Rosetta Stone LTD v. Google Inc.
Filing
136
Opposition to 94 MOTION to Dismiss the Seventh Cause of Action alleged in Rosetta Stone's First Amended Complaint filed by Rosetta Stone LTD. (Allen, Warren) Modified text on 3/31/2010 (klau, ).
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
____________________________________
ROSETTA STONE LTD.,
)
)
Plaintiff,
)
)
vs.
)
)
GOOGLE INC.,
)
)
Defendant.
)
____________________________________)
Civ. Action No. 1:09-cv-00736(GBL/TCB)
ROSETTA STONE LTD.’S OPPOSITION TO
GOOGLE’S MOTION TO DISMISS COUNT SEVEN
Of Counsel:
Mitchell S. Ettinger
(Pro hac vice)
Clifford M. Sloan
(Pro hac vice)
Jennifer L. Spaziano
(Pro hac vice)
Skadden, Arps, Slate, Meagher & Flom, LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Warren T. Allen II
Virginia Bar Number 72691
Attorney for Plaintiff Rosetta Stone Ltd.
Skadden, Arps, Slate, Meagher & Flom, LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
(202) 371-7000
(202) 393-5760
wtallen@skadden.com
TABLE OF CONTENTS
INTRODUCTION ......................................................................................................................1
ARGUMENT..............................................................................................................................2
I.
THE COMMUNICATIONS DECENCY ACT HAS NO APPLICATION TO
ROSETTA STONE’S UNJUST ENRICHMENT CLAIM ...............................................2
A.
Rosetta Stone’s Unjust Enrichment Claim Is Based Upon Google’s
Business Practices – Not the Content of Any Advertisement Appearing on
Its Website ...........................................................................................................3
B.
Rosetta Stone’s Unjust Enrichment Claim Does Not Treat Google as the
Publisher or Speaker of Any Information .............................................................6
II.
ROSETTA STONE’S UNJUST ENRICHMENT CLAIM IS NOT TIMEBARRED ........................................................................................................................8
III.
THE AMENDED COMPLAINT STATES A CLAIM FOR UNJUST
ENRICHMENT.............................................................................................................10
A.
Rosetta Stone Has Properly Pled a Claim for Unjust Enrichment........................11
B.
No Express Contract Governs the Subject Matter at Issue ..................................12
CONCLUSION.........................................................................................................................13
i
TABLE OF AUTHORITIES
CASES
800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F. Supp. 2d 273 (D. N.J. 2006)..................................3
Am. Physical Therapy Ass ‘n v. Fed’n of State Bds. of Physical Therapy,
271 Va. 481 (2006)..........................................................................................................9
Appleton v. Bondurant & Appleton, P.C.,
67 Va. Cir. 95, 2005 WL 517491 (Va. Cir. Ct. 2005) ............................................... 11, 12
Barnes v. Yahoo!, 570 F.3d 1096 (9th Cir. 2009).........................................................................7
Carafano v. Metrosplash.com Inc., 339 F.3d 1119 (9th Cir. 2003) ..............................................5
Curran v. Amazon.com, Inc., No. 2:07-0354,
2008 WL 472433 (S.D. W.Va. Feb. 19, 2008) .................................................................3
Davis v. Davis, 190 Va. 468 (1950).............................................................................................9
Doctor’s Assocs., Inc. v. QIP Holders, LLC, 82 U.S.P.Q.2d 1603 (D. Conn. 2007) .....................3
FTC v. Accusearch Inc., 570 F.3d 1187 (10th Cir. 2009) .........................................................7, 8
GIV, LLC v. IBM Corp., No. 3:07cv067-HEH,
2007 WL 1231443 (E.D. Va. April 24, 2007) ..................................................................9
Hampton Rds. Sanitation Dist. v. McDonnell, 234 Va. 235 (1987) ..............................................8
Hendrickson v. Meredeith, 161 Va. 193 (1933) .........................................................................11
In re Bay Vista of Va., Inc., No. 2:09cv46,
2009 WL 2900040 (E.D. Va. June 2, 2009) ............................................................. 10, 11
Marine Dev. Corp. v. Rodak, 225 Va. 137 (1983)..................................................................7, 11
Mazur v. eBay Inc., No. C 07-03967 MHP, 2008 WL 618988 (N.D. Cal. Mar. 4, 2008) ..............3
