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

Filing 21

TRANSCRIPT re: Initial Pretrial Conference held on 09/23/09 before Judge Janis Graham Jack. Court Reporter/Transcriber Molly Carter. Release of Transcript Restriction set for 12/24/2009., filed. (mocarter)

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 FOR THE DEFENDANT: 18 19 20 (APPEARANCES CONTINUED ON PAGE 2) 21 22 23 24 25 PROCEEDINGS RECORDED BY ELECTRONIC SOUND RECORDING TRANSCRIPT PRODUCED BY TRANSCRIPTION SERVICE: MOLLY CARTER, P. O. BOX 270203 CORPUS CHRISTI, TEXAS 78427 [phone] COURT RECORDER: MS. VELMA GANO MS. MARGARET CARUSO QUINN, EMANUEL, URQUHART, OLIVER & HEDGES, L.L.P. 555 TWIN DOLPHIN DRIVE, SUITE 560 REDWOOD SHORES, CALIFORNIA 94065 APPEARANCES: FOR THE PLAINTIFFS: MR. DAVID TARRANT BRIGHT WATTS, GUERRA & CRAFT, L.L.P. 555 NORTH CARANCAHUA, SUITE 1400 CORPUS CHRISTI, TEXAS 78478 TRANSCRIPT OF INITIAL PRETRIAL CONFERENCE BEFORE THE HONORABLE JANIS GRAHAM JACK UNITED STATES DISTRICT JUDGE * * * * PLAINTIFFS, * * VS. * * * GOOGLE, INC., * DEFENDANT. * * ***************** FLOWBEE INTERNATIONAL, INC., AND FLOWBEE HAIRCUTTER LIMITED PARTNERSHIP, CIVIL ACTION CA-C-09-199 IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS CORPUS CHRISTI DIVISION

CORPUS CHRISTI, TEXAS SEPTEMBER 23, 2009 1:08 P.M.

2 1 2 FOR THE DEFENDANT: 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CARL C. BUTZER JACKSON WALKER, L.L.P. 901 MAIN STREET, SUITE 6000 DALLAS, TEXAS 75202 APPEARANCES: (CONTINUED)

3 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 couldn't. MR. BRIGHT: THE COURT: That's very kind of you, Your Honor. I did contact your parents, though. (The proceedings began at 1:08 p.m.) (Call to Order of the Court.) THE CLERK: Court calls Civil Action C-09-199, May I have

Flowbee International, et al. versus Google, Inc. appearances, please? MR. BRIGHT: Good afternoon, Your Honor.

David

Bright here on behalf of the Plaintiffs. MS. CARUSO: THE COURT: MS. CARUSO: Good afternoon, Your Honor. Good afternoon. Margaret Caruso, from Quinn, Emanuel,

Urquhart, Oliver & Hedges, on behalf of Google, Inc., the Defendant. MR. BUTZER: Carl Butzer. Good afternoon, Your Honor. My name is And I'm

I'm also here representing Google, Inc.

with Jackson Walker. THE COURT: I wanted to call you Mr. Bright. I just

So you have a motion to dismiss -MS. CARUSO: THE COURT: sometime your -MS. CARUSO: THE COURT: Thank you very much, Your Honor. -- to appear. And I guess the question Yes, Your Honor. -- right? And I did sign last night

4 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 for this. is whether this arises out of the contract or just a plain old trademark infringement, if that's what they're going on. MS. CARUSO: THE COURT: MR. BRIGHT: I believe -- would you like -Mr. Bright? Your Honor, our deadline for responding Our

has not expired, and we will be vigorously contesting it. position -THE COURT:

I know, but I do all pending motions at

the initial pretrial conference. MR. BRIGHT: We intend to file a full-blown response. Let me first say, it's

This motion was just filed a week ago.

going to be our position, and I think it's going to be born out by the facts, that this suit does not arise out of that contract. The contract's not mentioned in the suit. The

conduct complained of by Google predates this click-through contract. There may be conflicting terms in various click-

through contracts. THE COURT: But you're not relying on the contract

You're relying on trademark infringement. MR. BRIGHT: THE COURT: That is absolutely correct, Your Honor. That's what I thought, reading through

your petition.

So I'm not sure if the forum selection clause But I'll give you a chance to

in the contract controls. respond to his response. MS. CARUSO:

Okay.

