b. Defendant's Speech Took Place in a Public Forum
Plaintiff argues that Defendant's statements were not made in a place open to the public or a public forum because the statements are only viewable to those who download or purchase the product, and therefore it is a place of selective access. (Opp. at 10). [FN 8] The Court disagrees.
Cases construing the term "public forum" as used in section 425.16 have noted that the term is "traditionally defined as a place that is open to the public where information is freely exchanged." ComputerXpress, Inc., 93 Cal.App.4th at 1006, 113 Cal.Rptr.2d 625 (quoting Damon v. Ocean Hills Journalism Club, 85 Cal.App.4th 468, 475, 102 Cal.Rptr.2d 205 (2000)). "Under its plain meaning, a public forum is not limited to a physical setting, but also includes other forms of public communication such as electronic communication media like the internet." ComputerXpress, Inc., 93 Cal.App.4th at 1006, 113 Cal.Rptr.2d 625 (citing Hatch v. Superior Court, 80 Cal.App.4th 170, 79 Cal.App.4th 663, 94 Cal.Rptr.2d 453 (2000)) (noting, although not in the context of section 425.16, that internet communications have been described as "classical forum communications").
Defendant's speech about Plaintiff is made in Defendant's Ad-aware software which is available and distributed free of charge and downloaded by millions of computer users via Defendant's website and other linked websites. In similar circumstances, it has been held that a website that is accessible free of charge to any member of the public, which provides a forum where members of the public may read the views and information posted, and also post their opinions on the site is deemed to be a public forum. Global Telemedia Intern., Inc. v. Doe 1, 132 F.Supp.2d 1261, 1264 (C.D.Cal.2001). This is the case because such websites satisfy the requirement that a public forum be "a place open to the public where information is freely exchanged." Damon, 85 Cal.App.4th at 475, 102 Cal.Rptr.2d 205.
In fact, the California Court of Appeal decided on January 21, 2004, that the contention that the internet is not a public forum is a peculiar contention that is difficult to take seriously. Barrett v. Rosenthal, 114 Cal.App.4th 1379, 9 Cal.Rptr.3d 142, 148-48 (2004). The court observed that the internet is a decentralized, global medium of communication that links people, institutions, corporations and governments around the world. Id. (citing ACLU v. Reno, 929 F.Supp. 824, 831 (E.D.Pa.1996)). Indeed, the U.S. Supreme Court theorized in affirming the Reno decision that the internet:
Reno v. ACLU, 521 U.S. 844, 870, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997). Considering that the internet provides "the most participatory form of mass speech yet developed," Reno, 929 F.Supp. at 883, it is not surprising that courts have uniformly held or, deeming the proposition obvious, simply assumed that internet venues to which members of the public have relatively easy access constitute a "public forum" or a place "open to the public" within the meaning of section 425.16. Barrett, 9 Cal.Rptr.3d at 149 (2004) (citing ComputerXpress, Inc., 93 Cal.App.4th at 1007, 113 Cal.Rptr.2d 625; Global Telemedia Intern., Inc. v. Doe, 132 F.Supp.2d 1261, 1264 (C.D.Cal.2001); Nicosia v. DeRooy, 72 F.Supp.2d 1093 (N.D.Cal.1999)).
The fact that computer users must download the software to read the speech provides no reason to ignore the self-evident truth that Defendant's speech occurred in a public forum. Moreover, Plaintiff does not solely complain of the speech that occurs once the user has downloaded the program for free or purchased the program. Plaintiff argues that the statements that induce a user to download the software are actionable because they falsely associate Plaintiff with insidious programs. Therefore, by Plaintiff's own contentions, speech is implicated that occurs before the user engages in any downloading or purchasing. Thus, by Plaintiff's own allegations, the access to the speech is not selective or limited. Additionally, Defendant has chat rooms which are an open forum permitting Ad-aware users, or even internet users in general, to discuss the benefits and disadvantages of various software, including Ad-aware and NewDotNet.
Accordingly, Defendant has made the required threshold showing that the statements about which Plaintiff complains were statements made in a place open to the public or a public forum in connection with an issue of public concern or in furtherance of Defendant's right of free speech under the United States or California Constitution, and were therefore within the ambit of the protection afforded by section 425.16. The burden, therefore, shifts to Plaintiff to demonstrate a probability of success on its claims.
