John Beck Amazing Profits, LLC v. Google Inc. et al

Filing 79

SUR-REPLY to Reply to Response to Motion re 59 Opposed MOTION to Certify Class filed by AOL LLC, Google Inc.. (Babcock, Charles)

John Beck Amazing Profits, LLC v. Google Inc. et al

Doc. 79

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION THE RODNEY A. HAMILTON LIVING TRUST and JOHN BECK AMAZING PROFITS, LLC, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. (1) GOOGLE INC.; AND (2) AOL LLC, Defendants. § § § § § § § § § § § § § §

Civil Action No. 2:09-cv-00151-TJW-CE

CLASS ACTION COMPLAINT

JURY TRIAL REQUESTED

DEFENDANTS' SUR-REPLY IN OPPOSITION TO MOTION FOR CLASS CERTIFICATION

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PLAINTIFFS' MOTION FOR CLASS CERIFICATION SHOULD BE DENIED Plaint iffs' Motion for Class Certification cannot survive the "rigorous analysis" mandated by the Fifth Circuit. Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996). There are at least seven separate bases for denying class certification: Lead Plaintiff RAH lacks Constitutional and prudential standing, is atypical, and is not a member of the class it purports to represent. O'Shea v. Littleton, 414 U.S. 488, 494 (1974); Ordonez v. Napolitano, 598 F.3d 222, 227 (5th Cir.), cert. denied, 2010 WL 3834380 (2010); Plaint iff Beck is atypical because it engaged in the very conduct it claims is trademark infringement, Feder v. Elec. Data Sys. Corp., 429 F.3d 125, 138 (5th Cir. 2005), and, if Beck is indeed representative of the class, Beck also is inadequate because the proposed class would be antagonistic, creating impermissible intra-class conflicts. Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 315 (5th Cir. 2007); Plaint iffs are inadequate for the additional reason that they have abandoned damages claims for the putative class in exchange for improving their chance of class certification under Rule 23(b)(2). McClain v. Lufkin Indus., Inc., 519 F.3d 264, 283 (5th Cir. 2008); Plaint iffs' proposed class only attempts to certify initial interest confusion, which is not a cause of action but rather is merely an evidentiary consideration, upon which certification may not be based. Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 976 (5th Cir. 2000); Plaint iffs' request for equitable disgorgement with their injunctive remedy is not certifiable because disgorgement is an individualized issue that will vary with each class member and is not automatically calculable. In re Wilborn, 609 F.3d 748, 757 (5th Cir. 2010); Plaint iffs' claims will involve complex, individualized determinations, entirely contrary to the required cohesiveness of an injunction class. Langbecker, 476 F.3d at 317; Ford v. Nylcare Health Plans, 190 F.R.D. 422, 428 (S.D. Tex. 1999), aff'd, 301 F.3d 329 (5th Cir. 2002); and Plaint iffs' proposed class would transform the narrow rights held by mark owners into a near word-monopoly on the Internet ­ resulting in the prohibition of all manner of legally permissible uses of marks long held to promote competition and benefit consumers. Faced with all of these grounds, each an independently sufficient basis for denying certification, the Reply seeks to salvage Plaintiffs' class case with two unavailing arguments: (1) it is too expensive to pursue a trademark infringement action for an individual plaintiff; and (2) there are so many "numerous issues of fact inherent in a trademark class" that it creates "a Gordian knot that can only be cut with the simpler method of a Rule 26(b)(2) [sic] injunction."

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 1

(Reply at 3 & 5, respectively). First, not only is there no evidence that the expense of trademark infringement suits is cost prohibitive, but there is also no legal authority to suggest such evidence would assist Plaintiffs in certifying their proposed class. Second, a tangled knot of individual issues does not relieve Plaintiffs from meeting their burden of proof for class certification, and indeed, is an insurmountable bar for the proposed class under Rule 23(b)(2). As demonstrated below, Plaintiffs' arguments fail under established law, and class certification should be denied. A. THE EXPENSE OF INDIVIDUAL SUITS IS NOT A GROUND FOR 23(B)(2) CERTIFICATION. Plaint iffs allege that the expense of individual suits for trademark infringement means that for "99% of trademark holders" the only way to resolve liability against Google is through a class action. (Reply at 3). Preliminarily, Plaintiffs have offered no actual evidence that the expense of individual trademark suits is cost prohibitive,1 and the case cited as illustrative of that notion, Rosetta Stone Ltd. v. Google Inc., --- F. Supp.2d ----, 2010 WL 3063152 (E.D. Va. Aug. 3, 2010) (granting summary judgment in favor of Google), itself cuts against a finding that costs are indeed prohibitive. If anything, Rosetta Stone is an example of a trademark owner obtaining a substantive determination regarding Google's conduct. Perhaps it is the result in that case, and not the costs associated with it, that concern Plaintiffs. Even accepting the unsupported

