Flowbee International, Inc. et al v. Google, Inc.

Filing 42

Google Inc.'s ANSWER to Complaint and Affirmative Defenses (with Jury Demand), and First COUNTERCLAIM against Flowbee Haircutter Limited Partnership, Flowbee International, Inc. by Google, Inc. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Galvin, Cheryl) (Filed on 2/18/2010) Modified on 2/19/2010 (cjl, COURT STAFF).

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Flowbee International, Inc. et al v. Google, Inc. Doc. 42 Case4:10-cv-00668-LB Document42 Filed02/18/10 Page1 of 26 1 QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP Margret M. Caruso (Bar No. 243473) 2 margretcaruso@quinnemanuel.com Cheryl A. Galvin (Bar No. 252262) 3 cherylgalvin@quinnemanuel.com 555 Twin Dolphin Drive, 5th Floor 4 Redwood Shores, California 94065-2139 Telephone: (650) 801-5000 5 Facsimile: (650) 801-5100 6 Attorneys for Google Inc. 7 8 9 10 11 FLOWBEE INTERNATIONAL, INC. and FLOWBEE HAIRCUTTER LIMITED 12 PARTNERSHIP, 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No. 4:10-cv-00668-LB ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Dockets.Justia.com UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION CIVIL ACTION: CASE NO. 4:10-cv-00668LB ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC AND FLOWBEE HAIRCUTTER LIMITED PARTNERSHIP FOR BREACH OF CONTRACT DEMAND FOR JURY TRIAL Trial Date: Plaintiffs and CounterDefendants, vs. GOOGLE, INC., Defendant and CounterComplainant. Case4:10-cv-00668-LB Document42 Filed02/18/10 Page2 of 26 1 Defendant Google Inc. ("Google"), through its counsel, answers the Complaint of Flowbee 2 International, Inc. ("Flowbee Int'l") and Flowbee Haircutter Limited Partnership ("Flowbee 3 L.P."), (collectively "Flowbee") as set forth below, and hereby bring a counterclaim against 4 Flowbee. Unless specifically admitted, Google denies each of the allegations of Flowbee's 5 Complaint. 6 7 1. NATURE OF THE ACTION Google admits that Plaintiffs purport to state claims related to the use of trademarks 8 on the Internet, that the fundamental purpose of trademark law, in the bricks-and-mortar world and 9 on the Internet, is to protect consumers from being confused as to the source or affiliation of the 10 products or services that they seek to buy, that many companies differentiate their products and 11 services within the marketplace, and that trademark law applies on the Internet. Google denies 12 the remaining allegations of Paragraph 1, including that it has made any unlawful use of 13 Flowbee's alleged trademarks and similar marks. 14 2. Google lacks knowledge or information sufficient to form a belief as to the truth or 15 falsity of the allegations of the first three sentences of Paragraph 2, and therefore denies the same. 16 Google denies the remaining allegations of Paragraph 2. 17 3. Google admits that it owns and operates one of the world's most utilized Internet 18 search engines, that a search engine allows computer users to search the World Wide Web for 19 websites containing particular content, and that Google's search engine is available on its own 20 website, www.google.com, and powers other websites' search functions. Google denies the 21 remaining allegations of Paragraph 3. 22 4. Google admits that to use its search engine, a web user must enter a search query to 23 receive a list of links to web pages that Google's search algorithm identifies as relevant to the 24 search query, that web users may then click on the provided links to view the associated websites, 25 and that Google displays search results that are the product of an objective algorithm, which is not 26 influenced by payments to Google from the website owners. Google denies the remaining 27 allegations of Paragraph 4. 28 Case No. 4:10-cv-00668-LB 1 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page3 of 26 1 5. Google admits that it allows third parties to bid on keywords that may trigger 2 display of their advertisements as Sponsored Links. Google denies the remaining allegations of 3 Paragraph 5. 4 6. Google denies the allegations of the fourth sentence of Paragraph 6 and denies the 5 implication that it allows "the misuse of the Flowbee Mark." Google admits that it currently has 6 a different trademark policy in Europe than in the United States. Google lacks knowledge or 7 information sufficient to form a belief as to the truth or falsity of the remaining allegations, and 8 therefore denies the same. 9 10 7. THE PARTIES Google lacks knowledge or information sufficient to form a belief as to the truth or 11 falsity of the allegations of Paragraph 7, and therefore denies the same. 12 8. Google lacks knowledge or information sufficient to form a belief as to the truth or 13 falsity of the allegations of Paragraph 8, and therefore denies the same. 14 9. Google admits that it is a corporation organized under the laws of the State of 15 Delaware with a principal place of business in Mountain View, California and the last sentence of 16 Paragraph 9. Google denies the remaining allegations of Paragraph 9. 17 18 10. JURISDICTION AND VENUE Google admits that in this action Rosetta Stone attempts to assert claims under the 19 Lanham Act, 15 U.S.C. 1114 and 1125, that this Court has federal question jurisdiction over 20 such claims and supplemental jurisdiction over the Texas state law claims, but Google denies the 21 substance of all alleged claims. 22 11. Because this action has been transferred since the Complaint was filed, Google 23 denies that the allegations of Paragraph 11 need to be responded to, and on that basis denies them. 24 12. Google denies that venue is proper in Texas on the grounds of a forum selection 25 clause in a contract it has with Flowbee, but admits that venue is proper in this District, where its 26 principal place of business is located. 