Novation Ventures, LLC v. J.G. Wentworth Co., LLC, 2016 WL 6821110, No. CV 15-00954 BRO (C.D. Cal. Feb. 1, 2016)
Novation factors structured settlements: it buys the right to receive scheduled future payments from settlement recipients who do not wish to or cannot wait years for their annuitized payments; it has a market share of no more than 7%. Its competitor J.G. Wentworth is, along with its subsidiaries, “by far the largest participant in the factoring of structured settlements,” with a market share of about 75%. In 2011, J.G. Wentworth bought its largest competitor, Peach Holdings, and they own and control the “Olive Branch Funding” brand. Given regulatory barriers to entry, there are only a handful of companies competing in the business.
Novation alleged antitrust and Lanham Act claims based on the idea that J.G. Wentworth “advertises and presents itself to the public using (at least) three distinct brand names (JG Wentworth, Olive Branch Funding, and Peachtree)” without advising consumers that those brands are “all controlled and coordinated by the brands’ common owner and manager: The JG Wentworth Company.” This, Novation alleged, served to “systematically corrupt and frustrate [the] competitive bidding process.” Novation alleged that comparison shopping was a key determinant of the price sellers received, and that sellers typically used search engines to do this.
Novation alleged that the top three paid search listings have “strategic importance,” because “most people ‘click through’ on slots one through three of search results only.” Further, Novation alleged that most sellers get no more than two bids; relatively few seek three or four. (Given the sums of money at stake, it’s interesting that the search is so limited—each negotiation with a potential provider takes time and effort, and that short-term cost seems to outweigh the possible long-term benefits, which are probably unclear at the outset to the consumers.)
In addition, Novation alleged that defendants violated Google’s internal policies against “double-serving” ads, that is, buying more than one search result to be shown in response to any given query. Consumers allegedly believed that they were getting distinct results, “especially if each APPEARS to be different by virtue of common visual cues and labels such as trademarked name, brand, phone number, and logo.” By coordinating their brands’ bidding, defendants allegedly “consistently grab two and often three of the top three search listing results on many of the keywords used by consumers searching for structured settlement buyers.” This behavior “crowds out competitors and/or drives up the cost of being in second or third position in any given search ranking, making it more difficult and expensive for Novation to be found by potential customers looking for genuinely competing offers.”
The court held that Novation failed to allege antitrust injury because they didn’t allege how the deceptive conduct prevented consumers from clicking on the third link, e.g., the “www.annuity.org/Cash-Out/” to Annuity that showed in several exhibits; Novation brought no claims against Annuity. Since consumers were free to choose whether to click on an ad, and could also use whatever search terms they wanted, there was no harm to consumer choice, especially since Novation could use TV ads or radio to compete. And other competitors could and did bid for the top ad positions.
Novation also failed to state a false advertising claim. There were no literal falsehoods; the only falsity came if a consumer searched “who competes with Peachtree Financial” or “who competes with JG Wentworth.” The real argument was that when three ads were displayed for ‘JG Wentworth’ and ‘Peachtree Financial’ and ‘Olive Branch Funding,’ reasonable consumers would believe that these were separate companies competing to provide the service advertised. Though likely confusion is often a question of fact, it isn’t always so. In the keyword advertising context, it turns on what the consumer saw on the screen and reasonably believed. The court found that the ads were clearly labeled as ads and didn’t explicitly describe the others as competitors. Even if reasonable consumers would be aware of Google’s internal advertising policy (the court’s recitation suggests a hint of skepticism about that), there was no plausible likelihood of deception “where the relevant reasonable consumer would exercise a heightened degree of care and precision, where the purchase price of the transactions range from $5,000 to $1,000,000 (or more),” and the consumer might even have an advisor. No reasonable factfinder could find likely confusion.
Novation Ventures, LLC v. J.G. Wentworth Co., LLC, 2015 WL 12765467, No. CV 15-00954 (C.D. Cal. Sept. 21, 2015)
Earlier version of the complaint, also dismissed. Defendants’ failure to disclose common ownership wasn’t a false statement; simple failure to disclose doesn’t violate the Lanham Act because not saying anything “is neither ‘false’ nor a ‘representation.’ ” Nor was it plausible that the ads were misleading. Toyota v. Tabari held that internet consumers “fully expect to find some sites that aren’t what they imagine based on a glance at the domain name or search engine summary.... [C]onsumers don’t form any firm expectations ... until they’ve seen the landing page—if then. This is sensible agnosticism, not consumer confusion.” The “ad” label made deception even less plausible.
Nor did the allegations support a trademark infringement claim. Novation argued that defendants’ use of their own marks “ ‘caused confusion,’ ‘mistake,’ and has ‘deceived’ thousands of persons … ‘as to the affiliation, connection, or association’ of JG Wentworth with ‘Olive Branch Funding’ and ‘Peachtree Financial.’ ” But that wasn’t a trademark infringement claim. Novation suggested that defendants infringed Novation’s marks by using keyword meta tags. However, there was no allegation that defendants’ ads or links “incorporate plaintiff’s marks in any way discernable to internet users and potential customers.” Thus, no reasonable factfinder could find a likelihood of confusion here.