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ATTORNEYS AT LAW
LOS ANGELES
DEFENDANT’S OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION
Case Number: 2:16-cv-04207 SVW (MRWx)
LATHAM & WATKINS LLPDaniel Scott Schecter (Bar No. 171472) Daniel.Schecter@lw.com Marvin S. Putnam (Bar No. 212839)
Marvin.Putnam@lw.com Laura R. Washington (Bar No. 266775) Laura.Washington@lw.com
10250 Constellation Boulevard, Suite 1100 Los Angeles, California 90067 Telephone: +1.424.653.5500 Facsimile: +1.424.653.5501 Attorneys for Defendant Steel House, Inc.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CRITEO S.A., Plaintiff, v. STEEL HOUSE, INC., Defendant.
CASE NO. 2:16-CV-04207 SVW (MRWx) Hon. Stephen V. Wilson DEFENDANT STEEL HOUSE, INC.’S OPPOSITION TO PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION [Supporting Declarations of Mark Douglas, Christopher Innes and Patrizio Spagnoletto Filed Concurrently Herewith] Hearing Date: August 29, 2016Time: 1:30 p.m. Courtroom: 6
Action Filed: June 13, 2016Trial Date: Not Yet Determined
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 1 of 32 Page ID #:191
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TABLE OF CONTENTS Page
I. INTRODUCTION .......................................................................................... 1
II. STATEMENT OF FACTS ............................................................................. 3
A. The Online Advertising Industry Is Competitive And Dynamic. .............................................................................................. 3
B. SteelHouse Has Revolutionized The Ad Tech Industry. ..................... 4
C. SteelHouse And Criteo Are Dramatically Different. ........................... 4
1. Different Pricing Models. .......................................................... 4
2. SteelHouse Offers More Information And Control. .................. 5
3. SteelHouse And Criteo Share Few Customers. ......................... 6
D. The Ad Tech Industry Does Not Recognize One Attribution Model. ............................................................................... 6
E. Head-To-Head Comparisons. .............................................................. 8
F. Criteo’s Baseless “Click-Fraud” Accusations. .................................... 8
III. ARGUMENT ............................................................................................... 11
A. Governing Legal Standard. ................................................................ 11
B. Criteo Fails To Demonstrate A Likelihood Of Success. ................... 12
1. Criteo Fails To Meet Its Burden On Its Lanham Act Claim. ................................................................................ 12
a. Criteo Fails To Show SteelHouse’s Attribution Reporting Constitutes False Advertising. ................................................................... 12
(1) SteelHouse’s Attribution Model Is Not False. ............................................................ 12
(2) The Challenged Attribution Was Neither Deceptive Nor Material. ........................ 13
b. Criteo Fails To Show The Comparative Performance Statements Constitute False Advertising. ................................................................... 15
(1) SteelHouse’s Performance Statements Are Not False And Constitute Nonactionable Puffery. ....................................... 15
(2) Criteo Has Not Established Any
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 2 of 32 Page ID #:192
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Deception, Materiality, Or Injury. ...................... 16
2. Criteo Is Not Likely To Prevail On Its § 17500 Claim. ....................................................................................... 17
3. Criteo Fails To Demonstrate A Likelihood Of Success On Its Intentional Interference Claim. ....................... 18
4. Criteo Fails To Demonstrate A Likelihood Of Success On Its § 17200 Claim. ................................................ 19
C. Criteo Has Failed To Show Irreparable Harm. .................................. 20
1. There Is No Presumption Of Irreparable Harm. ...................... 20
2. Criteo Has Not Made Any Showing That Irreparable Harm Is Likely In The Absence Of An Injunction. ................................................................................ 21
a. Injunctive Relief Is Improper Because Criteo Has An Adequate Remedy At Law. ................... 22
b. Criteo’s Loss Of Good Will Is Speculative. ................. 22
c. Criteo’s Delay In Seeking Injunctive Relief Undercuts Its Claim Of Irreparable Injury. ................... 23
D. Criteo Has Failed To Demonstrate The Balance Of The Hardships Tips In Its Favor. ............................................................... 24
IV. CONCLUSION ............................................................................................ 25
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 3 of 32 Page ID #:193
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TABLE OF AUTHORITIES
Page(s)
Cases
Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838 (N.D. Cal. 2012)................................................................ 25
Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners, 52 Cal. App. 4th 867 (1997) ............................................................................... 18
In re Century 21-RE/MAX Real Estate Adver. Claims Litig., 882 F. Supp. 915 (C.D. Cal 1994) ...................................................................... 12
CKE Restaurant v. Jack in the Box, Inc., 494 F. Supp. 2d 1139 (C.D. Cal. 2007) .............................................................. 17
Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., 911 F.2d 242 (9th Cir. 1990) .............................................................................. 16
CytoSport, Inc. v. Vital Pharms., Inc., 617 F. Supp. 2d 1051 (E.D. Cal. 2009), aff’d, 348 Fed. Appx. 288 (9th Cir. 2009) .................................................................................................... 22
Dahl v. Swift Distrib., Inc., 2010 U.S. Dist. LEXIS 35938 (C.D. Cal. April 1, 2010) .................................. 24
Della Penna v. Toyota Motor Sales, U.S.A., 11 Cal. 4th 376 (1995) ........................................................................................ 18
Dorado v. Shea Homes Ltd. P’ship, 2011 U.S. Dist. LEXIS 97672 (E.D. Cal. Aug. 31, 2011) ................................. 20
Fed. Trade Comm’n v. Affordable Media, 179 F.3d 1228 (9th Cir. 1999) ............................................................................ 24
Ferring Pharms., Inc. v. Watson Pharms., Inc., 765 F.3d 205 (3d Cir. 2014) ............................................................................... 21
Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989 (9th Cir. 2011) .............................................................................. 21
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 4 of 32 Page ID #:194
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Gemini Aluminum Corp. v. California Custom Shapes, 95 Cal. App. 4th 1249 (2002) ............................................................................. 19
Hambrick v. Healthcare Partners Medical Group, Inc., 238 Cal. App. 4th 124 (2015) ............................................................................. 17
Hansen Beverage Co. v. N2G Distrib., 2008 U.S. Dist. LEXIS 105442 (S.D. Cal. Dec. 30, 2008) ................................ 24
Herb Reed Enters., LLC v. Florida Entm’t Mgmt., 736 F.3d 1239 (9th Cir. 2013) ...................................................................... 22, 23
Homeland Housewares, LLC v. Euro-Pro Operating LLC, 2014 U.S. Dist. LEXIS 156676 (C.D. Cal. Nov. 5, 2014) ................................. 18
Implant Direct Sybron Int’l. v. Zest IP Holdings, LLC, 2012 U.S. Dist. LEXIS 76485 (S.D. Cal. May 31, 2012) .................................. 17
Int’l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819 (9th Cir. Cal. 1993) .......................................................................... 25
Kane v. Chobani, Inc., 2013 U.S. Dist. LEXIS 99359 (N.D. Cal. July 15, 2013) .................................. 21
Kwan Software Eng’G v. Foray Techs., LLC, 2013 U.S. Dist. LEXIS 14708 (N.D. Cal. Jan. 22, 2013), aff’d, 551 Fed. Appx. 298 (9th Cir. 2013) .......................................................................................................... 13, 16, 22, 23
