IP Law Daily, TRADEMARK—N.D. Cal.: Yelp’s complaint against competing review business survives dismissal, (Jun 7, 2024)

By Robert B. Barnett Jr., J.D.

Yelp was found to have sufficiently pleaded claims for unfair competition, trademark infringement, and trademark dilution against a competitor alleging an integration with Yelp.

In an unfair competition and trademark infringement suit by Yelp alleging that ReviewVio falsely marketed an integration with Yelp that included using Yelp’s logo, the California federal district court has largely allowed the suit to survive a motion to dismiss, ruling that Yelp adequately pleaded that ReviewVio violated federal and state law when it, in essence, offered business customers Yelp reviews but with the negative reviews removed. Although the court permitted a wide range of claims to proceed, it did agree to dismiss any claim for misrepresentation to consumers rather than to business customers because the claim was not pleaded with sufficient particularity (Yelp, Inc. v. ReviewVio, Inc., No. 3:23-cv-06508-WHA (N.D. Cal. June 6, 2024)).

Background. California-based Yelp offers a service for businesses to advertise to consumers and for consumers to review businesses. To support its free services, Yelp sells ads and “paid features” to businesses.

Meanwhile, in 2020, California-based ReviewVio incorporated to sell services to businesses that are “integrate[d] with the most popular review platforms,” including Yelp. ReviewVio promises to help businesses by gathering all patron feedback and then removing the bad reviews from sites like Yelp. As it turns out, ReviewVio can “remove” a negative review from Yelp the only way that anyone else can remove the bad reviews, by sending removal requests to Yelp. When Yelp tired of being bombarded by “tens of thousands of removal requests,” it revoked ReviewVio’s access. As a result, ReviewVio began doing business as Dandy, and it began bombarding Yelp all over again.

Yelp sued ReviewVio in California federal court, asserting claims for unfair competition, trademark infringement, and trademark dilution under federal law, plus unfair competition, false advertising, and breach of contract under California law. In essence, Yelp alleges that ReviewVio is improperly using Yelp’s name, mark, and reputation to create a business model that might result in businesses paying ReviewVio rather than Yelp because the bad reviews will be removed. For whatever it’s worth, the FTC had said that companies that remove negative reviews violate the Federal Trade Commission Act.

ReviewVio filed a motion to dismiss all claims. It also filed a motion in the alternative to strike certain allegations in the complaint.

Lanham Act unfair competition. ReviewVio first sought dismissal of the federal unfair competition claim on the ground that Yelp lacked standing because it failed to allege injury with particularity. More particularly, ReviewVio argued that Yelp failed to suffer proximate injury because it did not compete with ReviewVio. The court disagreed, noting that, under the complaint’s allegations, Yelp sells services to businesses to increase prominence on Yelp through ads, while ReviewVio sells services to businesses to increase prominence on Yelp through review gating (removing negative reviews). Thus, both companies compete for revenues from the same businesses, and Yelp had standing to bring its unfair competition claims.

Turning to the merits, the court noted that the unfair competition claim consisted of allegations of false association and false advertising. As for false advertising, the complaint alleged that ReviewVio advertised its services by touting its integration with Yelp and that it could remove critical reviews from Yelp. The complaint further alleged that ReviewVio had no such capabilities. ReviewVio sought dismissal because it argued that the complaint failed to allege any deception of the public. The court noted, however, that the complaint specifically alleged that at least one business owner was actually misled. This was sufficient to survive the motion to dismiss. The complaint also adequately alleged that the misstatements that ReviewVio made were likely to influence customer purchasing decisions. All further elements of a well-pleaded complaint were also satisfied, including Fed. R. of Civ. P. 9(b)’s requirement that the elements be pleaded with sufficient particularity.

As for false association or designation, the court again concluded that the complaint met its pleading requirements by alleging that ReviewVio’s business customers might mistakenly believe that Yelp was affiliated with ReviewVio. This claim also satisfied its Rule 9(b) requirements.

Thus, the court denied the motion to dismiss as it applied to the false advertising and false association claims under the Lanham Act.