Mylan Labs., Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993) ...........................................................2
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
564 F. Supp. 2d 544 (E.D. Va. 2008) .........................................................................2, 12
ii
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009)......................6
Nossen v. Hoy, 750 F. Supp. 740 (E.D. Va. 1990) ............................................................... 10, 11
Norfolk & W. Ry. Co. v. Allen, 118 Va. 428 (1915) .....................................................................8
Park v. Alcon Surgical, Inc., No. 92-1179, 1993 WL 114820 (4th Cir. Apr. 15, 1993).................8
Perfect 10, Inc. v. Google, Inc., No. CV 04-9484 AHM,
2008 WL 4217837 (C.D. Cal. July 18, 2008) ...................................................................3
Po River Water and Sewer Co. v. Indian Acres Club of Thornburg, Inc.,
255 Va. 108 (1998)........................................................................................................11
Primrose Dev. Corp. v. Benchmark Acquisition Fund Ltd. P’ship,
47 Va. Cir. 296 (Va. Cir. Ct. 1998) ..................................................................................8
Republican Party of N.C. v. Martin, 980 F.2d 943 (4th Cir. 1992) ...............................................2
Robinson v. American Honda Motor Co., Inc., 551 F.3d 218 (4th Cir. 2009)...............................2
S. Biscuit Co. v. Lloyd, 174 Va. 299 (1940) ...............................................................................12
Tao of Systems Integration, Inc. v. Analytical Services & Materials, Inc.,
299 F. Supp. 2d 565 (E.D. Va. 2004) ...............................................................................9
Universal Commc’ns Sys., Inc. v. Lycos, Inc., 478 F.3d 413 (1st Cir. 2007).................................2
Wright v. Cangiano, Chancery No. 15084, 1993 WL 946172 (Va. Cir. Ct. July 20, 1993) ...........7
STATUES
47 U.S.C. § 230(c) ......................................................................................................................7
Va. Code Ann. § 8.01-230...........................................................................................................8
OTHER AUTHORITIES
5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (1990)...........2
Restatement of Restitution at 1 (1937).........................................................................................7
iii
Plaintiff Rosetta Stone Ltd. (“Rosetta Stone”) respectfully submits this Opposition
to Defendant Google Inc.’s (“Google”) Motion to Dismiss Count VII of the First Amended
Complaint. For the reasons that follow, Google’s motion should be denied.
INTRODUCTION
Google made a strategic business decision in 2004 when it determined that it
could dramatically enhance its profits by auctioning branded search terms, including trademarks,
to be used as keyword triggers for third-party advertising through its AdWords program. With
full knowledge and acceptance of the legal risks inherent in this business decision, Google has
generated billions of dollars in additional revenue through the auction of third parties’
trademarks, including the trademarks of Rosetta Stone that are at issue in this litigation (the
“Rosetta Stone Marks”). In 2009, Google reassessed its business practices and determined that
even greater profits could be generated by permitting certain third parties to display in their ad
text the trademarks owned by others, including the Rosetta Stone Marks.
The additional
significant profits associated with Google’s strategic business decisions have been gleaned from
the strength of the trademarks being offered at auction. However, the trademark owners, like
Rosetta Stone, who have expended millions of dollars in building the brand equity and goodwill
in their marks, are being exploited by Google without compensation. Rosetta Stone’s unjust
enrichment claim is designed to address and correct this inequity.
Google’s attempt to avoid liability for unjust enrichment must fail for the
following reasons:
The Communications Decency Act provides no shelter for Google because the
unjust enrichment claim is not dependent upon the content of any advertisement
posted to Google’s website. Rather, the unjust enrichment claim arises from
Google’s own business practices in auctioning, without authorization, the Rosetta
Stone Marks.