2. Plaintiff Cannot Establish a Likelihood of Success on the Merits
New net complains that Ad-aware's inclusion of NewDotNet in its database constitutes: (1) unfair competition in violation of Cal. Bus. & Prof.Code § 17200, (2) trade libel, (3) interference with prospective economic advantage, and (4) false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a), and prays for injunctive and declaratory relief. Plaintiff's claims are stacked like a house of cards, each relying on the other for its support. A determination that one claim is not viable undermines the viability of the remaining causes of action. Thus, the facts advanced in support of each claim are similarly intertwined and overlapping. The salient facts are as follows:
In support of its claims, Plaintiff asserts that Defendant falsely labels it as a "data miner" and prompts the user to remove it. (See, e.g., Compl. ¶ 24; Opp. at 16). Plaintiff, pointing to the Akerlund Declaration filed in support of the instant motion, argues that Defendant concedes that NewDotNet is not a data miner. (Id.). Defendant, however, does not admit that NewDotNet is not a data miner; it takes no position on the issue. While Defendant, in the Akerlund Declaration, does admit that an earlier version of Ad-aware labeled NewDotNet as a "data miner," and that such a label was an unintended aberration, this does not amount to proof that the label was false. (Akerlund Decl. ¶ 26). Moreover, subsequent versions of Ad-aware place it in the non-pejorative category--"misc." As for the truth or falsity of the data miner label, the only evidence proffered by Plaintiff in support of its claim of falsity are two declarations that simply state that neither the "data miner" nor the "misc." labels are properly descriptive of NewDotNet. (Sheehy Decl. ¶ 14; Amabile Decl. ¶ 6). [FN 9] The Court, in ruling on Plaintiff's motion for a preliminary injunction commented that "New.net present[ed] no persuasive evidence that any of Lavasoft's statements are false." (11/04/03 Order at 3). Nothing has changed.
Plaintiff also complains that Ad-ware's flawed uninstall feature may totally and perhaps irredeemably sever connectivity -- a flaw which Plaintiff asserts has dealt a severe blow to its reputation with users. (Compl. at 2). Ad-aware does not clearly deny that its method may at one time been flawed, but asserts that the "current, and only, version distributed by Defendant today has never been the subject of such a claim." (Akerlund Decl. ¶ 30). Indeed, Plaintiff has never established that any currently distributed versions of Ad-aware cause connectivity problems when a user attempts to remove NewDotNet. Moreover, regardless of Ad-aware's uninstallation flaws, Microsoft and other software reviewers have noted that NewDotNet itself may cause serious system problems such as crashing Internet Explorer or causing loss of all network connectivity when users attempt to upgrade their operating systems or to remove it with its own uninstallation mechanism. (Id. ¶¶ 15-18; Exhs. I-P thereto).
Plaintiff also contends that, because Defendant targets malicious advertising programs, the mere inclusion of NewDotNet on its target list unfairly associates the program with the "worst of the worst" on the internet, when in reality, it is functionally benign and a beneficial enhancement for internet browsing. (Compl. ¶ 27; Sheeny Decl. ¶¶ 4-6, 12). However, noticeably absent from Lavasoft's homepage is any specific mention of New.net or NewDotNet of any sort, let alone the suggestion that NewDotNet is the "worst of the worst." Indeed, Plaintiff concedes that the only specific mention of NewDotNet appears after the user has downloaded and run the Ad-aware program. (See Opp. at 10 ("Such statements are generally viewable only by those who download or purchase one of the products.")). Ad-aware's disclosures about NewDotNet, after the download and scan are performed, merely describe it as a layered service provider and classify it as "misc." Thus, Plaintiff's assertion ignores the terms used by Ad-aware in its description of NewDotNet, and draws inferences about what users may or may not believe from Ad-aware's web page statements without providing any useful evidence on the subject.
Plaintiff's allegations also ignore its own conduct -- conduct which could easily foster negative impressions of NewDotNet -- which is described in internet articles submitted by Plaintiff in support of its motion for preliminary injunction. For example, one author related that "NN bundles with trash and questionable applications. In fact a few may have serious legal problems to contend with soon," and remarked that New.net has a number of problems including "bundling with so many crappy applications." (8/22/03 Amabile Decl. Exh. G). Thus, Plaintiff can hardly complain of any negative associations created by Ad-aware when its own conduct, i.e., surreptitiously downloading its program onto personal computers and bundling with questionable applications, creates associations that are less than desirable.