Your Honor, I, Google agrees that

5 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 their complaint is based on trademark infringement. not arise out of the contract. It does

However, the forum selection It

clause is broader than the scope of the contract alone.

goes beyond just the parties' relationship under the contract, if you look at the words, to all claims arising from or relating to the agreement and -THE COURT: MS. CARUSO: THE COURT: MS. CARUSO: THE COURT: Okay. Sure. I can Google my name on Google. Yes. And come up with lots of stuff. And if I I can -- let me say this.

found that you were putting my name with someone else, I would have some kind of a cause of action. slander cause of action. It might be some kind of

And that forum selection clause would

not apply to me, because I didn't have a contract with you. MS. CARUSO: THE COURT: MS. CARUSO: But if -So tell me the difference. The difference is that Flowbee, the

Plaintiff, does have a contract with us, an advertising contract. And as one of the terms of that contract, they

agreed that any dispute relating to Google's advertising programs would be brought in California, in the courts of Santa Clara County. of Texas -THE COURT: You're going to rely on the law for this? And there is a case, from the Northern District

6 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 Don't you hate that? MR. BRIGHT: MS. CARUSO: That's terrible. The Northern District of Texas, Your

Honor, but there aren't many cases -THE COURT: MS. CARUSO: I know. -- addressing broader claims than, forum

selection clauses than just the ones arising from the contract or relating to the contract. beyond just the contract. But in that case, it did go

And the Court pointed out that the

test of whether or not the action arises from the contract and the contractual relationship or could have been brought outside of the contractual relationship doesn't apply when the terms of the forum selection clause go beyond that relationship. That's

one of the terms that Flowbee agreed to in the contract, just like they agreed to other terms, such as that they weren't going to scrape or extract any data from Google's website in connection with what they do. THE COURT: MS. CARUSO: Okay. So whatever ability they could have had

to do that, they gave that up in exchange for advertising on Google's website. THE COURT: MS. CARUSO: THE COURT: Okay. Okay. We'll see what I come up with, because I Well, we'll see.

don't know, because I figured that's what they were going to

7 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 say, is that this had nothing to do with the contract. But now

what you're saying is that the relationship is broader than just the contractual relationship. MS. CARUSO: THE COURT: MS. CARUSO: THE COURT: MS. CARUSO: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: great issue. The forum selection clause is broader. The forum selection clause. Yes. Okay. Exactly, Your Honor. Okay. And we will be filing -I believe it. -- a lengthy -And I'll wait, excited -With bated breath. -- to hear from everybody, because it's a

And I don't want y'all to go away, but you know,

there you have it. MR. BRIGHT: MS. CARUSO: about that. THE COURT: that okay? MS. CARUSO: MR. BRIGHT: famously, Your Honor. Yes, Your Honor. It is indeed. We work together So what about the scheduling order? Is It's an interesting case. We're happy to come back and talk more

8 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 THE COURT: Good. Then I'll go ahead and sign the

scheduling order, which also adopts your Joint Discovery Case Management Plan. MS. CARUSO: THE COURT: Thank you. And then I'm going to give you a general

order that you might want to use, instead of going back and forth. I'm going to give you a mediation order. And you've I'm going

not been here before, so I'll tell you a little bit.

to enter a general order, too, that tells about my mediation policy and the discovery policy. In the mediation order, you pick your own mediator, you pick your own time for mediation. If it doesn't work out,

if you can't agree on a mediator, you can come back to me and I'll appoint one. MS. CARUSO: THE COURT: All right. That's never happened. Y'all know best

who can mediate these kind of things, where you want it done, and when you'll be ready for it. Now, I put a date in here for the order for referral to mediation to notify the Court no later than X date. you can change by agreement. That

In the general order, you can

also change all these dates by agreement, as long as it's not the ones I tell you you can't change, trial, final pretrial conference, dispositive motions deadline, because those, I kind of figure, are mine.

9 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 here? MR. BRIGHT: interested. Your Honor, only if the Court is Now, the discovery policy is this. It's in the

general order, but if you have a discovery problem, you just do a joint call to Ms. Scotch, and she'll have you in to the court within an hour or two, wherever I am, vacations, Timbuktu, literally anywhere. So with that in mind, do you all have any present or anticipated discovery problems? MS. CARUSO: MR. BRIGHT: Your Honor. Not at this time, Your Honor. We haven't propounded any discovery yet,

We have a -Do you think I can deny their motion to

THE COURT:

dismiss just because it would be fun for me to try it? MR. BRIGHT: I think that's a sound basis, and I will

find a case that supports that. THE COURT: MR. BRIGHT: that, Your Honor. THE COURT: All right. Anything else, while you're A sound legal decision? It is an interesting case, I will say

In anticipation of, having attended some other

pretrial conferences -THE COURT: love to see it. MR. BRIGHT: Only if you're interested in -Oh, you have a PowerPoint for me. I'd

10 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 it? MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: the same time? MR. BRIGHT: of school. You know, I don't think I'm talking out It is a little bit. Vacuuming your hair and cutting it? If I'm not mistaken -Doesn't that take care of everything at among -THE COURT: It's like a science fiction story, isn't and -MR. BRIGHT: Although, I will say that there is a, THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: I'm interested. Well, then I will -Thank you. -- show you what this case is about. And with I

anticipated you might ask what this case is about. that in mind -THE COURT:

Well, I figured out what it was about. I was

I

did my own little Google search to see what popped up. fascinated about the hair thing. MR. BRIGHT: THE COURT: Have you used it?

