Tuesday, February 15, 2022

Failure to show injury dooms ROP/endorsement claim, unusually

Troubleshooter Network, Inc. v. HomeAdvisor, Inc., 2021 WL 6881640, No. 18-cv-2362-WJM-STV (D. Colo. Nov. 24, 2021)

A rare case finding no violation of the right of publicity or trademark law from an allegedly false endorsement based on lack of harm. Benefit to the defendant, the court says, is not itself harm to the plaintiff—see also this recent Note on trademark standing by my former student Lauren Bilow.

Thomas Martino “is a Colorado talk radio host and online consumer advocate who is known as ‘The Troubleshooter.’” Troubleshooter Network runs a referral list website, www.referrallist.com, which offers referral services for various business and also promotes Martino. “Businesses pay membership fees to be reviewed or endorsed by Martino and to be placed on Tom Martino’s Referral List…. Businesses who wish to use the Tom Martino name or the Tom Martino’s Referral List mark in their advertising must pay a fee and be vetted and authorized by Plaintiffs.”

HomeAdvisor “matches consumers’ home improvement service requests to service professionals who are members of HomeAdvisor’s national network.” HomeAdvisor’s services are free to consumers, but service providers must pay for a membership subscription and pay “lead fees” when they receive customer contact information relating to a service request.

HomeAdvisor bid on “tom martino referral list” as a keyword (note: fine!). It also ran “some” search engine advertising which displayed “tom martino referral list.” (Note: not recommended!)  “As a result, on at least 1,524 occasions, individuals searching for Tom Martino or his Referral List were presented with ads that linked to HomeAdvisor’s website. Individuals clicked on the ads and were routed to HomeAdvisor’s website at least 663 times.” [Quite a clickthrough rate if those numbers are roughly accurate in the same magnitude!] “Over 60 individuals who clicked on HomeAdvisor’s ad containing Martino’s name completed service requests with HomeAdvisor and HomeAdvisor generated a ‘net result’ (after refunds) of $2,946.52 from selling other service requests as leads to service providers.” [As Eric Goldman notes, this may be a value-negative lawsuit regardless of recovery.]

Evidence of confusion: An executive producer declared that she received “numerous calls inquiring about certain about certain members of ReferralList.com that they heard advertising during the radio show”; however, “when they searched for the Referral List and Tom Martino, they were directed to a website with a search box on the front page,” and they could not find the business they had just heard advertised. Also, she received a call from an elderly gentleman who believed he had received a roofer referral from ReferralList.com, but had actually received a referral from HomeAdvisor.com. A VP also declared that he received more than a dozen calls complaining that merchants, contractors, or service professionals were not listed on ReferralList.com, as advertised.

Right of publicity: Under Colorado law, the elements are: (1) the defendant used the plaintiff’s name or likeness without consent; (2) the use of the plaintiff’s name or likeness was for the defendant’s own purposes or benefit, commercially or otherwise; (3) the plaintiff suffered damages; and (4) the defendant caused the damages incurred.

Plaintiffs alleged three types of injury (1) sales diversion, (2) negative publicity from false association with HomeAdvisor, and (3) failure to pay for the value of the endorsement.

Consumer/revenue diversion: Plaintiffs couldn’t identify specific lost business. The court agreed that, because the parties’ services were both free to consumers, the fact that some searchers clicked on HomeAdvisor’s ad and then used its website didn’t show that revenue was diverted from plaintiffs. Plaintiffs earn revenue through monthly membership fees paid by businesses who want to be vetted and/or endorsed by Martino, not through lead fees. Because plaintiffs don’t earn revenue from consumers who use services from a Martino-endorsed company, the fact that HomeAdvisor made over $2900 from selling leads didn’t show that any revenue was diverted from plaintiffs. Plaintiffs didn’t show, for example, that any members ended their agreements with plaintiffs as a result, or any service providers declined to sign on with Referral List because of HomeAdvisor’s ads. (Plaintiffs did provide testimony about one professional who threatened to end his relationship if they didn’t “do something” about the deceptive advertising; their witness indicated that the professional did continue the relationship, though.)

Why isn’t customer diversion itself harm? Because of the free-to-consumers nature of both parties’ services: consumers could easily have clicked on both parties’ ads. There was no evidence that plaintiffs actually lost any opportunities to reach consumers.

(2) Negative publicity from false association: The affidavits from plaintiffs’ employees about complaints from confused consumers were hearsay. The court didn’t address the more common reason for admitting such testimony—that it reflects consumers’ present state of mind and thus is not offered for the truth of the reported statements—but rejected plaintiffs’ argument that the affidavits were admissible “lay opinion testimony that is rationally based on the [affiants’] experience and perceptions and are not based on scientific, technical, or other specialized knowledge.” “Because Plaintiffs seek to use the statements as evidence that consumers were confused by HomeAdvisor’s advertisements or had a negative experience with HomeAdvisor,” the reports of customer calls were hearsay, and because plaintiffs had no records identifying the confused customers, there was no prospect that their statements could be presented in admissible form at trial. Thus, there was no evidence of damages from negative publicity generated by HomeAdvisor’s ads.

(3) Use of Martino’s name without paying for its endorsement value. The court excluded plaintiffs’ expert testimony about the value of Martino’s endorsement, and so there was no evidence of the value of Martino’s name in the context of search engine advertising. [Wow—even without evidence of magnitude, I would have thought that the fact that he charges for endorsements would be evidence that there was some amount he would have charged, though—as the exclusion of the expert’s opinion points out—the fact that HomeAdvisor was a kind of competitor makes that harder to figure out; his endorsements were of very different entities. Anyway, not getting money is not itself a loss, but many ROP cases treat it like a loss.]

No damage, no requisite element; summary judgment for HomeAdvisor.

The same flaws doomed the Lanham Act false endorsement/common law TM infringement and unfair competition claims, even though most TM cases don’t impose a separate injury requirement, and the Colorado Consumer Protection Act, negligence, and unjust enrichment claims.

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