27 28 Case No. 4:10-cv-00668-LB 2 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page4 of 26 1 13. Google denies that venue is proper in Texas on the grounds of a forum selection 2 clause in a contract it has with Flowbee, but admits that venue is proper in this District, where its 3 principal place of business is located. 4 5 14. FACTUAL BACKGROUND Google does not dispute the description of the Internet in Paragraph 14 is accurate, 6 except that it denies knowledge of a "Macintosh Safari" browser program and denies the 7 allegations of the last sentence to the extent "functionally" means anything other than "connects to 8 the same website." 9 15. Google lacks knowledge or information sufficient to form a belief as to the truth or 10 falsity of the allegations of Paragraph 15, and therefore denies the same. 11 16. Google lacks knowledge or information sufficient to form a belief as to the truth or 12 falsity of the allegations of Paragraph 16, and therefore denies the same. 13 17. Google lacks knowledge or information sufficient to form a belief as to the truth or 14 falsity of the allegations of Paragraph 17, and therefore denies the same. 15 18. Google lacks knowledge or information sufficient to form a belief as to the truth or 16 falsity of the allegations of Paragraph 18, and therefore denies the same. 17 19. Google lacks knowledge or information sufficient to form a belief as to the truth or 18 falsity of the allegations of Paragraph 19, and therefore denies the same. 19 20. Google lacks knowledge or information sufficient to form a belief as to the truth or 20 falsity of the allegations of Paragraph 20, and therefore denies the same. 21 21. Google lacks knowledge or information sufficient to form a belief as to the truth or 22 falsity of the allegations of Paragraph 21, and therefore denies the same. 23 22. Google lacks knowledge or information sufficient to form a belief as to the truth or 24 falsity of the allegations of Paragraph 22, and therefore denies the same. 25 23. Google lacks knowledge or information sufficient to form a belief as to the truth or 26 falsity of the allegations of Paragraph 23, and therefore denies the same. 27 24. Google lacks knowledge or information sufficient to form a belief as to the truth or 28 falsity of the allegations of Paragraph 24, and therefore denies the same. Case No. 4:10-cv-00668-LB 3 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page5 of 26 1 25. Google lacks knowledge or information sufficient to form a belief as to the truth or 2 falsity of the allegations of Paragraph 25, and therefore denies the same. 3 26. Google lacks knowledge or information sufficient to form a belief as to the truth or 4 falsity of the allegations of Paragraph 26, and therefore denies the same. 5 27. Google lacks knowledge or information sufficient to form a belief as to the truth or 6 falsity of the allegations of Paragraph 27, and therefore denies the same. 7 28. Google lacks knowledge or information sufficient to form a belief as to the truth or 8 falsity of the allegations of Paragraph 28, and therefore denies the same. 9 29. Google lacks knowledge or information sufficient to form a belief as to the truth or 10 falsity of the allegations of Paragraph 29, and therefore denies the same. 11 30. Google lacks knowledge or information sufficient to form a belief as to the truth or 12 falsity of the allegations of Paragraph 30, and therefore denies the same. 13 31. Google admits that many web users may use a search engine to locate a domain 14 name or website address and that its search engine applies a formula, or algorithm, to display links 15 to websites that may relate to the customer's search query. Google lacks knowledge or 16 information to form a belief as to the truth or falsity of the remaining allegations of Paragraph 31, 17 and therefore denies the same. 18 32. Google admits that the "natural" or "organic" results of its search engine are 19 determined by an objective system, including the patented PageRank algorithm, and admits the 20 description of the PageRank algorithm. 21 22 33. 34. To the extent Google understands the allegations of Paragraph 33, it admits them. Google admits that it profits from advertising relevant to search queries. Google 23 denies the remaining allegations of Paragraph 34. 24 35. Google admits that advertisements, labeled "Sponsored Links," may be displayed 25 to the right of and above "organic" search results. Google denies the remaining allegations of 26 Paragraph 35. 27 28 Case No. 4:10-cv-00668-LB 4 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al 36. Google denies all of the allegations of Paragraph 36. Case4:10-cv-00668-LB Document42 Filed02/18/10 Page6 of 26 1 37. Google admits that searchers for "flowbe.com" are shown the question, above any 2 results, "Did you mean: flowbee.com," followed by a natural listing for the searched for site 3 "flowbe.com." Google denies the remaining allegations of Paragraph 37. 4 5 38. 39. Google denies the allegations of Paragraph 38. Google admits that advertisers bid on the placement of their advertisements, and 6 the amount of such bids is one factor that may determine placement of the advertisement. Google 7 denies the remaining allegations of Paragraph 39. 8 9 10 11 40. 41. 42. 