Obviously not, Your Honor. Okay. Well no, I mean, you look so nice

Jon Muschenheim used this piece of equipment, with

apparent success for years, and might still to this day. THE COURT: No.

11 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 for -MR. BRIGHT: THE COURT: about this years ago. I will not lie. You know, that's why we were talking We know this, didn't we? Because we

looked, I looked up because Mary Hardin, who's the Court Administrator, she said, "This sounds so familiar." So we

looked up to see if we had had another Flowbee case, and no, I think we were talking about Muschenheim. Ms. Gano? COURT RECORDER: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: I know he's -Don't you think,

That's what it was. U.S. Attorney approved, Your Honor. Okay. So tell me. I've

Your Honor, I have a notebook.

given them to opposing counsel.

It contains an initial trial

brief and also has the slides of this PowerPoint presentation, if I can present that. THE COURT: MS. CARUSO: Thank you. Any objection?

Your Honor, we just, you know, saw this

five minutes ago, but we're happy to -THE COURT: won't look at it. Well, if you object to it, it's fine. I

I'll just look at the presentation. Um -It's going to hurt his feelings, though. The objection is the same either way

MS. CARUSO: THE COURT: MS. CARUSO:

12 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 mean -THE COURT: MR. BRIGHT: It's a mark. It's not only a mark, but as opposed to respond. THE COURT: response deadline. sentencing people. MR. BRIGHT: I've got to tell you, Your Honor, it's No response? Oh, you just missed the THE COURT: MS. CARUSO: It's going to hurt his feelings terribly. We're fine with you seeing it. We would

like to respond, and perhaps at some later opportunity to present our own PowerPoint explaining our side. THE COURT: MR. BRIGHT: That would be fine. I don't think they should be able to

Okay.

This is so much better than

much better than being sentenced. THE COURT: MR. BRIGHT: Uh-huh, uh-huh. This is fairly brief, Your Honor. It

Flowbee, as I described, is a vacuum hair cutting system.

is a, as seen in Wayne's World, it is a patented hair cutting system. More importantly, perhaps, for purposes of this case, In other words,

Flowbee, the word "Flowbee" is a coined term. it means nothing but what you see there. THE COURT: MR. BRIGHT: Okay.

It's not a generic term.

It doesn't

McDonalds, which is also a last name, Flowbee only refers to

13 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 this thing. It's a made-up word. Okay. So it's perhaps, you know, like Kleenex,

THE COURT: MR. BRIGHT:

which of course Kleenex has actually sort of become genericized. THE COURT: MR. BRIGHT: That's right. But it is a coined, made-up word.

Flowbees have been sold very successfully on infomercials on television and also through the internet. of Flowbee's internet -THE COURT: Well, do women use them? I mean, how do That's a screen shot

you do it for long hair? MR. BRIGHT: Yes, absolutely. In fact, Theresa

Swerenko is another happy Flowbee -- the former Mrs. -THE COURT: MR. BRIGHT: very similar hair. THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: Oh. Oh, similar to his, though. I don't know her. The former Mrs. Jon Muschenheim, who had

Yes. Yeah. Well no, I meant long hair. I'm sure it's adjustable.

I don't know.

It looks kind of dangerous. Well, you know, Mike Westergren is one

of the people who will -THE COURT: Don't tell me he uses it, because I don't

14 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 believe it. MR. BRIGHT: THE COURT: MR. BRIGHT: His hairs are precious to him. I know. And precious few, if I remember.

They're more precious than -- I A number of our claims

shouldn't be saying this on the record. pertain to Google's sponsored links.

And Your Honor, there's

been actually a pretty good track record of litigation regarding this, not only in the Federal District Court in the Northern District of Texas, which is within the Fifth Circuit, of course, but also in the Second Circuit and the Ninth and the Tenth and other places, about the sponsored links. And this is what happens. page, and you Google "Flowbee." THE COURT: MR. BRIGHT: Okay. It's F-L-O-W-B-E-E. It only means that You get to the Google

one patented thing that you saw. THE COURT: MR. BRIGHT: "Flowbee." Okay. So what comes up?

This is what comes up when you Google

You Google that and you get $40 sale vacuum hair That is -And do you

cutter right up at the top. THE COURT:

Oh, and that's the top one.

pay -- I assume that you kind of pay for how you go in the line? MR. BRIGHT: That is a purchased, sponsored link by In other words, RoboCut --

Flowbee's competitor, RoboCut.

15 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 mislead. get? THE COURT: Okay. So the annoying thing is, is that

when you Google "Flowbee," you should get Flowbee first. MR. BRIGHT: You certainly would expect that, because

otherwise that's why people use Google, because there's an assumption that the search algorithm is such that the most relevant search result will be first. THE COURT: MR. BRIGHT: At the top, yeah. And there's another aspect of it, and

that is that if you Google, for example, "David Bright," I would assume you would get any number of "Davids," any number of things that contain the word "bright," and maybe a whole passel of "David Brights." When you Google "Flowbee," no part of "$40 sale vacuum hair cutter" sounds like "Flowbee." park or something, you know, maybe. If you got a water

But you know, it's

Google's position that since this is a, what's called a sponsored link, that, you know, that's clearly an advertisement. I don't think that "sponsored link" -- I mean, It's certainly our position that that is -Okay. -- if not absolutely misleading -This is good. -- certainly has the capacity to And what do you This is if

sponsored by whom?

THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT:

If you -- this is Google Images.

You get the competitor, right up at the top.

16 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 question. THE COURT: And Yahoo said no. So Google was going to buy Yahoo. Right? you Google "Flowbee" on Google Maps, there's their competitor at the top. If you Google, Google News, you're going to get And again --

their competitor there. THE COURT:

Have you seen their contract, the

competitor's contract? MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: No, I have not, Your Honor. You're entitled to that under Rule 26. I believe so, Your Honor. So -And -That's it. Thank you, Your Honor. That's what I'm telling you. That should

be part of the Rule 26 disclosures from the Defendant. MR. BRIGHT: Google product search, Google "Flowbee,"

and again you're Googling a coined term, here's Google Groups, it's up at the top -THE COURT: Does Yahoo -- did I read that Yahoo now

uses Google to Google, I mean, to search words, phrases and things? MR. BRIGHT: I don't know the answer to that

And then they said, "Oh, forget about it. Is that --

We'll just use Google to, in our search."

17 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 MS. CARUSO: THE COURT: MS. CARUSO: I'm not sure about that, Your Honor. Okay. Maybe I just made that up.

I think perhaps Microsoft has an But I

arrangement with Yahoo concerning their search systems. don't believe that Google does in that fashion. THE COURT: I thought -- okay.

You would know.

I

just wondered if it was some kind of a contract between all these things that changed things around. MR. BRIGHT: Actually, this has been going on since,

if I'm not mistaken, 1994 maybe is when Google started selling trademark terms as trigger search words. If I'm not mistaken,

I have it in my notes, but they sell various words to trigger, you know, search results -THE COURT: that competitor. MR. BRIGHT: THE COURT: Unquestionably. One would assume. But I'm going to hear Well, they must have sold "Flowbee" to

something different, I imagine. MR. BRIGHT: I don't know that they're, I don't

believe that they are disputing that Google sold -THE COURT: MR. BRIGHT: Flowbee's competitor. THE COURT: can't trust Google. Flowbee. -- the use of the word "Flowbee" to I think they're -This is just a sad situation when you

18 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 MR. BRIGHT: If you Google "Flowbee.com," that's what

this is, Flowbee.com -THE COURT: MR. BRIGHT: put it up in the URL. "Flowbee.com" -THE COURT: MR. BRIGHT: I got it. -- you get the competitor at the top. Huh-uh. -- you get 40 -- I'm not saying if you I'm saying if you Google

If you Google something close to Flowbee, which is like leave the W out -THE COURT: MR. BRIGHT: Uh-huh. -- there's their competitor. If you

Google "F-L-O-W-B-E," leave an E out and misspell it, you get their competitor. THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: Okay. I got it.

How about, quote -Move on. "Flowbee haircut system." Okay. Clearly you're going to get the

Flowbee -- no, you're going to get competitor, competitor, competitor. THE COURT: MR. BRIGHT: Okay. In terms of whether it's confusing, I

don't -- I don't know why a person wouldn't assume that that

19 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 $45 sale vacuum hair cutter was Flowbee. THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: Was Flowbee. Yeah, I would. Google --

What does Google say?

But I'm not good at this either. On Google's AdWords learning center,

where they sell these search terms to people -THE COURT: Okay. I just think she ought to just

turn her pockets out and be done with it. MR. BRIGHT: Well, I don't want her money, Your

Honor, just her client's. THE COURT: MR. BRIGHT: Okay. But one of the things Google says to

people that do business with them, they say who, you know, for example -THE COURT: MR. BRIGHT: Okay. -- RoboCut. Let's say the competitor,

who availed themselves of this AdWords program, once you activate your account, RoboCut, your ads will be eligible to appear. That is, the AdWords system will constantly seek out In

search queries related to the key words you've selected. this case, they've selected trademark term "Flowbee." display your ads to highly targeted audiences.

Then

In short, you

would be advertising directly to an audience already looking for you. In other words, this is Google's -THE COURT: Got it. Is that in your contract?

