Kinderstart.Com, LLC v. Google, Inc.

Filing 47

AMENDED COMPLAINT Second Amended Class Action Complaint against Google, Inc.. Filed byKinderstart.Com, LLC. (Yu, Gregory) (Filed on 9/1/2006)

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Kinderstart.Com, LLC v. Google, Inc. Doc. 47 Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 1 of 63 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 Gregory J. Yu (State Bar No. 133955) GLOBAL LAW GROUP 2015 Pioneer Court, Suite P-1 San Mateo, CA 94403 Telephone: (650) 570-4140 Facsimile: (650) 570-4142 E-mail: glgroup [at] inreach [dot] com Attorney for Plaintiffs and Proposed Classes and Subclasses UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION Case No. C 06-2057 JF KINDERSTART.COM LLC, a California limited liability company, on behalf of itself and all others similarly situated, SECOND AMENDED CLASS ACTION COMPLAINT FOR DAMAGES, AND Plaintiffs, DECLARATORY AND INJUNCTIVE RELIEF BASED ON: v. I. SHERMAN ACT SECTION 2: GOOGLE, INC., a Delaware corporation, ATTEMPTED MONOPOLIZATION; II. SHERMAN ACT SECTION 2: Defendant. MONOPOLIZATION; III. VIOLATION OF LANHAM ACT SECTION 1125(a): FALSE REPRESENTATIONS; IV. VIOLATION OF RIGHTS OF FREE SPEECH; V. UNFAIR COMPETITION IN VIOLATION OF CALIFORNIA B & P C CODE SECTION 17200; AND VI. DEFAMATION AND LIBEL JURY TRIAL DEMANDED SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -1Dockets.Justia.com Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 2 of 63 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 Plaintiff KinderStart.com LLC ("KSC"), by and through its attorney, brings this federal class action against Defendant Google, Inc. ("Google") on behalf of KSC itself and all other similarly situated persons, companies and entities ("Class Members") (KSC and Class Members together are sometimes collectively referred to as the "Class" or "Plaintiffs"), requests a trial by jury and alleges in this Second Amended Class Action Complaint as follows: INTRODUCTION 1. This action is brought to challenge and remedy pervasive past and ongoing unlawful practices of Defendant Google to interrupt, suspend and destroy the flow of accurate and valued information, the fair trade conducted through interstate commerce, and the flow of free speech. 2. Defendant Google, with complete mastery over the world's most widely used search engine (the "Engine"), promotes itself as delivering to persons, businesses, organizations and government agencies and officials as public users, unhindered and unblocked objective results emerging out of millions of websites in the United States and worldwide ("Websites"). 3. The Engine is publicly and openly accessible in that Google actively promotes and invites anyone with an Internet connection worldwide to perform searches based on key words and other parameters for Websites and Webpages (collectively "Web Content"). The Engine presents on the user's screen a series of pages showing search results ("Search Results"). Search Results list Uniform Resource Locators ("URLs") as Web Content destinations in an order chosen by Defendant. 4. Beginning as early as 1998, Google used its own website, press releases, advertising, public statements and securities disclosure statements to unqualifiedly promise and represent to the public, advertisers and consumers that its Search Results generated from the Engine were and are objective and free of human interference and manipulation. 5. Google Co-Founder Sergey Brin, in the December 23, 2005 issue of The Financial Times, claimed, "I believe in our mission to make information accessible and I think this is a huge amount of the world's knowledge that's just being hidden right now from peoples' eyes." Defendant's Chief Executive Officer Eric Schmidt, in an interview with The Wall Street Journal SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -2- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 3 of 63 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 on October 18, 2005, declared: "In order to guide users to the information they're looking for, we copy and index all the Web sites we find. If we didn't, a useful search engine would be impossible." 6. PageRankTM, based in part upon U.S. Patent No. 6,285,999, filed on January 9, 1998 and issued on September 4, 2001, is a designed and implemented system employed by Google to numerically value Websites on the Internet. PageRank is published and disseminated to users, consumers, advertisers and the public throughout the United States and worldwide. On information and belief, the PageRank patent was assigned to Stanford University which then licensed it to a single party, Defendant Google, and to no other parties in the world. 7. Beginning as early as 2000, Google used its own website, advertising, and public statements to promise and represent to the public, advertisers and consumers that PageRank, as determined by Defendant, is the output of one or more computer algorithms. Further, it is a figure not simply reflecting an opinion of a solely subjective value of a Website by Google, but an opinion based upon a rigorous, objective calculation using mathematical formulae, parameters and criteria. 8. Defendant does not directly charge or bill users for their use of the Engine. While this service is offered by Defendant without direct charge to users, Defendants have developed and implemented a highly profitable online advertising program known as "AdWords." Surrounding the Search Results are one or more boxes containing "Sponsored Links" having several lines of text. These Sponsored Links are hyperlinked advertisements of organizations and businesses ("Advertisers") that promote goods, services and information with the program. Advertisers accrue a fee payable to Google each time a visitor views a Results Page and clicks through to a Sponsored Link. Each time such a click occurs, the Advertiser owes Defendant as a fee. 9. Defendant also operates the advertising program known as "AdSense." This is a worldwide program and integrated network system of digital sponsored links and hyperlinked advertisements ("Advertisements") placed on Websites and Webpages on the Internet. Google programmatically selects Advertisements and lodges them on receiving Websites. To participate SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -3- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 4 of 63 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 in AdSense, a website publisher places code on its site that asks Google's server to algorithmically select relevant advertisements. Google receives fees from AdWords partners, retains a significant but undisclosed portion, and shares a remainder to the AdSense partners that give up key space on their Websites for the Advertisements. 10. Defendant Google exerts its untrammeled right to terminate AdWords and AdSense partners at any time, without notice, for any reason or no reason at all. 11. Contrary to such promises, advertising, and promotions about its Website index and Search Results, Google does not prepare and present Search Results in an objective format and does not faithfully and completely index all Websites on the Internet. Google achieves these consequences by an ongoing practice of blockage, delisting, de-indexing and censoring of such Websites, collectively referred to herein as "Block", "Blocking" or "Blockage"1. 12. Google intentionally employs a practice of arbitrarily, indiscriminately, and maliciously assigning to Websites lowered, undeserved PageRanks, in some cases even all the way down to `0' ("PageRank Deflation"). 13. The owners and managers of these Websites victimized by Google in one form or another constitute the members of the Classes and Subclasses of aggrieved parties as described and defined below (collectively, the "Class"). Google is principally responsible for conduct, which thereby warrants declaratory and injunctive relief as well as compensatory, trebled, and exemplary damages according to proof under applicable law based on injuries to the Class of Plaintiffs. THE PARTIES 14. Plaintiff KSC is a California limited liability company whose principal offices are located in Norwalk, California. Members of the Classes and Subclasses as defined in paragraphs 187, 189, 191, 193, and 194 below comprise all remaining Plaintiffs in this action. 