Rosetta Stone’s unjust enrichment claim is not barred by the statute of limitations
because Google’s improper conduct is continuing in nature, with each new
auction inflicting a new injury and creating a separate cause of action.
The Amended Complaint states a cause of action for unjust enrichment and there
is no express contract between Google and Rosetta Stone governing the conduct
at issue.
For these reasons and those explained in detail below, Google’s Motion to Dismiss should be
denied.
ARGUMENT
“A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint;
importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992)
(citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (1990)).
In considering a Rule 12(b)(6) motion, the Court must construe the complaint in the light most
favorable to Rosetta Stone, read the complaint as a whole, and take the facts asserted therein as
true. See Robinson v. American Honda Motor Co., Inc., 551 F.3d 218, 222 (4th Cir. 2009);
Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).
I.
THE COMMUNICATIONS DECENCY ACT HAS NO APPLICATION TO
ROSETTA STONE’S UNJUST ENRICHMENT CLAIM
Google cannot stretch the limited immunity granted to interactive computer
service providers by the Communications Decency Act (“CDA”) to preclude liability for Rosetta
Stone’s unjust enrichment claim. In order to promote the free flow of information on the Internet,
the CDA limits the liability of interactive computer service providers for state law causes of
action arising from the content of communications created and posted on the Internet by third
parties. Universal Commc’ns Sys., Inc. v. Lycos, Inc., 478 F.3d 413, 418 (1st Cir. 2007); Nemet
Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 564 F. Supp. 2d 544, 548 (E.D. Va. 2008). The
2
CDA may not be asserted, however, as the basis to avoid liability for the interactive computer
service provider’s own tortious conduct. See, e.g., 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.
Supp. 2d 273, 295 (D. N.J. 2006) (“Immunity does not seem to fit here because the alleged fraud
is the use of the trademark name in the bidding process, and not solely the information from third
parties that appears on the search results page. It is not the purpose of the Act to shield entities
from claims of fraud and abuse arising from their own pay-for-priority advertising business,
rather than from the actions of third parties.”); Mazur v. eBay Inc., No. C 07-03967 MHP, 2008
WL 618988, at *9, 12 (N.D. Cal. Mar. 4, 2008) (“The CDA does not immunize [a content
provider] for its own fraudulent misconduct. . . . eBay's statement regarding safety affects and
creates an expectation regarding the procedures and manner in which the auction is conducted
and consequently goes beyond traditional editorial discretion.”). Here, because Rosetta Stone’s
unjust enrichment claim does not depend upon the content of any posting on Google’s website
and therefore does not treat Google as the publisher or speaker of any information giving rise to
such liability, the CDA is inapplicable.1
A.
Rosetta Stone’s Unjust Enrichment Claim Is Based Upon Google’s Business
Practices – Not the Content of Any Advertisement Appearing on Its Website
Rosetta Stone’s unjust enrichment claim pertains solely to Google’s business
practice of auctioning branded terms – including proprietary trademarks of third parties – as
keywords to trigger the display of advertisements. Specifically, the cause of action arises from
1
Rosetta Stone recognizes that this Court previously granted a motion to dismiss certain state
law claims based on the CDA, but maintains that immunity under the CDA is an affirmative
defense and not properly considered in the Rule 12(b)(6) context. See, e.g., Perfect 10, Inc.
v. Google, Inc., No. CV 04-9484 AHM, 2008 WL 4217837, at *8 (C.D. Cal. July 18, 2008)
(whether Google qualifies for CDA protection is “fact intensive” and therefore not properly
resolved through a Rule 12(b)(6) motion); Curran v. Amazon.com, Inc., No. 2:07-0354, 2008
WL 472433, at *12 (S.D. W.Va. Feb. 19, 2008); Doctor’s Assocs., Inc. v. QIP Holders, LLC,
82 U.S.P.Q.2d 1603, 1605 (D. Conn. 2007).
3
Google’s business practice of auctioning Rosetta Stone’s trademarks to the bidders most
favorable to Google, thereby seizing the benefit associated with the goodwill established in
Rosetta Stone’s trademarks to generate profits contrary to the express wishes of Rosetta Stone
and without compensating Rosetta Stone for such use. (Am. Compl. ¶¶ 122-124.) The content
of the advertisements posted by the third parties bidding on the Rosetta Stone trademarks is
irrelevant to the unjust enrichment claim and therefore falls outside the purview of the CDA.