43. Google denies all of the allegations of Paragraph 40. Google denies all of the allegations of Paragraph 41. Google denies all of the allegations of Paragraph 42. Google admits that Internet users may add a Google Toolbar on their Internet 12 browsers to allow for Google searching even when not viewing a web page that features Google's 13 search engine, and the allegations of the first two sentences of Paragraph 43. Google denies the 14 remaining allegations of Paragraph 43. 15 44. Google lacks knowledge or information sufficient to form a belief as to the truth or 16 falsity of the allegations of Paragraph 44, and therefore denies the same. 17 45. Google admits that it offers a program called AdWords through which it offers 18 advertisers the opportunity to bid on keyword and have their advertisements displayed on the 19 Internet, including on Google's search engine in the form of "Sponsored Links" that appear above 20 or to the right of "organic" links. Google denies the remaining allegations of Paragraph 45. 21 46. Google admits that it has previously stated that "[k]eywords are the advertiser's 22 window into the customer's thinking the most important basis for directing an advertising 23 message to precisely those people who want to see it." See "An in-depth exploration: why 24 search advertising works," available at http://www.google.ca/ads/indepth.html (last accessed Feb. 25 11, 2010).Google also admits that it has previously stated that "[a] list of keywords is, in turn, a 26 snapshot of the people who will use them incomplete, to be sure, but also uncannily accurate in 27 its ability to bring buyers and sellers together." See id. Google denies the remaining allegations 28 of Paragraph 46. Case No. 4:10-cv-00668-LB 5 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page7 of 26 1 47. Google admits that many advertisers agree to pay Google for each time a web user 2 clicks on a "Sponsored Link" that appears on Google's search results page. 3 4 48. 49. Google denies all of the allegations of Paragraph 48. Google admits that keywords selected by an advertiser may trigger advertisements 5 in response to user search queries corresponding to keywords selected by an advertiser, and that 6 sometimes advertisers choose to include keywords in the text or body of their advertisements. 7 Google denies the remaining allegations of paragraph 49. 8 50. Google admits that it has adopted a trademark policy and trademark complaint 9 procedure and that Google takes allegations of trademark infringement seriously. Google admits 10 that its terms and conditions prohibit intellectual property infringement by its AdWords 11 advertisers, which are responsible for selecting keywords and ad creatives that do not infringe 12 others' intellectual property rights. Google denies all remaining allegations of Paragraph 50. 13 14 51. 52. Google denies the allegations of Paragraph 51. Google admits that it could set different rules for its AdWords program, but denies 15 that it makes "infringing use of proprietary marks," and denies all remaining allegations of 16 Paragraph 52. 17 18 53. 54. Google denies all of the allegations of Paragraph 53. Google admits that its April 29, 2004 S-1 SEC filing reported that it "recently 19 revised [its] trademark policy in the U.S. and Canada" and, as a result, it "no longer disable ads 20 due to selection by our advertisers of trademarks as keyword triggers for the ads." See Form S-1 21 Registration Statement, Google, Inc. (Apr. 29, 2004), available at 22 http://www.sec.gov/Archives/edgar/data/1288776/000119312504073639/ds1.htm (last accessed 23 Feb. 11, 2010).Google denies all remaining allegations of Paragraph 54. 24 55. Google admits that it has the technical ability to stop advertisers from using certain 25 non-descriptive keywords as AdWords triggers. Google denies the remaining allegations of 26 Paragraph 55. 27 56. Google admits that the quoted language appeared in its 2004 S-1. Google denies 28 the remaining allegations of Paragraph 56. Case No. 4:10-cv-00668-LB 6 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page8 of 26 1 57. Google admits that the quoted language appeared in its 2004 S-1. Google denies 2 the remaining allegations of Paragraph 57. 3 58. Google admits that its current policy for many countries other than the United 4 States and Canada is that when it receives a complaint from a trademark owner it will investigate 5 to ensure that the advertisements at issue are not using a term corresponding to the trademarked 6 term in the ad text or as a keyword. Google denies the remaining allegations of Paragraph 58. 7 59. Google admits that it currently maintains guidelines for third party use of Google 8 brand features, and that those guidelines currently include the language quoted in Paragraph 59. 9 Google denies the remaining allegations of Paragraph 59, including the allegation that it does not 10 treat the marks of other companies with respect. 11 60. Google admits that Flowbee has not directly or indirectly given Google any 12 permission, authority, or license to use or sell the right to use the Flowbee Mark for the promotion 13 of the goods and services of any third parties, however Google denies the implication that Google 14 needs Flowbee's permission, authority or license in connection with the operation of the AdWords 15 Program or Google's organic search listings. 16 17 18 19 61. 62. 63. 64. Google denies all of the allegations of Paragraph 61. Google denies all of the allegations of Paragraph 62. Google denies all of the allegations of Paragraph 63. Google denies the implication that Google needs Flowbee's permission, authority 20 or license in connection with the operation of the AdWords program, denies the implication that 21 Google sells the right to use Flowbee's trademarks, and denies all the remaining allegations of 22 Paragraph 64. 