With respect to Plaintiff's alleged damages, the complaint merely alleges "direct financial injury" without specifying the precise nature or the amount of damage. The complaint also fails to allege the size of Plaintiff's business, its customer base, the amount of its sales, or even if it had sales, prior to or after Defendant's allegedly harmful statements were made and published. Plaintiff's opposition and the accompanying declarations and exhibits are similarly devoid of such facts. Plaintiff's opposition, however, attempts to expand somewhat on its conclusory assertion of injury, arguing that it may have permanently lost end users who unfairly blame Plaintiff when Ad-aware's uninstallation process breaks the users' connections with the internet and that as a result of Defendant's targeting of Plaintiff, it has lost its business partnering contracts with Hewlett Packard. (Opp. at 20; Sheehy Decl. ¶ 16).
Plaintiff offers no facts showing the value of the lost Hewlett Packard contract. Likewise, although Sheehy asserts that some action of Defendant caused the termination of Plaintiff's contract with Hewlett-Packard, he presents no documentation to support that claim. Plaintiff presents no reason why Lavasoft would have any reason to know of any specific relationship that Plaintiff had with any third party in connection with the distribution of its software. Even Plaintiff's cease and desist letters sent to Defendant prior to the suit's filing fail to identify any third party relationships that were supposedly damaged by the Ad-aware software. (See Simonds Decl. Exh. A, B). Instead, the complaint focuses solely on New.net's relationships with computer users and contains no allegations that it derives any revenue from its distribution of NewDotNet to such users.
Plaintiff also fails to provide documentation that it suffered any damage whatsoever from Ad-aware's uninstallation process, resulting in some users' loss of connectivity which Plaintiff claims harmed its reputation by unfairly associating Plaintiff with the loss. It should be clear, however, that Plaintiff had already lost its relationship with users who experienced connectivity problems because the loss of connectivity only occurred after the user had chosen to use the Ad-aware program to delete NewDotNet from his or her computer. As for other users who learn about the relationship between NewDotNet and connectivity problems from third parties, if those statements are defamatory and damage Plaintiff's reputation, Plaintiff's complaint lies with those third parties, not Defendant. This is especially true given that some of the system problems associated with NewDotNet by third parties are unrelated to uninstallation by Ad-aware; rather, they focus on inherent defects in the NewDotNet software. In any event, those third party statements pertaining to NewDotNet's removal, logically, must also primarily have an effect on users who already desire to eliminate NewDotNet from their hard drives.
(a) Plaintiff's Unfair Competition Claim
California Business and Professions Code section 17200 et seq. prohibits any person from engaging in "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising ...." Cal. Bus. & Prof. Code § 17200.
(i) Defendant's Speech is Not Commercial Speech but is Speech Afforded Full First Amendment Protection
Lawsuits premised on section 17200 are subject to being stricken because they are barred by the First Amendment where the speech complained of is not commercial speech. Kasky v. Nike, Inc., 79 Cal.App.4th 165, 178, 93 Cal.Rptr.2d 854 (2000) (reversed on other grounds). As a preliminary matter, Plaintiff argues, contrary to this Court's prior ruling, that the First Amendment does not protect Defendant's speech. (Opp. at 12). In particular, Plaintiff argues that Defendant's speech is commercial speech not entitled to full First Amendment protection. Despite Plaintiff's protests to the contrary, the Court concludes that the speech in question, which involves an identification of NewDotNet on a computer's hard drive and labels it as "misc." and gives the computer owner the option of deleting, is not commercial speech.
"[T]he category of commercial speech consists at its core of 'speech proposing a commercial transaction.'" Kasky v. Nike Inc., 27 Cal.4th 939, 956, 119 Cal.Rptr.2d 296, 45 P.3d 243 (2002). Factors to be considered in that analysis are: (1) whether the statements are in a typical advertising format; (2) whether the statements refer to a commercial product; and (3) whether the defendant had an economic or commercial motivation for making the statements. Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66-68, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983). Not all of the factors need to be present to conclude that speech is commercial, but none of these factors, in and of itself, is sufficient to support a commercial speech transaction. Id. at 67 n. 14, 103 S.Ct. 2875. Nor is commercial speech strictly limited to the core segment of speech that proposes a commercial transaction. Kasky, 27 Cal.4th at 956, 119 Cal.Rptr.2d 296, 45 P.3d 243. Speech is commercial in its content if it is likely to influence consumers in their commercial decisions. Id. at 969, 119 Cal.Rptr.2d 296, 45 P.3d 243. Speech is not advertising speech where it does not promote the speaker's product for sale or encourage a commercial transaction with the user. Id.
