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, 2020)

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 website.

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 clients.

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 materialized.

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.