Leatherman Tool Grp., Inc. v. Coast Cutlery Co., 823 F. Supp. 2d 1150 (D. Or. 2011) ................................................................... 21
Levi Strauss & Co. v. Shilon, 121 F.3d 1309 (9th Cir. 1997) ............................................................................ 11
Lilith Games (Shanghai) Co. v. uCool, Inc., 2015 U.S. Dist. LEXIS 128619 (N.D. Cal. Sept. 23, 2015) ............................... 25
Lustiger v. United States, 386 F.2d 132 (9th Cir. 1967) .............................................................................. 19
Mazurek v. Armstrong, 520 U.S. 968 (1997) ........................................................................................... 11
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 5 of 32 Page ID #:195
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MGM Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197 (C.D. Cal. 2007) (Wilson, J.) .......................................... 21
Moonrunners L.P. v. Time Warner, Inc., 2005 U.S. Dist. LEXIS 41244 (C.D. Cal. June 17, 2005) .................................. 25
Morgan v. AT&T Wireless Servs., Inc., 177 Cal. App. 4th 1235 (2009) ........................................................................... 20
Munchkin, Inc. v. Playtex Prods., LLC, 2011 U.S. Dist. LEXIS 58800 (C.D. Cal. Apr. 11, 2011) ........................ 11
nSight, Inc. v. PeopleSoft, Inc., 2005 U.S. Dist. LEXIS 24639 (N.D. Cal. June 1, 2005) ................................... 16
Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008)................................................................ 16
Open Text, S.A. v. Box, Inc., 36 F. Supp. 3d 885 (N.D. Cal. 2014) .................................................................. 25
Pom Wonderful LLC v. Pur Beverages LLC, 2015 U.S. Dist. LEXIS 176834 (C.D. Cal. Aug. 6, 2015) ................................. 23
Premier Nutrition, Inc. v. Organic Food Bar, Inc., 475 F. Supp. 2d 995 (C.D. Cal. 2007) .................................................... 11, 22, 23
Settimo Assocs. v. Environ Sys., Inc., 14 Cal. App. 4th 842 (1993) ............................................................................... 18
Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105 (9th Cir. 2012) ............................................................................ 14
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997) ...................................................................... 12, 13
Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832 (9th Cir. 2001) .............................................................................. 24
TYR Sport, Inc. v. Warnaco Swimwear, Inc. 709 F. Supp. 2d 821 (C.D. Cal. 2010) ................................................................ 16
United States v. Jinian, 725 F.3d 954 (9th Cir. 2013) .............................................................................. 19
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 6 of 32 Page ID #:196
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Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) ................................................................................... 11, 22, 25
Statutes
18 U.S.C. § 1343 ...................................................................................................... 19
Rules
Federal Rule of Civil Procedure 65(c) ..................................................................... 25
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 7 of 32 Page ID #:197
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I. INTRODUCTION
Given its repeated reliance on faulty syllogisms, wholly unsupported
conclusory assertions, and outright misstatements of fact, it is easy to lose sight of
the extraordinary relief Criteo S.A. (“Criteo”) seeks—namely, a preliminary
injunction to: (1) stop a practice that Steel House, Inc., (“SteelHouse”)
discontinued months ago, at Criteo’s instance; and (2) mandate that SteelHouse
stop using an attribution method accepted by the advertising technology (“Ad
Tech”) industry. Criteo provides no legal or factual bases for enjoining an already
discontinued practice or an accepted industry method for evaluating ad
performance. This Court should reject the extraordinarily relief Criteo seeks.
Criteo and SteelHouse are just two of the hundreds of players in the recently
developed Ad Tech industry, which emerged with the advent of online advertising.
SteelHouse is a more recent, Culver City-based innovator that has taken the
industry by storm with its cutting-edge products, innovations, and services. As
more online advertising retailers (known as e-tailers) are choosing SteelHouse for
their online campaigns, the French-based Criteo—a publicly traded industry
behemoth with 11,000 customers and over $1 billion in revenue—is doing
everything in its power to preserve market share and protect an increasingly
disfavored business model, based upon whether an online shopper “clicks” on its
ads.1
Criteo’s motion is based on three fundamental misapprehensions: (1) that its
attribution model is the standard for the entire Ad Tech industry; (2) that web
analytics systems, like Google Analytics, track clicks; and (3) the only way
SteelHouse can “win” customers is by reporting fraudulent ad clicks. Each is
categorically false. Criteo presented the Court with screenshots and videos with
1 SteelHouse has filed Counterclaims against Criteo concurrently with this Opposition. The allegations set forth in the Counterclaims are incorporated by reference herein.
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 8 of 32 Page ID #:198
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complex coding, and then claims the screenshots and videos somehow show
SteelHouse “hijacking” internet traffic and “counterfeiting” clicks. They show
nothing of the sort. And they certainly do not show false or misleading
advertising. Instead, Criteo’s supposed “evidence” only establishes two differing
attribution methodologies—i.e., methods of identifying the actions of online
customers that contribute to sales, and assigning values to those actions. Criteo’s
outdated and oversimplified model is based solely on last-clicks, while
SteelHouse’s more holistic model tracks ad views (impressions) that lead a
consumer to visit an e-tailer’s site without clicking an ad, as well as clicks.
Although the Ad Tech industry recognizes and employs numerous
attribution methodologies, including SteelHouse’s model, Criteo asks this Court to
enjoin SteelHouse’s entire business operations, simply because the companies use
different models. Tellingly, this extreme request comes after SteelHouse—in good
faith—ceased the very conduct that supposedly caused Criteo concern. Criteo still
seeks an injunction not because of some prior, ceased practice, but rather it is
alarmed by SteelHouse’s growth and innovation.
There is simply no basis in fact, law, or equity to grant Criteo’s request for
injunctive relief. First, Criteo has failed to meet its burden to show a likelihood of
success on any of its claims. Each claim is premised on the flawed notion that
SteelHouse’s attribution methodology is somehow fraudulent simply because it is
not in line with Criteo’s. Moreover, Criteo cannot demonstrate that the statements
made by SteelHouse were false (in fact they are true) or misleading, or that they
materially induced any behavior by e-tailers.
Second, Criteo has not established that it somehow faces imminent,
irreparable harm, particularly given its delay in seeking injunctive relief. Criteo’s
proffered “evidence” consists solely of self-serving declarations of its executives
that are nothing more than speculative and conclusory assertions and inadmissible
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 9 of 32 Page ID #:199
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hearsay.2 Indeed, Criteo has not provided any evidence from a single customer
stating that it was deceived by SteelHouse or moved its business from Criteo to
SteelHouse because of the alleged conduct.
Finally, the equities overwhelmingly favor denial of this preliminary
injunction. The balance of the hardships does not tip in Criteo’s favor. If the
Court denied Criteo’s motion and SteelHouse’s conduct continued, this might
impact no more than 0.3% of Criteo’s customers. In stark contrast, the drastic
relief that Criteo seeks, would gut SteelHouse’s business operations and cause
immeasurable damages, forcing it to abandon its entire attribution model—and
ultimately its business model. Criteo’s motion for preliminary injunction should
be denied in its entirety.
