Infogroup, Inc. v. DatabaseLLC, --- F.Supp.3d ----, 2015 WL
1499066, No. 8:14–CV–49 (D. Neb. Mar. 30, 2015)
The parties compete in the market for databases about
consumers and businesses. Individual
defendants are all former employees of Infogroup, including Vinod Gupta, the
founder of Infogroup and a former officer and shareholder. “Gupta founded
DatabaseUSA after leaving Infogroup, and there is no love lost between them.” Infogroup’s claims generally covered: (1)
DatabaseUSA’s alleged acquisition of information from Infogroup’s proprietary
database, (2) alleged false advertising regarding the extent to which DatabaseUSA’s
information is “verified,” and (3) alleged false representations suggesting to
potential customers that there is a corporate relationship between
DatabaseUSA’s products and Infogroup.
Infogroup puts false “seed data” into its listings with fake
combinations of name, address, and telephone number. In June 2013, Infogroup
found its November 2011 seed data in DatabaseUSA’s products, and sued on the
theory that the individual defendants had provided DatabaseUSA with
misappropriated data. However, some of
Infogroup’s data is available through search services such as Google; its
business database is available through a reference service provided to
libraries; and it sells data sets to customers, though licensed customers are
prohibited by licensing agreements from providing that data to DatabaseUSA.
Moreover, third parties have been able to “scrape” database information from
publicly-accessible sources and bundle it for resale; information from at least
some of Infogroup’s seed files has turned up in other competitors’ data and on
public search engines. Infogroup also
cast doubt on whether any of the individual defendants could’ve gotten the data
at issue—three of the five were terminated before the November 2011 seed data was
inserte, while another wasn’t hired by DatabaseUSA until after the June 2013
audit that discovered the seed data. None of them “(with the presumable
exception of Gupta, who was out the door by 2008)” had the necessary access to
Infogroup’s database to have “perpetrated a heist.” None of that was conclusive proof of lack of
involvement—there might have been further shenanigans, carried out by a traitor
working with DatabaseUSA while employed by Infogroup or a person who exceeded
authorized access. But there wasn’t evidence of any of that. “[I]t is certain
that information from Infogroup’s proprietary database ended up in
DatabaseUSA’s hands, and it is wholly uncertain how that happened.”
Separately, Infogroup argued that DatabaseUSA falsely
represented its database entries as “verified” and “Triple-Verified.” Infogroup uses “verified” when an Infogroup
employee has confirmed that the information is accurate and current, while
DatabaseUSA’s definition of “verified” was far less clear. DatabaseUSA promotes its “verification process”
as involving “original sources,” telephone verification, and Internet research.
DatabaseUSA displayed some of Infogroup’s seed files as “verified” records.
Infogroup’s argument was simple: “how could DatabaseUSA have ‘verified’ a
fictitious entry?” Infogroup identified other inaccuracies in
supposedly-“verified” entries in DatabaseUSA’s data.
However, DatabaseUSA argued that even the seed files
contained some real information, such as a fictional business at a real address
with a working phone number. Moreover, even “verified” listings will sometimes
be incorrect because of day-to-day changes.
DatabaseUSA presented evidence of the process it used to verify the
accuracy of its listings.
The final category of claims involved allegations that
DatabaseUSA was making misleading statements about its relationship with
Infogroup. For example, a DatabaseUSA
press release said that an employee had “spent eight years at InfoGroup, a
similar reference company that shares the same Founder, Vin Gupta.” There were multiple other references to Gupta
as founder of Infogroup. DatabaseUSA also used AdWords and related programs to
display ads when consumers searched for Infogroup marks. One DatabaseUSA site posted a letter from Bill
Clinton to Gupta, sent in 1998 and addressed to Gupta as the “Chairman and
Chief Executive Officer” of infoUSA. DatabaseUSA ads described DatabaseUSA as
“Serving the Database Industry Since 1972” or “Creators of the Finest Databases
Since 1972,” while in fact Infogroup
was founded in 1972; DatabaseUSA was founded in 2009. In addition, a 60 Minutes segment excerpted on
a DatabaseUSA site and in ads showed Gupta, then CEO of infoUSA, describing the
detailed data that infoUSA had compiled.
The clips played by DatabaseUSA didn’t identify the company, but its ads
made repeated claims to the effect that its databases are “so good, they were
featured on ‘60 Minutes.’”
