Alan Ross Machinery Corporation v. Machinio Corp.
MEMORANDUM Opinion and Order: For the foregoing reasons, Defendant Machinio's motion to dismiss the complaint, R. 16 , is granted without prejudice. If Plaintiff Alan Ross Machinery believes it can cure the deficiencies identified in this opi nion, it may file a motion for leave to file an amended complaint on or before July 30, 2018. The motion should attach a redlined comparison between the current complaint and the proposed amended complaint, and it should be supported by a brief of no more than five pages describing how the proposed amended complaint cures the deficiencies in the current complaint. Machinio is not to file a response unless directed to do so by the Court. Signed by the Honorable Thomas M. Durkin on 7/9/2018:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
ALAN ROSS MACHINERY
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Plaintiff Alan Ross Machinery Corporation brings this action against
Defendant Machinio Corporation alleging Machinio “scraped” 1 sales listings of
industrial machinery from Alan Ross’s website and duplicated those listings on its
website. Alan Ross brings five causes of action against Machinio—(1) violation of the
Lanham Act, 15 U.S.C. § 1125(a); (2) violation of the Computer Fraud and Abuse Act
(“CFAA”), 18 U.S.C. § 1030, et seq.; (3) breach of contract; (4) unjust enrichment; and
(5) tortious interference with prospective business advantage. Before the Court is
Machinio’s motion to dismiss the complaint in its entirety. For the reasons explained
below, Machinio’s motion is granted.
“Web scraping, also known as web harvesting or web data extraction, is data
scraping used for extracting data from websites using automated ‘bots’ or ‘spiders.’ It
is a process whereby an automated piece of software extracts data from a website by
‘scraping’ through the site’s many pages.” R. 3 ¶ 11.
Machinio is “a global search engine for finding used machinery and
equipment.” R. 3 ¶ 15. Machinio’s “database contains more active machinery listings
than any other website.” Id. Alan Ross claims to be the “largest vendor of used and
new scrap processing and recycling equipment.” Id. ¶ 5. It maintains a website listing
machinery for sale. There are no allegations that Alan Ross manufactures the
machinery it sells. See, generally, id. Alan Ross alleges that Machinio is one of its
“direct competitors” in the “scrap processing and recycling equipment business.” Id.
At some point between September 27, 2016 and October 24, 2016, Alan Ross
and Machinio discussed using Machinio’s website to list Alan Ross’s content for sale.
Id. ¶¶ 15-16. Alan Ross eventually decided not to list its content on Machinio’s
website. Id. ¶ 17. Alan Ross then alleges it “expressly demanded that Machinio not
scrape Alan Ross’s website.” Id. ¶ 18. Nevertheless, Machinio used web scraping
techniques to extract Alan Ross content without consent, and duplicated Alan Ross
listings on Machinio’s website. Id. ¶¶ 19-21. Alan Ross demanded that Machinio
remove the listings and Machinio complied. Id. ¶¶ 41-42. Alan Ross’s website contains
terms and conditions that state that visitors to the website “may not copy, reproduce,
modify, create derivative works from, nor distribute content from this site without
our prior written consent” but that “reproductions and derivatives are available for
$500 US Dollars per asset.” Id. ¶ 13.
Alan Ross brings five claims against Machinio for its alleged “scraping” of Alan
Ross’s website. First, it alleges Machinio’s unauthorized use of Alan Ross’s listings
violates the Lanham Act because it causes confusion as to the “affiliation, connection
or association of Machinio with Alan Ross, or as to the origin, sponsorship, or approval
of Machinio’s goods, services or commercial activities by Alan Ross.” Id. ¶¶ 26-27.
Second, it alleges Machinio violated the CFAA by knowingly and with intent to
defraud accessing Alan Ross’s protected computers and/or servers without
authorization. Id. ¶ 35. Third, Alan Ross brings a breach of contract claim alleging
Machinio breached the website’s terms and conditions when it scraped the listings.
Id. ¶¶ 39-45. Fourth, Alan Ross alleges Machinio has been unjustly enriched through
its web scraping. Id. ¶ 50. Finally, Alan Ross alleges Machinio tortiously interfered
with its prospective business advantage by republishing Alan Ross’s machinery on
Machinio’s website and materially diminishing traffic to Alan Ross’s website. Id. ¶
55. Machinio has moved to dismiss all five claims.
Standard of Review
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g.,
Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir.
2009). A complaint must provide “a short and plain statement of the claim showing
that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), sufficient to provide
defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.’” Mann v. Vogel, 707
F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this
standard, the Court accepts all well-pleaded facts as true and draws all reasonable
inferences in favor of the non-moving party. Mann, 707 F.3d at 877.