II. STATEMENT OF FACTS
A. The Online Advertising Industry Is Competitive And Dynamic.
Unlike Criteo’s depiction, today’s Ad Tech industry is actually not a
monolith where indistinguishable companies play a zero-sum game in which one’s
loss is another’s gain. (See Declaration of Mark Douglas (“Douglas Decl.”) at ¶
11.) Rather, the industry is a dynamic market involving constant reallocations of
advertising budgets among multiple vendors. It is more akin to the modern
exchange of today’s Wall Street—with millions of ads being sold to market and
delivered each day, but without the regulation or established industry standards.
Like stock trades, decisions to bid for advertising space on websites are made in
milliseconds. Similarly, just as investors use multiple brokerage firms to trade
stocks, e-tailers usually work with multiple marketing firms at the same time and
determine where and how to allocate their advertising budget on an almost daily
basis. Indeed, SteelHouse’s 296 smallest customers changed their advertising
spend 2,213 times in the month of June 2016 alone. (Id.)
2 See SteelHouse’s Evidentiary Objections and Motion to Strike Re: Criteo’s Declarations and Exhibits Thereto filed concurrently herewith.
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 10 of 32 Page ID #:200
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Because advertising customers easily and often reallocate their spend among
multiple vendors, there are numerous competitors in the Ad Tech industry. In fact,
there are currently more than 50 vendors competing for retargeting business alone,
which is when e-tailers target potential consumers based upon their prior online
activity. (See Declaration of Christopher Innes (“Innes Decl.”) at ¶ 4.)
B. SteelHouse Has Revolutionized The Ad Tech Industry.
Founded in 2009, SteelHouse is one of Ad Tech’s most recent innovators,
pioneering a cloud-based advertising platform. Unlike its competitors, SteelHouse
provides customers control and access to marketing channels—all from an easy-to-
use user interface called the SteelHouse Advertising Suite. (Douglas Decl. at ¶¶
10, 38, Ex. 6.) The SteelHouse Advertising Suite enables customers to create
targeted ad campaigns and drive high ad engagement based on consumers’ real-
time behavior. SteelHouse’s innovative approach to online advertising has
generated a 150% growth rate in 2015. SteelHouse now reaches more than 350
million consumers per month, across hundreds of the world’s largest brands. (Id.
at ¶ 10.)
C. SteelHouse And Criteo Are Dramatically Different.
1. Different Pricing Models.
Criteo’s business model is based on promising customers the most
“clicks”—which occur when a consumer clicks on an online ad. (Id. at ¶ 34.)
Criteo’s revenue is determined by the number of clicks its ads generate.3
SteelHouse’s customers pay a technology fee, based on the number of ads served
or Cost-Per-Thousand Impressions (“CPM”). (Id. at ¶ 35.) SteelHouse never
charges its customers based on clicks. (Id.)
3 In light of Criteo’s click-based revenue model, it is noteworthy that its self-reported click rate is suspiciously high—four times as high as the rest of the Ad Tech industry. (Douglas Decl. at ¶ 34; see also Counterclaim at ¶ 18 (Figure 1).)
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 11 of 32 Page ID #:201
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2. SteelHouse Offers More Information And Control.
Criteo’s model is built on advertisers relinquishing control of their ad
campaigns to Criteo. Criteo’s customers do not control the visual creative in the
ads, nor the targeting. (Id. at ¶ 36.) Criteo essentially offers a one-size-fits-all
approach and operates as a black box, sharing little information with its customers
and promising performance without customer insight or control. (Id.)
In contrast, SteelHouse provides user-friendly tools that give customers
control of their ad campaigns, with the innovative SteelHouse Advertising Suite.
(Id. at ¶¶ 37-38.) Customers can monitor performance in real-time. And based
upon performance, customers can manually alter their ad campaign through the
Advertising Suite, instantly changing the audience, appearance, or any other
feature of the campaign at any time. Unlike the majority of vendors (including
Criteo), SteelHouse’s platform allows customers to target specific audience
segments. SteelHouse also provides customers with up to 1,234 metrics to track
the effectiveness of their ad campaigns; by comparison, Criteo provides less than
100 metrics. (Id. at ¶ 38.)
SteelHouse’s customers also can control how much money they spend on
their ad campaigns at any moment by using the Price By Campaign feature. This
feature gives customers complete control over ad spending, including monthly
budgets and CPM pricing, which they can alter in real-time. (Id. at ¶ 40, Ex. 7.)
SteelHouse’s customers also have full control over creative solutions
through SteelHouse’s Creative Suite. SteelHouse customers have access to the
most up-to-date creative design tools to create their own ad campaigns, thereby
eliminating the expense of a creative agency. For example, customers can upload
video or browse Getty images to perfectly target consumers. (Id. at ¶ 41, Ex. 8.)
And for customers who want design assistance, SteelHouse has a Creative Services
Team available. This creative component of its product, whereby an e-tailer can
create—and continuously tweak—its own ads is but one of SteelHouse’s
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distinguishing innovative differences. And they are all included for the same price.
SteelHouse has signed numerous new customers based solely on the creative
features offered. (Id. at ¶¶ 41-42; see also Innes Decl. at ¶¶ 15-16.)
3. SteelHouse And Criteo Share Few Customers.
Given their distinct differences in pricing and product, SteelHouse and
Criteo are barely competitors. In fact, direct competition is limited to the
retargeting business alone. (Id. at ¶ 4.) Further limiting that direct competition,
SteelHouse also provides prospecting services for potential new consumers; Criteo
does not. Of Criteo’s 11,000 clients, SteelHouse is aware of only thirty-seven that
overlap—a mere 0.3% of Criteo’s customer base. (Id. at ¶ 5.) It is thus
unsurprising that Criteo has previously stated that it did not view SteelHouse as a
direct competitor, and acknowledged that the two companies have very different
businesses. (Id. at ¶ 25.) Nonetheless, in the very first line of its motion, Criteo
now claims SteelHouse is a “direct competitor.”
D. The Ad Tech Industry Does Not Recognize One Attribution Model.
Attribution is the process of identifying a set of online consumer actions
(“events”), such as an online purchase, and then assigning value to each of these
actions or events. (Douglas Decl. at ¶ 25.) There is no single accepted attribution
model in the Ad Tech industry. (Id. at ¶ 26.)
Criteo uses the increasingly disfavored last-click attribution model. Last-
click attribution allocates 100% attribution to the vendor serving an online ad that
is subsequently clicked on to direct a consumer to the advertiser’s website. (Id. at
¶ 27.) The last click-attribution model was developed with the growth of social
media and opportunities to advertise on new platforms. (Id.) As the Ad Tech
industry matured, innovated, and developed, however, many—including online
advertising’s leading trade organization, the Interactive Advertising Bureau (the
“IAB”)—questioned the validity of the last-click attribution model. (Id. at ¶ 28.)
Case 2:16-cv-04207-SVW-MRW Document 19 Filed 07/25/16 Page 13 of 32 Page ID #:203
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This repudiation arose because of the over-simplification of single-source
attribution and the unreliability of last-clicks as a metric of ad performance.4 (Id.)
Given the increasing complexity for any attribution, e-tailers have turned to
various web analytics models to monitor vendor performance. The most widely
used web analytics service today is Google Analytics. (Id. at ¶ 20.) As one of the
only supposed evidentiary basis for its claims, Criteo makes the fantastical factual
assertion that industry leader Google Analytics tracks based upon “last-click”
attribution. This could not be further from the truth. In fact, Google Analytics
does not even track clicks. Instead, it tracks website visits called user “sessions,”
defined as interactions that take place on a website within a given time. (Id. at Ex.