1 Internet "Blogs" discussing Google's temporary or permanent blocking of websites have variously called Google's act of blocking "sandboxing," "penalizing" and "whacking", and the state of limbo for such handicapped sites as "the Google Sin Bin," "Google Purgatory," the "Google Bench" and "Google Jail." SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -4- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 5 of 63 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 15. Defendant Google is a Delaware corporation, with its principal place of business located within Santa Clara County, the State of California, at 1600 Amphitheatre Parkway, Mountain View, California 94043. JURISDICTION AND VENUE 16. This Court has original jurisdiction over this action pursuant to 28 U.S.C. 1332(a) because this is an action brought by at least one Plaintiff against Defendant in which "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . [c]itizens of different States." 17. This Court has original jurisdiction over this action pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. 1332(d)(2) because this is a class action where "any member of a class of plaintiffs is a citizen of a state different from any defendant and the aggregated amount in controversy exceeds $5,000,000, exclusive of interest and costs." 18. This Court has original exclusive jurisdiction over Plaintiffs' "Count One" and "Count Two" under Section 4 of the Clayton Act, 15 U.S.C. 15(a) in that they seek damages and other relief for violations of Section 2 of the Sherman Act, 15 U.S.C. 2. Such jurisdiction lies within 15 U.S.C. 26 and 28 U.S.C. 1331 and 1337(a). 19. This Court has original exclusive jurisdiction over Plaintiffs' "Count Three" for false representations and advertising under the Federal Trademark Act of 1946. Such jurisdiction lies within 15 U.S.C. 1125. 20. This Court has original jurisdiction over Plaintiffs' "Count Four" under the First Amendment of the United States Constitution, which guarantees Plaintiffs their constitutional right of free speech. Such jurisdiction lies within 28 U.S.C. 1331. 21. This action relates to other counts in this complaint of Plaintiffs which are so related to the First, Second, Third and Fourth Counts in that all such other counts form part of the same case or controversy under Article III of the United States Constitution, as hereinafter more fully presented. Therefore, this Court has jurisdiction over such state claims pursuant to 28 U.S.C. 1367. 22. This is a class action brought in diversity between the Class of Plaintiffs and Case No. C 06-2057 JF SECOND AMENDED CLASS ACTION COMPLAINT -5- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 6 of 63 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 Defendant Google, wherein jurisdiction lies under 28 U.S.C. 1332. 23. Defendant Google, a resident of the State of California, is the principal defendant from whom relief is sought by members of the Class, and whose alleged conduct forms the basis for the claims asserted by the Class. 24. Venue is proper in this District under the provisions of 15 U.S.C. 15, 22, and 26, and 28 U.S.C. 1391 because: (i) Google transacts business, committed an act alleged to be unconstitutional, illegal or tortious, and/or is found within this district; and (ii) a substantial portion of the affected interstate trade and commerce described below has been carried out in this district. 25. Intradistrict Assignment. Assignment to the San Jose division of this District is proper pursuant to Local Rule 3-2(c) and (d) because a substantial portion of the events, conduct and omissions giving rise to this action occurred within this District and division. INTERSTATE TRADE AND COMMERCE 26. At all times relevant hereto, Google was engaged in a continuous flow of interstate business with various commercial and profitable operations, including without limitation processing search requests and marketing and publishing advertisements on Search Results pages and on Webpages generally on the Internet and establishing and executing such links among millions of Websites on the Internet. Google regularly conducts business in this jurisdiction and in other locations of the United States and the world. 27. Google's business activities that are the subject of this complaint were within the flow of and substantially affected interstate and foreign trade and commerce. BACKGROUND OF THE CLASS REPRESENTATIVE 28. At one time, www.kinderstart.com ("KS.com") was one of the choicest Internet destinations for thousands of parents, caregivers, educators, nonprofit and advocacy representatives, and federal, state and local organizations and officials in the United States and worldwide to access health, educational and other vital information about infants and toddlers basically from prenatal up to age 7. 29. KS.com is a Website providing and linking to information and subjects affecting Case No. C 06-2057 JF SECOND AMENDED CLASS ACTION COMPLAINT -6- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 7 of 63 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 young children, including without limitation child rearing, child care, child development, food and nutrition, and education, under the tagline "Because kids don't come with instructionsTM". 30. Since the time in or about May 2000, Plaintiff KSC has operated KS.com with various functions, including without limitation a presentation of its own organic content, a subject directory of information, a topical index, and a search engine. 31. By 2005, steady, organic growth in visits and page views at KS.com reached approximately 10,000,000 page views by visitors on a monthly basis. 32. Beginning in 2003, Plaintiff KSC enrolled into Defendant Google's AdSense Program and placed a series of sponsored links for compensation from Google under this program. Following enrollment into the program by Plaintiff KSC, in or about August 2003, Plaintiff KSC began placement of a series advertisements out of the Google Network onto KS.com and began to receive fee payments from Defendant Google for rendering AdSense services. GOOGLE AS THE DEFENDANT 33. Defendant Google is the dominant actor in the world of searching all forms of text, Web and image content on the Internet. It operates a search engine, topical directory, an electronic commerce system for referral, electronic payments system, among other tools and functions. A. DEFENDANT AS A MONOPOLIST The Relevant Markets 34. Defendant Google owns and operates the Engine in the market of search engine design, implementation and usage within the United States (the "Search Market"). Defendant generates and processes search queries of key words that appear within the approximately 10 billion Web pages currently indexed by Defendant Google on its tens of thousands of servers. 35. Obtaining and seeking data on the Internet is almost completely dependent upon using a search engine. Browsers encounter an almost unlimited number of URLs that include a variety of trailing suffixes (e.g., .com, .net, .org, .info, etc.). Given how many sites a browser may visit and wish to return to, the process of bookmarking uniformly and consistently is SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -7- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 8 of 63 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 difficult where browsers use multiple access points from office, home, portable, public and borrowed devices. Therefore, the search engine is a vital means to identify and locate the Website of an organization, business or person without remembering the URL. Google itself has stated on its Website: "The overwhelming amount of information of the web requires an excellent search service to render that information accessible and useful. Without a powerful search tool, finding a specific website can be as difficult as finding a book in a library that has no card catalogue and a completely random method of storing its books." 