TWiT, LLC et al v. Twitter Inc.

Filing 41

ORDER by Magistrate Judge Jacqueline Scott Corley granting in part and denying in part 17 Motion to Dismiss. Amended Complaint due by 6/19/2018. Joint Case Management Statement due by 7/26/2018. Initial Case Management Conference set for 8/2/2018 at 1:30 PM in San Francisco, Courtroom F, 15th Floor. (ahm, COURT STAFF) (Filed on 5/30/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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TWIT, LLC, ET AL.,

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Plaintiffs,

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ORDER RE: MOTION TO DISMISS

v.

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Re: Dkt. No. 17
TWITTER INC.,

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Defendant.

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United States District Court
Northern District of California

Case No.18-cv-00341-JSC

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Plaintiffs TWiT, LLC, and its founder, Leo Laporte bring this civil action against Twitter,

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Inc. alleging breach of contract and tort claims, as well as trademark infringement claims under

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the common law and the Lanham Act, 15 U.S.C. §§ 1114, 1125. Twitter has moved to dismiss

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Plaintiffs’ claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim

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and as barred by the applicable statute of limitation. (Dkt. No. 17.) Having considered the parties’

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briefs and having had the benefit of oral argument on May 24, 2018, the Court GRANTS the

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motion to dismiss.1 Plaintiffs have not plausibly alleged that they entered into a contract with

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Twitter, that Twitter defrauded Plaintiffs, or that Twitter is doing something that infringes on

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Plaintiffs’ trademarks.
BACKGROUND

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A. Complaint Allegations

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Since 2005 TWiT has distributed audio and video content over the internet in the form of

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hosted programs covering a broad range of topics. (Dkt. No. 1 at ¶ 7.) These programs are

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distributed to the public by TWiT via downloading or streaming from the internet (“netcasts”).

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Both parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. §
636(c). (Dkt. Nos. 7 & 13.)

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(Id. at ¶ 7.) In addition to streaming live content, the TWiT website retains archives of its shows

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dating back numerous years which are available for download. (Id. at ¶ 8.)

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This audio and video content is provided under the TWIT trademark. Leo Laporte is the

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owner of the TWIT trademark and TWiT is the exclusive licensee. (Id. at ¶ 9.) The TWIT mark is

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registered on the U.S. Principal Register for use in connection with entertainment in the nature of

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visual and audio performances, and musical, variety, news and comedy shows (Registration No.

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3,217,759). (Id. at ¶ 10.) The application for this registration was filed on May 15, 2006 and the

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Registration issued on March 13, 2007. (Id; Dkt. No. 1-1.) Since 2005, Plaintiffs have

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extensively advertised and promoted the TWIT mark, and invested substantial time, energy and

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resources to develop substantial consumer recognition of the mark. (Complaint at ¶ 11.)
On March 6, 2007, Evan Williams, one of the co-founders of Twitter, appeared on TWiT’s

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“net@night” program. (Id. at ¶ 12.) Mr. Laporte co-hosted the show. (Id.) Williams described

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Twitter as a text-based microblogging service. (Id. at ¶ 13) He “acknowledged that Twitter was

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aware of the conflict between their TWITTER brand and Plaintiffs’ TWiT mark when they

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adopted TWITTER as their mark.” (Id. at ¶ 13.) Williams also “acknowledged the confusion

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which likely would arise from the use of TWITTER in the marketplace, as well as instances of

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actual confusion which already had arisen.” (Id.) Given this, Williams and Laporte, “on behalf of

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Twitter and TWiT, recognized and agreed to a basis for coexistence of the two marks, conditioned

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on each company continuing its own unique distribution platform.” (Id. at ¶ 14.)

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This “coexistence agreement” was honored by both TWiT and Twitter for years. (Id.)