Said more plainly, it is Google’s business strategy to enhance its profits through the auction of
trademarks that it does not own or have permission to sell – the goodwill for which is created
solely by the equity invested in the trademarks by their owners – that gives rise to this cause of
action.
In an effort to invoke the protections afforded by the CDA, Google artfully, but
unsuccessfully, attempts to tie the unjust enrichment claim to the content posted by third parties.
Google first argues “that third-party advertisers, not Google, select the keywords that trigger and
the content posted in the Sponsored Links.” (Google’s Mem. at 3.) Google then asserts that
“Google receives no money from the mere act of a third-party advertiser selecting Rosetta
Stone’s trademarks as a keyword. . . . Google only earns revenue once a search engine user
chooses to click on an advertisement. . . .” (Id.) These arguments miss the mark. Although it is
true that a third party selects the trademarks offered by Google upon which it wishes to bid, the
selection process does not relate in any way to the content of the advertisement that is posted on
the Sponsored Link. Similarly, although it is true that Google does not profit until a user “clicks
on” a Sponsored Link, the unjust enrichment claim does not depend upon the content of that
advertisement. Rather, it is the business practice of auctioning trademarks for profit, that occurs
prior to and independent of the posting of any information on the Internet, that serves as the
4
basis for the unjust enrichment claim. Indeed, irrespective of whether the Sponsored Link makes
reference to the trademark term, Google has been unjustly enriched.
That Google fully appreciated the benefits to be gleaned from auctioning the
intellectual property owned by others is plain from the facts alleged in the Amended Complaint.
Prior to 2004, Google did not offer branded terms to be used as keywords for its AdWords
auction. (Am. Compl. ¶ 42.) In 2004, however, Google elected to expand its AdWords program
to include branded terms, recognizing that there would be greater demand (and greater profits) to
be gained by permitting third parties to bid on trademarks owned by others. (Id. ¶ 44.) In so
doing, Google expressly recognized that it could achieve greater profits by usurping the goodwill
associated with such famous marks. The stronger the mark, the greater the demand; the greater
the demand, the higher the auction price. The strategy has proven to be very lucrative. Google
realizes billions of dollars annually on the strength of trademarks owned by third parties, but
does not compensate the trademark owners in any respect. (Id. ¶¶ 33, 62 & 124.) In fact, its
strategy to offer the trademarks of third parties was made without authorization from the
trademark owners and, in the case of Rosetta Stone, against its express direction to the contrary.
(Id. ¶ 124.) These facts demonstrate that it is Google’s business practice to reap profits from the
strength and goodwill of the Rosetta Stone Marks that gives rise to the unjust enrichment claim –
not the content of any advertisement that appears on the Internet.
None of the cases cited by Google support its position here. In each of those
cases, the plaintiff sought to hold the defendant liable solely as a result of the defendant’s
dissemination of statements made by others, or the dissemination of information regarding
actions taken by others. See, e.g., Carafano v. Metrosplash.com Inc., 339 F.3d 1119 (9th Cir.
2003) (holding that a dating service, Matchmaker.com, was not liable for the actions of third
5
parties posting information on its website); Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250 (4th Cir. 2009) (holding that the website owner posting consumer reviews drafted
by third parties was not liable for false statements contained therein). Unlike these cases,
Rosetta Stone’s unjust enrichment claim does not seek to hold Google liable for the content of
any advertisement or posting appearing on its website.
Moreover, Google’s reliance on this Court’s prior ruling dismissing Rosetta
Stone’s claim under the Virginia Business Conspiracy Act is misplaced. (Google’s Mem. at 2-4.)