36. On information and belief, as of July 2006, Defendant Google has garnered in excess of 55% market share of all closed and open access search engine use on a combined basis within the Search Market and in excess of 75% market share of all open access search engine use within the Search Market. 37. Google's CEO has stated about America Online the following: ''AOL has been our longest and in many ways tightest partner for many, many years. We hope it will be true forever.'' In 2005, up to 10% of all of Google's search advertising revenues emanated from AOL sites. AOL, based on its alliance with and investment from Google, uses the Engine as its Web search engine. When AOL's market share based on the Engine in the Search Market is combined with Google's native market share derived from its own website, the Engine of Google is used in excess of 60% of all search queries among users within the Search Market in the U.S. 38. In a market related to the Search Market, Defendant Google operates two online advertising programs known as AdWords and AdSense with the relevant market of the "Search Ad Market." AdWords enables Websites within the Google Advertising Network to display Sponsored Links on Google's Results Pages presented to users by the Engine operating within the Search Market. AdSense allows Advertisers with Sponsored Links to have Google programmatically display their ads on the Websites of AdSense Partners which are a part of the Google Advertising Network. The universe of advertisers who seek and pay for online advertising target and reach Internet browsers and users of search engines. Therefore, the Search Ad Market is a distinct but related relevant market in which Defendant Google can and does SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -8- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 9 of 63 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 participate, set prices, affect demand and supply of search ads, and impact competitors, competition and consumers. 39. Within the Search Ad Market, Defendant Google carries a market share of at least 75% of the relevant market based on total revenues among advertisers in the U.S., in which Google's AdWords and AdSense programs dominate. Defendant is easily the largest and best recognized online advertising network in the United States for millions of third-party Websites. 40. Defendant Google is ever increasing its market share of the search and search-led advertising markets in certain demographic groups, particularly among those aged 25 and under. Google leverages its branding and appeal among these users who often prefer linked multiple channels and functionality, including e-mail, electronic payments and all other forms of online tools that are cross-branded and cross-sold within this target audience and consumer base. 41. Dangerous probability of success in monopolizing the two relevant and related markets exists because Google' market shares is steadily rising and is in each market upwards of 60% or more. 42. Market shares of two major competing firms of Defendant, individually and in the aggregate, in the two relevant markets of search and search ads have fallen since January 2005. 43. Defendant Google derives at least 98% of its total company revenues from searchrelated advertising, which exceeded $3.1 billion for the year ended December 31, 2004. Searchrelated advertising revenues for the industry as a whole during the 2004 fiscal year was approximately $3.9 billion. For the 2004 fiscal year, Google attained a market share based on revenues alone that exceeds 80% of the search-related advertising revenues. 44. For the fiscal year ended December 31, 2005 according to the Google 2005 10-K, Google online advertising revenues within the United States reached approximately $3.3 billion, while the industry as a whole within the United States is estimated to reach $5 billion in such revenues. For the 2005 fiscal year, based on search-related advertising revenues Defendant Google enjoyed at comfortable market share in excess of 65% of the Search Ad Market. According to Defendant Google's Form 10-K for the fiscal year ended December 31, 2005 (the SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -9- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 10 of 63 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 "Google 2005 10-K"), Defendant Google's total advertising revenues worldwide for the 2005 fiscal year exceeded $6 billion. 45. Over 90% of search marketers place advertising with Google for their Websites or their clients' Websites. This near universal dependence on Google further demonstrates that Google holds a monopoly share within the relevant market of search services linked with searchdriven advertising. 46. All Websites of businesses, organization, government entities and persons throughout the United States, once indexed by Defendant Google, are assignable with a PageRank ranging from "0" to "10" by Defendant Google. PageRank as promulgated and propagated by Defendant Google throughout the Internet, is now the de facto and prevailing standard for rating Websites throughout the United States. Barriers to Entry into the Relevant Markets 47. On information and belief, there are growing, even insurmountable barriers to entry into the Relevant Markets such that no competitor, new or existing, can challenge the nearcomplete control of the markets by Defendant. 48. As to existing competitors of Defendant Google, two of its next largest competitors are losing market share within the Relevant Markets to Google as follows: (A) Yahoo! unsuccessfully tried to build a stand-alone index and directory off of the Open Directory Project to free itself of dependence upon Google's index, but has actually lost market share. Its CEO has conceded that it cannot make any serious gains in market share of search and the company is no longer attempting to ever challenge Google's top position in the relevant market. (B) Microsoft, while flush with technology, capital and talent, has not made any appreciable gain in its market share in the relevant markets. Even with its size and reputation, this powerful company has been unable to secure any significant user migration started onto its search engine. 49. As to smaller competitors together with recent entrants, their aggregate market share in the relevant markets has actually moved downward during the 2006 calendar year. The causes for their massive handicap are as follows: SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -10- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 11 of 63 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 50. Defendant's Control of Information. Google News is now a major media force, particularly because it can assign priority and immediacy (or the lack thereof) in news and other information tools. Discovery and identity within any market of any new company or new entrant into the relevant market mandates immediate information access. Much of news and information about companies is channeled in the United States through search engines. Google has dominant control of news and information, and can literally Block, sandbox, PageRank deflate or ban any new competing site and search engine emerging out of its shell. The anticompetitive conduct as alleged below make the task of a new search engine launch to challenge Defendant Google even more daunting. 