23 65. Google admits that, in response to some search queries, it will display "Sponsored 24 Links" alongside the natural search results. Google lacks knowledge or information sufficient to 25 form a belief as to the truth or falsity of the remaining allegations of Paragraph 65, and therefore 26 denies the same. 27 66. Google admits that, in response to some search queries, "Sponsored Links" may be 28 displayed to the right of and above the natural search results. Google lacks knowledge or Case No. 4:10-cv-00668-LB 7 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page9 of 26 1 information sufficient to form a belief as to the truth or falsity of the remaining allegations of 2 Paragraph 66, and therefore denies the same. 3 4 67. 68. Google denies all of the allegations of Paragraph 67. Google denies knowledge or information sufficient to form a belief as to the truth 5 of the allegations concerning the screen shot contained in Paragraph 68, and on the basis denies 6 allegations relating to the same. Google denies all of the remaining allegations of Paragraph 68. 7 8 9 10 69. 70. 71. 72. Google denies all of the allegations of Paragraph 69. Google denies all of the allegations of Paragraph 70. Google denies all of the allegations of Paragraph 71. Google denies knowledge or information sufficient to form a belief as to the truth 11 of the allegations concerning the screen shot contained in Paragraph 72, and on the basis denies 12 allegations relating to the same. Google denies all of the remaining allegations of Paragraph 72. 13 73. Google denies knowledge or information sufficient to form a belief as to the truth 14 of the allegations concerning the screen shot contained in Paragraph 73, and on the basis denies 15 allegations relating to the same. Google denies all of the remaining allegations of Paragraph 73. 16 74. Google admits that its AdWords program may identify "related keywords" to 17 advertisers based on a term the advertiser enters, but Google denies the remaining allegations of 18 Paragraph 74. 19 75. Google denies the last two sentences of Paragraph 75. Google denies knowledge or 20 information sufficient to form a belief, at the present time, as to remaining allegations of 21 Paragraph 75, and on that basis, denies them. 22 23 24 25 76. 77. 78. 79. Google denies all of the allegations of Paragraph 76. Google denies all of the allegations of Paragraph 77. Google denies all of the allegations of Paragraph 78. Google admits that it has other advertising programs in addition to the AdSense 26 program that the word Flowbee may be used in. Google denies the remaining allegations of 27 Paragraph 79. 28 80. Google denies all of the allegations of Paragraph 80. Case No. 4:10-cv-00668-LB 8 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page10 of 26 1 81. Google admits that it charges advertisers a fee every time a web user clicks on a 2 "Sponsored Link." 3 4 5 6 7 8 9 10 11 88. 82. 83. 84. 85. 86. 87. Google denies all of the allegations of Paragraph 82. Google denies all of the allegations of Paragraph 83. Google denies all of the allegations of Paragraph 84. Google denies all of the allegations of Paragraph 85. Google denies all of the allegations of Paragraph 86. Google denies all of the allegations of Paragraph 87. FIRST CLAIM FOR RELIEF: TRADEMARK/SERVICE MARK INFRINGEMENT Lanham Act, 15 U.S.C. 1114(1), 1125(a) Google incorporates its responses to each and every allegation contained above 12 with the same force and effect as if fully set forth herein. 13 89. Google lacks knowledge or information sufficient to form a belief as to the truth or 14 falsity of the allegations of Paragraph 89, and therefore denies the same. 15 16 17 18 19 20 21 22 23 24 25 90. 91. 92. 93. 94. 95. 96. 97. Google denies all of the allegations of Paragraph 90. Google denies all of the allegations of Paragraph 91. Google denies all of the allegations of Paragraph 92. Google denies all of the allegations of Paragraph 93. Google denies all of the allegations of Paragraph 94. Google denies all of the allegations of Paragraph 95. Google denies all of the allegations of Paragraph 96. Google denies all of the allegations of Paragraph 97. SECOND CLAIM FOR RELIEF: CONTRIBUTORY TRADEMARK/SERVICE MARK INFRINGEMENT Lanham Act, 15 U.S.C. 1114 and 1125(a) 98. Google incorporates its responses to each and every allegation contained above 26 with the same force and effect as if fully set forth herein. 27 28 99. 100. Google denies all of the allegations of Paragraph 99. Google denies all of the allegations of Paragraph 100. Case No. 4:10-cv-00668-LB 9 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page11 of 26 1 2 3 4 5 6 7 8 9 10 101. 102. 103. 104. 105. 106. 107. Google denies all of the allegations of Paragraph 101. Google denies all of the allegations of Paragraph 102. Google denies all of the allegations of Paragraph 103. Google denies all of the allegations of Paragraph 104. Google denies all of the allegations of Paragraph 105. Google denies all of the allegations of Paragraph 106. Google denies all of the allegations of Paragraph 107. THIRD CLAIM FOR RELIEF: VICARIOUS TRADEMARK/SERVICE MARK INFRINGEMENT Lanham Act, 15 U.S.C. 1114 and 1125(a) 108. Google incorporates its responses to each and every allegation contained above 11 with the same force and effect as if fully set forth herein. 12 109. Google admits that it has the ability to prevent certain uses of the alleged Flowbee 13 Marks in connection with its advertising programs. Google denies the remaining allegations of 14 Paragraph 109. 15 16 17 18 19 20 21 22 23 24 117. 110. 