provides the
essential published content, the interactive service provider receives full
immunity regardless of the specific editing or selection process.” The
complaint alleged that the codefendants partnered to sell vouchers, and that
“[t]he vouchers sold by defendant LivingSocial failed to contain a phone number
for At Your Service [Housekeeping], causing customers to search for the phone
number online and to confuse and associate Plaintiffs with At Your Service.” Because
of the prior partnership, the complaint further alleged, LivingSocial knew
about the resulting “dilution,” and profited from the vouchers; it also
“permitted 30 days to pass without providing the services ordered.”
Eric Goldman is going to hate
this:
Based on the allegations of the
FAC, the Court cannot conclude that Defendant LivingSocial is entitled to
immunity as an “interactive computer service” that is not an “information
content provider.” The FAC alleges that Defendant LivingSocial advertises and
sells the allegedly misleading vouchers. From this allegation, the Court is
able to draw the “reasonable inference” that Defendant LivingSocial was
“‘responsible, in whole or in part’ for creating or developing” the content
made available on LivingSocial’s website.
I’m not as militant as Eric is on this point, but this
strikes me as entirely wrong. Amazon
advertises and sells lots of books. It is not reasonable to infer that it was
responsible in whole or in part for creating and developing the content
therein. We know, under Roommates, that providing guidelines for
content is not enough to make a defendant a content provider, if the actual
content provider can still choose between legal and illegal content. How then could it possibly be reasonable to
infer that it is more likely than not, per Twiqbal,
that LivingSocial bore responsibility for creating or developing the unlawful content
from the allegation of advertising and sale of vouchers for third-party
services? The court even quoted the
right standard: selection or editing rules don’t strip a provider of §230
immunity. It seems much more plausible
that LivingSocial applied selection or editing rules than that it wrote the
unlawful content (or that it barred
the other provider from including its telephone number, triggering the resulting
confusion).
LivingSocial then argued that §1114(2)(B) of the Lanham Act
required that federal claims against it be dismissed to the extent they sought
anything but injunctive relief, since it provided advertising services for the
codefendants’ company and was therefore entitled to the publisher’s safe
harbor. Moreover, any request for injunctive relief was moot because
“LivingSocial stopped running co-Defendants’ advertisement in July 2013 and the
co-Defendants’ website and business is defunct.”
Plaintiffs argued that LivingSocial wasn’t an innocent
infringer and therefore couldn’t qualify for a safe harbor: it was aware of
A.T. Your Service Cleaning and Janitorial’s existence through the parties own
business relationship beginning in early 2012. Under §1114(2)(B):
Where the infringement or violation
complained of is contained in or is part of paid advertising matter in a
newspaper, magazine, or other similar periodical or in an electronic
communication …, the remedies of the owner of the right infringed or person
bringing the action under section 1125(a) of this title as against the
publisher or distributor of such newspaper, magazine, or other similar
periodical or electronic communication shall be limited to an injunction
against the presentation of such advertising matter in future issues of such
newspapers, magazines, or other similar periodicals or in future transmissions
of such electronic communications. The limitations of this subparagraph shall
apply only to innocent infringers and innocent violators.
Because the complaint alleged knowing infringement based on
the prior relationship, LivingSocial wasn’t entitled to safe harbor protection.
Similarly, the claim for willful trademark dilution under
state law survived, even though LivingSocial argued that the complaint only
alleged that LivingSocial “knew or should have known that the business names
were similar and that its advertisements would cause dilution of the famous
mark,” a “threadbare recital” of the elements.
Given the prior relationship, the court found that the allegations were
sufficient to infer willful infringement.
Comment: I don’t get how knowledge or constructive knowledge became
willful intent to dilute—what’s the
motive on LivingSocial’s part that justifies that further inference, as opposed
to indifference? Also, the court’s
failure to distinguish infringement from dilution hampers it here: intent to infringe
(confuse consumers) is different from intent to dilute (whatever that is).
Although the court called dilution “infringement,” it
correctly recognized that plaintiffs hadn’t plausibly pled federal fame.
Plaintiffs argued that any such determination was premature, because they
alleged that they’d advertised A.T. Your Service on numerous websites and that
the service had been recognized on consumer review websites such as Yelp,
Google +, and Facebook. The complaint
further alleged that the advertising partnership with LivingSocial helped make
A.T. Your Service’s mark famous and distinguished. But federal fame requires
that the plaintiff be a “household name,” and the complaint failed to allege
facts demonstrating that A.T. Your Service was “widely recognized by the general
consuming public of the United States.”
The UCL claim survived because of the other alleged legal
violations.
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