51. Use of PageRank as a Legal and Marketing Shield. PageRankTM as a U.S. Patent expires in the year 2017. It has been licensed exclusively to one private company Defendant Google until the year 2011. PageRank is the de facto universal, worldwide industry and consumer standard for assessing the value and worth of a Website. PageRank, claimed by Google to be protected by trade secrets, effectively influences millions of users, businesses and organizations regarding the evaluation and goodwill of millions of Websites across the Internet. As existing and new competitors attempt to challenge Google in the relevant markets, they are unable to use or license PageRank exclusively reserved for Google through at least the year 2011. The technology, legal and marketing barriers to develop a competing Website rating tool are plainly insurmountable. Further, any new or existing Website or competitor that faces the abusive, deliberate and unchecked use of PageRank Deflation by Defendant Google will be challenged and harmed when entering and expanding in the relevant markets. 52. Importance of the Open Directory Project ("ODP"). Any new search engine must have access to and index the largest possible and most comprehensive database of Websites, which is the OPD. New engines should have clear and open access to the OPD. However, on information and belief Defendant Google exerts a material if not controlling influence on whether a Website can be included in the OPD. Google's own index of Websites starts with a mirror copy of the OPD. The inclusion of a site in OPD is a very strong, if not determinative, factor for Google to consider inclusion in its own Web index and ultimately gain visibility and SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -11- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 12 of 63 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 user traffic on the Internet. If a new site and search engine itself is refused by OPD for inclusion, it must wait another full year to be re-considered for inclusion. This fact alone can delay any rapid entry by a new competitor into the Relevant Markets. 53. Massive Investment Requirements. Any serious search engine must have a massive computing infrastructure to be able to search the World Wide Web and its perhaps 10 billionsome sites and counting. Defendant Google is known to have over 150,000 networked servers across the entire United States and worldwide. This massive database naturally requires active, on-call redundancy and back-up. The network to support massive search traffic and results must include high-speed, robust Internet bandwidth and pipes that are increasingly limited in supply, even with available capital alone. An equally vital investment comes from building or and monetizing sustainable advertising revenues from a secure online advertising network of critical mass. These revenues must be grown and sustained to fund a broad, robust search engine and index in the Search Market. The ad network itself is unlikely to grow because advertisers when reaching target audiences will turn to secure, established search engines (as in the Engine) that already have a mass following in the Search Market. 54. Entrenched Buyer Preferences. Any search engine must be free to the user because of past user experience and expectations with search engines and due to the preexisting governmental and technological policy of Internet freedom and Internet neutrality. Therefore, any new entrant to compete against Google is almost certain to make its use free and without charge. Therefore, the only way for revenue and survival is to build a critical mass and network of online advertisers. Further, Defendant Google has differentiated itself from all other search engines and competitors. It claims it indexes every site it locates on the Internet, and that its Search Results and PageRank are objective and trustworthy, generated solely by computer programs and algorithms. Further, Defendant has represented within various media and documents that once its Search Results and PageRanks are initially generated by computer, they are not manipulated or further adjusted by human beings. All these are misrepresentations to the search user population that have flowed through a steady stream of persuasion, advertising, Web content, and securities law disclosures over the past seven years and counting. Therefore, users SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -12- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 13 of 63 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 prefer and trust the claimed objectivity of the Engine over all other options. In addition, as Google's gmail has garnered a substantial market share for e-mail accounts particularly among the younger generation, Google as the search engine of choice for new users will prove to be even harder to break. 55. Secured Relationships with Academia, Libraries, Business and Entertainment. Google's multiple nationwide library digitization and search contracts and partnerships with academia, schools, and libraries (collectively, "Public Information Sources") mean that any person seeking facts or research are going to be regularly and even automatically steered to Google's Engine by Public Information Sources, and by their respective Websites through hyperlinks, and by their respective staff, educators, and written and electronic informational and promotional materials. 56. Technical Requirements for Acceptable Search Load Times. Load times for a search engine and its results are crucial for appeal and user value. On information and belief, the load times for the Engine for a user normally do not exceed one-half of a second. Other search engines have taken upwards of five seconds to load results. This is directly related to the amount of capital and technical investment required for a search engine. If a new search engine's load time is too long for the user, it simply will not be adopted and heavily used. With the established expectation of search engines to load results quickly from massive amounts of Website Content, a competitor in the market faces serious difficulties to enter or grow in the market. 57. User Tracking Data. In partnership with AOL, Google has nationwide and worldwide the greatest amount of user behavior and histories. As Google's revenues are 98% based upon advertising, it takes not only a massive technical infrastructure but a massive amount of historical data, all archived, backed up and accessible. As 90% of online advertisers use Google, they expect and demand data on search behavior of their target audiences. Google uses online tracking tools and reports to give advertisers updates on performance of their campaigns in order to make quick changes or refinements. Advertisers in a fast-moving Web-savvy consumer and commercial market cannot afford to await a new entrant to ably provide a mass of SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -13- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 14 of 63 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 visibility and user traffic and behavioral data. Accordingly, any new search engine with an online ad program will face extreme difficulty in having advertisers switch from Google. Species and Impact of Defendant's Anticompetitive Conduct 58. Defendant is engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Selecting target competitors in the Search Market and artificially depressing the PageRanks of Websites of Class members, which would otherwise have received and yielded a higher PageRank under its normal operation but for human intervention and override; b) Promoting generally the widespread, worldwide use, value and reliance of PageRank by users and search advertisers over the Internet across the United States; c) Publishing and disseminating the deflated PageRanks of competitors worldwide on the Internet; d) Choosing in some instances to deflate PageRanks of competitors as Class members in retaliation for certain behavior or actions against Google, including, by way of example, (1) the case where Plaintiff KSC witnessed an unexpected rise of its PageRank to `7' after the filing of the initial Complaint in or about April 4, 2006, only to see a sudden drop in PageRank all the way back down to `0' immediately after the Court's July 13, 2006 Order, and (2) the case where a Website and putative Class member suffering from PageRank Deflation submitted a letter from its attorney to Defendant Google asking for remedial and fair treatment, only to have the Website owner's other Websites suffer from PageRank Deflation within the next month. 