20 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 them. MR. BRIGHT: No. This is actually on the Google

learning center page -THE COURT: MR. BRIGHT: Okay. -- for the AdWords. If you're

interested in buying AdWords through Google, such as Flowbee, they're saying in short, RoboCut, you're advertising directly to an audience already looking for Google, I mean for -THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: Flowbee. -- Flowbee. Got it. In contrast, if you go to the Google Pardon me.

page, you Google the word "Google," you see no such sponsored links on there. Yahoo -THE COURT: MR. BRIGHT: THE COURT: Yahoo. -- or Dogpile. Well, that's because they hadn't paid You don't see anything for bing.com or

Yahoo hasn't paid them. MR. BRIGHT: If they would allow them to do that in

the first place. There's also the Google AdSense program, which allows people with websites to display targeted Google ads on their own websites. Now, with respect to this, we talked about the In

F-L-O-W-B-E.com, where you had the competitor show up.

addition, you're directed to a website that is F-L-O-W-B-E.com.

21 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 And on information and belief, we think these are, this is a website which has availed itself of the AdSense, you know, Google's AdSense campaign. correctly spelled. THE COURT: MR. BRIGHT: Who did that website? We don't know. Do you know the -You see Flowbee on there that is

I mean, we have a -- I

think that's something we're going to have to be assessing out in discovery. THE COURT: MR. BRIGHT: Okay. But, I mean, we can find out who did the

website and we know the name of some company, but we don't know -THE COURT: MR. BRIGHT: and I'm not sure. you know. THE COURT: MR. BRIGHT: But on it -THE COURT: MR. BRIGHT: Could you look it up and find out? I don't know that I have that -- I know That did the website? Yes, that did this F-L-O-W-B-E website. What's the name of the company? Oh, I have it in my notes, Your Honor,

I mean, it's a very generic sounding name,

that we did look it up, and I know that we did come up with that information. (PAUSE.) THE COURT: Go ahead. I'm watching.

22 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 this -THE COURT: MR. BRIGHT: That thing at the top left? If you go to this F-L-O-W-B-E.com, in MR. BRIGHT: Oh, pardon me. The interesting thing is You

here we see Flowbee correctly spelled, F-L-O-W-B-E-E.

click on that, and you get to this page that has the Flowbee search request, and it is chock full of competitors. THE COURT: MR. BRIGHT: That's the same as the one without the E. Right. But when you, if you go to

other words, the misspelled -THE COURT: MR. BRIGHT: Yeah. -- Flowbee, you get to this website that Flowbe, it's

is F-L-O-W-B-E.com, which doesn't mean anything. not even a coined term or anything else. Flowbee.

It's a misspelling of

And it is our belief that the owner of this website

has availed itself of the AdSense campaign that Google has which allows these links that you can buy from Google. you click on that Flowbee link there that is correctly spelled -THE COURT: MR. BRIGHT: Okay. -- you end up with competitors. And And if

this again is something we're going to have to do some serious discovery on, but that's something that's of great concern. And I have a discussion of the applicable state and federal law, if the Court is interested in it. It's also

23 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 included in our brief and in our petition, if you're interested in the various causes of action. THE COURT: MR. BRIGHT: that, Your Honor. I read all of it, I promise. Well, in that case, I won't belabor

So there you have it. Now, don't you think she can respond now? Certainly. Are you done? I am, Your Honor. Okay. Thank you, Mr. Bright. I didn't come

THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: MS. CARUSO:

Thank you, Your Honor.

prepared with slides, but I would like to address a few of the points, just so you can understand -THE COURT: Yes, please. MS. CARUSO: -- the context here. I saw you were making notes to tell me.

First of all, as noted, I think it would be an interesting case to see through, and perhaps someone else who doesn't have a contract with Google will sue us here, and we can be back. THE COURT: MS. CARUSO: Very diplomatic. Thank you.

You know, one thing that, when you were

talking earlier about Kleenex, I think it provides a useful analogy for what we're talking about here, and to understand how it is that sponsored links work for the searcher.

24 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 THE COURT: Because I imagine if I put in Kleenex, I

would get not just Kleenex, but Scott Tissues and all the other -MS. CARUSO: Wal-Mart or -THE COURT: But I don't know if they still have a Probably so, much like if you went to

mark, if Kleenex still has a mark. MS. CARUSO: present it that way. THE COURT: MS. CARUSO: Okay. If you were to go into a drug store and I believe that they do. At least they

say, "Where do you keep the Kleenex," it's not necessarily that you want to purchase Kleenex brand tissue. THE COURT: MS. CARUSO: Uh-huh. It's that you want to know where that Or maybe you have it in your head

type of product is kept.

that you do want Kleenex, but when you go to that section that has the tissue, you decide, you know, this one has lotion in it. Maybe I want that one instead. It has some features I

hadn't thought about.

Or this one has a better price, and

that's my primary driving point. So it's useful to have all of those relevant things in one place, because not everyone who types in, "I'm looking for Kleenex," is looking just to buy Kleenex. doing some competitive shopping as well. They might be

25 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 They also might be looking for, you know, a lot of the examples here were of competitors. But those aren't, of There

course, the only types of sponsored links there are.

could be people who have news stories about that product, customer reviews of that product. So there's a lot of

information, relevant information to a trademark product that can be gotten from this search term. interested in providing. And in terms of the sponsored links, Mr. Bright referred continuously to Google selling words. And Google And that's what Google is

recognizes that it doesn't have, it doesn't own those trademarks. It does not sell those trademarks. Well, what do you do? I thought it was

THE COURT: just a search engine. MS. CARUSO:

It is a search engine.