That state law claim sought to hold Google liable for information appearing on its website
whereas, as explained above, Rosetta Stone’s unjust enrichment claim does not. Indeed, in
granting Google’s motion to dismiss the conspiracy claim, the Court expressly recognized that a
distinction must be drawn between the auction bidding process itself and the advertisement that
appears on the Internet as a result of that process. (09/18/2009 Hearing Tr. at 30-31 (“And
similarly the 800-JR Cigar case is distinguishable in at least two ways. . . . [T]he court held that
immunity was inapplicable because the alleged fraud is use of the plaintiff’s trademark in the
advertiser’s bidding process, not necessarily [ad] information from the third party that may
appear on the search results page.”).) Because Rosetta Stone’s unjust enrichment claim is based
on the auction bidding process itself, under the Court’s prior reasoning, CDA immunity is
inapplicable.
B.
Rosetta Stone’s Unjust Enrichment Claim Does Not Treat Google as the
Publisher or Speaker of Any Information
Google’s CDA immunity argument fails for yet another reason – Rosetta Stone’s
unjust enrichment claim does not seek to “treat[] [Google] as the publisher or speaker” of any
information. Rather, in an unjust enrichment case, the duty the defendant violated springs from
an implied contract – an enforceable promise – not from any non-contractual conduct or capacity
6
of the defendant.2 In this regard, Rosetta Stone seeks to hold Google liable as the counter-party
to an implied contract, as a promisor who has breached. See Barnes v. Yahoo!, 570 F.3d 1096,
1107 (9th Cir. 2009) (denying CDA immunity for a promissory estoppel claim, and stating when
a party engages in conduct giving rise to an independent and enforceable contractual obligation,
that party may be “h[eld]...liable [not] as a publisher or speaker of third-party content, but rather
as a counterparty to a contract, as a promisor who has breached”). Liability for the unjust
enrichment claim is not premised on anything related to Google’s status as a “publisher” or to
actually editing or publicizing anything, but rather to its implied promise to pay when it elected
to auction Rosetta Stone’s trademarks without authorization and without compensating Rosetta
Stone for the value it received. See Part III.A., infra.
*
*
*
In sum, Google may not invoke the CDA to avoid liability for the unjust enrichment
claim asserted by Rosetta Stone.3
2
“Unjust enrichment is a quasi-contract claim based upon the equitable remedy available
when a recipient of a benefit obtains it under conditions where the receipt amounts to unjust
enrichment.” Wright v. Cangiano, Chancery No. 15084, 1993 WL 946172, at *1 (Va. Cir. Ct.
July 20, 1993) (citation omitted). It is a common-law doctrine that provides restitution in the
situation where “one person is accountable to another on the ground that otherwise he would
unjustly benefit or the other would unjustly suffer loss.” Restatement of Restitution at 1
(1937). To avoid unjust enrichment, equity will effect a “contract implied in law,” requiring
one who accepts and receives the services of another to make reasonable compensation for
those services. See Marine Dev. Corp. v. Rodak, 225 Va. 137, 142-44 (1983).
3
Even if the Court were to conclude that the unjust enrichment claim somehow depends upon
the content of the Sponsored Link appearing on the Google website – and it should not – the
claim still would not be barred by the CDA. A provider of an interactive computer service,
such as Google, may claim CDA immunity only with respect to “information content
provided by another information content provider.” 47 U.S.C. § 230(c). “[A]n interactive
computer service that also is an ‘information content provider’ is not immune from liability
arising from publication of that content.” FTC v. Accusearch Inc., 570 F.3d 1187, 1197
(10th Cir. 2009) (citations omitted). Here, discovery has established that Google actively
encourages advertisers to bid on branded keywords and to use branded keywords in their
(cont’d)
7
II.
ROSETTA STONE’S UNJUST ENRICHMENT CLAIM IS NOT TIME-BARRED
Google also contends that Rosetta Stone’s unjust enrichment claim is time-barred,
asserting that its continuing auctions of Rosetta Stone trademarks should be treated as a one-time
event dating to its first auction in 2004. (Google’s Mem. at 4-5.) Applying this rationale,
Google asserts that Rosetta Stone must have initiated an action within three years of Google’s
first auction and, since it did not, Rosetta Stone is forever barred from asserting this cause of
action.