Here the speech that Plaintiff targets occurred after the conclusion of the "transaction" (which typically involves no exchange of money) between Lavasoft and a computer user. Accordingly, Defendant's after-the-fact statements about NewDotNet cannot relate to the "sale" of Lavasoft's Ad-Aware program or be intended to induce an economic transaction between Defendant and the Ad-aware user. The statements are similar to those that would appear in a review published in a magazine whose focus is the evaluation of consumer goods. Moreover, when users initiate the Ad-aware program, review the results of its search of the user's hard-drive and initiate the Ad-aware uninstall feature, they are not making a decision to purchase anything -- rather, they are managing the content of their computer's hard drive. This is not activity that falls within the scope of Section 17200.
Similarly, the statements on Defendant's homepage focus not so much on the marketing of any particular software program (the basic Ad-aware program is given away free), but primarily on the larger issue of the surreptitious downloading of computer programs. The computer user who accesses the Lavasoft web site is provided with information regarding the means by which internet businesses access personal computers, place programs on those computers, and accomplish that goal without the user's knowledge. The site further describes how many of those downloaded programs work to track the user's internet activities and reports those activities to persons unknown to the user. The site explains how the freely available Ad-aware works, the benefits it provides, and then permits the user to download Ad-aware, or not, for free. This is not commercial speech within any commonly understood meaning of that term.
(ii) Defendant Has Not Engaged in an Unlawful Practice
Plaintiff argues that Defendant's speech is unlawful because it violates the Lanham Act and constitutes trade libel and tortious interference with prospective economic advantage. (Opp. at 16). Thus, Plaintiff seeks to piggyback its unfair competition claim upon these other claims. Because the Lanham Act, [FN 10] trade libel, and tortious interference claims are not viable, there are no independently unlawful facts upon which Plaintiff can premise its unfair competition claim.
(iii) The Speech Was Not Fraudulent Nor Did It Involve False Advertising
Plaintiff argues that Defendant's statements are fraudulent and constitute a violation of the false advertising prong of section 17200. (Opp. at 16). First, despite this Court's prior ruling to the contrary, Plaintiff persists in its contention that Defendant falsely labeled NewDotNet a data miner and that Defendant conceded this point, but does so without presenting any additional support for its position. (Id.). To the extent that any evidence has been presented on this point, it fails to establish that the statements allegedly included in the Ad-aware software (which are no longer included) are in fact false. Because evidence proving that Plaintiff is not a data miner lies exclusively in its own hands, permitting discovery into the issue of falsity will not help Plaintiff to bolster its position.
Second, Plaintiff contends that, because Defendant holds itself out as being an expert in the internet privacy and anti-trackware industry and sends the marketing message "buy Ad-aware to remove malicious advertising programs on your computer," the inclusion of NewDotNet in its software database would lead an average person of ordinary intelligence to understand that NewDotNet is an advertising program or data miner. (Opp. at 18). The problem with the argument is that users who download Ad-aware are not provided with a listing of the programs in its database, and won't know whether anything in the database exists on their computer until after the software has been run. Thus, Plaintiff's convoluted argument that user's obtain the Ad-aware software in part because of a belief that NewDotNet is a dataminer or an advertising program will not withstand even casual analysis.