Lanham Act, 15 U.S.C. § 1125 (Count I)
“Congress passed the Lanham Act in 1946 to ‘federalize’ existing common law
protection of trademarks used in interstate commerce.” CAE, Inc. v. Clean Air Eng’g,
Inc., 267 F.3d 660, 672 (7th Cir. 2001). It established a federal right of action for
trademark infringement to protect both consumer confidence in the quality and
source of goods and businesses’ goodwill in their products. Id. Alan Ross brings its
claim under the “false endorsement” provision 2 of the Lanham Act, which imposes
Any person who, on or in connection with any goods or services . . . uses
in commerce any . . . false designation of origin, false or misleading
description of fact, or false or misleading misrepresentation of fact,
which is likely to cause confusion or to cause mistake, or to deceive as to
the affiliation, connection, or association of such person with another
person, or as to the origin, sponsorship, or approval of his or her goods
. . . by another person.
15 U.S.C. § 1125(a)(1)(A).
To state a claim of false endorsement, Alan Ross must allege two elements.
Segal v. Geisha NYC LLC, 517 F.3d 501, 506 (7th Cir. 2008). First, it must allege that
“its mark is protected under the Lanham Act.” Barbecue Marx, Inc. v. 551 Ogden,
Inc., 235 F.3d 1041, 1043 (7th Cir. 2000). Second, Alan Ross must allege that the
challenged mark is “likely to cause confusion among consumers.” Id.
A. Protectible Mark
A trademark identifies a particular product or service as coming from a
particular manufacturer or service provider. 15 U.S.C. § 1127; Hoopla Sports and
Entm’t, Inc. v. Nike, Inc., 947 F. Supp. 347, 353 (N.D. Ill. 1996) (explaining that a
trademark is a “distinctive mark of authenticity” through which products of
Alan Ross’s complaint suggests it also brings a “reverse passing off” claim under the
Lanham Act, R. 3 ¶ 2, and a claim regarding misappropriation of “exclusive rights,”
id. ¶ 26. Machinio addressed both claims in its motion to dismiss arguing they were
deficient, R. 17 at 10-12, but Alan Ross failed to respond to those arguments. Instead,
it addressed only a claim of “false endorsement.” R. 24 at 4-6. Accordingly, Alan Ross
has waived any claim of “reverse passing off” or misappropriation of “exclusive
rights,” and the Court will address only the “false endorsement” claim. See 7241 W.
100th Place Corp. v. Vill. of Bridgeview, 2014 WL 517961, at *3 (N.D. Ill. Feb. 6, 2014)
(failing to respond to an argument in opposition to a motion to dismiss results in
particular manufacturers may be distinguished from those of others). A party may
obtain “a protectable right in a trademark only through the use of the mark in
connection with its product.” Johnny Blastoff, Inc. v. Los Angeles Rams Football Co.,
188 F.3d 427, 433 (7th Cir. 1999). Alan Ross must show appropriation of the mark
and “use in a way sufficiently public to identify or distinguish the marked goods in
an appropriate segment of the public mind as those of [Alan Ross].” Id. at 433-34.
“Only active use allows consumers to associate a mark with particular goods.” Zazu
Designs v. L’Oreal, S.A., 979 F.2d 499, 503 (7th Cir. 1992).
Here, there are no allegations that “Alan Ross Machinery” was used in a
trademark sense to distinctively identify the machinery or the machinery listings.
The complaint does allege that “[e]ach webpage presented to users of Alan Ross
Machinery’s website contains Alan Ross Machinery’s copyright symbol.” R. 3 ¶ 25.
But that does not describe “appropriation of the mark” by Alan Ross to allow the
public to identify certain goods as those of Alan Ross. Alan Ross has failed to show
that it has a protectible trademark in the machinery listings. S. Illinois Storm
Shelters, Inc. v. 4SEMO.com, Inc., 2015 WL 5062769, at *7 (S.D. Ill. Aug. 26, 2015)
(in summary judgment context, corporate name did not constitute protectible
trademark without evidence that the company considered it a trademark and
identified its products under the name).
B. Likelihood of Confusion
Even if Alan Ross had alleged a protectible mark, it has failed to allege a
likelihood of confusion among consumers. “The key issue in a false endorsement case
is whether defendant’s use of the mark to identify its goods or services is likely to
create confusion concerning the plaintiff’s sponsorship or approval of those goods or
services.” Stayart v. Yahoo! Inc., 651 F. Supp. 2d 873, 882-83 (E.D. Wis. 2009), aff’d,
623 F.3d 436 (7th Cir. 2010). “Plaintiff must be able to show that the public believes
that the mark’s owner sponsored or otherwise approved of the use of the trademark.”