(Id. at 5.) Google’s position is directly contradicted by established Virginia legal
precedent.
The three-year limitation period associated with unjust enrichment claims begins
to run when the defendant is required to pay the expected compensation. Primrose Dev. Corp. v.
Benchmark Acquisition Fund Ltd. P’ship, 47 Va. Cir. 296, 298 (Va. Cir. Ct. 1998). When a
defendant’s wrongful acts occur at intervals, each occurrence inflicts a new injury and a separate
cause of action arises. See Hampton Rds. Sanitation Dist. v. McDonnell, 234 Va. 235, 239
(1987); Norfolk & W. Ry. Co. v. Allen, 118 Va. 428, 432-33 (1915).4 A plaintiff may demand
________________________
(cont’d from previous page)
advertisements. See Rosetta Stone’s Mem. of Law in Supp. of its Mot. for Partial Summ. J.
as to Liability [Docket No. 104] at p. 10-11, ¶¶ 30-33. Google thus is responsible for the
content of the advertisements appearing on its website and is subject to state law liability for
that content. See Accusearch, 570 F.3d at 1199-1201 (holding that the service provider was
“responsible for the development of the offensive content” by “specifically encourag[ing]
development of what is offensive about the content”).
4
The same is true in the breach of contract context. The statute of limitations begins to run on
a breach of contract claim when the breach occurs. Va. Code Ann. § 8.01-230. “Virginia
recognizes that multiple breaches or occurrences can give rise to separate causes of action.”
Park v. Alcon Surgical, Inc., No. 92-1179, 1993 WL 114820, at *3 (4th Cir. Apr. 15, 1993)
(citation omitted). The Supreme Court of Virginia recently explained the application of the
statute of limitations to situations involving multiple breaches of contract: “[i]f the wrongful
act is of a permanent nature and one that produces all the damage which can ever result from
it, [then] the entire damages must be recovered in one action, and the statute of limitations
begins to run from the date of the wrongful act, but if the wrongful acts are not continuous
(cont’d)
8
money due by filing a complaint to recover all sums due which accrued three years prior to filing
suit. Davis v. Davis, 190 Va. 468, 478 (1950) (holding that defendant’s statute of limitations
defense to plaintiff’s implied contract claim did not apply to “such sums as accrued within three
years prior to the institution of this suit”). Here, each time Google, without authorization,
auctions Rosetta Stone’s trademarks, it inflicts a new injury on Rosetta Stone and a separate
cause of action arises.
The two cases relied upon by Google for the contrary position – Tao of Systems
Integration, Inc. v. Analytical Services & Materials, Inc., 299 F. Supp. 2d 565, 576-77 (E.D. Va.
2004) and GIV, LLC v. IBM Corp., No. 3:07cv067-HEH, 2007 WL 1231443, at *3 (E.D. Va.
April 24, 2007) – involved claims of a single misrepresentation regarding the ownership of trade
secrets and a single misappropriation of patented technology, respectively. Because the actions
giving rise to the unjust enrichment claims in those cases occurred on a date certain (or within a
specified date range), the statute of limitations began to run from that time period. Unlike the
Tao and GIV cases, however, here there is continuing conduct – Google’s daily auctions of
Rosetta Stone’s marks – giving rise to the unjust enrichment claim.
Accordingly, Rosetta
Stone’s unjust enrichment claim entitles it to compensation for the benefits taken by Google
without Rosetta Stone’s authorization during the three-year period leading up to the filing of the
complaint, and up to and including the date of judgment.
________________________
(cont’d from previous page)
and occur only at intervals, each occurrence inflicts a new injury and gives rise to a new and
separate cause of action.” Am. Physical Therapy Ass ‘n v. Fed’n of State Bds. of Physical
Therapy, 271 Va. 481, 484 (2006) (citation and internal quotations omitted).
9
III.