1.)
Accordingly, SteelHouse’s attribution methodology is in line with Google
Analytics’ tracking methods. SteelHouse tracks view throughs (when a consumer
sees an ad and then goes to the product website without clicking the ad), as well as
click throughs (when a consumer clicks on an ad). (Id. at ¶¶ 21, 30.) A view
through can be attributed to SteelHouse up to thirty minutes after SteelHouse’s ad
is served. This thirty-minute timeframe is consistent with, and based upon, Google
Analytics’ own definition of a session. (Id. at ¶¶ 20, 30.) SteelHouse reports view
throughs because it provides its customers with more reliable information
regarding attribution (consumers today do not reach advertisers’ websites only
when clicking on ads) and performance. After all, consumers also obviously reach
e-tailers by directly typing a web address into a browser or searching through a
search engine, after seeing an ad. (Id. at ¶ 30.)
4 Such unreliability has only grown with the burgeoning problem of “fake” clicks generated by computers and bots (a software application that runs automated tasks, such as repetitively clicking ads). (Douglas Decl. at ¶ 28, Ex. 3.)
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E. Head-To-Head Comparisons.
Contrary to Criteo’s assertions, head-to-head click comparisons are not
advertisers’ sole determinate in choosing online marketers. (Innes Decl. at ¶ 6.)
Moreover, head-to-head comparisons can involve more than just two vendors, and
are run at the request of advertisers. (Id. at ¶ 7.) When e-tailers conduct
comparisons, they alone set the metrics for the tests, based on any number of
different metrics. Understandably, e-tailers consider many factors when evaluating
potential marketers. Click count or click conversion is just one factor, amongst
many. (Id. at ¶ 11.)
SteelHouse rarely sees the results of these tests, unless the e-tailer informs
SteelHouse. (Id. at ¶ 8.) SteelHouse has never induced a customer to run a head-
to-head comparison. (Id. at ¶ 7.) It is not in its interests. Nonetheless, SteelHouse
understands it regularly outperforms Criteo in audience segmentation, campaign
management, creative tools, creative services, reporting, and client support. (Id. at
¶ 11.) It also understands that Criteo regularly outperforms SteelHouse on click
rates. As such, SteelHouse pitches potential clients on product demos, which show
services Criteo does not offer, like SteelHouse Creative. (Id. at ¶¶ 11-13.) Criteo’s
allegations that SteelHouse created a “click-fraud scheme” to rig head-to-head
competition based on clicks thus defies reason.
F. Criteo’s Baseless “Click-Fraud” Accusations.
Criteo accuses SteelHouse of “counterfeiting” clicks and thereby “cheating”
in head-to-head comparisons simply because SteelHouse’s attribution methodology
is different than Criteo’s. Rather than follow Criteo’s click-based model, which
only attributes value to the last click before a consumer arrives on an advertiser’s
website (a practice that leads to unfair and inadequate results), SteelHouse—like
others in the industry—takes a more holistic approach and assigns value to ad
impressions or view throughs. SteelHouse thus reports view throughs in its User
Interface to its clients and reports those same view throughs to Google Analytics.
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Understandably, SteelHouse’s customers expect the data to match. (Douglas Decl.
at ¶ 45.) This distinction reflects the parties’ differing attribution models. It is not
a fraud for SteelHouse to provide its customers with the promised tabulations of
when a consumer views an ad served and then goes to that advertiser’s website
without clicking the ad. Rather, it is a logical, commonsense performance metric
(and valid business model). Yet, Criteo falsely accuses SteelHouse of somehow
“hijacking” internet traffic.
These accusations began when Mollie Spilman, Criteo’s Chief Revenue
Officer, first contacted SteelHouse on April 6, 2016, regarding some unspecified
concern. SteelHouse’s Chief Marketing Officer, Patrizio Spagnoletto, a friend of
Ms. Spilman, responded the next day, offering to meet with her in New York the
following week. (Declaration of Patrizio Spagnoletto (“Spagnoletto Decl.”) at ¶¶
10-11.) On April 12, 2016, Mr. Spagnoletto and SteelHouse’s Chief Monetization
Officer, Chris Innes, met with Ms. Spilman at Criteo’s office in New York.
Criteo’s employees Robert Shaw and Jaysen Gillespie attended by telephone. At
this meeting, Criteo informed SteelHouse that the issue related to attribution but
never mentioned fraudulent clicks. (Innes Decl. at ¶ 25.)
On April 14, 2016, SteelHouse requested that Criteo provide more detail
regarding Criteo’s attribution concerns so it could conduct a meaningful inquiry.
In response, on April 18, Robert Shaw provided two log files, stating “the
attribution of the click appears to have been altered from the inbound source.” Mr.
Innes responded with an update on April 26 and offered to meet with Criteo to
discuss inquiry results “in depth” while in New York the following week. (Id. at
¶¶ 26-28.)
On May 1, 2016, Ms. Spilman announced that Criteo was going to tell its
clients about SteelHouse’s supposed misconduct. Subsequently, she provided a
draft “announcement.” Rather than object, Mr. Spagnoletto responded with a
limited mark up in the hopes of appeasing Criteo. Criteo then sent the
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“announcement.” SteelHouse sent a written response to the few customers it
shared with Criteo. (Spagnoletto Decl. at ¶¶ 16-19; see also Innes Decl. at ¶ 31.)
Although SteelHouse does not believe its attribution model is or was
inaccurate or flawed (to the contrary, its attribution methodology is an accepted
industry practice), SteelHouse nonetheless acquiesced to Criteo’s demands in an
attempt to avoid the threat of litigation and create further animosity. Accordingly,
on May 5, SteelHouse changed its attribution methodology to exclude all reporting
where SteelHouse and Criteo both served ads. (Douglas Decl. at ¶ 50.)
Following the May 5 reporting change, SteelHouse and Criteo had a
conference call on May 12 in which SteelHouse informed Criteo of the change.
Robert Shaw stated that it would take Criteo up to six months to “QA” (conduct
quality assurance) the issue and that it would inform SteelHouse if it believed the
issue persisted. The issue thus appeared resolved. It was not. (Innes Decl. at ¶
33.) Criteo sent Steel House a cease and desist letter on May 23, 2016.
Criteo could not see the source code change that SteelHouse implemented
and thus believed no change had in fact occurred. SteelHouse therefore decided to
further change the code at the end of May to make it apparent to Criteo that the
demanded change had in fact occurred. (Douglas Dec. at ¶ 51.) These changes
removed all reporting (seen in an iFrame) where SteelHouse and another vendor
(including Criteo) both served ads and the other vendor’s ad was subsequently
clicked. As such, SteelHouse now attributes no value to its own valid ad
impressions (even though they influence consumer’s behavior) when a user
purportedly clicks a Criteo ad. In fact, SteelHouse ceased its supposedly
problematic attribution practice months ago. (Id.) Nonetheless, Criteo continued
to claim otherwise to its customers, and ultimately filed this baseless lawsuit, just
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weeks before the launch of SteelHouse’s new creative products.5
III. ARGUMENT
A. Governing Legal Standard.
“A preliminary injunction is a drastic and extraordinary remedy that should
not be granted unless the movant, by a clear showing, carries the burden of
persuasion.” Premier Nutrition, Inc. v. Organic Food Bar, Inc., 475 F. Supp. 2d
995, 1000 (C.D. Cal. 2007) (citing Mazurek v. Armstrong, 520 U.S. 968, 972
(1997)). Such is particularly the case when the demanded injunction seeks to stifle
competition and commercial speech. As such, “[c]ourts are cautioned that, in
issuing preliminary injunctions, [t]o ensure vigorous competition and to protect
legitimate commercial speech, courts . . . should give advertisers a fair amount of
leeway, at least in the absence of a clear intent to deceive or substantial consumer
confusion.” Munchkin, Inc. v. Playtex Prods., LLC, 2011 U.S. Dist. LEXIS 58800,
*6-7 (C.D. Cal. Apr. 11, 2011) (citations and internal quotation marks omitted).