So what we do in

the AdWords program, Google offers the -THE COURT: Don't you buy, I mean, I've heard this, I

didn't know it was true, but I've heard that you, you're able to buy kind of a slot in the deal. you can buy your position. MS. CARUSO: THE COURT: MS. CARUSO: THE COURT: MS. CARUSO: It's a little bit, not exactly that. Can you -- no? I'll talk a little bit about it. Okay. So what happens if you decide to become When you look up Kleenex,

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 an AdWords advertiser? You get various information from Google Mr. Bright had one of

about how your account is going to work. those terms up here -THE COURT: MS. CARUSO: Okay.

-- that applies to all AdWords And you identify key words. So

advertisers, Flowbee included.

the whole point of AdWords is to provide relevant advertising to the consumers -THE COURT: So you would put vacuum, hair cutter,

Flowbee, because that's the biggest, like the Kleenex, of the vacuum hair cutter industry. MS. CARUSO: as the key words. THE COURT: searches." MS. CARUSO: And then you have the opportunity to And say, "I want to come up under these Right. You might choose to enter those

bid, to tell Google, "I'm willing to pay X amount of money for every click that someone makes when my ad is displayed, in connection with that key word." THE COURT: So if that competitor that he kept

showing that comes up first paid more money than Flowbee -MS. CARUSO: It may or may not be the case, because There is an algorithm that

it's not driven solely by price.

Google uses, and it's a combination of relevance and price. And that algorithm is much more complicated than I could

27 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 explain to you. THE COURT: MS. CARUSO: Is that a trade secret? I believe it is, Your Honor. It's --

and it's what enables Google to display that information. Because from Google's perspective, it's in everyone's interest to have the most relevant information be displayed. So if you wanted to bid on the Flowbee mark, but you're selling your services as a mediator, for example, you could, you know, bid "I'll pay $20 a click for people who are looking for Flowbee. There's a high correlation of Flowbee

users and people who need mediators." THE COURT: MS. CARUSO: And mediators or whatever, okay. But Google's, that's probably not going

to be highly rated, even if you're by and away the higher bidder, because Google's going to look at the relevance of that, their algorithm will look at the relevance of that site and kind of the clicks -THE COURT: Well, do you tell your, do you tell

people when they enter into a contract with you that they're going to be subject to these algorithms, and they may not be the first person, even if that's their trademark name, they may not be the first entity that comes up when their actual name is Googled? MS. CARUSO: THE COURT: Yes. Google has --

You tell them all that?

28 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 MS. CARUSO: If you sign up for an AdWords account,

you get numerous correspondence from Google explaining kind of here's how AdWords works. and answers. be. And then there's a lot of questions

"My ad isn't showing up as high as I want it to And Google will give explanations. Did you get an explanation, Mr. Bright,

Why is that?"

THE COURT:

for your company, Flowbee? MR. BRIGHT: THE COURT: MR. BRIGHT: THE COURT: I'm sorry, Your Honor? Did Flowbee say, "Why is this happening?" No. I think --

They never contacted Google and said,

"Why is this happening?" MR. BRIGHT: I don't know that they did. I don't

think it's that easy to get a response to -- I'm not sure if you can get Mr. Google on the phone, but I think he -THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: I've talked to him many times. I think he -And it's Ms. Google. My bad, Your Honor. I think it's pretty

clear why this happens. talking about.

There's two different things we're

One is if you're a lawyer who handles cases

involving foreclosures, you might want to bump yourself up on the search, this generic search for foreclosure lawyers, or foreclosure, or lawyers. money, as a competitor -It's another thing when you're paying

29 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 that. So basically, that's how AdWords works. And we, THE COURT: MR. BRIGHT: THE COURT: Okay. -- paying money to pop up there. I just, I didn't mean to interrupt her And I'll give you

presentation, except for that one issue.

another chance to speak, if you would like. MR. BRIGHT: THE COURT: Sure. But I just wanted to know if you had Other

complained to Google that this is happening, fix it. than the suit. MR. BRIGHT: THE COURT: them, from Flowbee? MS. CARUSO: THE COURT: MS. CARUSO: Well --

So do you have any correspondence from

Not that we're aware, Your Honor. Okay. You've talked to all the Googles?

Not every one of them, but we looked for

Google's position, again, one of the things Mr. Bright said when he had the screen shot up and pointed to, he circled in red the sponsored link language. THE COURT: MS. CARUSO: Right. That's something that, you know, as he So,

said, it's clearly sponsors, clearly paid-for advertising. and there's the shading beneath that as well.