111. 112. 113. 114. 115. 116. Google denies all of the allegations of Paragraph 110. Google denies all of the allegations of Paragraph 111. Google denies all of the allegations of Paragraph 112. Google denies all of the allegations of Paragraph 113. Google denies all of the allegations of Paragraph 114. Google denies all of the allegations of Paragraph 115. Google denies all of the allegations of Paragraph 116. FOURTH CLAIM FOR RELIEF: FALSE REPRESENTATION UNDER THE LANHAM ACT Lanham Act, 15 U.S.C. 1125(a) Google incorporates its responses to each and every allegation contained above 25 with the same force and effect as if fully set forth herein. 26 27 28 118. 119. 120. Google denies all of the allegations of Paragraph 118. Google denies all of the allegations of Paragraph 119 Google denies all of the allegations of Paragraph 120. Case No. 4:10-cv-00668-LB 10 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page12 of 26 1 2 3 4 5 6 7 .121. 122. 123. 124. Google denies all of the allegations of Paragraph 121. Google denies all of the allegations of Paragraph 122. Google denies all of the allegations of Paragraph 123. Google denies all of the allegations of Paragraph 124. FIFTH CLAIM FOR RELIEF: TRADEMARK/SERVICE MARK DILUTION Lanham Act, 15 U.S.C. 1125(c) 125. Google incorporates its responses to each and every allegation contained above 8 with the same force and effect as if fully set forth herein. 9 126. Google denies the last sentence of Paragraph 126. Google lacks knowledge or 10 information sufficient to form a belief as to the truth or falsity of the remaining allegations of 11 Paragraph 126, and therefore denies the same. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 135. 127. 128. 129. 130. 131. 132. 133. 134. Google denies all of the allegations of Paragraph 127. Google denies all of the allegations of Paragraph 128. Google denies all of the allegations of Paragraph 129. Google denies all of the allegations of Paragraph 130. Google denies all of the allegations of Paragraph 131. Google denies all of the allegations of Paragraph 132. Google denies all of the allegations of Paragraph 133. Google denies all of the allegations of Paragraph 134. SIXTH CLAIM FOR RELIEF: FOR TRADEMARK INFRINGEMENT UNDER TEXAS LAW Google incorporates its responses to each and every allegation contained above with the same force and effect as if fully set forth herein. 136. Google lacks knowledge or information sufficient to form a belief as to the truth or falsity of Paragraph 136, and therefore denies the same. 137. 138. 139. Google denies all of the allegations of Paragraph 137. Google denies all of the allegations of Paragraph 138. Google denies all of the allegations of Paragraph 139. Case No. 4:10-cv-00668-LB 11 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page13 of 26 1 2 3 4 140. Google denies all of the allegations of Paragraph 140. SEVENTH CLAIM FOR RELIEF: TRADEMARK DILUTION UNDER TEXAS LAW TEX. BUS. & COM. CODE 16.29 141. Google incorporates its responses to each and every allegation contained above 5 with the same force and effect as if fully set forth herein. 6 142. Google lacks knowledge or information sufficient to form a belief as to the truth or 7 falsity of first sentence of Paragraph 142, and therefore denies the same. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 151. 145. 143. 144. Google denies all of the allegations of Paragraph 143. Google denies all of the allegations of Paragraph 144. EIGHTH CLAIM FOR RELIEF: UNFAIR COMPETITION UNDER TEXAS LAW Google incorporates its responses to each and every allegation contained above with the same force and effect as if fully set forth herein. 146. The allegations of Paragraph 146 constitute legal conclusions and Google therefore denies them on those grounds. 147. 148. 149. 150. Google denies all of the allegations of Paragraph 147. Google denies all of the allegations of Paragraph 148. Google denies all of the allegations of Paragraph 149. Google denies all of the allegations of Paragraph 150. NINTH CLAIM FOR RELIEF: MISAPPROPRIATION UNDER TEXAS LAW Google incorporates its responses to each and every allegation contained above 22 with the same force and effect as if fully set forth herein. 23 152. The allegations of Paragraph 152 constitute legal conclusions and Google therefore 24 denies them on those grounds. 25 153. Google lacks knowledge or information sufficient to form a belief as to the truth or 26 falsity of first sentence of Paragraph 153, and therefore denies the same. 27 28 154. 155. Google denies all of the allegations of Paragraph 154. Google denies all of the allegations of Paragraph 155. Case No. 4:10-cv-00668-LB 12 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page14 of 26 1 2 3 4 156. 157. Google denies all of the allegations of Paragraph 156. Google denies all of the allegations of Paragraph 157. TENTH CLAIM FOR RELIEF: MONEY HAD AND RECEIVED Google incorporates its responses to each and every allegation contained above 158. 5 with the same force and effect as if fully set forth herein. 6 159. The allegations of Paragraph 159 constitute legal conclusions and Google therefore 7 denies them on those grounds. 8 160. Google lacks knowledge or information sufficient to form a belief as to the truth or 9 falsity of first sentence of Paragraph 160, and therefore denies the same. 10 11 12 13 14 15 161. 162. 163. 