Id. at 883. But here, there can be no likelihood of confusion—Alan Ross does not allege
its name even appears on Machinio’s website. See R. 3, Ex. B (screenshot of website
that allegedly violated the Lanham Act); R. 24 at 5 (“However, knowing that it did
not have Alan Ross Machinery’s approval, Machinio hid Alan Ross Machinery’s name
from its reproduction on its website.”). Accordingly, Machinio could not have lulled
consumers into believing that Alan Ross had endorsed Machinio’s listings.
In response to the motion to dismiss, Alan Ross argues that the “click to contact
seller” button next to every listing (R. 3, Ex. B) confuses the public as to whether Alan
Ross endorsed Machinio’s conduct and as to the source of the content. R. 24 at 5. But
even if that button leads consumers to Alan Ross, that does not imply that Alan Ross
has endorsed Machinio or has any specific affiliation with Machinio to support a false
endorsement claim. “This is not the reality of commerce.” Hart v. Amazon.com, Inc.,
191 F. Supp. 3d 809, 819 (N.D. Ill. 2016), aff’d, 845 F.3d 802 (7th Cir. 2017). In Hart,
the court dismissed a false endorsement complaint against Amazon for allowing
third-party sellers to list the plaintiff’s books, noting that “a shopper at a bookstore
does not automatically believe that just because a used book is appearing at the store,
the author is expressly endorsing that store.” Id. The same is true here. Even if
Machinio had listed Alan Ross’s name on its website, that does not suggest a
consumer would be misled into believing that Alan Ross had endorsed Machinio’s
At bottom, the Court simply cannot conclude that Alan Ross has alleged a
plausible claim under the Lanham Act for false endorsement. See Martin v. Wendy’s
Int’l, Inc., 183 F. Supp. 3d 925, 936 (N.D. Ill. May 2, 2016) (dismissing false
endorsement claim because “it is not plausible that any consumer would be likely to
be confused about whether plaintiff endorsed” the product when “[t]here is no
language directly or indirectly suggesting that plaintiff endorsed defendants’
products, nor do the plaintiff’s name and record appear in a context that might, by its
nature, plausibly mislead consumers to believe that plaintiff endorsed defendants’
Because Alan Ross has not alleged a protectible mark and because it has failed
to allege a likelihood of confusion among consumers as to whether Alan Ross has
endorsed Machinio’s listings, Alan Ross has failed to state a false endorsement claim
under the Lanham Act.
Computer Fraud and Abuse Act (Count II)
The CFAA prohibits acts of computer trespass by unauthorized users and
creates a civil remedy for “[a]ny person who suffers damage or loss by reason of
violation of this section.” 18 U.S.C. § 1030(g). The CFAA defines damage as “any
impairment to the integrity or availability of data, a program, a system, or
information.” Id. § 1030(e)(8). Courts have interpreted “damage” to include “the
destruction, corruption, or deletion of electronic files, the physical destruction of a
hard drive, or any diminution in the completeness or usability of the data on a
computer system.” Farmers Ins. Exch. v. Auto Club Grp., 823 F. Supp. 2d 847, 852
(N.D. Ill. 2011). The “mere copying of electronic information from a computer system
is not enough to satisfy the CFAA’s damage requirement.” Id. The CFAA defines
“loss” as the “reasonable cost” of “responding to an offense, conducting a damage
assessment, and restoring the data, program, system, or information to its condition
prior to the offense, and any revenue lost, cost incurred, or other consequential
damages incurred because of interruption of service.” 18 U.S.C. § 1030(e)(11).
Machinio correctly argues that Alan Ross’s CFAA claim must be dismissed
because Alan Ross has failed to allege any damage or loss. R. 17 at 12-13. Indeed, all
Alan Ross alleges is that “Alan Ross Machinery has been harmed.” R. 3 ¶ 36. That is
not enough to survive a motion to dismiss. 3 A plaintiff’s obligation to “provide the
‘grounds’ [of] ‘entitlement to relief’ requires more than labels and conclusions, and a
Throughout its response, Alan Ross argues that its complaint has satisfied the
“notice-pleading standard” sufficient to survive a Rule 12(b)(6) motion to dismiss, and
that it need not plead any additional facts to support its theories. See R. 24 at 2, 3, 6,
9. “As the Seventh Circuit has explained, ‘it is of course true that many pleadingstandards cases both before and after Twombly and Iqbal refer to ‘notice,’ but the
point is that it is necessary to give the defendants notice of the claims against them,
not that giving the defendants notice is sufficient to state a claim. By emphasizing a
plausibility requirement, Twombly and Iqbal obviously require more than mere
notice. When ruling on a motion to dismiss, the court must review the complaint to
determine whether it contains enough facts to raise a reasonable expectation that
discovery will reveal evidence to support liability for the wrongdoing alleged. An
inadequate complaint will not survive a motion to dismiss simply because the
defendants managed to figure out the basic factual or legal grounds for the claims.’”