proposition that trademark infringement suits are expensive, Plaintiffs can offer no authority that the high costs of individual suits are a sufficient basis under Rule 23(b)(2) to certify. B. THE NUMEROUS FACT ISSUES PRECLUDE 23(B)(2) CERTIFICATION. Plaint iffs actually admit that there are numerous fact issues inherent in any trademark infringement suit (Reply at 5), and think this is somehow helpful to their request for certification under Rule 23(b)(2). In effect, Plaintiffs argue that because there is no way a class could ever be
1

Indeed, Defendants have provided numerous examples of individual trademark owners pursuing trademark infringement claims based on keyword bids by advertisers. (Resp. at 7, n.11). Defendants also have identified cases brought against Google in which courts reached the merits of trademark infringement claims based on keyword bidding ­ and found in Google's favor. (Resp. at 8 & n.12).

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 2

certified under Rule 23(b)(3) given the "Gordian knot" of individual fact issues, Plaintiffs are automatically entitled to Rule 23(b)(2) class certification. First, this wrongly presumes that Plaintiffs are entitled to bring a class in the first instance, and have no burden of establishing the same. To the contrary of course, "[t]he party seeking certification bears the burden of proof." Castano, 84 F.3d at 740. Second, individual issues are not avoided under Rule 23(b)(2); in fact, Vulcan rejected Rule 23(b)(2) certification due to "the individual inquiries that the plaintiffs' proposed class would require." Vulcan Golf, LLC v. Google, Inc., 254 F.R.D. 521, 535 (N.D. Ill. 2008). Such inherent factual inquiries are likewise fatal here to class certification. C. THE LESSONS OF VULCAN TEACH THAT CERTIFICATION IS IMPROPER. In their opening brief, Plaintiffs asserted in a footnote that their "theory has little in common with" Vulcan. (Mot. at 10, n.8). But now in their Reply, Plaintiffs concede that Vulcan is "roughly analogous to this case." (Reply at 4). Defendants have consistently argued that the lessons of Vulcan teach that Rule 23(b)(2) certification would be improper here. Vulcan correctly holds that trademark infringement actions are inherently ill-suited for class treatment. Vulcan, 254 F.R.D. at 535-37. The individual factual inquiries that preclude class treatment include ownership, distinctiveness, "inevitable individual discovery disputes," affirmative defenses, as well as the inability to prove liability on a class-wide basis. Id. at 52836. Plaintiffs argue, without support, that the presumption of validity for a registered mark makes certification proper. (Reply at 5). However, as Vulcan explains no class-wide

presumption of distinctiveness for marks is permitted. Id. at 529. This holding is in accord with Fifth Circuit law, which requires the Court to analyze the "independent validity" of every mark, Enrique Bernat F., S.A., et al. v. Guadalajara, Inc., 210 F.3d 439, 443 n.2 (5th Cir. 2000), and indeed the presumption "evaporates as soon as evidence of invalidity is presented." Amazing

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 3

Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 239 (5th Cir. 2010) (citation omitted).2 Given these hurdles to class treatment, it is unsurprising that the only two courts to consider such relief have rejected certification. Vulcan, 254 F.R.D. at 535; Chambers v. Time Warner, 66