Criteo bears the heavy burden of establishing that: (1) it is likely to succeed on the
merits; (2) it is likely to suffer irreparable harm in the absence of preliminary
relief; (3) the balance of equities tips in its favor; and (4) an injunction is in the
public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 20, 24 (2008).6
5 SteelHouse will launch its new Creative Suite in August 2016, and new user interface (“UI”) in Q1 2017. (Douglas Decl. at ¶ 44, Ex. 9.) SteelHouse began showcasing its new UI at the Consumer Electrics Show (“CES”) in Las Vegas in January 2016, and continues to market its brand and the impending launches. SteelHouse marketed its new Creative Suite at the recent Cannes Lion Festival in France. (Id.) 6 The doctrine of unclean hands bars Criteo from the relief it seeks. See Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1313 (9th Cir. 1997) (“[E]quity requires that those seeking its protection shall have acted fairly and without fraud or deceit as to the controversy in issue.”). Criteo is barred from injunctive relief because, as detailed more fully in SteelHouse’s Answer and Counterclaims, Criteo has engaged in unlawful conduct, including false advertising, by generating fraudulent
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B. Criteo Fails To Demonstrate A Likelihood Of Success.
1. Criteo Fails To Meet Its Burden On Its Lanham Act Claim.
To establish false advertising under Section 43(a) of the Lanham Act, Criteo
must show: (1) a false statement by SteelHouse in a commercial advertisement
about its own or another’s product; (2) the statement actually deceived or has the
tendency to deceive a substantial segment of its audience; (3) the deception is
material, in that it is likely to influence the purchasing decision; (4) SteelHouse
caused its false statement to enter interstate commerce; and (5) Criteo has been or
is likely to be injured as a result. See Southland Sod Farms v. Stover Seed Co., 108
F.3d 1134, 1139 (9th Cir. 1997). Criteo must establish the alleged statement either
is literally false, or is likely to mislead and confuse customers. Id.
Criteo’s false advertising claim, however, is based on nothing more than:
(a) Criteo’s misapprehension as to SteelHouse’s actual attribution model, which it
baselessly deems “counterfeit click fraud” and (b) a lone email purportedly sent by
a SteelHouse salesperson to “potential customers,” which has not properly been
offered as evidence. Criteo fails to demonstrate a likelihood of success because it
fails to establish the challenged statements are actually false, provide any extrinsic
evidence of customer deception, and establish that such statements were material
to any decision to use SteelHouse’s services.
a. Criteo Fails To Show SteelHouse’s Attribution Reporting Constitutes False Advertising.
(1) SteelHouse’s Attribution Model Is Not False.
A “literally false” statement must be unambiguously false. See In re
Century 21-RE/MAX Real Estate Adver. Claims Litig., 882 F. Supp. 915, 923 (C.D.
Cal 1994). Despite Criteo’s singular focus on click attribution, the industry, as a
whole, does not solely measure attribution based on clicks. SteelHouse’s more- clicks and instituting a smear campaign SteelHouse to drive away SteelHouse customers. This lawsuit is only the latest strategy in that campaign.
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nuanced attribution reporting is not false particularly when examined within this
industry context. “When evaluating whether an advertising claim is literally false,
the claim must always be analyzed in its full context,” including industry
standards. Southland, 108 F.3d at 1139; see also Kwan Software Eng’G v. Foray
Techs., LLC, 2013 U.S. Dist. LEXIS 14708, *8 (N.D. Cal. Jan. 22, 2013), aff’d,
551 Fed. Appx. 298 (9th Cir. 2013) (“Where the statements were made to
sophisticated consumers with unique background knowledge and experience, the
court should consider that as part of the relevant context.”).
Today, there is no singular method to define “attribution” in the Ad Tech
industry. While last-click is one way to measure attribution, it is not the only way.
Indeed, Google Analytics—the dominant tracking web analytics system—does not
even track clicks. Without industry consensus as to how to define attribution,
Criteo cannot establish falsity because it cannot show there is a “clear-cut
definition” from which SteelHouse’s methodology “clearly and unambiguously
deviate[s].” Kwan Software, 2013 U.S. Dist. LEXIS 14708 at *18. Moreover, the
reliance on clicks and the last-click attribution model championed by Criteo has
faced increasing skepticism, including a push from the IAB to move away from
last-click attribution to more sophisticated attribution models. (See Douglas Decl.
at ¶ 28.) Recognizing the inadequacies of last-click attribution, SteelHouse, like
others in the industry, attributes value to ad impressions that result in site visits,
regardless of clicks. Accordingly, Criteo cannot establish falsity.
(2) The Challenged Attribution Was Neither Deceptive Nor Material.
Contrary to Criteo’s contention, Criteo is not entitled to a presumption of
deception and reliance because it has not established any deliberately false conduct
by SteelHouse. First, SteelHouse in no way intended to “take credit” for Criteo’s
clicks. (See Id. at ¶ 46.) Second, Criteo’s assertion is illogical, as SteelHouse has
absolutely no incentive to “take credit” for Criteo’s clicks. Unlike Criteo, which
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only gets paid for clicks, SteelHouse never charges its customers for clicks. (Id. at
¶ 34.) Instead, SteelHouse’s customers pay for impressions (when ads are
published on a website). (Id.) Thus, SteelHouse generates revenue regardless of
whether the ad is clicked and thus has no incentive to manufacture clicks. Third,
this previously challenged conduct (see, e.g., Declaration of Hersh Anand, Exhibits
1, 2)—which SteelHouse stopped months ago—only occurred when an online user
interacted with both SteelHouse and Criteo ads for the same advertising customer
and subsequently arrived on the advertiser’s website by clicking the Criteo ad.
(Douglas Decl. at ¶ 46.) SteelHouse’s prior attribution reporting automatically
notified Google Analytics of this session, because it was based on whether a
customer saw the SteelHouse ad and then went to advertiser’s website (which
occurred), not anticipating the simultaneous ads. (Id. at ¶¶ 45-46.) As such,
Criteo’s assertion that SteelHouse “intended to take credit for clicks and
conversions SteelHouse had nothing to do with” (Mot. at 18) is simply not true.