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However, in 2009, news stories were published indicating that “Twitter was planning to expand its

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services to distribute video content under the TWITTER brand, contrary to the coexistence

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agreement.” (Id. at ¶ 15.) TWiT and Laporte were greatly concerned that this potential business

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model expansion would have a significant effect on TWiT’s business. On June 4, 2009, Laporte

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sent a letter to Williams (who was then Twitter’s CEO) to express his concern about Twitter’s

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expansion beyond microblogging and into audio-video streaming. (Id. at ¶ 16; Dkt. No. 1-2.) The

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next day, Williams responded via email “[c]onsistent with the coexistence agreement” and advised

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Laporte that the news reports were not accurate. (Dkt. No. 1 at ¶ 17.) Williams responded:
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“Don’t worry: We’re not expanding to audio or video under the Twitter brand.” (Id.; Dkt. No. 1-

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3.)

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In reliance on this renewed promise and representation by Twitter regarding coexistence in

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separate business models, Laporte and TWiT continued forward with the use of the TWiT mark,

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and did not take steps otherwise available to protect their rights. (Id. at ¶ 18.) However, in May

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2017, TWiT and Laporte became aware of Twitter’s current plans to expand its use of the

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TWITTER mark in connection with the streaming and downloading of video content over the

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internet. (Id. at ¶ 19.) Twitter’s use of the TWITER mark with these new products and services

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breaches its promise and agreement with TWiT and Laporte and creates a likelihood of confusion

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with the TWIT mark. (Id. at ¶ 20.)

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B. Procedural Background

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Plaintiffs TWiT and Laporte filed this action in January 2018, six months after sending a

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cease and desist letter to Twitter. (Id. at ¶ 21.) Plaintiffs allege 12 claims for relief: (1) breach of

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written contract; (2) breach of oral agreement; (3) breach of implied contract; (4) promissory

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estoppel; (5) false promise; (6) negligent misrepresentation; (7) intentional interference with

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prospective economic advantage; (8) intentional misrepresentation; (9) negligent interference with

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prospective economic advantage; (10) trademark infringement, in violation of the Lanham Act, 15

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U.S.C. § 1114(1)(a); (11) unfair competition, in violation of the Lanham Act, 15 U.S.C. § 1125(a);

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and (12) common law trademark infringement.

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Twitter responded by filing the now pending motion to dismiss. (Dkt. No. 17.) Shortly

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after Twitter filed the motion to dismiss, Plaintiffs filed a motion to disqualify Durie Tangri LLP

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and its attorneys as counsel for Defendant Twitter. (Dkt. No. 25.) Both motions are fully briefed

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and came before the Court for hearing on May 24, 2018.

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JURISDICTION

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In federal court, subject matter jurisdiction may arise from either “federal question

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jurisdiction” or “diversity of citizenship” when the amount in controversy exceeds $75,000. See

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Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). To properly allege diversity jurisdiction,

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a plaintiff must claim damages in excess of $75,000 and each defendant must be a citizen of a
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different state from each plaintiff. See 28 U.S.C. § 1332; Diaz v. Davis (In re Digimarc Corp.

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Derivative Litig.), 549 F.3d 1223, 1234 (9th Cir. 2008). Here, as all parties are residents of

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California, there is no diversity jurisdiction. However, the Court has federal question jurisdiction

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under 28 U.S.C. § 1331 because Plaintiffs plead trademark infringement and unfair competition

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claims under the Lanham Act.
DISCUSSION

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Plaintiffs’ claims fall within four general categories: contract, tort, fraud, and the Lanham

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Act. Twitter insists that Plaintiffs have failed to plead facts suggesting entitlement to relief under

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any category of claims. Twitter also contends that the claims are all barred by the applicable
statute of limitations.

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A.

Plaintiffs’ Contract Claims

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Plaintiffs allege four contract-related claims: (1) breach of written contract; (2) breach of

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oral agreement; (3) breach of implied contract, and (4) an alternative promissory estoppel claim.