U.S.P.Q.2d 1292, 1298-99 (S.D.N.Y. 2003). The Vulcan court noted, "it is difficult for this court to comprehend any circumstances by which the plaintiffs could properly obtain class certification of their trademark-related claims." Vulcan, 254 F.R.D. at 537. The same is true here, and certification should be denied. D. PLAINTIFFS ARE ATYPICAL AND INADEQUATE.3 Plaintiffs cannot rely on Vulcan to meet the basic typicality and adequacy requirements under Rule 23(a). (Reply at 4). In Vulcan, the court analyzed whether some class members' ongoing business relationship with Google created a typicality problem. Vulcan, 254 F.R.D. at 526-27. Here, by contrast, Beck is faced with the fact that it engaged in the specific conduct (trademark keyword advertising) that it now contends constitutes trademark infringement. (Resp. at 6). Moreover, RAH's alleged mark has not even been bid on as a keyword in Google AdWords during the relevant class period. (Id.).4 Thus, Plaintiffs are atypical. Feder, 429 F.3d at 138; Dallas Gay Alliance, Inc. v. Dallas County Hosp. Dist., 719 F. Supp. 1380, 1391 (N.D. Tex. 1989). Defendants' challenge to Plaintiffs' trademark ownership (Resp. at 6, 11) also remains unrefuted. This is yet another ground that establishes Plaintiffs will be required to defend issues unique to them, and, therefore, are atypical. Feder, 429 F.3d at 138. Plaintiffs' individual issues necessarily render Plaintiffs atypical for pursuing infringement claims against Google on behalf of the putative class. Id.
2

In addition, the proposed class includes trademarks registered on the Supplemental Register, which are entitled to no presumption. (Resp. at 9, n.13); see also Vulcan, 254 F.R.D. at 528. 3 Plaintiffs failed to respond to Defendants' arguments concerning numerosity and commonality. (Resp. at 12, n.19, n.20). 4 Plaintiffs did not respond to Defendants' argument that RAH lacks standing and is not a member of the putative class. (Resp. at 11).

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 4

Plaint iffs are also inadequate because they "dropped the class members' demand for compensatory and punitive damages in order to protect the `predominance' of nonmonetary claims." McClain, 519 F.3d at 283. Plaintiffs' only response to this is in a footnote stating they have "no objection" to class members being given an option to opt out. (Reply at 6, n.6). There are at least two reasons why this argument is insufficient to save the class. Preliminarily, Plaintiffs, who are obligated to actively protect class interests, never before sought an opt-out option in their Complaint, in their Motion or in any other briefing. More importantly, there is no right to opt out for an injunctive class member. McManus v. Fleetwood Enters., Inc., 320 F.3d 545, 553 (5th Cir. 2003); McClain, 519 F.3d at 283. Even if the Court could provide notice and an opt-out option, these offer no protection to those class members who oppose Plaintiffs' sought-after remedy: enjoining the ability to bid on keywords that also happen to be federally registered trademarks. This is a significant difference from the typical civil rights Rule 23(b)(2) class, in which class members may not all necessarily be aggrieved by a defendant's discriminating conduct, but none would oppose the relief of enjoining discrimination. 5 In contrast, the proposed class here would be filled with members who actively advertise on Google and would affirmatively oppose the injunctive relief sought. Indeed, Plaintiff Beck and Plaintiff FPX have each bid on numerous words that are also trademarks of other potential class members, (Barker Decl. ¶¶ 22-24); but Plaintiffs are somehow arguing that it is only infringement when someone other than Plaintiffs does it. This also demonstrates the fundamental lack of cohesiveness of Plaintiffs' proposed class, which will necessarily involve complex fact-based determinations that will be individualized and often

5

For this reason, Plaintiffs' reliance on Jones v. Diamond, 519 F.2d 1090 (5th Cir. 1975), for the proposition that not all class members must be aggrieved by the defendant's conduct is misplaced. As the Jones Court explained, its holding must be considered in light of the requirement that it read Rule 23(a) "liberally in the context of civil rights suits" brought under Rule 23(b)(2). Id. at 1099.

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 5

antagonistic among class members. Langbecker, 476 F.3d at 317; Ford, 190 F.R.D. at 428. Plaintiffs are inadequate as class representatives and any supposed availability of notice and optout options does not alter that conclusion. E. INITIAL INTEREST CONFUSION IS NOT CERTIFIABLE. Plaint iffs seek certification solely upon a theory of initial interest confusion, which is not a cause of action. Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 194, 203-04 (5th Cir. 1998). Certification must be based upon a cause of action, not merely some evidentiary