Plaintiff's argument as to defendant's supposed motivation for making these imagined "false statements" further demonstrates the lack of merit in Plaintiff's position. Plaintiff insists that NewDotNet has been included in the Ad-aware database because its inclusion furthers Defendant's economic interest by increasing the software's perceived value in the mind of the consumer, enticing more consumers to purchase the enhanced versions of Ad-aware. On that basis, Plaintiff concludes that Defendant's statements constitute advertising and that the advertising is misleading or has the capacity or tendency to deceive or confuse the public. But again, the size and content of the database are unknown to the downloader, and the inclusion of NewDotNet in Ad-aware's database will remain unknown to the user unless NewDotNet has been downloaded to the user's computer without his knowledge or consent. Thus, although Plaintiff correctly asserts that the term advertising should be interpreted broadly (id. at 17) (citing Chern v. Bank of America, 15 Cal.3d 866, 875-76, 127 Cal.Rptr. 110, 544 P.2d 1310 (1976)), no authority has interpreted the term to include statements not made, or information unknown, until after a transaction has taken place. Accordingly, as the purpose of section 17200 is to prevent consumers from purchasing the product based on a seller's false statements, Rosenbluth Int'l, Inc. v. Superior Court, 101 Cal.App.4th 1073, 1078, 124 Cal.Rptr.2d 844 (2002) ( Section 17200 is designed to protect "a 'singularly dense' group of customers who fall prey to misleading advertising ...."), logically it cannot apply in a situation where the alleged false representation post-dates the transaction. (See Opp. at 10 (conceding that "such statements are generally viewable only by those who download or purchase one of the products.")).
Finally, as already noted, negative descriptions of NewDotNet are included not only in the Ad-aware software, but are also disseminated by and to the general public in a wide array of other places, including internet chat-rooms and bulletin boards. Such statements by third parties certainly cannot be construed as advertising by Ad-aware.
(b) Plaintiff's Claim for Trade Libel
Under California law, "trade libel is an intentional disparagement of the quality of property, which results in pecuniary damage." Films of Distinction, Inc. v. Allegro Film Prod., Inc., 12 F.Supp.2d 1068, 1081 (C.D.Cal.1998). To prove trade libel, Plaintiff must show (1) a statement that (2) was false, (3) disparaging, (4) published to others in writing, (5) induced others not to deal with it, and (6) caused special damages. Atlantic Mut. Ins. Co. v. J. Lamb. Inc., 100 Cal.App.4th 1017, 1035, 123 Cal.Rptr.2d 256 (2002); see also Leonardini v. Shell Oil Co., 216 Cal.App.3d 547, 572, 264 Cal.Rptr. 883 (1989) ("A cause of action for damages for trade libel requires pleading and proof of special damages in the form of pecuniary loss.").
As for the element of falsity, as noted above, there is a dearth of persuasive evidence that Defendant made any false statement about Plaintiff's software or that it is being defamed by innuendo. (Opp. at 19- 20). Additionally, Plaintiff cannot satisfy the special damages requirement for trade libel under California law. "A bare allegation of the amount of pecuniary loss is insufficient for the pleading of a trade libel claim." Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F.Supp.2d 1035, 1047 (C.D.Cal.1998). Here, Plaintiff's complaint does not even specify the amount of damage, and simply refers to an amount to be ascertained at trial. Moreover,
(Id.). Plaintiff's complaint as well as its opposition papers and accompanying declarations and exhibits contain no such factual allegations. Again, all this information is in Plaintiff's hands, so granting time to engage in discovery would be of no assistance to Plaintiff. Given that Plaintiff has failed to plead special damages, it cannot establish it has a probability of success on the merits with regard to its trade libel claim.
(c) Plaintiff's Claim for Tortious Interference
Plaintiff also claims tortious interference with prospective business advantage, which requires a showing of: (1) an economic relationship containing the probability of future economic benefit to plaintiff; (2) knowledge by defendant of the relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages to plaintiff proximately caused by defendant's acts. Los Angeles Land Co. v. Brunswick Corp., 6 F.3d 1422, 1429 (9th Cir.1993). Accordingly, the Plaintiff must establish that the "defendant not only knowingly interfered with the plaintiff's expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself." Hsu v. OZ Optics, Ltd., 211 F.R.D. 615, 620 (N.D.Cal.2002) (citing Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 393, 45 Cal.Rptr.2d 436, 902 P.2d 740 (1995)); see also Marin Tug & Barge, Inc. v. Westport Petroleum, Inc., 271 F.3d 825, 831 n. 8 (9th Cir.2001). Stated differently, "[i]t is ... the plaintiff's burden to prove, as an element of the cause of action itself, that the defendant's conduct was independently wrongful." Hsu, 211 F.R.D. at 620.