59. Defendant is further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Filing public disclosures during 2004 to 2006 with the Securities and Exchange Commission ("SEC") as required by the Federal securities laws and various state securities regulatory agencies across the United States as required by blue sky laws; b) Making misrepresentations of material facts and false and misleading statements within such disclosures for the purpose and effect of falsely differentiating and SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -14- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 15 of 63 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 labeling Google's search engine results as objective and free from human tampering and bias, when in fact such results are manipulated for gain and advantage of Google and certain third parties; c) Using such publicly sworn statements and misrepresentations to unilaterally distinguish to the investment community, public, search users, and advertisers that the Engine is superior to all other competing Class members because of the Engine's purported objectivity; and d) Failing to make and file with the SEC and state regulatory agencies necessary corrective or amendatory disclosures to rectify and/or eliminate misrepresentations within the original disclosures. 60. Defendant is further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Selecting target competitors in the Search Market and blocking, banning and/or censoring Websites of Class members, which would otherwise have appeared as organic search results under the Engine's normal operation but for human intervention and override; b) results"; c) Breaching Google's own published and public policy where it states: "When Violating Google's own published and public policy "not to censor search we remove search results, . . . we display a notice on our search results"; d) Failing to display to users in the United States on Search Results pages that Websites are in fact Blocked or censored from viewing by the user, as opposed to the practice of Google to do so for search results presented through www.google.cn in China to comply with local laws and regulations; e) Failing to provide any advance notice or warning to competitors' sites that are Blocked, banned or censored by Google; f) Failing to provide any meaningful, reasonable, timely and fair means, technical, financial or otherwise, for such competitors' sites to be re-included in Google's index; and SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -15- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 16 of 63 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 g) Choosing in some instances to Block, ban or censor Websites of competitors as Class members in retaliation for certain behavior, speech, or actions of such firms deemed to be unfavorable or undesirable by Google in its sole discretion, including, by way of example, (1) the case where a Website of a putative Class member suffering from Blockage, after sending to Google an attorney's letter to request remedial action on its Blocked site, suddenly found a host of its other sites suddenly Blocked, (2) the case where a competing search engine based in Maryland had its site Blocked and continue to be Blocked after publishing content that challenged the operation of the Engine and the inappropriate search practices of Defendant Google and the Engine, and (3) the case where a site carrying certain political content and views suffered from selective, immediate, and arbitrary enforcement and the penalty of Blocking by Google after of one or more of its Web Recommendations (as defined in paragraph 160 below) were violated as alleged and reported by a third party to Google, even though similar Websites with other or alternative content and views were not and are not so identified, targeted, and penalized. 61. Defendant further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Using its Website to publish and disseminate statements constituting false advertising about the purported objectivity of Google's Search Results; and b) Authoring and endorsing statements of the Engine's objectivity which are clearly false, clearly material, clearly likely to induce unreasonable reliance by users and advertisers alike, made to unsophisticated parties who are unskilled in knowing or understanding the difference in search results, continued for long periods of time going back as far as 1999, and not readily or effectively refuted, challenged or cured by competitors in the relevant markets. 62. Defendant further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Inducing persons and businesses with Websites to enlist in Google's AdSense program and generate traffic and revenues from the placement of Advertisements from the AdWords network onto Google's Search Results pages and onto other online content; SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -16- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 17 of 63 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 b) Arbitrarily reducing traffic through Blocking, or PageRank Deflation of competitors as AdSense partners, including without limitation Plaintiff KSC; c) Intentionally terminating the AdSense contracts of competitors as Class members relying upon internal and/or disclosed reasons based on pretense and not related to economic sense or business justification, including without limitation: (1) pure suspicion or discretion of Defendant Google that the AdSense partner has somehow intentionally or inadvertently allowed click fraud to occur on AdSense advertisements appearing on the partner's site; (2) general or specific complaints from AdWords partners about click fraud occurring with their placed Advertisements; (3) (4) litigation generally arising from click fraud; and business, commercial, or intellectual property disputes, including by way of example Google's trademark challenge to a competing search engine based in Southern California that used an allegedly valid trade name for its engine, only to have its AdSense contract terminated without recourse by Defendant Google under its fear of further confusion by the further appearance of the AdSense Advertisements viewed by site visitors already arriving at the competitor's site, even though (i) such Advertisements are programmatically placed by Google without the AdWords advance knowledge of destination Website of the AdSense partner and (ii) Google states on its Website to AdSense partners that when "Google provides the ads, you have no advertiser relationship to maintain"; d) Falsely claiming to AdSense partners that there are legitimate business reasons for termination of their AdSense contracts, ceasing payments of AdSense ad fees to such partners, failing to remit accrued ad fees for previously run Advertisements, and failing to promptly or actually disable AdSense ads that continue to appear on the sites and occupy valuable space on such sites of AdSense partners against the will and consent of such partners; e) Causing, as a result of one or more of the above events, the sudden reduction or elimination of revenues that are significant and vital to the survival of such AdSense partners and their businesses, which destroys or tends to destroy competition in the relevant markets and SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -17- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 18 of 63 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 further intimidates and discourages other potential competitors to venture into the relevant markets and engage in competing online ad placement as a business, which may lead to participation in, followed by the sudden termination from, the AdSense network operated and controlled by Defendant Google. 