As evidence of consumer confusion, Infogroup pointed to
several incidents: one ad sent to an Infogroup customer caused the recipient to
contact Infogroup asking if Infogroup and DatabaseUSA were the same company. Two
consumers called Infogroup asking about an advertising special that was being
offered by infofree.com, a DatabaseUSA site.
A customer question posted at infofree.com’s customer support portal
asked, “You are not part of Sales Genie are you?” An agent replied, “Yes, that
is correct. Vin Gupta was the founder of InfoUSA (Sales Genie), but sold it and
is not the CEO of infofree.com which is a separate company.” An Infogroup customer sent an email to an
Infogroup account executive asking for a copy of a particular invoice, but when
the account executive replied that no such invoice existed, the customer
replied, “You are info free correct?” In a telephone call from a consumer to
Infogroup, the consumer said that he had been told (by whom is unclear) that
“the Database USA company was the one that has been around forever.” Another
customer had been exchanging emails with a DatabaseUSA sales manager for
several months regarding a purchase. When an email wasn’t replied to for a
couple of days, the customer emailed an Infogroup employee he had apparently
also been in contact with to ask about it, implying that he believed the two worked
for the same company, though the DatabaseUSA sales manager promptly replied to
the second email and explained that the two worked at separate companies.
First, the court found that Infogroup hadn’t shown likely
success on the merits sufficient to get a preliminary injunction, due in part
to Infogroup’s failure to show harm, much less irreparable harm. As for the trade secret claim, Infogroup
didn’t want DatabaseUSA to scrub its database of the existing seed files, but
to refrain from obtaining its data going forward using webscraping. It wasn’t
clear to the court that the identified conduct actually violated the Nebraska
Trade Secrets Act, in that it wasn’t clear that the information at issue was a
trade secret or that this conduct constituted misappropriation.
Second, on the false advertising claim, the court ran
through the usual rules, pausing to note that it thought that materiality could
not be presumed from literal falsity. “There is a difference between whether a
consumer is likely to be deceived by a falsehood, and whether that deception
makes a difference to the consumer. … [T]here is good reason to presume that a
literally false statement has a tendency to deceive. That does not mean the
deception made a difference, so there is no basis to also relieve the plaintiff
of the materiality element of its prima facie case.”
First, the court found that “verified” wasn’t shown to be
literally false, since DatabaseUSA produced substantially uncontested evidence
that it did have a verification process.
Infogroup’s theory that DatabaseUSA’s process wasn’t good enough to
warrant use of “verified,” or that DatabaseUSA described records as “verified”
that haven’t been through its verification process, but the context indicated
that there was no implication of perfect accuracy. One representative ad touted
its “95% Accurate, Triple–Verified Database....” Thus, Infogroup’s limited
evidence of inaccuracy didn’t do enough to prove that DatabaseUSA’s data wasn’t
generally “verified.”
At worst, DatabaseUSA’s claims were puffery. “Whether a
database entry is ‘verified’ is not (as the parties’ disagreements here
demonstrate) a specific, measurable attribute.” Plus, the parties primarily
marketed to other sales professionals, who were unlikely to be confused. “No reasonable buyer of such services would
expect verification to be foolproof.”
And even if the “verified” claim was misleading, there was
no evidence that anyone was misled. There was no consumer reaction evidence or
evidence of intentional deception. Furthermore,
Infogroup didn’t show injury from the “verified” claim. Under Lexmark,
this might even deprive it of standing. Without harm, there could of course be
no irreparable harm.
Infogroup’s final claim for a preliminary injunction rested
on its allegations that DatabaseUSA falsely described the relationship between
the companies. The court first analyzed
this as a false association claim. “[T]he
degree of similarity is not a relevant criterion, because only Infogroup’s
marks are at issue—Infogroup’s theory is that DatabaseUSA is using Infogroup’s
marks in a manner that could confuse the public.” Thus, the facts didn’t fit
neatly into the multifactor test; courts evaluating similar situations have
used nominative fair use. The court mistakenly
treated the Ninth Circuit’s New Kids
test as being restated by the Third Circuit’s Century 21 test: “In other words, the defendant’s conduct or
language must reflect the true and accurate relationship between plaintiff and
defendant’s products or services.” Though the Eighth Circuit hasn’t formally
adopted the test, “the broad parameters of the doctrine are consistent.”