First and foremost, for reasons already articulated above, Plaintiff cannot meet this standard. In particular, Plaintiff cannot show that Defendant engaged in independently wrongful conduct. [FN 11] Accordingly, the Court's inquiry could end here.
Additionally, to prove this tort, Plaintiff must establish that it was reasonably probable that economic advantage would have been realized but for Defendant's interference. Bell Atlantic Bus. Sys. Services v. Hitachi Data Sys. Corp., 1995 WL 798935, at *9 (N.D.Cal. Mar. 10, 1995). There is no evidence that NewDotNet's inclusion in the Ad-aware program was the cause of the loss of any contract. (See Compl. ¶¶ 38-42; Opp. at 21). Indeed, the complaint focuses solely on Plaintiff's relationships with computer users. Despite the fact that the success of Plaintiff's business ultimately depends on its ability to distribute as many copies of its software as possible onto users' computers, these relationships with the public at large are based on free and usually surreptitious downloads, and thus hardly rise to the level of "economic relationships" as there is no business dealing between the unsuspecting users and Plaintiff. Moreover, the complaint is devoid of any allegation that it derives revenue from that distribution of its software.
Finally, because the motive or purpose to disrupt an ongoing business relationship is of central concern to tortious interference cases, a strong showing of such intent is required. Bell Atlantic Bus. Sys. Services, 1995 WL 798935, at *9. However, as noted above, because there is no evidence that Defendant had any interest in, or any way of knowing about, Plaintiff's business operations, Plaintiff would under no circumstances be able to show that Defendant acted with the intent to disrupt any such relationships.
Finally, the Court notes that the record, including the evidence provided by Plaintiff, clearly establishes that because the tactics being used in the internet business community are a proper subject of public debate, Ad-aware is just one of a number of participants in a movement to provide information to computer users and to foster public debate on the topic.
For the foregoing reasons, Plaintiff has failed to meet its burden that it has a probability of success on the merits of its tortious interference claim.
(d) Plaintiff's Claim for Declaratory Relief
A portion of Plaintiff's claim for declaratory relief relies on Plaintiff's other state law causes of action. Accordingly, to the extent that the section 17200 unfair competition claim, trade libel claim, and tortious interference with prospective economic advantage claim are stricken, so too are the related portions of Plaintiff's declaratory relief claim. Accordingly, these portions of the declaratory relief claim are DISMISSED WITH PREJUDICE.
E. DEFENDANT IS ENTITLED TO MANDATORY ATTORNEYS' FEES AND COSTS
Under section 425.16(c), a defendant who prevails on an anti-SLAPP motion to strike is entitled to recover his or her attorney fees. Pfeiffer Venice Props. v. Bernard, 101 Cal.App.4th 211, 216, 123 Cal.Rptr.2d 647 (2002). The statute is broadly construed so as to effectuate the legislative purpose of reimbursing the prevailing defendant for expenses incurred in extricating him or herself from a baseless lawsuit. Wilkerson, 99 Cal.App.4th at 446, 121 Cal.Rptr.2d 275. An award is proper even if the anti-SLAPP motion is granted as to only some of a plaintiff's claims. ComputerXpress, 93 Cal.App.4th at 1020, 113 Cal.Rptr.2d 625. Accordingly, Defendant is ordered to provide evidence of its costs and attorneys' fees so that the Court may award Defendant its attorneys' fees.
Because claims under federal law are not subject to California's anti-SLAPP statute, Defendant moves under Fed. R. Civ. P. 12(c) ("FRCP") to dismiss Plaintiff's single federal claim under the Lanham Act as well as Plaintiff's claim for declaratory relief to the extent it is predicated upon the Lanham Act claim.
A. LEGAL STANDARD FOR JUDGMENT ON THE PLEADINGS PURSUANT TO FRCP 12(c)
A motion for judgment on the pleadings, pursuant to FRCP 12(c), is a proper means to challenge the sufficiency of the complaint after an answer has been filed. See Fed. R. Civ. P. 12(c). FRCP 12(c) is a vehicle for summary adjudication, but the standard is like that of a motion to dismiss. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). Dismissal is proper only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of its claim which would entitle him to relief. Sun Savings & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191 (9th Cir.1987). In ruling on a motion for judgment on the pleadings, the court must construe the complaint, and resolve all doubts, in the light most favorable to the plaintiff. General Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir.1989). Although the court must accept all material allegations in the complaint as true, the court need not accept as true conclusory allegations or legal characterizations. McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir.1988).