164. Google denies all of the allegations of Paragraph 161. Google denies all of the allegations of Paragraph 162. Google denies all of the allegations of Paragraph 163. Google denies all of the allegations of Paragraph 164. FURTHER ANSWER AND AFFIRMATIVE DEFENSES By way of further Answer and as affirmative defenses, Google denies that it is liable to 16 Plaintiff on any of the claims alleged and denies that Plaintiff is entitled to damages, treble or 17 punitive damages, equitable relief, attorneys' fees, costs, pre-judgment interest or to any relief 18 whatsoever, and states as follows: 19 20 21 165. FIRST AFFIRMATIVE DEFENSE (Failure to State a Claim) The Complaint, on one or more counts set forth therein, fails to state a claim upon 22 which relief can be granted. 23 24 25 166. SECOND AFFIRMATIVE DEFENSE (Fair Use) The claims made in the Complaint are barred, in whole or in part, by the doctrines 26 of fair use, nominative fair use and/or descriptive use. 27 28 Case No. 4:10-cv-00668-LB 13 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page15 of 26 1 2 3 167. THIRD AFFIRMATIVE DEFENSE (First Sale Doctrine) The claims made in the Complaint are barred, in whole or in part, by the first sale 4 doctrine. 5 6 7 168. FOURTH AFFIRMATIVE DEFENSE (Functionality) The claims made in the Complaint are barred, in whole or in part, on the basis that 8 any marks and use of marks at issue are functional. 9 10 11 169. FIFTH AFFIRMATIVE DEFENSE (Innocent Infringement) The claims made in the Complaint are barred, in whole or in part, because any 12 infringement, if any, was innocent. 13 14 15 170. SIXTH AFFIRMATIVE DEFENSE (Statutes of Limitations) The claims made in the Complaint are barred, in whole or in part, by applicable 16 statutes of limitations. 17 18 19 171. SEVENTH AFFIRMATIVE DEFENSE (Laches) Plaintiff's claims are barred by laches, in that Plaintiff has unreasonably delayed 20 efforts to enforce its rights, if any, despite its full awareness of Google's actions. 21 22 23 172. EIGHTH AFFIRMATIVE DEFENSE (Res Judicata and Collateral Estoppel) The claims made in the Complaint are barred, in whole or in part, on the basis that 24 prior actions based, in whole or in part, on the same allegations and underlying facts have already 25 been adjudicated. 26 27 28 Case No. 4:10-cv-00668-LB 14 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page16 of 26 1 2 3 173. NINTH AFFIRMATIVE DEFENSE (Waiver, Acquiescence, and Estoppel) Each of the purported claims set forth in this Complaint is barred by the doctrines 4 of waiver, acquiescence, and estoppel. 5 6 7 8 9 10 175. 174. TENTH AFFIRMATIVE DEFENSE (Non-Infringement) Defendant has not infringed any applicable trademarks under federal or state law. ELEVENTH AFFIRMATIVE DEFENSE (No Causation) Plaintiff's claims against Google are barred because Plaintiff's damages, if any, 11 were not caused by Google. 12 13 14 176. TWELFTH AFFIRMATIVE DEFENSE (No Damage) Without admitting that the Complaint states a claim, there has been no damage in 15 any amount, manner or at all by reason of any act alleged against Defendant in the Complaint, and 16 the relief prayed for in the Complaint therefore cannot be granted. 17 18 19 20 21 22 178. 177. THIRTEENTH AFFIRMATIVE DEFENSE (Unclean Hands) Plaintiff's claims are barred by the doctrine of unclean hands. FOURTEENTH AFFIRMATIVE DEFENSE (Lack of Irreparable Harm) Plaintiff's claims for injunctive relief are barred because Plaintiff cannot show that 23 it will suffer any irreparable harm from Google's actions. 24 25 26 179. FIFTEENTH AFFIRMATIVE DEFENSE (Adequacy of Remedy at Law) The alleged injury or damage suffered by Plaintiff, if any, would be adequately 27 compensated by damages. Accordingly, Plaintiff has a complete and adequate remedy at law and 28 is not entitled to seek equitable relief. Case No. 4:10-cv-00668-LB 15 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page17 of 26 1 2 3 180. SIXTEENTH AFFIRMATIVE DEFENSE (Failure to Mitigate) The claims made in the Complaint are barred, in whole or in part, because of a 4 failure to mitigate damages, if such damages exist. 5 6 7 181. SEVENTEENTH AFFIRMATIVE DEFENSE (First Amendment) The claims made in the Complaint are barred, in whole or in part, by the First 8 Amendment to the Constitution of the United States. 9 10 11 182. EIGHTEENTH AFFIRMATIVE DEFENSE (Duplicative Claims) Without admitting that the Complaint states a claim, any remedies are limited to the 12 extent that there is sought an overlapping or duplicative recovery pursuant to the various claims 13 against Google or others for any alleged single wrong. 14 15 16 183. NINETEENTH AFFIRMATIVE DEFENSE (Fraud) The claims made in the Complaint are barred, in whole or in part, by fraud on the 17 United States Patent & Trademark Office. 18 19 20 184. TWENTIETH AFFIRMATIVE DEFENSE (Third-Party Use) The claims made in the Complaint are barred, in whole or in part, by reason of 21 other parties' use of any marks at issue. 22 23 24 185. TWENTY-FIRST AFFIRMATIVE DEFENSE (Actions of Others) The claims made in the Complaint are barred, in whole or in part, because Google 25 is not liable for the acts of others over whom it has no control. 