Moreover, Criteo’s conclusory assertion that “there is evidence that e-tailers
were actually deceived by SteelHouse’s false statements, and the deception was
material because it altered their purchasing decision,” is insufficient to establish
the required elements. In fact, Criteo does not even mention what this supposed
“evidence” is. Criteo has not proffered a single customer survey or declarations
that any customer was in fact deceived by SteelHouse’s attribution and altered its
advertising spend solely because of the purported deception. Cf. Skydive Arizona,
Inc. v. Quattrocchi, 673 F.3d 1105, 1111 (9th Cir. 2012) (consumer declaration
and evidence established materiality requirement). Advertisers are sophisticated
purchasers that look at multiple factors when determining how to allocate their
advertising budget—price, creative tools, tracking metrics offered, audience
segmentation capabilities—not simply clicks. Therefore, even if SteelHouse’s
attribution reporting was false (which it was not), Criteo cannot establish that it
was material to a customers’ decisions to use SteelHouse. Accordingly, Criteo has
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not met its burden of showing the necessary likelihood of success on the merits of
its false advertising claim.
b. Criteo Fails To Show The Comparative Performance Statements Constitute False Advertising.
SteelHouse has no formal advertising campaign, no marketing materials, and
no statement on its website comparing its performance to Criteo. (See Spagnoletto
Decl. at ¶¶ 5-6.) As such, Criteo’s entire claim is based on a single email (see Mot.
at 6; Declaration of Harris Bernstein at ¶ 6) that a SteelHouse salesperson
purportedly sent to potential customers—supposed evidence that Criteo again has
not bothered to provide. Criteo has not established when this email was sent or to
which “potential customers.” Nor has Criteo established that any recipients moved
their business to SteelHouse as a result. As set forth below, Criteo is not likely to
demonstrate false advertising based on the asserted email.
(1) SteelHouse’s Performance Statements Are Not False And Constitute Nonactionable Puffery.
Statements that SteelHouse outperforms competitors, including Criteo, are
not false. SteelHouse has in fact won business from customers following “head-to-
head” comparisons, such as Thrive Market, even where Criteo’s click rates
purportedly were higher. (Innes Decl. at ¶¶ 15-16.) The fundamental flaw to
Criteo’s claim is the baseless presumption that customers measure performance
and determine ad spend solely based on clicks. The proffered email does not even
mention the word click. Further, there is no commonly-used industry definition or
metrics for these performance comparisons. (Id. at ¶ 6.) Customers—who set their
own comparison metrics—compare many different things in these tests, including,
but not limited to, price, creative capabilities, audience segmenting capabilities,
conversion rates, clicks, click-to-conversion rates, audience reach, and other
reporting metrics. (Id. at ¶ 11.) Criteo thus cannot credibly claim, let alone prove,
there is a “clear-cut definition” of performance comparisons from which the
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challenged statements “clearly and unambiguously deviate.” Kwan Software, 2013
U.S. Dist. LEXIS 14708 at *18.
Moreover, under the Lanham Act, only statements of fact are actionable as
false advertising; vague or highly subjective statements of opinion regarding
product superiority are nonactionable puffery. See Cook, Perkiss & Liehe, Inc. v.
N. Cal. Collection Serv., 911 F.2d 242, 246 (9th Cir. 1990) (“Advertising which
merely states in general terms that one product is superior is not actionable.”); see
also Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 973 (N.D. Cal. 2008)
(statements of product superiority based on being “faster, more powerful, and more
innovative,” “higher performance,” and having a “longer battery life” are
nonactionable puffery). “Whether a statement is puffery does not depend on the
truth or falsity of a statement; it depends on the degree of generality or specificity.”
TYR Sport, Inc. v. Warnaco Swimwear, Inc. 709 F. Supp. 2d 821, 830 (C.D. Cal.
2010).
Here, one salesperson’s email regarding “performance” is nothing more than
generalized bragging. “Performance” is vague and subjective. This email does not
identify any particular metric by which to determine whether or not this claim is
true. As such, this one salesperson’s single statement is too general to be
actionable and constitutes “mere puffery.” See nSight, Inc. v. PeopleSoft, Inc.,
2005 U.S. Dist. LEXIS 24639, *1 (N.D. Cal. June 1, 2005) (finding claim that
“plaintiff[’]s implementation services were ‘inferior to [defendant’s] services’”
was puffery).
(2) Criteo Has Not Established Any Deception, Materiality, Or Injury.
Criteo also fails to offer any extrinsic evidence that the challenged
statements actually deceived customers or caused any injury to Criteo. See CKE
Restaurant v. Jack in the Box, Inc., 494 F. Supp. 2d 1139, 1145, 1148 (C.D. Cal.
2007) (denying preliminary injunction where plaintiff did not offer “substantial
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extrinsic evidence that a significant portion of the commercial audience has been
deceived”). Criteo has offered no evidence whatsoever that any customers were
deceived by this one email or that any customers actually decreased their
advertising spend with Criteo in favor of SteelHouse. Indeed, the two advertisers
that received the email never opened accounts with SteelHouse. (Innes Decl. at ¶
12.) Sophisticated advertisers are not likely to choose an advertising vendor based
on a single email lauding its own performance. As set forth above, there are a host
of factors (e.g., price, creative capabilities, reporting metrics) that e-tailers consider
in allocating their budget. Accordingly, Criteo has not satisfied its burden of
establishing a likelihood that the email deceived any customer or caused Criteo any
injury.
2. Criteo Is Not Likely To Prevail On Its § 17500 Claim.
Criteo similarly fails to carry its burden of establishing its false advertising
claim under California Business and Professions Code Section 17500.7 Because
the factual bases for Criteo’s section 17500 claim are the same as its Lanham Act
claim, “[t]he claims must stand or fall together[.]” See Implant Direct Sybron Int’l.
v. Zest IP Holdings, LLC, 2012 U.S. Dist. LEXIS 76485, *12 (S.D. Cal. May 31,
2012) (dismissing section 17500 claim where factual basis was more or less
identical to deficient Lanham Act claim); see also Homeland Housewares, LLC v.
Euro-Pro Operating LLC, 2014 U.S. Dist. LEXIS 156676, *12 (C.D. Cal. Nov. 5,
2014). For the same reasons provided above, Criteo has also failed to demonstrate
a likelihood of success of its section 17500 claim.
7 Section 17500 “prohibits the dissemination in any advertising media of any ‘statement’ . . . ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Hambrick v. Healthcare Partners Medical Group, Inc., 238 Cal. App. 4th 124, 154 (2015) (citation omitted).
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3. Criteo Fails To Demonstrate A Likelihood Of Success On Its Intentional Interference Claim.
Criteo also fails to meet its burden regarding its tortious interference claim
because it cannot establish any independently wrongful conduct. See Della Penna
v. Toyota Motor Sales, U.S.A., 11 Cal. 4th 376, 393 (1995) (plaintiff must prove
“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.”) (emphasis added). The California Supreme Court specifically
developed the independent wrongfulness element to protect against the danger of
imposing tort liability for legitimate competitive business practices, like the one at
issue here. Id. at 389 (“Ours is a competitive economy in which business entities
vie for economic advantage . . . and success goes to him who is able to induce
potential customers not to deal with a competitor.”) (citation omitted). Liability
therefore may only be imposed “for improper methods of disrupting or diverting
the business relationship of another which fall outside the boundaries of fair
competition.” Settimo Assocs. v. Environ Sys., Inc.,14 Cal. App. 4th 842, 845
(1993). Here, Criteo improperly seeks to enjoin SteelHouse solely based on
legitimate business competition. Such conduct is not actionable. See Bed, Bath &
Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners, 52 Cal. App.