In deciding a motion for judgment on the pleadings, the court generally is limited to the pleadings and may not consider extrinsic evidence. See Fed. R. Civ. P. 12(c). A district court may, however, consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). Moreover, a district court may consider a document if it is "necessarily relied" upon by the complaint, as long as the authenticity of the document is not challenged. See Parrino v. FHP. Inc., 146 F.3d 699, 706 (9th Cir.1998).
B. PLAINTIFF'S LANHAM ACT CLAIM DOES NOT STATE A CLAIM FOR RELIEF AND PLAINTIFF
LACKS STANDING TO BRING SUCH AN ACTION
Plaintiff now attempts to raise allegations in support of its Lanham Act claim that are not mentioned in the complaint. For example, there is no allegation in the complaint that Plaintiff and Defendant are competitors -- a position that is vigorously argued in opposition to Defendant's motion. In fact, New.net's description of the two companies in its complaint is at odds with its current stance that the parties are competitors and makes clear that the parties are engaged in separate and distinct businesses. (Compare Compl. ¶ 9 ("Newdotnet Client software allows users to enable individual computers to access the website names and e-mail addresses that are within the domain namespace that New.Net has launched.") with Compl. ¶ 10 (Lavasoft's software "provide[s] continuous protection from ... aggressive advertising ... tracking components' " and other " 'unauthorized program[s].' ")). Additionally, Plaintiff's complaint does not allege conduct that is harmful to its ability to effectively compete with Defendant or that it derives revenue from its distribution of NewDotNet to computer users.
1. Plaintiff Lacks Standing to Bring Its False Advertising Claim
In order to bring a false advertising claim, the Lanham Act requires that: (1) the plaintiff competes with defendant in some marketplace; (2) the plaintiff has alleged a discernibly competitive injury resulting from the misrepresentation in the marketplace; and (3) the misrepresentation implicates some purpose of the Lanham Act such as the protection of trademarks or unfair competition. Kournikova v. General Media Communications, Inc., 278 F.Supp.2d 1111, 1117 (C.D.Cal. May 2, 2003). For the purposes of the Lanham Act, "competitors" are "persons endeavoring to do the same thing and each offering to perform the act, furnish the merchandise, or render the services better or cheaper than his rival." Id. They are parties vying for the same dollars from the same consumer group. Id.
Based on Plaintiff's own description of the parties' respective businesses in the complaint, they would not be considered competitors because they are involved in different products in different segments of the internet market. Moreover, the complaint is devoid of any allegation that Plaintiff derives revenue from computer users for the distribution of its software and therefore that it is competing for the same dollars from the same consumers (computer users) who purchase goods from Defendant. Plaintiff now argues that Defendant is a competitor because both parties market their
products to internet users who seek an enhanced browsing experience and enhanced functionality. (Opp. at 23). This broad definition would capture almost any company that sells software that has some connection or relationship to the internet. Norton anti-virus and a program which enables internet users to effectively download and file-share pornography would be competitors under Defendant's proposed definition. (See Reply at 15). Lanham Act jurisprudence precludes such a broad definition of "competitor" which, contrary to the Act's expressly stated purpose, would transform it into a "statute of misrepresentation." Halicki v. United Artists Comms., Inc., 812 F.2d 1213, 1214 (9th Cir.1987). [FN 12]
In sum, because Defendant's purported misrepresentations do not implicate the purposes of the Lanham Act -- protection of trademark or prevention of unfair competition -- Plaintiff lacks standing to bring suit under the Lanham Act. Id. at 1117-18. Thus, Plaintiff's allegations are insufficient to establish standing to bring suit under the Lanham Act, which alone provides a sufficient basis for dismissal.
2. Plaintiff Cannot Prove the Elements of False Advertising
Plaintiff's complaint fails to sufficiently plead the elements of a false advertising claim under the Lanham Act. False advertising under the Lanham Act occurs when:
15 U.S.C. § 1125(a)(1). Accordingly, the Lanham Act requires, among other things, that the false statements are: (1) commercial speech [as defined by the Lanham Act]; (2) by a defendant who is in commercial competition with the plaintiff; (3) for the purpose of influencing consumers to buy defendant's goods or services; and (4) disseminated sufficiently to the relevant purchasing public to constitute advertising within the industry. Rice v. Fox Broadcasting Co., 330 F.3d 1170, 1181 (9th Cir.2003).