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Twitter contends that each of these claims fails because Plaintiffs have not pled any of the required

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elements of a contract or an enforceable promise. The Court agrees.
The essential elements of a contract under California law are “(1) ‘[p]arties capable of

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contracting;’ (2) ‘[t]heir consent;’ (3) ‘[a] lawful object;’ and (4) ‘[s]ufficient cause or

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consideration.’” U.S. ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir. 1999) (alterations

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in original) (quoting Cal. Civ. Code § 1550). “Contract formation requires mutual consent, which

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cannot exist unless the parties agree on the same thing in the same sense.” Bustamante v. Intuit,

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Inc., 141 Cal. App. 4th 199, 208 (2006) (quotations omitted); see also Rennick v. O.P.T.I.O.N.

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Care, Inc., 77 F.3d 309, 315 (9th Cir. 1996) (“[p]arties must communicate their mutual consent to

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enter into a contract.”).

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Oral contract claim

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Plaintiffs allege that during Williams’ March 2007 discussion on TWiT’s net@night

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program Williams and Laporte, on behalf of Twitter and TWiT, agreed that “Twitter would not

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distribute video or audio content and TWiT would not be a microblogging service.” (Dkt. No. 1 at

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¶ 31.)
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Twitter has submitted the complete audio of Williams’ March 2007 TWiT discussion. As
the complaint references this discussion (indeed, the oral contract claim is based on the

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discussion), and Plaintiffs do not dispute the audio’s authenticity, the Court may review and has

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reviewed the audio. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (“A court may

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... consider certain materials—documents attached to the complaint, documents incorporated by

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reference in the complaint, or matters of judicial notice—without converting the motion to dismiss

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into a motion for summary judgment.”). Nothing in the audio suggests that a contract was formed.

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No offer was made. No offer was accepted. No consideration was exchanged. As Plaintiffs rely

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entirely on the March 2007 discussion as the basis for the oral contract claim, they must be able to

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point to something in the exchange that plausibly supports an inference that a contract was formed.

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They have not done so.

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The 2009 letter from Mr. Laporte which forms the basis for Plaintiffs’ written contract

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claim highlights the implausibility of the oral contract claim. Plaintiffs allege that “news stories

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were published in 2009 indicating that TWITTER was planning to expand its services to distribute

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video content under the Twitter brand “contrary to the coexistence agreement.” (Dkt. No. 1 at ¶

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15; Dkt. No. 1-2.) Laporte therefore sent correspondence to Williams “to express his concern

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about Twitter’s expansion beyond microblogging and into audio/video streaming services.” (Id. at

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¶ 16; Dkt. No. 1-2.) Laporte’s letter references the “recent news stories” and TWiT’s efforts to

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build up its mark; he concludes: “[c]learly, the use of the TWITTER mark for audio or video

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streaming is problematic for TWiT and we don’t want to have to use any formal legal means to

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protect our mark. I am open to any creative solutions that you may have to this problem but any

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solution needs to be respectful of our trademark rights.” (Dkt. No. 1-2 at 2.) Although Plaintiffs

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insist that at the time Laporte wrote this letter they had an enforceable oral agreement with Twitter

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in which Twitter promised not to offer video content under the Twitter brand, Mr. Laporte’s letter

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does not even hint that such an agreement exists. Plaintiffs have not pled facts that state a

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plausible oral contract claim. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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Plaintiffs nonetheless urge that because Twitter did not offer audio or video under the
Twitter brand until 2017, such conduct plausibly supports an inference that a contract not to offer
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such services was formed. Not so. Twitter’s decision not to provide audio or video content under

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the Twitter brand until 2017 cannot retroactively make the March 2007 TWiT discussion create a

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contract when there are no words in that discussion that can reasonably be construed as an offer

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and acceptance of particular terms and identification of consideration.

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The written contract claim is implausible as well. It is based upon the 2009 letter and Mr.

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The Written Contract Claim

Williams’ email response the following day:

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(Dkt. No. 1-2.)

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(Complaint at ¶ 16; Dkt. No. 1-3.) Plaintiffs contend the letter and email “confirm the essential

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terms of a written contract between and among the parties by which Twitter agreed not to

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distribute audio and video content under the TWITTER brand.” Further, the consideration for this

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promise was that each party would refrain from entering into the area of the other and TWiT

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would also not enforce “its rights through legal means.” (Dkt. No. 1 ¶¶ 24-25.)

