Worldwide Media, Inc. v. Twitter, Inc.

WORLDWIDE MEDIA, INC., et al., Plaintiffs, v. TWITTER, INC., et al. Defendant.

Case No. 17-cv-07335-VKD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

October 24, 2018

ORDER GRANTING TWITTER'S MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT

Re: Dkt. No. 31

Plaintiffs Worldwide Media, Inc. ("Worldwide Media") and Michael Berkens filed this suit against defendants Twitter, Inc. ("Twitter") and Does 1-10 ("the Doe defendants") on December 27, 2017. Dkt. No. 1. Twitter filed a motion to dismiss the original complaint on May 14, 2018. Dkt. No. 24. Plaintiffs did not oppose that motion; instead, they filed a First Amended Complaint ("FAC") as of right on May 29, 2018, mooting Twitter's motion. Fed. R. Civ. P. 15(a)(1)(B).

The First Amended Complaint asserts the following claims: (1) trademark infringement, (2) contributory trademark infringement, (3) violation of the Computer Fraud and Abuse Act ("CFAA") under 18 U.S.C. § 1030, (4) breach of contract, (5) negligence and recklessness, (6) tortious interference with contract, (7) breach of duty of bailment, (8) conversion, (9) unfair competition under California Business and Professions Code § 17200 et seq., and (10) declaratory judgment. This Court has jurisdiction over these claims based on federal question jurisdiction under Section 39 of the Lanham Act (15 U.S.C. § 1121), the CFAA under 18 U.S.C. § 1030, and the Declaratory Judgment Act under 28 U.S.C. § 2201; diversity jurisdiction under 28 U.S.C. § 1332; and supplemental jurisdiction over state law claims under 28 U.S.C. § 1367(a).

As explained below, only some of plaintiffs' claims are asserted against Twitter. Twitter moves to dismiss the FAC pursuant to Fed. R. Civ. P. 12(b)(6). Dkt. No. 31. The Court heard oral argument on the motion on July 24, 2018. Dkt. No. 34.

Plaintiffs and Twitter have consented to magistrate judge jurisdiction. Dkt. Nos. 15, 16. Plaintiffs voluntarily dismissed the Doe defendants.¹ Dkt. No. 40. Accordingly, this Court grants Twitter's motion to dismiss, with leave to amend afforded as to the particular claims identified below.

I. BACKGROUND²

Plaintiffs own and operate the @TheDomains Twitter account and a related blog (http://www.thedomains.com) about the domain name industry. Dkt. No. 25 ¶ 10. Plaintiffs generate advertising revenue from the blog, and generate traffic, advertising, and associated revenue from their Twitter account, which they use to promote the blog. Id. ¶¶ 10-11. Plaintiffs also do business with third parties through Twitter's direct messaging feature, and these communications contain confidential and proprietary information of plaintiffs and third parties. Id. ¶ 11. Through their blog and Twitter account, plaintiffs have developed and maintained the THEDOMAINS mark, for which they claim common law trademark protection. Id. ¶ 13.

On December 22, 2017, the Doe defendants hacked plaintiffs' Twitter account. Id. ¶ 16. Plaintiffs do not know who the Doe defendants are or how they obtained access to the account. Id. Shortly after the hack, the Does changed the email address associated with the Twitter account, effectively locking plaintiffs out. Id. ¶ 17. Plaintiffs submitted multiple complaints to Twitter on December 23, 2017, December 24, 2017, and December 27, 2017. Id. ¶ 18. However, Twitter informed plaintiffs that it was unable to investigate their complaints because the email address used to submit the complaints did not match the email address associated with account (now the Does' chosen address). Id. ¶ 19. Plaintiffs had not protected access to their account using Twitter's two-factor authentication feature because they say Twitter failed to make them awarethat this additional security feature was available. Id. ¶ 27. Several third parties independently attempted to inform Twitter that plaintiffs' account had been hacked, but did not succeed in getting Twitter to take action. Id. ¶¶ 20, 28.

After gaining control of the account, the Doe defendants used plaintiffs' credit card without permission to purchase 93,000 promoted tweets. They also posted fake tweets from the account, such as "This Twitter Account For Sell [sic]" and "You want Get Free iPhone X." Id. ¶ 21. Plaintiffs say they asked Twitter to refund the unauthorized credit card charges, but that Twitter's online credit card refund process "does not work" because "the web pages are broken." Id. Plaintiffs do not allege whether they attempted to obtain a refund through other means.