You would think

that calls out to customers this is not the natural search

30 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 Uh-oh. Google -MS. CARUSO: THE COURT: what comes up. MS. CARUSO: THE COURT: All right. Flowbee haircut system, first thing. Okay. -- and I put in "Flowbee," and we'll see result. This is giving you something that's sponsored. Just

like you know that when you have a football game that's sponsored by something, or a game show, they say, "Please support our sponsors," we know that sponsors mean paid for. THE COURT: MS. CARUSO: THE COURT: link first? MS. CARUSO: It depends, Your Honor, actually on -But if you Google "Flowbee" -Uh-huh. -- does that not come up as sponsored

there are -- because of the way the algorithm works, it's not always going to show up the same way every day. THE COURT: MS. CARUSO: THE COURT: It will be different every day? But so some days -If I Google it right now, I've got on

Are you the $45 RoboCut? MR. BRIGHT: THE COURT: That's our competitor, Your Honor. Flowbee -- no, it says "Flowbee" with a

trademark. MS. CARUSO: Your Honor, I believe --

31 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 this. THE COURT: Is that your competitor? Come look at I don't

You all come look at this and see what this is.

see how that could be your competitor. MR. BRIGHT: That is our competitor. It says,

"Flowbee, $45 RoboCut," and that is not us, Your Honor. MS. CARUSO: So, Your Honor, I think that this site,

haircut compare, if you click on it, I think it compares Flowbee to RoboCut. THE COURT: MS. CARUSO: MR. BRIGHT: MS. CARUSO: THE COURT: MR. BRIGHT: THE COURT: "Flowbee." Okay. So it -That is RoboCut's website. So it's using -Oh, so that's RoboCut's website? RoboCut has that website. Oh. So if I -- I'm just Googling

And what comes up is the sponsored link -That is correct. -- with the competitor's website. Right. And this use, you know,

MR. BRIGHT: THE COURT: MS. CARUSO:

comparing Flowbee to RoboCut on the website, we submit, Your Honor, is clearly fair use. there are FTC guidelines -THE COURT: I've got it. But it may be a little And I may not have It's comparative advertising,

unfair if I were Flowbee.

I'm just saying.

this case, you know, permanently, but --

32 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 MS. CARUSO: THE COURT: MS. CARUSO: Right. -- I would be annoyed. Well, Your Honor, the law is more

specific -- I know you didn't (inaudible) talked about earlier, but annoyance isn't the test really. It's whether or not And,

there's a likelihood of confusion that arises from this.

you know, here you've got the Flowbee name and the RoboCut name, and Haircut Compare is your URL there. comparison website. THE COURT: MS. CARUSO: Except it's RoboCut's website. It is, and they're free to compare the So this is a

two products, just like -THE COURT: MS. CARUSO: I understand. -- Coke is free to compare itself to

Pepsi, and Pepsi does a Pepsi challenge. THE COURT: I would feel somewhat confused if I were That's all I'm

looking up Flowbee and got that for number one. saying. And that is one of the legal issues -MS. CARUSO: THE COURT:

Yes, Your Honor, it certainly is. -- is the possibility of confusion, or

the likelihood of confusion. MR. BRIGHT: MS. CARUSO: Correct. That's right, Your Honor. That's the

key legal issue, and one that certainly will be addressed by -THE COURT: In California, you think.

33 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 Honor. THE COURT: How else could you find out what you RoboCut. it. MS. CARUSO: -- by consumer studies and experts. MS. CARUSO: THE COURT: Yes. And it may be. You may be right about

So because, you know, as consumers people bring different ideas and perceptions into things. THE COURT: What are the damages? You have to

disclose how many hits were made on that RoboCut versus Flowbee? MS. CARUSO: THE COURT: MR. BRIGHT: Well -Is that it? What are the damages?

Well, it's the money that they have been

paid, it is the money that we have lost, and it is potentially attorney's fees and exemplary damages, depending on -THE COURT: So you're going to have to look at

Are you going to have to add them in and see how much

they've made off this? MR. BRIGHT: We don't anticipate doing that, Your

lost, except for what they got? MR. BRIGHT: I suspect it will be the subject of

forensic accounting that can show when this practice started and -THE COURT: I see.

34 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 MR. BRIGHT: THE COURT: MS. CARUSO: question, Your Honor. THE COURT: MS. CARUSO: It is, isn't it? Because, of course, the Plaintiff is -- how it affected our profits. Okay. You know, it's a very interesting

very free to sue the competitor for -- they're the ones who chose to frame the ad the way that they did. THE COURT: Except for you put it -- it was the

placement, is what he's saying, is that -MS. CARUSO: THE COURT: MS. CARUSO: that's correct. connection. California. THE COURT: MS. CARUSO: Really? Yes. So as you can see, though, I guess It was placed -Location, location, location. It was placed pursuant to our algorithm,

They chose the words and they chose that

Flowbee has sued this competitor before, in

maybe perhaps Google is perceived as having a bigger -THE COURT: MS. CARUSO: THE COURT: MS. CARUSO: A hand in it? -- bank book. Okay. So I'm happy to address anything else

Your Honor has questions on. THE COURT: No, I think you've done a wonderful job.