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The letter and the email response do not plausibly support an inference that Twitter agreed

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not to offer audio and video content under the Twitter brand in return for some unidentified

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consideration. At oral argument Plaintiffs focused on the words “don’t worry” and “under the

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Twitter brand” in Williams’ email. But “don’t worry” does not support a plausible inference that

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Mr. Williams promised that Twitter would never expand to audio or video under the Twitter

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brand. The “don’t worry” was in response to Laporte’s concern that recent news stories indicated

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that Twitter was planning to expand into those services and, if so, TWiT might have to pursue

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litigation. Williams responded that the news stories were wrong and that Twitter was not

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expanding to audio or video under the Twitter brand. Drawing all reasonable inferences from the

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letter and email in Plaintiffs’ favor, Twitter did not agree to never expand into audio and video.

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Under Plaintiffs’ theory, any time someone accuses another of engaging in trademark

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infringement and threatens litigation, and the threatened party responds that it is not engaging in
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the accused conduct, the parties have entered into a contract in which the threatened party

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promises to never engage in the accused conduct in return for the accusing party’s promise not to

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sue. Such theory finds no support in the law of contracts.

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The implied contract/promissory estoppel claim

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Plaintiffs’ alternative implied contract/promissory estoppel claim fails for the same

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reasons. The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous

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in its terms; (2) reliance by the party to whom the promise is made; (3)[the] reliance must be both

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reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his

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reliance.” US Ecology, Inc. v. State, 129 Cal. App. 4th 887, 901 (2005) (internal citation and
quotation marks omitted). The promise must be “definite enough that a court can determine the

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scope of the duty[,] and the limits of performance must be sufficiently defined to provide a

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rational basis for the assessment of damages.” Garcia v. World Sav., FSB, 183 Cal. App. 4th 1031,

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1045 (2010). Plaintiffs allege that “Twitter by both express assertions and through its conduct,

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promised that it would forebear from providing a means for the general public to stream or

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download video and audio content over the internet” such that they “did not bring an action for

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infringement of their rights in either 2007 or 2009.” (Complaint at ¶ ¶ 44-46.) Those allegations,

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however, are directly contradicted by the March 2007 audio and 2009 letter and email upon which

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they are based. See Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295–96 (9th Cir.1998)

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(“[W]e are not required to accept as true conclusory allegations which are contradicted by

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documents referred to in the complaint.”) Drawing all reasonable inferences in Plaintiffs’ favor,

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the audio of the March 2007 discussion does not plausibly suggest that Williams clearly and

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unambiguously promised that Twitter would never offer audio or video under the Twitter brand.

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Nor can the 2009 email be reasonably read as a promise to never offer audio or video content. A

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statement regarding Twitter’s present operation does not create an enforceable promise. See Block

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v. eBay, Inc., 747 F.3d 1135, 1138 (9th Cir. 2014).

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Leave to amend would be futile

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Plaintiffs’ first, second, third, and fourth claims for relief for breach of written contract,

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breach of oral agreement, breach of implied contract, and promissory estoppel are dismissed as
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they are premised on the formation of a contract that is belied by the very documents/audio on

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which they are premised. The dismissal is without leave to amend. At oral argument the Court

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asked Plaintiffs what more they could allege if given leave to amend these claims given that the

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Court currently has before it the exact language that was exchanged between the parties and upon

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which Plaintiffs’ claims are based. Plaintiffs only responded that Twitter’s subsequent conduct,

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that is, its failure to offer video or audio under the TWITTER brand until 2017, supports their

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contract claims. But such conduct is already alleged in the complaint and has been considered by

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the Court. Accordingly, leave to amend would be futile.

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B.