First, the complaint does not allege that Defendant's statements constitute commercial speech. Moreover, the statements about Plaintiff are not commercial speech within the meaning of the Lanham Act. Not unlike the definition of commercial speech for the purposes of a section 17200 claim, under the Lanham Act, "[t]he core notion of commercial speech is 'speech which does no more than propose a commercial transaction.' " Rice, 330 F.3d at 1181 (citing City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 422, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993)). Because, as this Court has already ruled, Defendant's speech constitutes speech on an issue of public importance, (11/4/03 Order at 16), it cannot be said that the sole purpose of the speech is to propose a commercial transaction. (See also id. at 22 ("New.net can hardly argue that the speech involved in this case is of limited or purely private interest.")).
Courts have acknowledged that the Lanham Act's prohibition against false advertising "has never been applied to stifle criticism of the goods or services of another by one, such as a consumer advocate, who is not engaged in marketing or promoting a competitive product or service." Wojnarowicz v. American Family Ass'n., 745 F.Supp. 130, 141 (S.D.N.Y.1990). As the legislative history of section 43(a) of the Lanham Act makes plain, misrepresentations other than false advertising:
Id. at 142 (quoting S. 1883, 101st Cong., 1st Sess., 135 Cong. Rec. 1207, 1217 (Apr. 13, 1989)). Precisely the same rationale applies to Defendant.
Defendant functions like various consumer protection groups in that it gathers publicly-available information about various software products and then discloses that information to the general public so that the public can intelligently and independently decide whether they want various software to remain on their computer. If the law were otherwise, then every statement by one entity concerning another's product that is alleged to be false would be the subject of a Lanham Act claim. Moreover, even though many product evaluation magazines and newsletters (e.g., Consumer Reports) charge for their publication, their statements about the products of others cannot be described as speech that proposes a commercial transaction. Accordingly, such statements cannot reasonably be characterized as "advertising" the sale of its magazine as that term is interpreted in the context of Lanham Act jurisprudence. Rice, 330 F.3d at 1181. Accordingly, based on the pleading, the Lanham Act false advertising claim fails as a matter of law.
Second, as discussed supra, Plaintiff's complaint does not, and indeed, cannot allege that Defendant is one of its competitors. Third, Plaintiff has not adequately alleged, and as a matter of law, cannot allege, that the reference to Plaintiff in its software was "for the purpose of influencing consumers to buy Defendant's goods or services," id., because the statements about NewDotNet appear only after Ad-aware has been downloaded and the scan has been run on the user's hard drive. See also Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir.1997) (holding that in order to prevail on Lanham Act false advertising claims, the plaintiff must show that "such deception is material, in that it is likely to influence the purchasing decision" of the consumer). Moreover, there is no purchase here because Ad-aware is available for free to the general public and its enhanced versions, which are available for sale, are virtually identical to the free version in all respects relevant to Plaintiff's claim. (11/4/03 Order at 7 n. 4). Because the statements are made after the goods are delivered, and there is typically no "purchase," Defendant's statements are not and cannot be alleged to be "disseminated sufficiently to the relevant purchasing public to constitute 'advertising' ... within that industry." Rice, 330 F.3d at 1181.
Because Plaintiff does not plead, and indeed, cannot plead the elements of a false advertising claim under the Lanham Act, the Court DISMISSES the claim WITH PREJUDICE.
C. PLAINTIFF'S CLAIM FOR DECLARATORY RELIEF IS ALSO DISMISSED
The Court DISMISSES the portions of Plaintiff's claim for declaratory relief claim that rely on the Lanham Act claim.
For the foregoing reasons, each of Plaintiff's state law claims are STRICKEN pursuant to California's anti-SLAPP statute. Furthermore, Defendant is entitled to a judgment on the pleadings with regard to Plaintiff's Lanham Act claim. Because Plaintiff does not and cannot sufficiently plead the elements of its Lanham Act claim, the claim is DISMISSED WITH PREJUDICE. Moreover, because Plaintiff's claim for declaratory relief is wholly reliant on its state law claims and federal Lanham Act claim, it too is STRICKEN or DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.