THE AMENDED
ENRICHMENT
COMPLAINT
STATES
A
CLAIM
FOR
UNJUST
Rosetta Stone’s unjust enrichment claim is adequately pled. Under Virginia law,
a plaintiff seeking recovery for unjust enrichment must show (1) that it “conferred” a benefit on
the defendant, (2) that the defendant knew of the benefit and should reasonably have expected to
repay the plaintiff, and (3) that the defendant accepted or retained the benefit without paying for
its value. Nossen v. Hoy, 750 F. Supp. 740, 744-45 (E.D. Va. 1990). Judge Davis of the Norfolk
Division of the Eastern District of Virginia recently explained that the word “conferred” in this
context includes situations in which the defendant, without authorization, takes a benefit from
the plaintiff even when the plaintiff has not voluntarily bestowed the benefit on the defendant.
See In re Bay Vista of Va., Inc., No. 2:09cv46, 2009 WL 2900040, at *5 (E.D. Va. June 2, 2009).
Paragraphs 13 through 69 of the Amended Complaint allege that Google has used the Rosetta
Stone Marks without Rosetta Stone’s authorization, has sold those marks as keyword triggers for
third-party advertising, and has retained these profits without paying for the value that Rosetta
Stone has created in its intellectual property. Thus, the Amended Complaint states a claim for
unjust enrichment under Virginia law.
In asserting that Rosetta Stone has failed to properly allege the elements of a
claim for unjust enrichment, Google argues that (1) “Rosetta Stone does not expressly identify
what benefit it supposedly conferred on Google,” (2) “Rosetta Stone may not maintain an unjust
enrichment claim without pleading sufficient facts to raise the implication that Google promised
to pay for the benefit Rosetta Stone provided,” and (3) a contract governs the claims and
therefore an unjust enrichment claim cannot be maintained. (Google Mem. at 6.) None of these
arguments can withstand scrutiny.
10
A.
Rosetta Stone Has Properly Pled a Claim for Unjust Enrichment
The first element of an unjust enrichment claim requires that Rosetta Stone plead
and establish that it “conferred” a benefit on Google. Nossen, 750 F. Supp. at 744-45. As noted
above, the word “conferred” in this context, includes situations in which the defendant, without
authorization, takes a benefit from the plaintiff even when the plaintiff has not voluntarily
bestowed the benefit on the defendant. See In re Bay Vista of Va., Inc., 2009 WL 2900040, at *5
(“The fact that Defendants are alleged to have intentionally acted to improperly seize and retain
such benefit, rather than such benefit being voluntarily conferred by Debtor, is inconsequential.”)
(citation omitted). Rosetta Stone specifically alleges in the Amended Complaint that
Rosetta Stone requested that Google not auction its trademarks to third parties,
including resellers and affiliates, but Google has refused to alter its trademark
policy or practices. Rosetta Stone thus has conferred involuntarily a benefit on
Google, which is knowingly using the goodwill established in the Rosetta Stone
trademarks to derive additional advertising revenue.
(Am. Compl. ¶ 124.) Thus, Rosetta Stone has properly alleged it conferred, albeit involuntarily,
a benefit on Google and that Google has improperly seized a benefit from Rosetta Stone.
Google also contends that Rosetta Stone has not properly pled a promise to pay by
Google for the use of Rosetta Stone’s trademarks. (Google Mem. at 6.) The promise to pay,
however, “is implied from the consideration received.” Appleton v. Bondurant & Appleton, P.C.,
67 Va. Cir. 95, 2005 WL 517491, at *6 (Va. Cir. Ct. 2005) (citing Marine Dev. Corp., 225 Va.
at 142 & Hendrickson v. Meredeith, 161 Va. 193, 200-01 (1933)); see also Po River Water and
Sewer Co. v. Indian Acres Club of Thornburg, Inc., 255 Va. 108, 114-15 (1998). Here, it is
properly pled that Google accepted, or took without authorization, Rosetta Stone’s trademarks
and made them available to third parties at auctions hosted by Google. (Am. Compl. ¶¶ 122-124.)