consideration. Bolin, 231 F.3d at 976. Plaintiffs contend initial interest confusion is a valid cause of action because, "Defendants cite no law suggesting the principles described in Rescuecom . . . have been overruled." (Reply at 5, n.4). This response misses the point. First, the issue in Rescuecom was whether keyword advertising constituted a "use in commerce," not whether the particular ads caused a likelihood of confusion. Rescuecom Corp. v. Google Inc., 562 F.3d 123, 124, 130 (2d Cir. 2009). Initial interest confusion is not even mentioned in Rescuecom. And, a year after Rescuecom was decided, that same Circuit ruled that the display of sponsored links on a Google search page triggered by trademark keywords was not confusing and was lawful. Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 103 (2d Cir. 2010). In short, there is no Second Circuit decision that supports certifying a class merely to test for an evidentiary factor of one element of a multi-factor confusion test, and settled Fifth Circuit law certainly precludes certification on such a basis. Bolin, 231 F.3d at 976. F. PLAINTIFFS' CLAIM FOR DISGORGEMENT PRECLUDES CLASS CERTIFICATION. The Fifth Circuit's decision in In re Wilborn holds that Rule 23(b)(2) certification must be denied when, as here, the pursuit of equitable disgorgement depends "on the specific circumstances of each class member." 609 F.3d at 757. Plaintiffs are entirely silent on the issue and do not even mention Wilborn. On this basis alone, certification must be denied.

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 6

G.

PLAINTIFFS CANNOT CERTIFY AN INJUNCTION CLASS. Plaint iffs' choice to proceed under 23(b)(2) for an injunction, if granted, would leave

class members unable to bid on keywords that also are registered trademarks. (Reply at 6). Such injunctive relief under Rule 23(b)(2) must be denied because it would be extraordinarily overbroad. See Vulcan, 254 F.R.D. at 536 ("Simply because a domain name may include a particular mark does not mean that the domain name violates the trademark laws."). Granting such an injunction would far exceed the protection afforded marks under trademark law, as it would prevent resellers of genuine branded products from advertising them, would bar use of trademarks in comparative advertising, would curtail valuable free speech and would even restrict everyday usage of the English language. (Resp. at 20). For example, a practitioner who works in the field of intellectual property could not advertise by bidding on the words "intellectual property" to trigger her advertisement because "intellectual property" also happens to be registered as a trademark for both wine and clothing. (See Butzer Decl. Exs. 18 & 19). H. CONCLUSION. Plaintiffs' proposed class is not certifiable due to the numerous individual inquiries inherent in a trademark infringement action, even as a Rule 23(b)(2) injunction class. Plaintiffs' insistence that they must be allowed to proceed on a novel theory as a class, rather than on an individual basis, is also improper under Rule 23. As the Fifth and Seventh Circuits have held, the fate of an entire industry should not be decided with one roll of the dice. Castano, 84 F.3d at 748; Vulcan, 254 F.R.D. at 535. And while the merits are not considered at the class

certification stage, it would be a strange world indeed if ­ as Plaintiffs claim (Reply at 3-4) ­ the probability of class certification is increased simply because a defendant has been successful in defending individual one-off cases. Accordingly, Plaintiffs' Motion must be denied.

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 7

Respect fully submitted, /s/ Charles L. Babcock CHARLES L. "CHIP" BABCOCK Texas State Bar No. 01479500 JACKSON WALKER L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 [phone] [phone] - Fax Email: [e-mail] DAVID T. MORAN Texas State Bar No. 14419400 JACKSON WALKER L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 [phone] [phone] - Fax Email: [e-mail] CARL C. BUTZER Texas State Bar No. 03545900 JACKSON WALKER L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 [phone] [phone] - Fax Email: [e-mail] SHANNON ZMUD TEICHER Texas State Bar No. 24047169 JACKSON WALKER L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 [phone] [phone] ­ Fax Email: [e-mail] ATTORNEYS FOR DEFENDANTS

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 8

CERTIFICATE OF SERVICE I hereby certify that on November 15, 2010, I electronically submitted the foregoing document with the clerk of the court for the U.S. District Court, Eastern District of Texas, using the electronic case files system of the court. The electronic case files system sent a "Notice of Electronic Filing" to individuals who have consented in writing to accept this Notice as service of this document by electronic means. All other counsel of record not deemed to have consented to electronic service were served with a true and correct copy of the foregoing by first class mail today, November 15, 2010.

/s/ Charles L. Babcock Charles L. Babcock

Defendants' Sur-Reply in Opposition to Motion for Class Certification ­ Page 9