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Plaintiffs’ Fraud Claims
Plaintiffs also bring three fraud-based claims: (1) false promise; (2) intentional

misrepresentation; and (3) negligent misrepresentation. All of these claims fail as well.
Fraud requires “(a) misrepresentation (false representation, concealment, or

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nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance;

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(d) justifiable reliance; and (e) resulting damage.” Small v. Fritz Companies Inc., 30 Cal.4th 167,

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173 (2003). The elements for intentional misrepresentation are (1) a misrepresentation, (2)

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knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5)

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resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996). A promissory fraud

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(false promises) claim requires: “(1) a promise made regarding a material fact without any

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intention of performing it; (2) the existence of the intent not to perform at the time the promise

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was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable

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reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting

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damage to the promise[e].” Rossberg v. Bank of Am., N.A., 219 Cal. App. 4th 1481, 1498 (2013),

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as modified on denial of reh’g (Sept. 26, 2013). Each of these claims are subject to Federal Rule

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of Civil Procedure 9(b)’s requirement that “[i]n averments of fraud or mistake, the circumstances

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constituting fraud or mistake shall be stated with particularity.” That is, “[e]ach element of a fraud

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count must be pleaded with particularity so as to apprise the defendant of the specific grounds for

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the charge and enable the court to determine whether there is any basis for the cause of action.”

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Chapman v. Skype Inc., 220 Cal.App.4th 217, 231 (2013).
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As the fraud claims (like the contract claims), are based on the March 2007 discussion and

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the 2009 letter and email, and as it is not reasonable to infer from the audio or the letter and email

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that Williams promised that Twitter would never officer video or audio content under the Twitter

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brand, Plaintiffs have failed to plead any misrepresentation or promise. Further, to the extent that

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Plaintiffs’ fraud claims are based on Williams’ 2009 email saying “Don’t worry: We’re not

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expanding to audio or video under the Twitter brand,” Plaintiffs have failed to allege how or why

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this statement was false or misleading. To the contrary, at oral argument Plaintiffs conceded that

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they have no basis to allege that the statement was false when made. According to Plaintiffs,

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Twitter did not expand into audio or video in 2009, 2010, 2011, 2012, 2013, 2014, 2015, and

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2016. Thus, based on Plaintiffs’ own allegations, the statement was true.
Accordingly, Plaintiffs’ fifth, sixth, and eighth claims for relief for false promises,

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negligent misrepresentation, and intentional misrepresentation, respectively, are dismissed. As

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amendment would be futile for the same reasons as the contract claims, the dismissal is without

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leave to amend.

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C.

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Plaintiffs’ Tort Claims
Plaintiffs also plead claims for intentional interference with prospective economic

advantage and negligent interference with prospective economic advantage.
The elements of a claim for tortious interference with prospective economic advantage are:

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“(1) an economic relationship between the plaintiff and some third party, with the probability of

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future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3)

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intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual

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disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the

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acts of the defendant.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153

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(2003). A negligent and tortious interference claim have essentially the same elements, except in

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the former, the plaintiff must prove that the defendant engaged in negligent as opposed to

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intentional conduct. See N. Am. Chem. Co. v. Superior Court, 59 Cal. App. 4th 764, 786 (1997).

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Plaintiffs allege that “since establishing its business Plaintiffs have gained and maintained

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valuable economic relationships with both consumers of its content and businesses who advertise
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on, or in connection with, Plaintiffs’ programs” and that Twitter “was or reasonably should have

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been aware of these relationships” and intentionally or negligently “expand[ed] its platform and

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services to include distribution of video content” and “disrupt[] Plaintiffs’ relationships with both

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consumers and advertisers alike.” (Complaint at ¶¶ 64-66, 78-80.) To the extent that these claims

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are predicated on Plaintiffs’ contract clams, they fail for the same reasons stated above. Even if

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based on separate allegations—for example, trademark infringement— Plaintiffs’ allegations are

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insufficient because they simply parrot the elements of the claim. See Starr v. Baca, 652 F.3d

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1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not simply recite

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the elements of a cause of action, but must contain sufficient allegations of underlying facts to
give fair notice and to enable the opposing party to defend itself effectively.”) Plaintiffs have not

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pled facts that state a plausible claim for intentional or negligent interference.
Accordingly, Plaintiffs’ seventh and ninth claims for relief for intentional and negligent

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interference with prospective economic advantage, respectively, are dismissed for failure to state a

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claim. The dismissal will be leave to amend given Plaintiffs’ representation at oral argument that

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they can plead facts to support their claims.