It is also pled that Google derived considerable profits from the unauthorized auction of the
11
Rosetta Stone Marks. (Id. ¶¶ 33 & 62.) The promise to pay for this benefit is implied in law
from the unauthorized taking and subsequent sale of Rosetta Stone’s trademarks to third parties.5
B.
No Express Contract Governs the Subject Matter at Issue
Although Google relies on the proposition that one cannot maintain an unjust
enrichment claim when there is an express contract governing the parties contractual relationship,
Google fails to point out that the express contract must govern the “same subject matter” that
gives rise to the unjust enrichment claim. Appleton, 2005 WL 517491 at *6 (quoting S. Biscuit
Co. v. Lloyd, 174 Va. 299, 311 (1940) (“an express contract defining the rights of the parties
necessarily precludes the existence of an implied contract of a different nature containing the
same subject matter”)) (emphasis added). For this reason, Google’s reliance on its Terms of Use
is misplaced.6 First, there is no contract between Google and Rosetta Stone that governs or even
addresses Google’s right to auction Rosetta Stone’s trademarks to third parties. Second, to the
extent Google’s Terms of Use merely delineate what Rosetta Stone agreed to pay to Google for
Rosetta Stone’s advertisements appearing on the Google website, such cannot be construed as an
express contract between Google and Rosetta Stone governing Google’s rights and obligations
5
Rosetta Stone included its unjust enrichment claim in the Amended Complaint without
adding a single factual averment. It did so because the facts alleged provide Google with
adequate notice under Fed. R. Civ. P. 8(a) and properly state a cause of action for unjust
enrichment. The alleged infirmities cited by Google are based upon purportedly inadequate
factual averments to draw the legal implications to support an unjust enrichment claim.
However, with fact discovery now closed and summary judgment briefing having been filed,
including cross-motions for summary judgment on the unjust enrichment claim, it is
unnecessary to resolve this issue on the pleadings. In the event the Court nevertheless
concludes that the pleading is somehow deficient, Rosetta Stone should be permitted an
opportunity to allege additional detail.
6
Google’s Terms of Use are not referenced or cited in the Amended Complaint and therefore
may not properly be considered by the Court in the context of Google’s motion to dismiss.
See Nemet Chevrolet, 564 F. Supp. 2d at 549 (“On a Rule 12(b)(6) motion, the Court’s
analysis is limited to the four corners of the Complaint.”)
12
vis-à-vis third parties and its AdWords auctions. This is the very logic employed by the Court in
refusing to apply the contractual venue provision that would have required transfer of this action
to California. (09/18/2009 Hearing Tr. at 27-28.)
CONCLUSION
For the foregoing reasons, Rosetta Stone respectfully requests that this Court deny
Google’s Motion to Dismiss Count VII of the First Amended Complaint.
Respectfully submitted,
March 30, 2010
Of Counsel:
Mitchell S. Ettinger
(Pro hac vice)
Cliff Sloan
(Pro hac vice)
Jennifer L. Spaziano
(Pro hac vice)
Skadden, Arps, Slate, Meagher & Flom, LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
/s/
Warren T. Allen II
Virginia Bar Number 72691
Attorney for Plaintiff Rosetta Stone Ltd.
Skadden, Arps, Slate, Meagher & Flom, LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
(202) 371-7000
(202) 661-9121
wtallen@skadden.com
13
CERTIFICATE OF SERVICE
I hereby certify that on March 30, 2010 I will electronically file the foregoing with the
Clerk of the Court using the CM/ECF system which will then send a notification of such filing
(NEF) to the following:
Jonathan D. Frieden
ODIN, FELDMAN & PETTLEMAN, P.C.
9302 Lee Highway, Suite 1100
Fairfax, VA 22031
jonathan.frieden@ofplaw.com
Counsel for Defendant, Google Inc.
March 30, 2010
Date
/s/
Warren T. Allen II (Va. Bar No. 72691)
Attorney for Rosetta Stone Ltd.
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Telephone: (202) 371-7000
Facsimile: (202) 661-9121
Warren.Allen@skadden.com
14
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