Plaintiffs filed this action on December 27, 2017. Dkt. No. 1. Twitter restored plaintiffs' access to and control over the Twitter account on December 30, 2017. Dkt. No. 25 ¶ 24.

II. LEGAL STANDARD

"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted 'tests the legal sufficiency of a claim.'" Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese, 643 F.3d at 690. While a complaint need not contain detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

III. DISCUSSION

Twitter moves to dismiss all claims asserted against it. At the July 17, 2018 hearing, plaintiffs clarified that they assert the following five claims against Twitter: (1) claim 3: contributory trademark infringement, (2) claim 5: breach of contract, (3) claim 6: negligence and recklessness, (4) claim 8: breach of duty of bailment, and (6) claim 10: unfair competition. Id. at 10:24-11:4. Plaintiffs previously asserted the following claims against the Doe defendants: (1)claim 2: direct trademark infringement, (2) claim 4: CFAA violation, (3) claim 7: tortious interference with contract, (4) claim 9: conversion, and (5) claim 10: unfair competition. Dkt. No. 37 at 10:3-13. Because plaintiffs have dismissed their claims against the Doe defendants, the Court addresses the remaining claims asserted against Twitter.

A. Claim 3: Contributory Trademark Infringement

"To be liable for contributory trademark infringement, a defendant must have (1) 'intentionally induced' the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied." Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, 494 F.3d 788, 807 (9th Cir. 2007) (citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982)). When the defendant supplies a service rather than a product, under the second prong of this test, "the plaintiff must allege facts showing that the defendant had direct control and monitoring of the instrumentality used by a third party to infringe the plaintiff's mark." Free Kick Master LLC v. Apple Inc., 140 F. Supp. 3d 975, 983 (N.D. Cal. 2015) (internal quotations and alterations omitted).³

Plaintiffs do not assert contributory infringement based on "intentional inducement" by Twitter; instead, they rely on Twitter's alleged control of the instrumentality used to infringe the trademark. Plaintiffs argue that Twitter continued to supply use of the account to the Doe defendants for a week despite being notified repeatedly that the account was stolen, thus permitting the Doe defendants to send direct messages, publish public tweets, and purchase 93,000 promoted tweets with plaintiffs' credit card. Dkt. No. 32 at 12-13.

1. Actual or constructive knowledge

Plaintiffs argue that Twitter possessed actual or constructive knowledge that the Doe defendants were infringing plaintiffs' mark by controlling the Twitter account because plaintiffs and other third parties notified Twitter that the Doe defendants had taken over the account. However, the FAC only pleads that plaintiffs complained to Twitter about the hacking, but notabout any trademark infringement. Dkt. No. 25 ¶¶ 18-20. In their opposition, plaintiffs appear to acknowledge that they did not complain to Twitter about trademark infringement. See Dkt. No. 32 at 10 ("Plaintiffs cannot have been required to immediately know the law around contributory trademark infringement, and thus specifically claim 'trademark infringement' in their notices."). Thus, on the face of the complaint, Twitter's actual knowledge of trademark infringement is neither pled, nor could it plausibly be inferred.⁴

With respect to constructive knowledge, plaintiffs contend that any hacked Twitter account necessarily implicates trademark infringement. Dkt. No. 32 at 10. They also argue that because Twitter had dealt with stolen accounts in the past, it "knew or should have known that trademark infringement must be occurring as an inevitable result of account theft," because a thief s tweets from a stolen account would confuse that account's audience, and thus infringing the account holder's mark. Id. at 10-11. Plaintiffs assert that many, if not most, Twitter account names are also trademarks, especially for those accounts used by businesses, and that (knowing this) Twitter previously has given prompt attention to accounts associated with "higher profile" names that have also been hacked. Id. ¶¶ 31, 52; see also Dkt. No. 37 at 13:21-14:9.

Twitter observes that not all Twitter account names are also trademarks, and that not all hacking necessarily results in trademark infringement. Dkt. No. 33 at 4. It contends that notice of hacking, without more, is not enough to support a plausible claim that Twitter had constructive knowledge of trademark...