Lanham Act trademark infringement. ReviewVio’s motion to dismiss sought dismissal of the federal trademark infringement claim on the ground that Yelp failed to establish a likelihood of success. While likelihood of success in the Ninth Circuit is typically determined under the factors set forth in AMF inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979), the more appropriate analysis under these facts is determined by the factors set forth in New Kids on the Bloc v. News Am. Publ’g, 971 F.2d 302, 308 (9th Cir. 1992), which specifically addresses cases in which the defendant uses the plaintiff’s mark to describe its own product. The New Kids analysis was triggered when ReviewVio asserted that Yelp’s complaint only asserted that ReviewVio used Yelp’s mark descriptively. The court rejected that argument. The complaint established a likelihood of success under New Kids by alleging that ReviewVio did more than describe its own product—it suggested an affiliation—and by alleging that ReviewVio used far more of the Yelp mark than was reasonably necessary to identify RediewVio’s services.

Did ReviewVio confuse consumers into believing that it was affiliated with Yelp? The court said that the complaint sufficiently raised that argument, ruling that, on its face, the complaint met the New Kids test for likelihood of success in answering the question “yes.”

Lanham Act trademark dilution. Dilution occurs when the defendant’s use of the trademark whittles away its value by blurring its uniqueness. ReviewVio’s motion sought dismissal on the grounds that Yelp’s mark was insufficiently famous and that the allegations of blurring or tarnishing were insufficient. On the famous mark argument, the court again disagreed with ReviewVio, ruling that Yelp’s mark, which had been in continuous use since 2006, was famous.

As for blurring and tarnishing, the court ruled that the complaint sufficiently alleged that ReviewVio’s claim that it would allow businesses to withhold negative reviews potentially harmed Yelp’s trademark by association. That was enough, the court ruled, to meet the pleading requirements for dilution.

California unfair competition. For the most part, the reasons why the California unfair competition allegations were sufficient tracked the reasons why the federal unfair competition allegations were sufficient. One argument that the court had to resolve, however, was on the question of showing causation by actual reliance in fraud cases. ReviewVio contended that the reliance required is reliance by Yelp. Yelp, on the other hand, said that the reliance can be by a third party, including a customer.

In essence, ReviewVio argued that, if reliance is required by Yelp, Yelp lacked standing because it had no injury, given that did not rely on ReviewVio’s assertions. This question has not been resolved in the Ninth Circuit, with district courts having been split. This court chose to adopt the third-party rule urged by Yelp because, as it noted, the other rule makes no sense when competitors are involved. If the rule were to require that Yelp be fooled by statements that ReviewVio made to its customers, Yelp could not bring its suit. The law was intended stop frivolous suits, not to bar potentially legitimate suits because of a lack of standing.

Turning to the merits, the court upheld the unfair competition claims, regardless of the flavor—unlawful, unfair, or fraudulent. All were deemed to have been sufficiently pleaded. The complaint sufficiently alleged that ReviewVio’s marketing materials misled business customers about ReviewVio’s relationship and capabilities with respect to Yelp. It also sufficiently established unlawfulness, and it alleged how ReviewVio breaks trademark law to win customers.

California false advertising. Once again, the court concluded that Yelp’s allegations were sufficient to establish a claim under California false advertising law, largely for the same reasons that the federal false advertising claims were sufficiently pleaded.

California breach of contract. Yelp asserted a breach of contract claim that was based on a breach of the Terms of Service agreement that ReviewVio assented to when it logged into the Yelp website. The court ruled that the complaint plausibly alleged a contract between Yelp and ReviewVio and that it was potentially breached. The court also, however, ruled that the complaint failed to sufficiently allege what damages flowed from the scraping of the negative reviews. Thus, the motion was denied on the breach of contract claim except for the allegations around scraping.

Damages. Returning to the subject of damages, the court noted that the complaint sought damages for misrepresentations made not just to business customers but also to individual consumers. The court agreed with ReviewVio that those damage allegations involving individual consumers were insufficiently pleaded. Such fraud-based claims must be pleaded with specificity under Rule 9(b). The complaint merely states something to the effect that ReviewVio’s misrepresentations not only cost Yelp business customers but also individual reviewers. The complaint, however, never addressed the specifics of how it came to lose individual reviewers.

Motion to strike. In addition to its motion to dismiss, ReviewVio filed a motion to strike certain “impertinent or scandalous” material in the complaint. The court denied the motion.

The court, therefore, granted the motion to dismiss to the extent that the complaint seeks damages for fraudulent misrepresentations made directly to consumers. In all other respects, the motion was denied.

The Case is No. 3:23-cv-06508-WHA.

Judge: Alsup, W.

Attorneys: Aaron Schur for Yelp Inc. Anton N. Handal (Munck Wilson Mandala, LLP) for Reviewvio Inc.

Companies: Yelp Inc.; Reviewvio Inc.

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