4th 867, 881 (1997) (“[T]he crux of the competition privilege is that one can
interfere with a competitor’s prospective contractual relationship with a third party
as long as the interfering conduct is not independently wrongful[.]”) (emphasis
omitted).
Criteo’s attempt to rely on its false advertising claims and purported wire
fraud allegations to establish the “wrongful” element must fail. Criteo has not
established a likelihood of success on its false advertising claims. (See Sections
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III.B.1-2, supra.)8 Nor can Criteo rely on its wire fraud allegations. Criteo has not
established the existence of a scheme to defraud or that SteelHouse acted with the
requisite specific intent to defraud. See United States v. Jinian, 725 F.3d 954, 960
(9th Cir. 2013); 18 U.S.C. § 1343. Criteo cannot show that SteelHouse’s
attribution methodology was devised dishonestly or to trick or deceive Criteo or e-
tailers. Jinian, 725 F.3d at 960; see Douglas Decl. at ¶ 46 (“SteelHouse had no
intent to attribute sessions resulting from a click on a Criteo ad.”) Any purported
misattribution lacks the necessary intent to defraud. Further, to the extent Criteo
bases its wire fraud allegations on the challenged salesperson’s email, its claims
are similarly flawed. See Lustiger v. United States, 386 F.2d 132, 138 (9th Cir.
1967) (explaining that reasonable “exaggeration” related to sales puffery will not
“support a finding of a scheme to defraud”).
Finally, Criteo has not established that the alleged harm (disruption in its
customer relationships) was proximately caused by the alleged conduct—a
required element of the claim. Criteo provides nothing more than self-serving
conclusory statements that customers have reduced their business with Criteo as a
result of SteelHouse’s alleged conduct. (See, e.g., Declaration of Nicole Bliss at ¶
8.) The customers could have reduced their business for any number of reasons
unrelated to SteelHouse—one competitor in a market with more than 50 others.
Accordingly, Criteo has not shown a likelihood of success on the merits of its
tortious interference claim.
4. Criteo Fails To Demonstrate A Likelihood Of Success On Its § 17200 Claim.
Criteo’s UCL claim lacks merit because it too is predicated on its defective
8 Even if Criteo could somehow establish that SteelHouse’s attribution model is contrary to industry standards (which it is not), this would not satisfy the wrongfulness element. See Gemini Aluminum Corp. v. California Custom Shapes, 95 Cal. App. 4th 1249, 1256-59 (2002) (holding competitive activity allegedly in violation of industry standards was not enough to overcome competition privilege).
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false advertising claims and unsupported wire fraud allegations. “Section 17200
‘borrows’ violations from other laws by making them independently actionable as
unfair competitive practices.” Korea Supply, 29 Cal. 4th at 1143. As set forth
above, Criteo has not established a likelihood of success on its false advertising
claims or its baseless wire fraud allegations. (See Sections III.B.1-3, supra.)
Because these “borrowed” claims fail, Criteo’s UCL claim under the “unlawful”
prong must also fail. See Dorado v. Shea Homes Ltd. P’ship, 2011 U.S. Dist.
LEXIS 97672, *19 (E.D. Cal. Aug. 31, 2011) (“Where a plaintiff cannot state a
claim under the ‘borrowed’ law, she cannot state a UCL claim either.”).
Criteo also cannot establish its claim under the “fraudulent” prong. Criteo
fails to establish any fraudulent business practice taken by SteelHouse. As set
forth herein, there is not one sole attribution model in the industry. Nor is one
required. Indeed, Google Analytics and other web analytic systems allow
customers to select their attribution methodology. Criteo cannot establish fraud
simply because SteelHouse’s attribution methodology differs from its own.
Moreover, because the industry accepts attributing value to ad views that result in
site visits, the challenged attribution model is not likely to deceive the public. Cf.
Morgan v. AT&T Wireless Servs., Inc., 177 Cal. App. 4th 1235, 1254 (2009).
C. Criteo Has Failed To Show Irreparable Harm.
1. There Is No Presumption Of Irreparable Harm.
Criteo relies on a single outdated case to wrongly argue that irreparable
harm should be presumed. (See Mot. at 24) (citing Valu Eng’g, Inc. v. Nolu
Plastics, Inc., 732 F. Supp. 1024 (N.D. Cal. 1990)). As the Ninth Circuit,
however, has aptly proclaimed, the presumption “is dead.” See Flexible Lifeline
Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 995 (9th Cir. 2011) (“[T]oday we
proclaim that the ‘King’ is dead, referring to Elvis Presley the case – to the extent it
supported the use of a presumption of irreparable harm in issuing injunctive
relief.”); see MGM Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197, 1211
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(C.D. Cal. 2007) (Wilson, J.) (“[T]he presumption of irreparable harm no longer
inures to the benefit of Plaintiffs. The eBay Court plainly stated that Plaintiffs
‘must demonstrate’ the presence of the traditional factors, and therefore have the
burden of proof with regard to irreparable harm.”).
In fact, courts across the country have held that a plaintiff seeking a
preliminary injunction for a false advertising claim is not entitled to a presumption
of irreparable harm. See, e.g., Ferring Pharms., Inc. v. Watson Pharms., Inc., 765
F.3d 205, 206 (3d Cir. 2014) (party bringing false advertising claim “under the
Lanham Act is not entitled to a presumption of irreparable harm when seeking a
preliminary injunction and must demonstrate that irreparable harm is likely.”);
Leatherman Tool Grp., Inc. v. Coast Cutlery Co., 823 F. Supp. 2d 1150, 1157 (D.
Or. 2011) (denying preliminary injunction on false advertising claim, and stating,
“[i]t is now clear that eBay signifies a return to traditional equitable principles,
under which presumptions of harm are not allowed.”).9 Accordingly, Criteo cannot
rely on such a presumption; Criteo needed to establish a likelihood of irreparable
harm and it did not do so.
2. Criteo Has Not Made Any Showing That Irreparable Harm Is Likely In The Absence Of An Injunction.
A plaintiff seeking a preliminary injunction must establish a likelihood—not
the mere possibility—of irreparable harm. See Winter, 555 U.S. at 22 (“Issuing a
preliminary injunction based only on a possibility of irreparable harm is
inconsistent with our characterization of injunctive relief as an extraordinary
remedy that may only be awarded upon a clear showing that the plaintiff is entitled
to such relief.”) (emphasis added); see also Herb Reed Enters., LLC v. Florida
9 Similarly, there is no indication the California legislature ever intended to permit a presumption of irreparable harm for UCL or false advertising claims. See Kane v. Chobani, Inc., 2013 U.S. Dist. LEXIS 99359, *26-27 (N.D. Cal. July 15, 2013) (rejecting a presumption of irreparable harm for UCL and false advertising claims brought under California law).
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Entm’t Mgmt., 736 F.3d 1239, 1249 (9th Cir. 2013) (stating the Winter Court
rejected the Ninth Circuit’s “possibility” of irreparable harm as “too lenient”). A
plaintiff must demonstrate “by the introduction of admissible evidence and with a
clear likelihood of success that the harm is real, imminent and significant, not just
speculative or potential.” CytoSport, Inc. v. Vital Pharms., Inc., 617 F. Supp. 2d
1051 (E.D. Cal. 2009), aff’d, 348 Fed. Appx. 288 (9th Cir. 2009). Criteo fails to
make a showing that imminent, irreparable harm is likely.
a. Injunctive Relief Is Improper Because Criteo Has An Adequate Remedy At Law.
