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Digital Envoy, Inc. v. Google

May 20, 2005

DIGITAL ENVOY, INC., PLAINTIFF,
v.
GOOGLE, INC., DEFENDANT.



The opinion of the court was delivered by: Richard Seeborg United States Magistrate Judge

ORDER DENYING GOOGLE'S MOTION FOR SUMMARY JUDGMENT AND GRANTING GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT

I. INTRODUCTION

Defendant Google, Inc. ("Google") moves for summary judgment on all six claims for relief advanced by plaintiff Digital Envoy, Inc. ("Digital"). Google contends that those claims are fatally flawed because: (1) the only reasonable interpretation of the parties' November 2000 License Agreement ("License") permitted Google to use Digital's technology in both its AdWords and AdSense programs; (2) Digital's state law claims all relate to the theory of trade secret misappropriation and are thereby preempted by the California Uniform Trade Secrets Act ("UTSA"); and, (3) as a matter of law, Digital cannot sustain its Lanham Act claim. Digital opposes the motions and argues that its claims for relief are legally cognizable and that entry of judgment is inappropriate at this stage of the litigation.*fn1 The motions were fully briefed and heard by the Court on May 4, 2005. Based on all papers filed to date, as well as on the oral argument of counsel, the Court denies the motion for summary judgment and grants the motion for partial summary judgment, for the reasons set forth below.

II. BACKGROUND

This action stems from a dispute between the parties as to the scope of a license obtained by Google from Digital regarding the use of technology which assists a user in making an educated guess about the approximate geographic location of a visitor to a website. Although Google has now discontinued its use of the technology, it contends that the terms of its license permitted it in the past to afford its advertisers the opportunity to use Digital's technology through Google's advertisement programs, known as AdWords and AdSense.

A. Google's AdWords Program

AdWords is an advertising program offered by Google which allows advertisers to display their messages on the Google website to Internet users all over the world. See Wojcicki and Rose Declarations. In its simplest form, the program is implemented through Google's analysis of several factors, such as the user's estimated geographic location, the user's demonstrated interest in a particular subject, and the rate the advertiser will pay for the placement of its advertisement on the website. Id. For example, if a user visits Google's website and types in a search for "furniture," such query is communicated to Google's computers, along with the user's IP address*fn2. In a matter of milliseconds, Google then initiates two separate processes - one to find the results from its web index which may be responsive to the user's inquiry and the other to locate ads which might be relevant to the user. Id. In searching for relevant advertisements to display, Google often utilized Digital's technology to ascertain the user's geographic location and thereby to assist it in displaying the most geographically pertinent ads where that factor was important to its advertising customer. Id.

At the time that the parties entered into the License, Google was operating AdWords. Digital concedes that Google's use of its technology in the AdWords program was both contemplated by the parties when they executed the License and covered by its express terms. See Digital's Opposition Brief at p. 6, fn. 3.

B. Google's AdSense Program

Almost two years after the execution of the License*fn3, Google launched its AdSense program, under which Google displays advertisements not on its own website but rather on those of third-parties. See Wojcicki Decl. at ¶ 6. If a user clicks on an advertisement displayed on the third-party site, the advertiser pays Google which in turn shares a portion of that payment with the third-party site owner. See Susan Wojcicki Declaration ("Wojcicki Decl.") at ¶ 6. According to Google, this program operates in precisely the same manner as does its AdWords program, except that the interface with the internet user occurs at a separate and distinct website. Id. at ¶¶ 7, 8. In AdSense for search ("AFS"), a user's query is utilized to determine which ads will be displayed, while in AdSense for content ("AFC"), advertising messages are displayed to an end-user based on the content of the material such user is viewing, rather than on that particular user's query. Id.

As with the AdWords program, Google states that in AdSense, Digital's data remained at all times on Google's computers and was accessed and manipulated only by Google. See Rose Declaration at ¶¶ 8-9. Since, from Google's perspective, there is no difference in the manner in which Google utilized Digital's proprietary technology in either the AdWords or AdSense programs, Google argues that there is no breach of the License. Digital, on the other hand, contends that by including Digital's data in Google's algorithm and transferring the resulting application, in AdSense, to a third-party website, Google "distributed, shared or otherwise gave" another party Digital's proprietary technology, in violation of Section 3, ¶ 1 of the License.

C. The Parties' License Agreement

At the heart of this dispute lies the scope of the License negotiated between Digital and Google, which permitted Google to use Digital's data in Google's "Business;" defined as "producing and maintaining information search technology." Kratz Decl., Exh A. From the outset of the parties' negotiations regarding the terms of the License, Google states that it was encouraged by Digital to use its technology in a variety of ways to assist Google in targeting search results and in advertising on a geographic basis. (See, e.g., Kramer Decl, Exh. A, email from Digital's CEO Rob Friedman to Google stating his belief that Digital's technology "could help [Google] target search results and advertising on a geographic basis", and Exh. B, emails from Digital suggesting several ways in which Google could use Digital's data).

Google acknowledged the versatility of Digital's product and noted that, while it would likely use it solely for advertising targeting for a while, Google "liked to have flexibility." Id. at Exh. B. In response to Google's flexibility concern, Digital assured Google that Digital was providing an "'all you can eat' metro-targeting-you can use it for everything and there is no volume cap." Id. at p. 8759. Google replied with an offer to license Digital's technology if it was granted "unlimited servers, usage and volume." Id. Digital submitted a draft of the License to Google "incorporating the terms the parties had discussed." Id. at Exh. C. Specifically, the License grants Google "....the limited, worldwide right to use in its Business (and not distribute to any third party in whole or in part) the Product and the Database Libraries." Kratz Decl., Exh. A at Section 3. The License provided, however, that such right was nonexclusive and strictly limited to the right to:

Input, download, and store some or all of the Database Libraries in files and memory; and compile some or all of the Database Libraries at the Site. Licensee may also use the Database Libraries to develop indices, services, or applications that are provided to third parties (e.g., developing a country-specific index of web pages). In no event, however, are the Database Libraries to be sold, licensed, ...


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