63. Defendant further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows a) Identifying various Websites unfairly and arbitrarily deemed by Google in its sole discretion to be spam or marginal viewer content, and removing them from Google's index in order to redirect users and valuable search traffic to sites competing against such Websites; b) Lodging and profiting further from banked AdSense Advertisements onto such sites without the full knowledge of AdSense Partners, by welcoming a stream of search users re-directed from other search engines onto these low-quality sites; c) Appropriating low-quality sites as a means to unfairly increase the fees paid by AdSense partners to Google for no meaningful absolute gain in uniquely acquired and paid for search traffic; d) Capturing and retaining such traffic redirected from low-quality sites sent via search results of other major competitors, thereby intentionally degrading the search user experience for these competitors that leads them to migrate to Google as their search engine of choice in the short or long term. On information and belief, over 50% of sites that have been banned or de-indexed by Google continue to feed in detoured and redirected search user traffic amounting to large amounts of click-through revenue from the AdSense program. 64. Defendant further engaged in and continues to engage in anticompetitive and exclusionary practices and conduct as follows: a) Establishing pricing system for AdWords advertising services whereby advertisers bid against one another to arrive at a certain unit price per click-through for having its advertisement appear in the margin of a results page generated by a keyword search; SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -18- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 19 of 63 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 b) Having secured a dominant share of the Search Ad market through the AdWords program, launching a new system of ranking the Websites and pages of Defendant's competitors known as "Landing Page Quality" ("LPQ"); c) On information and belief, creating and utilizing LPQs as a device to impose minimum floors for bids for AdWords keywords by advertisers; d) Imposing massive, exorbitant and disruptive price increases and price discrimination upon AdWords advertisers running ongoing e-commerce and ad campaigns, based on secretive and arbitrarily determined LPQ ratings for disparate Websites; and e) Broadly and maliciously disrupting and harming competition that has depended upon a free flow of information, online promotion and e-commerce by making it difficult if not prohibitive for the market of advertising Websites to preserve a viable cash flow position and sustain and retain their business, success and survival. B. DEFENDANT AS AN UNFAIR COMPETITOR 65. Defendant and Class I Plaintiffs, including KSC, are competitors in the same market of securing, retaining and growing traffic by use of a search engine and directory on their own Websites, and earning revenue based on advertisers who place sponsored links and pay Defendant and the Subclass based on one or more business models, including that which generates pay-per-click fees arising from click-throughs by the search user. 66. Defendant itself is engaged in broad intrastate, foreign and interstate commerce by profiting from the offer, sale and/or provision of information and the flow of information, ecommerce and advertising facilitated by the Engine and search results. 67. Defendant misrepresents its own products and services in and through various media, including its own website, that its search results are objective and free of human interference or manipulation, when in fact they are allegedly subjective and subject to human tampering and violate the promises and guarantees made by Defendant itself. 68. Defendant has made and continues to make untrue statements of material fact to the SEC, and various securities regulatory agencies among one or more of the 50 United States, including without limitation that of the State of California, that its search results are objective. SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -19- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 20 of 63 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 69. Defendant through its counsel admitted on June 30, 2006 in a hearing before this Court that Defendant's search results are not objective but indeed subjective and understood by as such by the average person. 70. Defendant's misrepresentations about objectivity of search results, without human manipulation, deceive or have a tendency to deceive a substantial segment of Defendant's audience, including without limitation (a) persons using the Engine for search and persons who advertise in reliance upon a loyal and trusting search audience and (b) the founder of a competing search engine who states, regarding the Engine, "Google relies 100% on computers." 71. Defendant's misrepresentations about objectivity of search results are material to, and likely to influence, the decision of Advertisers and other partners that use Defendant's products and services. 72. Defendant's misrepresentations about objectivity of search results proximately cause Class I and Class III Plaintiffs a loss of sales, a diversion of sales from itself to Defendant and/or its third party beneficiaries for direct or indirect benefit, and a loss of Plaintiffs' goodwill. 73. Defendant misrepresents its own products and services in and through various media, including its own website, that its Website rating system known as PageRankTM is objective and free of human interference or manipulation, when in fact it is actually subjective and subject to human tampering and actually manipulated by human involvement. 74. Defendant's misrepresentations are made in a commercial advertising or promotion and they deceive or have a tendency to deceive a substantial segment of Defendant's audience, including persons using the Engine for search and persons who advertise or otherwise do business with competitors in reliance upon the competing Website's PageRank. 75. Defendant's misrepresentations about objectivity of PageRank are material to, and likely to influence, the decision of Advertisers and other partners that use Defendant's products and services. Many Websites, businesses and organizations have terminated or refrained from commercial, marketing and financial relationships with Class I, Class II, and Class III Plaintiffs because they carry, either knowingly or unknowingly, `0' PageRanks ("0-PR"). SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -20- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 21 of 63 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 76. Defendant's misrepresentations about objectivity of PageRank proximately cause Class I, Class II, and Class III Plaintiffs a loss of sales, a diversion of sales from itself to Defendant and/or designated beneficiaries for direct or indirect benefit, and a loss of Plaintiffs' goodwill. 77. Defendant misrepresents the value and worth of the Websites and businesses of the Class I, Class II, and Class III Plaintiffs, including KSC, in and through various media, including its own website, and the Google Toolbar, by artificially and arbitrarily violating the normal operation of PageRank and assessing deflated and even 0-PRs to such competitors' Websites. 78. Defendant's misrepresentations with manipulated and deflated PageRanks are made throughout the Internet with use of the downloadable Toolbar provided for free by Defendant to thousands of persons and businesses on the Internet. Further, Webmasters of sites can freely access the Google Directory, www.directory.google.com. The ODP is accessible through www.dmoz.org which presents PageRank for viewing well. In contrast to Google's Toolbar PageRank, the scale of PageRank within the ODP does not have a `0' figure but ranges from `1' to `7'. 