Spector v. Mondelez Int’l, Inc., 178 F. Supp. 3d 657, 671 (N.D. Ill. 2016) (quoting
Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014)).
formulaic recitation of a cause of action’s elements will not do.” Twombly, 127 S. Ct.
at 1965. Alan Ross alleges no facts to raise a reasonable expectation that it suffered
damage or loss sufficient to bring a claim under the CFAA. See, e.g., Garelli Wong &
Assocs., Inc. v. Nichols, 551 F. Supp. 2d 704, 711 (N.D. Ill. 2008) (dismissing complaint
with allegations that defendant’s “conduct caused losses to [plaintiff] in excess of
$5,000,” finding such pleading insufficient under Twombly). Count II fails to state a
claim for relief under the CFAA.
State Law Claims (Counts III to V)
Alan Ross’s remaining claims are state law claims for breach of contract, unjust
enrichment, and tortious interference with prospective business advantage. Because
the Court has dismissed Alan Ross’s federal causes of action, it need not exercise
supplemental jurisdiction over these state law causes of action. See 28 U.S.C. §
1367(c) (“The district courts may decline to exercise supplemental jurisdiction over a
claim under subsection (a) if . . . (3) the district court has dismissed all claims over
which it has original jurisdiction.”). However, because the Court will allow Alan Ross
the opportunity to amend its complaint to address the issues identified in this
opinion, it briefly addresses the state law claims as well.
A. Breach of Contract (Count III)
The terms and conditions on Alan Ross’s website state that visitors to the
website “may not copy, reproduce, modify, create derivative works from, nor
distribute content from this site without our prior written consent; and reproductions
and derivatives are available for $500 US Dollars per asset.” R. 3 ¶ 13. In Count III,
Alan Ross alleges Machinio violated those terms and conditions by reproducing
content from the website without paying the $500 proscribed. Id. ¶ 42.
Alan Ross’s terms and conditions are what is known as a “browsewrap”
agreement, where users are bound to the terms by merely navigating or using a
website. See Sgouros v. TransUnion Corp., 2015 WL 507584, at *6 (N.D. Ill. Feb. 5,
2015), aff'd, 817 F.3d 1029 (7th Cir. 2016) (citing Michelle Garcia, Browsewrap: A
Unique Solution to the Slippery Slope of the Clickwrap Conundrum, 36 Campbell L.
Rev. 31, 35-36 (2013)). Such agreements do not require users to “sign a document or
click an ‘accept’ or ‘I agree’ button,” so users are considered to give assent “simply by
using the website.” Id. Courts enforce browsewrap agreements only when there is
actual or constructive knowledge of terms. Id. When there is no evidence that users
had actual knowledge of the terms at issue, “the validity of a browsewrap contract
hinges on whether a website provided reasonable notice of the terms of the contract,
i.e., whether users could have completed their purchases without ever having notice
that their purchases are bound by the terms.” Id.
Alan Ross argues that it demanded that Machinio not scrape Alan Ross’s
website for content, but Machinio did so anyway, leading to the “only reasonable
inference” that “Machinio stole that content from Alan Ross Machinery’s website with
express knowledge or, at a minimum, constructive knowledge of Alan Ross
Machinery’s terms and conditions.” R. 24 at 8. But for a breach of contract claim, it is
not enough to allege that Machinio was told not to scrape the website. Instead, Alan
Ross must allege that Machinio had knowledge of the terms and conditions. Sgouros,
2015 WL 507584 at *6. Alan Ross has made no such allegations.
In its response to Machinio’s motion to dismiss, Alan Ross argues that
Machinio had constructive knowledge of the terms and conditions because of their
conspicuous placement on the website. See R. 24 at 8 (arguing the terms and
conditions link was prominently displayed and appeared at the bottom of every
webpage). Nevertheless, hyperlinking the terms and conditions at the bottom of every
page is insufficient to provide adequate constructive notice to create a contract based
on a browsewrap agreement. See Hussein v. Coinabul, LLC, 2014 WL 7261240, at *3
(N.D. Ill. Dec. 19, 2014) (“Although the hyperlink’s font is adequately contrasted by
the color of its background, the hyperlink’s location—buried at the bottom of the
webpage—is, without some additional act of notification, insufficient for the purpose
of providing reasonable notice.”); In re Zappos.com, Inc., Customer Data Sec. Breach
inconspicuous, buried in the middle to bottom of every Zappos.com webpage among
was insufficient to find a contract existed); Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp.
bottom of a page and prominently displayed on the website were insufficient to state
a plausible claim for breach of contract).