26 27 28 Case No. 4:10-cv-00668-LB 16 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page18 of 26 1 2 3 186. TWENTY-SECOND AFFIRMATIVE DEFENSE (No Punitive Damages) Google alleges that no punitive or exemplary damages should be awarded arising 4 out of the claims made in the Complaint under the law of the United States and California 5 because: (i) an award of punitive or exemplary damages would be unconstitutional under the 6 United States and California Constitutions; specifically, the First Amendment to the United States 7 Constitution and Article I, Section 2 of the California Constitution; (ii) any recovery of punitive or 8 exemplary damages arising out of the claims made in the Complaint would constitute the 9 imposition of a criminal fine or penalty without the substantive or procedural safeguards 10 guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution and by 11 Article I, Section 7 of the California Constitution; (iii) the imposition of any punitive or exemplary 12 damages in this lawsuit would constitute an excessive fine or penalty under Article I, Section 17 of 13 the California Constitution; (iv) any such award is precluded or limited pursuant to Section 3294 14 of the California Civil Code or the United States Constitution and the due process clause; and (v) 15 punitive damages would violate the United States and California Constitutions and common law 16 because such an award is based from procedures that are vague, open-ended unbound in 17 discretion, arbitrary and without sufficient constraints or protection against arbitrary and excessive 18 awards. 19 20 187. ADDITIONAL DEFENSES Google reserves the right to assert additional defenses based on information learned 21 or obtained during discovery. 22 23 24 WHEREFORE, Google prays for judgment as follows: 1. That Rosetta Stone takes nothing by way of its Complaint; 2. That the Complaint, and each and every purported claim for relief therein, 25 be dismissed with prejudice. 26 27 28 Case No. 4:10-cv-00668-LB 17 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al 3. That Google be awarded its costs of suit incurred herein, including attorneys' fees and expenses; and Case4:10-cv-00668-LB Document42 Filed02/18/10 Page19 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4. For such other and further relief as the Court deems just and proper. Case No. 4:10-cv-00668-LB 18 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page20 of 26 1 2 COUNTERCLAIM Defendant and Counterclaimant Google Inc. ("Google"), for its counterclaim against 3 Plaintiffs and Counterdefendants Flowbee International, Inc. ("Flowbee Int'l") and Flowbee 4 Haircutter Limited Partnership ("Flowbee L.P."), (collectively "Flowbee") state as follows: 5 6 1. NATURE OF THE CASE Google brings this action for breach of contract against Flowbee under California 7 State Law. 8 2. By originally filing the instant action against Google in the United States District 9 Court, Southern District of Texas, Flowbee breached the mandatory venue selection provision of a 10 contract it entered with Google. That contract required Flowbee to bring "all claims arising out of 11 or relating to . . . Google's Program(s)" in "the federal or state courts of Santa Clara County, 12 California, USA." (See Exhibit A, attached.) The United States District Court for the Southern 13 District of Texas held that this contract was valid, enforceable and applied to Plaintiff's claims. 14 See Flowbee Int'l v. Google, Inc., Civil Action No. C-09-199 (S.D. Tex. Feb. 8, 2010) (attached as 15 Exhibit B). 16 3. As a result of Flowbee's breach of this contract, Google was forced to expend 17 money and resources to seek the transfer of the instant action from the improper venue of the 18 Southern District of Texas to the Northern District of California. Google seeks recovery of these 19 damages. 20 21 4. PARTIES On information and belief, Plaintiff and Counterdefendant Flowbee International, 22 Inc. is a corporation organized under the laws of the state of Wyoming with its principal place of 23 business in Corpus Christi, Texas. 24 5. On information and belief, Plaintiff and Counterdefendant Flowbee Haircutter 25 Limited Partnership is a limited partnership organized under the laws of the state of Texas with its 26 principal place of business in Corpus Christi, Texas. 27 6. Defendant and Counterclaimant Google Inc. is a corporation organized under the 28 laws of the State of Delaware with a principal place of business in Mountain View, California. Case No. 4:10-cv-00668-LB 19 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page21 of 26 1 2 7. JURISDICTION AND VENUE This action arises under the laws of the State of California. This Court has 3 supplemental jurisdiction over this California state law claim pursuant to 28 U.S.C. 1367(a) 4 because it is so closely related to the federal claims brought herein by Flowbee as to form part of 5 the same case or controversy. 6 8. Flowbee is subject to personal jurisdiction in the State of California because, on 7 information and belief, Flowbee conducts business within the District and, in its agreement with 8 Google that forms the basis for this claim, Flowbee specifically consented to personal jurisdiction 9 in the federal or state courts of Santa Clara County, California. 10 9. Venue is proper in this district pursuant to 28 U.S.C. 1391(b)(2) because a 11 substantial part of the events or omissions giving rise to the claim herein occurred in this district. 12 13 14 10. FACTUAL BACKGROUND The Agreement In or around March 2004, Flowbee entered into an advertising contract with Google 15 to participate in Google's advertising program. Flowbee agreed to the terms of a revised contract 16 on or around February 9, 2007 (the "Agreement") . A true copy of the Agreement is attached 17 hereto as Exhibit A. 18 11. The Agreement contains a forum selection clause requiring that "ALL CLAIMS 19 ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE GOOGLE 20 PROGRAM(S) SHALL BE LITIGATED EXCLUSIVELY IN THE FEDERAL OR STATE 21 COURTS OF SANTA CLARA COUNTY, CALIFORNIA, USA, AND GOOGLE AND 22 CUSTOMER CONSENT TO PERSONAL JURISDICTION IN THOSE COURTS." 23 12. The Agreement defines "Google Programs" as "Google's advertising program(s)." 