79. Defendant's misrepresentations with manipulated and deflated PageRanks deceive or have a tendency to deceive a substantial segment of consumers audience, including persons using the Engine for search, persons who advertise in reliance upon a loyal and trusting search audience, and persons that otherwise engage in business or commercial relationships with Classes of Plaintiffs, including KSC. The deception is due, in part, to Defendant Google's seven-year promotion and publication to the public that PageRank is protected by a U.S. Patent. 80. Defendant's alleged misrepresentations are material to, and likely to influence, the decision of Advertisers and other partners that use products and services and the Classes of Plaintiffs, including KSC. 81. The PageRank of Websites serves as an intrinsic and fundamental reason as to whether parties will engage in business with Classes of Plaintiffs, including KSC. 82. Defendant's alleged misrepresentations proximately cause the Classes of Plaintiffs a loss of sales, a diversion of sales from itself to Defendant and/or designated beneficiaries for SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -21- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 22 of 63 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 direct or indirect benefit, and a loss of Plaintiffs' goodwill. C. DEFENDANT AS A STATE ACTOR VIOLATING FREE SPEECH RIGHTS 83. The Engine accepts text-based queries and other search criteria over the Internet from millions of users weekly across the U.S. These queries cover the widest possible range of topics, expression, and opinions on all facets of society, culture, and human experience, including politics and religion ("Topical Queries"). 84. The Engine presents for access, viewing, reading and hearing Websites and Web Content that are associated and linked with Topical Queries ("Speech Content"). Search Results are ordered by the Engine as textual excerpts or snippets release and channel Speech Content out to users across the U.S. up to 150,000 times daily. 85. In both stated purpose and function, Google sets the Engine apart from all other search engines in stating, "In order to guide users to the information they're looking for, we copy and index all the Web sites we find. If we didn't, a useful search engine would be impossible." Further, Google has made the commitment and practice to invite every possible Website on the Internet containing any form or type of Web Content to be spidered by Googlebot and properly and fully indexed and searchable by the Engine. 86. Google makes it a stated policy that it allows and encourages Topical Queries of any sort to be presented to the Engine and that it places no limit or restriction on Web Content. Google expressly waives any responsibility for Speech Content appearing through the Search Results that may be inaccurate, inappropriate, vulgar or offensive to the listening user. Google further enjoys near complete immunity and protection afforded by federal law against liability for content that appears through the functioning of Engine over the Internet. 87. Google acknowledges that removal of Web Content from its index can be "inappropriate". Accordingly, Google's website represents that removal of Websites and Web Content from Google's index is not done except (a) upon request of the webmaster of the Website, (b) in the case of "spamming" the index, or (c) as required by law. 88. Google's practice and policy of unrestricted Speech Content through the Engine as stated in the above paragraphs create an unlimited expectation among millions of public users of SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -22- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 23 of 63 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 the Engine that, unless there is a knowing or unknowingly operation of filters to restrict the Search Results, all forms of Speech Content are available for access and viewing in the public domain. 89. Google's practice and policy on unrestricted Speech Content is further reinforced among public users of the Engine when it promises to reveal and disclose when censorship and removal of Speech Content occurs in its statement, "When we remove search results, . . . we display a notice on our search results." On information and belief, not once has the Engine ever produced Search Results viewed within the U.S. that disclose or notify users that Speech Content, URLs or Websites have been removed from the results. 90. The Engine, by virtue of its unprecedented and unmatched size, promised inclusiveness and objectivity, and functional mass to index, associate, transfer and link Speech Content of all Websites with and among users in the public domain, operates as and is a public forum for speech on the Internet. 91. Defendant Google has created and now controls as the sole steward the Engine, which is a public forum for the expression, transfer and flow of information, opinions, ideas and speech among millions of users, Websites and members of the public. The Engine operates 24-7 to allow any user to perform a search for Websites and Web Content and viewing and receiving speech and information of all forms. Defendant has confirmed in a written letter in or about March 2006 that the "GOOGLE search engine . . . is available to the general public." Anyone with Internet access can go to Defendant's own website or any number of thousands of other Websites having a "Google Search Box" as provided by Google to use the Engine without payment or charge. Further, the Engine is endorsed and lodged for open public use through the platform of thousands of public agency, public educational and public institutional facilities and Websites. All of these statements, actions, and conditions, among many others, as initiated and effected by Google demonstrate that Google has willfully dedicated the Engine for public use. 92. Defendant Google is a state actor by its open alliance and partnerships with key public institutions to digitize, index, control and commercialize massive quantities of material under copyright and material in the public domain housed and previously restricted from broad SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -23- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 24 of 63 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 copying and commercialization. Defendant Google has commenced a program to digitally copy and archive the complete university libraries of the University of California, Stanford University and the University of Michigan, and portions of the New York City Public Library. Defendant Google has partnered with the very largest and substantial public university, academic and government funded libraries to formulate an indexible, searchable, federated digital archive the content of all such libraries. These libraries access and share and exchange digital content with all other public and academic libraries across the entire United States in order to have Defendant Google as the master search engine and digital archive for all such libraries. 93. Major public universities, government agencies, and public libraries actively and aggressively promote, encourage and support the public use of the Engine as built, managed, controlled and operated by Defendant Google, including, by way of example, University of California - Berkeley which instructs students, faculty and staff to learn to use and rely upon the Engine for research with "Teaching Library Internet Workshops" which states: Google is still recognized as the best general web search engine. Recognizing this, we have decided to update and continue to offer a "Googling to the Max" course in which we teach how to use Google really well, taking advantage of its features and negotiating around its weaknesses. . . . Why Google? Google is the BIGGEST search engine database in the world. PageRankTM often finds useful pages. It is one of the defaults that cannot be turned off in Google and is not for sale. (Emphasis in original.) This course and other similar courses on Google Engine usage are taught around the United States at publicly owned and/or funded universities using publicly funded staff and facilities. 