Without allegations that Machinio had notice of their existence, the terms and
conditions are not an enforceable agreement. See Sgouros, 2015 WL 507584 at *7
(“[T]his Agreement is not a valid browsewrap agreement because it did not provide
sufficient constructive notice to users that they are being bound by the terms in the
Window by using the website.”); Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp.
2d 770, 793 (N.D. Ill. 2011) (“Accordingly, the Court finds that because the
ChefsCatalog.com website fails to provide reasonable notice of the Conditions of Use,
there was not a valid agreement to arbitrate.”). Alan Ross fails to state a breach of
contract claim because it fails to allege an enforceable contract exists.
B. Unjust Enrichment (Count IV)
To state a claim for unjust enrichment, Alan Ross must allege that “[Machinio]
has unjustly retained a benefit to [Alan Ross’s] detriment, and that [Machinio’s]
retention of the benefit violates the fundamental principles of justice, equity, and
good conscience.” Cleary v. Philip Morris Inc., 656 F.3d 511, 516 (7th Cir. 2011).
Here, Alan Ross fails to allege anything but conclusory allegations that
Machinio “derived a benefit from its unlawful, unauthorized and willful web scraping
and copying of Alan Ross Machinery’s Assets from Alan Ross Machinery’s website”
as Alan Ross’s competitor. R. 3 ¶¶ 14, 49. Alan Ross also fails to allege any detriment.
In response to the motion to dismiss, it argues that Machinio’s scraping of the listing
conferred a benefit to Machinio that “would have otherwise accrued to Alan Ross
Machinery’s benefit.” R. 24 at 12. But it is not clear how Machinio’s listing of Alan
Ross’s machinery hurts Alan Ross. After all, Machinio is not a vendor, but rather a
global search engine. Listing on Machinio’s search engine would presumably benefit
Alan Ross, by allowing more potential buyers and sellers to view the machinery. Alan
Ross has failed to allege a plausible theory of unjust enrichment.
C. Tortious Interference with Prospective Business Advantage
To state a claim for tortious interference with economic advantage under
Illinois law, Alan Ross must allege: (1) its reasonable expectancy of entering into a
valid business relationship; (2) Machinio’s knowledge of the expectancy; (3)
Machinio’s intentional and unjustifiable interference that induced or caused a breach
or termination of the expectancy; and (4) damage to Alan Ross resulting from
Machinio’s conduct. F:A J Kikson v. Underwriters Lab., Inc., 492 F.3d 794, 800 (7th
Cir. 2007). To establish the intent element, Alan Ross must allege that Machinio
directed wrongful conduct at a third-party business prospect to induce the third party
to end its relationship with Alan Ross. See Sunny Handicraft Ltd. v. Envision This!,
LLC, 2015 WL 231108, at *8 (N.D. Ill. Jan. 16, 2015). Alan Ross fails to make such
allegations. All it alleges is that Machinio “knew of Alan Ross Machinery’s website
and [of] its marketing the Assets on that website.” R. 3 ¶ 53. It does not allege that
Machinio directed its conduct at Alan Ross’s business prospects to induce them to end
their relationship with Alan Ross. And as described above, Machinio does not sell the
machinery—it connects buyers and sellers, presumably helping Alan Ross, a vendor,
to buy and sell more machinery through additional marketing. Alan Ross has failed
to plausibly allege that Machinio intended to induce a third party to end its
relationship with Alan Ross. Alan Ross has therefore failed to state a tortious
interference with prospective business advantage claim.
For the foregoing reasons, Defendant Machinio’s motion to dismiss the
complaint, R. 16, is granted without prejudice. If Plaintiff Alan Ross Machinery
believes it can cure the deficiencies identified in this opinion, it may file a motion for
leave to file an amended complaint on or before July 30, 2018. The motion should
attach a redlined comparison between the current complaint and the proposed
amended complaint, and it should be supported by a brief of no more than five pages
describing how the proposed amended complaint cures the deficiencies in the current
complaint. Machinio is not to file a response unless directed to do so by the Court.
--------------------------------------------Honorable Thomas M. Durkin
United States District Judge
Dated: July 9, 2018
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