24 One of Google's advertising programs is the AdWords program, which permits third parties to bid 25 on keywords that may trigger display of their advertisements as Sponsored Links alongside natural 26 search results. 27 28 Case No. 4:10-cv-00668-LB 20 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page22 of 26 1 2 13. Flowbee's Breach of the Agreement On August 13, 2009, Flowbee filed suit against Google in the United States District 3 Court for the Southern District of Texas, claiming direct, contributory, and vicarious trademark 4 infringement, trademark dilution, and false representation under the Lanham Act, as well as state 5 law claims. 6 14. All of Flowbee's state and federal claims relate to Google's advertising programs. 7 As such, the claims all fall within the scope of the forum selection clause in the Agreement, which 8 requires such suits to be brought in the state and federal courts of Santa Clara County, California. 9 15. Google brought a motion to dismiss for improper venue pursuant to Federal Rule of 10 Civil Procedure 12(b)(3), or alternatively, to transfer the case to the Northern District of California 11 pursuant to 28 U.S.C. 1406(a) or 1404(a). After briefing and oral argument on the issue, the 12 District Court for the Southern District of Texas granted Google's motion to transfer the case 13 based on the forum selection clause. See Flowbee Int'l, Civil Action No. C-09-199 at p. 18. 14 16. The District Court for the Southern District of Texas held that the forum selection 15 clause applied to Flowbee's claims because such claims "each relate to Google's advertising 16 programs" and that the forum selection clause was mandatory and required the claims to be 17 litigated exclusively in California state or federal court. See Flowbee Int'l, Civil Action No. C18 09-199 at p. 7. 19 17. The District Court for the Southern District of Texas further held that the 20 mandatory forum selection clause was valid and enforceable. It explained that "[m]andatory 21 forum-selection clauses that require all litigation to be conducted in a specific forum are 22 enforceable if their language is clear" and that because "Plaintiff disputes only the scope of the 23 forum selection clause, not its enforceability," the "forum selection clause is thus enforceable." 24 Flowbee Int'l, Civil Action No. C-09-199 at p. 14. 25 26 27 18. CAUSE OF ACTION Breach of Contract Google realleges and incorporates by reference paragraphs 1 through 17 of its 28 Counterclaim. Case No. 4:10-cv-00668-LB 21 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page23 of 26 1 19. The parties' Agreement includes a forum selection clause requiring all claims 2 relating to Google's advertising programs to be brought in the federal or state courts of Santa 3 Clara County, California. See Flowbee Int'l, Civil Action No. C-09-199 at p. 2-3, 8. 4 20. Google performed all obligations and conditions that it was required to perform 5 under the Agreement. 6 21. Flowbee breached the Agreement by filing the instant suit, which relates to 7 Google's advertising programs, in the Southern District of Texas rather than a court in Santa Clara 8 County, California. 9 22. Google suffered damages as a proximate result of Flowbee's breach of the 10 Agreement because it was forced to litigate the issue of improper venue and incurred attorneys' 11 fees and costs related to that action in the District Court for the Southern District of Texas, 12 including the filing, briefing, and oral argument for the motion to transfer the case to the Northern 13 District of California. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No. 4:10-cv-00668-LB 22 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page24 of 26 1 2 PRAYER FOR RELIEF ON COUNTERCLAIMS WHEREFORE, Google requests that judgment be entered in its favor and against Flowbee 3 as follows: 4 A. Awarding Google all damages resulting from Flowbee's breach of the Contract, 5 including all attorneys' fees and costs associated with its litigation in the Southern District of 6 Texas. 7 B. An Order granting Google such other and further relief as this Court may deem just 8 and proper. 9 10 DATED: February 18, 2010 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No. 4:10-cv-00668-LB 23 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Respectfully submitted, QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP By /s/ Margret M. Caruso Attorneys for Google Inc. Case4:10-cv-00668-LB Document42 Filed02/18/10 Page25 of 26 1 2 3 4 DATED: February 18, 2010 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEMAND FOR JURY TRIAL Google hereby demands a jury trial on all issues which can be heard by a jury. Respectfully submitted, QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP By /s/ Margret M. Caruso Attorneys for Google Inc. Case No. 4:10-cv-00668-LB 24 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al Case4:10-cv-00668-LB Document42 Filed02/18/10 Page26 of 26 1 2 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on February 18, 2010, I will electronically file the foregoing 3 with the Clerk of Court using the CM/ECF system, which will then send a notification of such 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No. 4:10-cv-00668-LB 25 ANSWER TO PLAINTIFFS' COMPLAINT AND AFFIRMATIVE DEFENSES AND COUNTERCLAIM AGAINST FLOWBEE INTERNATIONAL, INC et al filing (NEF) to the following: David T. Bright Mikal C. Watts Christopher V. Goodpastor Watts Guerra Craft, L.L.P. Tower II Building 555 North Carancahua, Suite 1400 Corpus Christi, Texas 78478-0801 (361) 887-0500 (361) 887-0055 (facsimile) Counsel for Plaintiffs Flowbee International, Inc. and Flowbee Haircutter Limited Partnership. By /s/ Margret M. Caruso Attorneys for Google Inc.