Spy Phone v. spy phone: Google loses motion to dismiss TM and other claims

Spy Phone Labs LLC. v. Google Inc., No. 15-cv-03756, 2016 WL 6025469 (N.D. Cal. Oct. 14, 2016)

The plaintiff here, an app maker with a registered mark for Spy Phone for a monitoring app, squeaks past dismissal of its trademark secondary liability claim, and gets a win on §230(c)(2)(A) by alleging that Google acted in bad faith—another for Eric Goldman’s tally.  Spy Phone offers its free app on Google’s Play Store and generates revenue through AdSense ads on its website.

Spy Phone alleged that, between November 2012 and May 2013, it discovered other monitoring apps that used or incorporated the “Spy Phone” trademark.  It submitted trademark infringement complaints to the Google Play Team, and Google removed the apps.  But in May 2013, Google delayed removal for 27 days, and then Spy Phone received an email from the developer of the challenged “Spy Phone App” complaining about the removal.  At that point, Google allegedly began retaliating against Spy Phone, taking actions orchestrated by the developer and the Google Play Team. [I imagine the developer is thrilled to learn of its power over Google.]

In June 2013, Spy Phone submitted a trademark infringement complaint regarding the “Reptilicus.net Brutal Spy Phone” app. Google took no action, responding that: “Google is not in a position to mediate trademark disputes between developers and trademark owners. As a courtesy we have considered your claim, but are unable to determine its merits at this time.”  Later that month, Google removed Spy Phone’s app on the ground that it violated Google’s anti-spyware policy, even though Spy Phone alleges its app was in full compliance with Google’s Developer Distribution Agreement.  Spy Phone alleged its belief that the complaint that triggered the removal was submitted by the angry developer, the Google Play Team, or a Doe defendant in retaliation for Spy Phone’s trademark infringement complaints.

After Spy Phone sued, Google clarified that the app itself did not violate the anti-spyware policy, but that the app title was in violation because “[a]pp titles should not be misleading or represent the product as being spyware and/or capable of surreptitious tracking.” Spy Phone’s counsel pointed out that other monitoring apps contained the word “spy” in the title, and Google responded that it intended to prohibit all developers from using the word “spy.” In October, Google reinstated Spy Phone’s developer account, but deleted all of the consumer reviews and records for the original “Spy Phone” app.

Spy Phone relaunched its app as “Phone Tracker,” but got many fewer downloads and lost much advertising revenue.  Other apps allegedly continued using “spy” in their titles.  Thus, beginning in January 2014, Spy Phone began submitting complaints about apps using the word “spy” in their title, asserting violations of the anti-spyware policy. Google allegedly removed only some of these apps, and many of the apps that were removed were re-listed afterwards.  In July 2014, Spy Phone complained about a monitoring app developed by that same angry developer, and then Google suspended Spy Phone’s developer account and removed its app for violating Google’s spam policy. Again, Spy Phone alleged its belief the removal was based on a complaint submitted by the angry developer, a Google Play Team member, and/or a Doe defendant. Spy Phone still filed complaints against other monitoring apps to test whether the anti-spam policy was being applied uniformly, but alleged that none of these apps were removed.  “A month after having its developer account terminated, Plaintiff received a letter from a ‘Concerned Google Play Member,’ which ‘confirmed Plaintiff’s belief’ that Plaintiff was being singled out for submitting trademark infringement complaints.”  After Spy Phone sued, Google removed an app that Spy Phone identified as an infringing app, and also removed at least five apps that infringed without Spy Phone’s specific request.

Contributory trademark infringement: Previously, Judge Grewal dismissed this claim because Spy Phone had not alleged Google had notice of the specific acts of infringement because Spy Phone made spyware complaints instead of trademark complaints.  For the Reptilicus.net Brutal Spy Phone complaint, Google didn’t ignore the trademark complaint but investigated and found that it could not assess the merits of the claim.  Because “Spy Phone” could have been a descriptor, Google didn’t have actual notice. 

Here, Spy Phone argued that Google failed to act promptly to suspend services to known infringers, citing (1) the 27 days it took Google to remove “Spy Phone App” after Plaintiff filed a trademark complaint on May 17, 2013, and (2) the 18 days it took Google to remove an infringing app identified in Plaintiff’s First Amended Complaint on January 23, 2015.  This allegation wasn’t addressed by the previous order.  Cases have found action within three days to be sufficient to avoid liability, but six to nine months of delay have been found sufficient to allege contributory copyright infringement.  Here, the court found that “whether this delay is actionable cannot be decided at the pleading stage.” 

However, the court rejected Spy Phone’s disagreement with Judge Grewal about the Reptilicus.net app.  Mere assertion by a trademark owner that a domain name infringes isn’t sufficient to impute knowledge of infringement, without more knowledge of the relevant goods and services; so too here.  Spy Phone didn’t allege that Google knew the Reptilicus.net app was a parental monitoring app or make factual allegations regarding the likelihood of confusion factors.