94. Defendant Google has a library division and business development team which promotes the use of the Engine and other information services built and operated by Google, including, the Library Links program with U.S. public and private libraries, Librarian Center, Book Search, and Google Scholar. Google has effectively imbedded its brand and the Engine inside the sites at such universities, making it the #1 Web search and search engine tool used and relied upon at public universities and colleges throughout the United States. 95. Public Information Sources freely offer facilities, Internet access to patrons and Case No. C 06-2057 JF members of the public, whom, when using the Engine, view Advertisements and engage in eSECOND AMENDED CLASS ACTION COMPLAINT -24- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 25 of 63 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 commerce from and through the Engine. Defendant Google derives material and profitable traffic and audiences from the public use of the Internet and the Engine from Public Information Sources, which do not restrict the use of the Internet or the Engine other than to comply with the Child Online Protection Act and similar laws that mandate software filters against material unsuitable for children as a condition for government funding. 96. Defendant Google has provided, without charge, a steady stream and diet of resources, benefits, technical expertise, consultants to library and information science programs of a vast number of public universities and colleges throughout the United States. This facilitates the massive endorsement of the Engine and its related features, tools, and functions by such public educational institutions to their staff, faculty and students. 97. Through its ongoing exhaustive campaign in the educational and commercial markets, the Engine of Google has become the dominant information source for teens and students. In a recent survey conducted among teens in 2005, 78 percent of teens rate search engines as an information resource as somewhat or very favorable, with over 50 percent considering search engines as the perfect information source. The Engine is the largest of these search engines. 98. College and research libraries currently face increasing budget pressures in 2005, with libraries of municipalities, public educational facilities and large public universities ("Public Information Sources") reporting a tighter financial pressure than private institutions with healthy endowments. Accordingly, a reduction and shut-down of services and facilities and staff lay-offs has been pervasive among Public Information Sources in the United States, forcing them to increasingly rely upon consortia and collaborations to maintain services while controlling costs. 99. The wholesale linkage and endorsement by Public Information Sources, including U.S. public universities, to the Engine of Defendant Google has been effectuated and activated without sufficient disclosure by Google of the practice and propensity of censorship, Blockage and/or PageRank Deflation to occur in Search Results or Webpage views based on SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -25- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 26 of 63 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 discriminatory political or religious content or vague and/or overbroad content guidelines known as Web Recommendations (as defined in paragraph 160 below). 100. Public Information Sources have not performed sufficient due diligence to determine the nature, risk and spread of censorship, Blockage, and/or PageRank Deflation of Websites throughout the United States and the world. In addition, a sizable number of Public Information Sources are aware of censorship and Blockage of Websites by Google with the Engine but have not taken any effective steps to request or demand that Defendant Google release the new content of such Websites or resume the open circulation of such preexisting Website content. Specifically, Webmasters employed at or servicing Public Information Sources are aware of Blockage by Defendant Google. 101. Two of the largest public universities in the world, the University of California campuses, and the University of Michigan, have established partnerships with Defendant Google to digitize all printed content within such university libraries, both that under copyright and that outside of copyright ("Google Copied Library") under comprehensive cooperative agreements with Google. By way of example only, the Cooperative Agreement between Defendant Google and the Regents of the University of Michigan / University Library, provides in relevant part: (a) Google is to make two digital copies, one for itself (Google Digital Copy) and one for U-M (U of M Digital Copy), and will have the right under the Agreement to make unlimited copies of the Google Copied Library for provision, licensing and sale of such content to any third party, in its sole discretion. (b) Google and U-M have jointly agreed to a "Distribution Price" which the per-page amount is charged by Google to the general public for distribution to the general public. Google sets this amount based on the price used for other similar content and if none exists, Google and U-M will jointly agree on the price. (c) As Google and U-M both acknowledge the possibility of copyright infringement suits against either or both from alleged violations of the Copyright Act, each will indemnify the other party for damages, legal costs and other consequences of such violations. SECOND AMENDED CLASS ACTION COMPLAINT Case No. C 06-2057 JF -26- Case 5:06-cv-02057-JF Document 47 Filed 09/01/2006 Page 27 of 63 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 28 102. On information and belief, Google gains profits from the Google Copied Library by appropriating digital content from the Google Copy onto its own website to attract visitors and generate greater advertising revenues. This constitutes commercial use of the copyrighted material within the Google Copied Library and amounts to a material financial benefit to Google from its unlimited and unchecked use of public, copyrighted material surrendered by the Public Information Sources. 103. Since 2004, Google has already digitized massive amounts of copyrighted material held within the Public Information Sources which allegedly violates on a massive, unprecedented scale, the copyrights of owners, authors, publishers and other aggrieved parties. Portions of this content are already viewable by the public through Google Book Search. Both Google and Public Information Sources fully acknowledge that copyright infringement cases (collectively the "Library Lawsuit") are being filed and litigated, creating a serious risk of financial damages and/or injunctive relief against both sets of actors. 104. On information and belief, the receipt of content from Google out of the Google Copied Library and subsequent copy and distribution of such content under unexpired copyrights constitutes contributory and willful copyright infringement by Public Information Sources, for which Google plans to fully indemnify its library partners for damages and costs. On U-M's Website, it states, "The [Library] [L]awsuit was disappointing, but not unexpected." Such compensatory and exemplary damages, if imposed upon Public Information Sources, will be material and adversely detrimental to the viability of such libraries lacking sufficient coverage which may be either non-existent or insufficient for willful

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