Here, Gupta’s identification as being the founder of
Infogroup and its associated entities was accurate. He was entitled to
accurately describe his experience in the industry. Likewise, he was entitled
to display the genuine letter from President Clinton, clearly dated 1998. “The obvious purpose of publicizing it is to
suggest that Gupta is an important person, not that he is still associated with
Infogroup. It happened, and Gupta is entitled to say so.”
The court cautioned that “some of Gupta’s descriptions come
very close to the line,” but they were sufficiently accurate to avoid a
preliminary injunction, especially what Infogroup sought: a ban on any
marketing materials “to the effect that Gupta founded InfoUSA, or any Infogroup
company.” Gupta should “strongly
consider avoiding the word ‘proprietor,’ as opposed to ‘founder,’ and may want
to think about confining himself to relatively unambiguous phrases such as
‘founder and former CEO.’ The fact that Infogroup’s motion for preliminary
injunction is denied does not mean this case is over.”
Infogroup also failed to show sufficient actual
confusion. Its confusion evidence was
“anecdotal at best,” and the best evidence of confusion tied to any of Gupta’s
representations was the letter that led an Infogroup customer to call Infogroup
and ask about the mailing. But the precise nature of the customer’s inquiry wasn’t
reflected in the record, and the fact that the customer called to ask
“indicates a distinction in the mind of the questioner, rather than confusion.”
The court found the other evidence “to be de minimis and to
show inattentiveness on the part of the caller or sender rather than actual
confusion.” The businesses were similar, “and the prefixes ‘info-’ and ‘data-’
have similar connotations and can only be conjoined in so many ways.” The court
somewhat acidly concluded:
To be candid, it would be
surprising if someone hadn’t confused them at some point, particularly when at
least some customers apparently use both businesses. Ask enough people and you
could probably find someone who thought infofree.com and Infowars.com were
somehow associated.
As for the keyword ads, nope. “Although the use of such targeted
advertising can be misused, it is generally understood that such tactics can be
deployed consistently with the Lanham Act.” The ads at issue didn’t use
Infogroup’s marks, and were either separated from search results or plainly
labeled as sponsored ads. Eric Goldman will be pleased to note that the court is quite brisk and matter-of-fact in dealing with this argument, supporting the idea that this kind of liability has been mostly put to rest.
As for the “60 Minutes” references and the “since 1972” claim,
they didn’t make direct reference to Infogroup and thus couldn’t support a
false association claim. They could
maybe be false ads, but Infogroup didn’t ask for an injunction on that ground.
“That said, there’s an argument to be made that they’re misleading, so
DatabaseUSA would be well advised to knock it off.” (Yep, except I’d say “literally false” rather
than “misleading.”)
Infogroup argued that implying a connection between the
parties also constitued false advertising.
(Why anyone would subject themselves to the more stringent standards
courts have made up for §43(a)(1)(B) over the relaxed requirements for
§43(a)(1)(A) if they had a choice is a mystery to me.) “But, although the factors are phrased
differently, the Court’s reasoning with respect to Infogroup’s false
association theory is equally dispositive of its false advertising theory.”
Lack of likely confusion translates to lack of a tendency to deceive, and
without evidence of confusion there was also no persuasive evidence of injury.
The court then rejected Infogroup’s motion to dismiss two of
DatabaseUSA’s counterclaims, tortious interference and unjust enrichment. Infogroup
argued that DatabaseUSA failed to identify any prospective customers who
reviewed Infogroup’s allegedly false statements and declined to do business
with DatabaseUSA. DatabaseUSA did plead that
agents of Infogroup left false reviews on DatabaseUSA’s Web sites for the
purpose of harming its reputation. Many courts wouldn’t find that enough
without identifying particular lost consumers who were reasonably likely to
transact with DatabaseUSA, but this court did find the allegations sufficient
because the case is at the pleading stage.
Likewise, Nebraska’s concept of unjust enrichment was
flexible enough to cover situations in which the defendant’s wrongful gain
wasn’t previously possessed by the plaintiff. Under the Restatement (Third),
followed by Nebraska, “[a] person who obtains a benefit by conscious
interference with a claimant’s legally protected interests (or in consequence
of such interference by another) is liable in restitution as necessary to
prevent unjust enrichment” and thus DatabaseUSA adequately stated a claim under
Nebraska law.
Final note: The parties submitted a lot of their stuff under
seal, and the court relied on it. Given the strong presumption of public
access, the court determined to provisionally restrict access and then lift it
on April 3 in the absence of a persuasive objection; none apparently having
been received, the opinion was then released.
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