35 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 I appreciate it. MS. CARUSO: THE COURT: Thank you. And it's interesting. You know, I wish So anything

I -- I hope I get to keep the case, but I may not. else? MR. BRIGHT: Your Honor. THE COURT: MR. BRIGHT: of the Court. THE COURT: MR. BRIGHT: It's up to you. Do you want another round? If you like.

Only if you want us to start Round 2,

We operate at the pleasure

My time is your time. I don't

Well, I guess I would say this.

think the sponsored link is clear.

Google did a customer

survey to find out whether they ought to call this a sponsored link or an advertisement, which is what it is, and they chose sponsored links, because more people clicked on a thing that said sponsored link than clicked on an advertisement. why? Because I don't know what sponsored link means. I mean, you -Sponsored by Google? Sponsored by -You know It means

sponsored by whom?

THE COURT: MR. BRIGHT:

Apparently sponsored by Google and paid

for by a competitor, competitors' paid advertisements with -THE COURT: I wouldn't know what it meant. I

wouldn't have an opinion. MR. BRIGHT: And I think that's misleading. I think

36 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 it's -- I think it has more value to the competitor. RoboCut

gets more value out of that when it has "sponsored link" than -THE COURT: I guess I was, I didn't know -- I figured

if I put in a "Flowbee," that I would get not a sponsored link first, but I would get something else, like a natural word search. You know what I'm -- like you used to do in Westlaw. MR. BRIGHT: Which is why you use Google. If you

thought that every time you did a search on Google you were just going to come up with a mass of advertisements, nobody would use it. It's -- the stock and trade of Google is not They make their money doing

where they make all their money. this stuff.

But the stock and trade of Google is people

clicking on there, because they think that they're going to get the most relevant, in descending order of relevance, with respect to their search. THE COURT: MR. BRIGHT: Well, I think that's interesting. And if you're searching a generic term

like "vacuum hair system," or if you're looking in the Yellow Pages, or if you're walking down an aisle in the store that says "pain relievers," I understand you're going to be bombarded with products. Advil -THE COURT: But even those products pay for their But when you pick up a box of

placement in the stores.

37 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 that's -THE COURT: MR. BRIGHT: THE COURT: MS. CARUSO: THE COURT: I understand. -- rather confusing. You may both be right. Who knows? MR. BRIGHT: They do indeed. You walk down the aisle

in the store, assuming that you're going to get a number of brands of toothpaste, or, to use this example, a number of brands of pain reliever. THE COURT: Except for Crest toothpaste and all those

tooth -- they pay for their placement in the stores also. MR. BRIGHT: THE COURT: no matter what. MR. BRIGHT: I think that's correct. And if you Unquestionably. Now, if --

So placement, so location is important,

reach for a box of Crest toothpaste, and what is inside that Crest toothpaste is Ultra Bright, that is rather confusing. And what people are doing is they are Googling "Flowbee," a coined term that refers to one and only one thing in the whole universe. THE COURT: MR. BRIGHT: THE COURT: MR. BRIGHT: Okay. It's not a generic search. Thank you. And I think that's one of the things

I'd like to make just a few points -You may.

38 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 people. MS. CARUSO: -- in response, Your Honor. Thank you.

One is that, you know, Flowbee vacuum hair cutting system, this is one of the things that Mr. Bright just said could be typed in, if someone has only bid on vacuum hair cutting system, and not Flowbee, the fact that vacuum hair cutting system is typed in is going to be part of what drives their ad to show up in response as well. THE COURT: MS. CARUSO: I can imagine that. So just, I bring that to your attention

because it's not as if, you know, Flowbee can decide, we're going to carve out this realm of words and no one else can be associated with them at all. A couple of other things. You know, Westlaw you

mentioned, and of course, Westlaw charges you for the use of the system. system. Google doesn't charge you for the use of the So that's -Thank you

It's paid for by advertising. THE COURT:

You all paid for my Westlaw.

very much. MS. CARUSO: Yes, Your Honor. Westlaw charges

They don't give it out for free. And just one final thing I'd like to raise, since

we're citing evidence that's not before the Court, is that the FTC has issued a letter specifically approving of the use of the term -THE COURT: This type of use?

39 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 /s/ Molly Carter Molly Carter September 25, 2009 Date I, court approved transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-entitled matter. MS. CARUSO: -- "sponsored link," as a way to call

out to consumers that this is not natural results. THE COURT: MS. CARUSO: THE COURT: Thank you. Okay. That it's something else. Thank you.

I think I can see why Google hired you.

That's it? I believe so, Your Honor. All right. Thank you. Thank you, Your Honor. You're excused. Thank you. Thank you all very much.

MR. BRIGHT: THE COURT: MS. CARUSO: MR. BRIGHT: THE COURT: MR. BRIGHT:

(Proceedings concluded at 1:44 p.m.)