Even if Criteo could prove that customers will reduce their advertising
budget or will not work with Criteo based solely on SteelHouse’s attribution
methodology, such harm is merely financial and does not warrant the extraordinary
relief sought. See Premier Nutrition, Inc. v. Organic Food Bar, Inc., 475 F. Supp.
2d 995, 1007 (C.D. Cal. 2007) (“Mere financial injury does not constitute
irreparable harm if adequate compensatory relief will be available in the course of
litigation.”). Criteo has not shown that “remedies available at law, such as
monetary damages, are inadequate to compensate for [its] injury.” Kwan Software,
2013 U.S. Dist. LEXIS 14708 at *22.
b. Criteo’s Loss Of Good Will Is Speculative.
While a loss of goodwill and reputation can support injunctive relief in some
instances, Criteo “must adduce evidence of likely irreparable harm and may not
rely on ‘unsupported and conclusory statements regarding harm [it] might suffer.”
Pom Wonderful LLC v. Pur Beverages LLC, 2015 U.S. Dist. LEXIS 176834, *15
(C.D. Cal. Aug. 6, 2015) (emphasis in original); see also Herb Reed, 736 F.3d at
1250; Kwan Software, 2013 U.S. Dist. LEXIS 14708 at *24 (denying preliminary
injunction when plaintiff failed “to present any evidence tending to show that the
loss of customers is anything more than speculation or the result of legitimate
competition”) (emphasis added).
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Criteo has offered nothing more than its speculative belief that it might lose
customers or goodwill based on the fact that a handful of customers reduced their
ad spend with Criteo and six are currently running purported head-to-head
comparisons. (See Declaration of Jessica Breslav at ¶ 10.) Yet, these supposed
bases prove nothing more without some nexus to the alleged wrongdoing. See
Premier, 475 F. Supp. 2d at 1007 (vague and unsupported arguments the party may
experience a loss of goodwill were insufficient to establish irreparable harm).
Criteo has not proffered any evidence to show supposed customer losses resulted
from anything more than legitimate competition. Second, there is no irreparable
harm associated with the alleged head-to-head comparisons. Not only has Criteo
failed to identify customers purportedly running these comparisons, it has also
failed to show what metrics these comparisons are using or establish that
SteelHouse is providing those specific customers with false information in an
attempt to rig the competition. Criteo therefore has not proffered sufficient
evidence to show irreparable harm.
c. Criteo’s Delay In Seeking Injunctive Relief Undercuts Its Claim Of Irreparable Injury.
By its own admission, Criteo has been aware of the challenged conduct since
at least January 2016. (Mot. at 7.) This six-month delay belies the supposed claim
of urgency necessary for such extraordinary injunctive relief. So does the almost
twenty-day delay between filing a complaint and seeking a preliminary injunction.
Delay in seeking injunctive relief undercuts any claim that the injunction is
necessary to prevent immediate and irreparable injury, and alone should result in
denial of Criteo’s motion. See Dahl v. Swift Distrib., Inc., 2010 U.S. Dist. LEXIS
35938, *8 (C.D. Cal. April 1, 2010) (“Plaintiff’s long delay before seeking a
preliminary injunction implies a lack of urgency and irreparable harm.”) (citation
omitted); Hansen Beverage Co. v. N2G Distrib., 2008 U.S. Dist. LEXIS 105442,
*17-18 (S.D. Cal. Dec. 30, 2008) (denying preliminary injunction on false
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advertising claim where plaintiff admitted knowing of alleged issue for at least two
months before taking any legal action and then waiting twenty days to move for
preliminary injunction after bringing suit, stating “[d]elays in requesting an
injunction, whether for months or years, tend to negate a claim of irreparable
harm”).10
D. Criteo Has Failed To Demonstrate The Balance Of The Hardships Tips In Its Favor.
Even if Criteo could establish that “serious questions” exist as to the merits
(which it cannot), injunctive relief must still be denied because Criteo has not
shown that the balance of hardships tips sharply in its favor. See Stuhlbarg Int’l
Sales Co. v. John D. Brush & Co., 240 F.3d 832, 840 (9th Cir. 2001). “[C]ourts
must balance the competing claims of injury and must consider the effect on each
party of the granting or withholding of the requested relief.” Winter, 555 U.S. at
24 (internal quotation marks omitted). In determining the impact on both parties,
courts have denied injunctive relief in light of the relative strength and size of the
parties and where the injunction would cause substantial financial hardship to the
defendant. See, e.g., Int’l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 827
(9th Cir. Cal. 1993); Open Text, S.A. v. Box, Inc., 36 F. Supp. 3d 885, 910-11 (N.D.
Cal. 2014) (denying proposed injunction because it was “likely to cause a
substantial financial hardship to [the defendant] pending the outcome of this
litigation”); Lilith Games (Shanghai) Co. v. uCool, Inc., 2015 U.S. Dist. LEXIS
128619, *34-35 (N.D. Cal. Sept. 23, 2015) (finding balance tipped in the
defendant’s favor because if court granted the injunction, the defendant “would be
forced to take down its most popular game, threatening [its] viability as a
10 The requested injunctive relief is also moot. SteelHouse’s attribution reporting change on May 5, 2016, stopped and ensures that the challenged conduct “cannot reasonably be expected to recur.” Fed. Trade Comm’n v. Affordable Media, 179 F.3d 1228, 1238 (9th Cir. 1999).
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company,” and would lose profits, market share and goodwill).
Here, Criteo is a long-standing industry behemoth with 11,000 customers
and more than $1 billion in annual revenue. Criteo seeks an injunction that would
force SteelHouse to change its entire attribution model—a model that is in line
with many in the Ad Tech industry, including Google Analytics’ reporting.
Because the injunction would significantly impair SteelHouse’s business
operations, Criteo cannot show that the mere possibility of ad spend decline from
five unidentified clients currently running head-to-head comparisons somehow tips
the balance of hardships in its favor.
IV. CONCLUSION
For the foregoing reasons, SteelHouse respectfully requests that the Court
deny Criteo’s Motion for Preliminary Injunction in its entirety.11
Dated: July 25, 2016 LATHAM & WATKINS LLP Daniel Scott Schecter
Marvin S. Putnam Laura R. Washington By /s/ Daniel Scott Schecter
Daniel Scott Schecter Attorneys for Defendant and Counterclaimant SteelHouse, Inc.
11 Should the Court grant Criteo’s Motion, a substantial bond should issue pursuant to Federal Rule of Civil Procedure 65(c). The broad injunction Criteo seeks would significantly impair SteelHouse’s business operations, a company currently valued at $130 million that employs 248 people. (Douglas Decl. at ¶ 43). Because the bond is the “upper limit” on SteelHouse’s redress for a wrongful injunction and courts “should err on the high side,” SteelHouse requests that should the court issue an injunction, the Court order a bond in the amount of tens of millions dollars. See Apple, Inc. v. Samsung Elecs. Co., 877 F. Supp. 2d 838, 918 (N.D. Cal. 2012) (granting preliminary injunction and ordering the requested bond of over $95 million); Moonrunners L.P. v. Time Warner, Inc., 2005 U.S. Dist. LEXIS 41244, *44 (C.D. Cal. June 17, 2005) (ordering a $5 million bond).
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