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D.

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Plaintiffs’ Lanham Act and Common Law Trademark Claims
Plaintiffs plead two claims for relief under the Lanham Act: (1) trademark infringement, in

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violation of the Lanham Act, 15 U.S.C. § 1114(1)(a), and (2) unfair competition, in violation of

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the Lanham Act, 15 U.S.C. § 1125(a). They also make a common law trademark claim.

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A claim of trademark infringement under § 1114(1)(a) of the Lanham Act requires a

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trademark holder to demonstrate: (1) ownership of a valid mark (i.e., a protectable interest), and

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(2) that the alleged infringer’s use of the mark “‘is likely to cause confusion, or to cause mistake,

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or to deceive’” consumers. KP Permanent Make–Up, Inc. v. Lasting Impression I, Inc., 408 F.3d

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596, 602 (9th Cir. 2005) (quoting 15 U.S.C. § 1114(1)(a)), on remand from 543 U.S. 111 (2004).

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Twitter does not dispute that Plaintiffs own a valid mark; rather, it contends that the Twitter mark

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is incontestable such that there can be no claim of infringement.

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Under the Lanham Act, a trademark registration becomes incontestable if and when the
mark has been in continuous use for five years after the initial registration, there has been no final
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decision adverse to the registrant’s claim of ownership of the mark, there is no pleading challenge

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to the validity of the mark, and the registrant files an affidavit with the Commissioner of Patents

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within one year after the expiration of the initial five-year period, affirming the mark is still in use.

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15 U.S.C. § 1065. Registration with the USPTO “constitute[s] ‘prima facie evidence’ of the

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validity of the registered mark and of the registrant’s exclusive right to use the mark on the goods

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and services specified in the registration.” Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1390

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(9th Cir. 1993) (quoting 15 U.S.C. § 1115(a)). Twitter thus seeks judicial notice of its May 12,

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2009 trademark registration. (Dkt. No. 18-2.)
As discussed at oral argument, Plaintiffs’ Complaint does not sufficiently identify

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Twitter’s allegedly infringing conduct. For this reason alone the trademark claims must be

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dismissed. Plaintiffs have not sufficiently pled a likelihood of confusion given that they have not

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adequately pled what Twitter is doing that is allegedly creating that confusion. Further, unless and

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until Plaintiffs sufficiently allege infringing conduct, the Court cannot determine whether the

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incontestability presumption applies. Accordingly, the Lanham Act and common law trademark

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claims are dismissed with leave to amend.

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E.

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The Statute of Limitations
For the reasons stated at oral argument, Twitter’s motion to dismiss on statute of

limitations grounds is denied without prejudice.
CONCLUSION

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The contract and fraud claims are premised on the March 2007 TWiT discussion and the

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2009 letter and email. As there is no dispute as to the contents of the discussion or the letter and

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email, and as the discussion, letter and email, considered separately or together, do not support a

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plausible inference that Twitter agreed to never offer audio or video content under the Twitter

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brand, Twitter’s motion to dismiss the contract and fraud claims is GRANTED without leave to

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amend. Twitter’s motion to dismiss the remaining claims is GRANTED with leave to amend to

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allege facts to support those claims. Any amended complaint must be filed within 20 days of the

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date of this Order.

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The Initial Case Management Conference is reset for August 2, 2018 at 1:30 p.m. in
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Courtroom F, 450 Golden Gate Ave., San Francisco, California. A Joint Case Management

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Conference Statement is due July 26, 2018.

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This Order disposes of Docket No. 17.

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IT IS SO ORDERED.

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Dated: May 30, 2018

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JACQUELINE SCOTT CORLEY
United States Magistrate Judge

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United States District Court
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