Spy Phone also alleged willful blindness to ongoing infringement. “Plaintiff is essentially alleging that Google had a duty to preemptively remove apps that infringed on Plaintiff’s trademark, on the basis that it has alleged that the Google Play Team is a small group who was put on notice that Plaintiff possessed the ‘Spy Phone’ trademark.” Spy Phone also alleged that Google had engaged in human review to ensure compliance with the Google Play’s Developer Program Policies, which meant that “Google knew the names of all infringing apps before they were listed on Google Play.” That wasn’t enough; at most, it was generalized knowledge insufficient to impute actionable knowledge without something more.  Spy Phone argued that Google was like a flea market operator who has been put on notice that a particular vendor is selling counterfeit goods, but continues to allow that vendor to sell counterfeit goods. “Not so. Plaintiff seeks to require the flea market operator not to just police specific vendors who it has been put on notice of selling counterfeit goods, but to also preemptively check over the goods of every vendor to ensure they are not also selling counterfeit goods. This is the type of generalized notice that Tiffany rejected.”

However, Spy Phone did allege a claim as to apps from developers that Plaintiff had previously reported to have infringed on its trademark, such as the defendant angry developer. Thus, the motion to dismiss was denied.

State claims and the CDA, section 230(c)(2)(A) (immunity for good faith removals): Spy Phone argued that Google was an information content provider (of the source code that enables apps to use Android), not an interactive computer service. Opperman v. Path, Inc., 84 F. Supp. 3d 962, 987 (N.D. Cal. 2015), found that Apple was an information content provider because it controlled the development of the apps that were being challenged. But “development” means material contribution to the alleged unlawfulness, and providing neutral tools isn’t “development.”  Opperman involved Apple’s “iOS Human Interface Guidelines,” which included “several suggestions that do, on their face, appear to encourage the practices Plaintiffs complain of in this case.” Not here.

However, the court found that it couldn’t resolve the issue of whether Google acted in good faith at the motion to dismiss stage.  Google argued that selective enforcement of its spyware polic was not actionable. But Spy Phone argued that Google’s claim that Plaintiff’s app violated the spyware policy was entirely pretextual. Google would have to return to § 230(c)(2)(A) on summary judgment.

Tortious interference with contract: Spy Phone relied on its contract with Google through AdSense.  Google can’t interfere with its own contract, even when the allegedly tortious actions are committed by a different department (the Google Play Team).  Dismissed with prejudice.

Breach of contract and the covenant of good faith and fair dealing: “[t]he general rule regarding the covenant of good faith is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing.” Google’s developer agreement says it has the right to take down content that, among other things, “is deemed by Google to have a virus or is deemed to be malware, spyware or have an adverse impact on Google’s or an Authorized Carrier’s network …. Google reserves the right to suspend and/or bar any Developer from the Market at its sole discretion.” But Spy Phone alleged that Google failed to exercise this right in good faith and that Google didn’t actually find the app in violation of the anti-spyware policy (as no such policy allegedly exists).  Thus this claim survived.

Tortious interference with prospective economic advantage: Google argued that its developer agreement precluded recovery for consequential and lost profits damages. Spy Phone argued that this section was unconscionable or should be interpreted as applying only to good faith acts.  Though the contract might be procedurally unconscionable, Spy Phone didn’t explain why the limitation on liability provision was substantively unconscionable.  These provisions “have long been recognized valid in California” and “are particularly appropriate where, as here, one party is offering a service for free.” However, the limitation of liability provision couldn’t be applied to intentional wrongs.  Motion to dismiss denied.

The coordinate California UCL claims based on the above also survived.  However, the court declined to allow Spy Phone to add a new claim for false advertising under the Lanham Act and California’s False Advertising Law. Spy Phone wanted to argue that when Google AdWords sold the keywords “Spy Phone” to other developers, Google was engaging in false advertising because Google had previously told Plaintiff that the term “spy” was misleading as it deceives people into thinking that such apps are spyware and/or capable of surreptitiously monitoring data.  Thus, allowing others to buy priority placement in response to a search for those keywords put Spy Phone at a competitive disadvantage by falsely suggesting that the competing app associated with the keywords “Spy Phone” was “capable of surreptitious tracking.”

But Spy Phone’s allegations of falsity were too clever by half; it alleged that Google had no reason to believe its own statement that use of “spy” is misleading.  Also, Spy Phone didn’t allege facts that would establish materiality or injury caused by the allegedly false statement that the apps shown in response to the search would allow surreptitious monitoring. “In fact, the only ad listed above Plaintiff’s app when using the ‘Spy Phone’ keyword search is an app that is clearly labeled as the ‘Best Parental Control App,’ the same function as Plaintiff’s app.” Amendment to allow the false advertising claim would be futile.