PC Drivers Headquarters, LP v. Malwarebytes Inc.

• Decision Date: 06 March 2019
• Docket Number: Case No. 5:18-cv-05409-EJD
• Citation: 371 F.Supp.3d 652
• Court: U.S. District Court — Northern District of California
• Parties: PC DRIVERS HEADQUARTERS, LP, Plaintiff, v. MALWAREBYTES INC., Defendant.

371 F.Supp.3d 652

PC DRIVERS HEADQUARTERS, LP, Plaintiff,

v.MALWAREBYTES INC., Defendant.

Case No. 5:18-cv-05409-EJD

United States District Court, N.D. California, San Jose Division.

Signed March 6, 2019

Andrew John Schumacher, Marcus James Brooks, James G. Ruiz, Winstead P.C., Austin, TX, David J. Cook, A Professional Law Corporation, San Francisco, CA, for Plaintiff.

Katherine Patrice Chiarello, Wittliff Cutter Austin PLLC, Austin, TX, Tyler Griffin Newby, Pro Hac Vice, Guinevere Louise Jobson, Fenwick & West LLP, San Francisco, CA, Sapna S. Mehta, Fenwick and West LLP, Mountain View, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

EDWARD J. DAVILA, United States District Judge

I. INTRODUCTION

In this action Plaintiff PC Drivers Headquarters, LP ("PC Drivers") alleges that Malwarebytes, Inc. ("Malwarebytes") wrongfully categorized PC Drivers' software as malware or a "Potentially Unwanted Program" ("PUP"). PC Drivers asserts claims under the Lanham (Trademark) Act, 15 U.S.C. § 1501, as well as claims for business disparagement, tortious interference with contractual relations, negligence and gross negligence, unfair competition, promissory estoppel, and declaratory relief. PC Drivers filed suit in the Western District of Texas. The Texas court denied PC Drivers' motions for a temporary restraining order and preliminary injunction and transferred the action to this court pursuant to 28 U.S.C. section 1404(a).

Malwarebytes moves to dismiss the Complaint, asserting among other things that it is entitled to immunity under section 230(c)(2)(B) of the Communications Decency Act of 1996 ("CDA"), 47 U.S.C. § 230. The court finds it appropriate to take Malwarebytes' motion to dismiss under submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons set forth below, Malwarebytes' motion will be granted with leave to amend.

II. BACKGROUND¹

Plaintiff PC Drivers provides technical support using a software-first approach to fix the most common computer issues consumers face. Comp. ¶ 7. PC Drivers' services include "locating and installing all missing and outdated software drivers and working in real time in the background of the operating system to optimize processing." Id. PC Drivers uses internet search and display marketing techniques. Id. ¶ 8. Consumers responding to advertisements are encouraged to download and install PC Drivers' software. Id. The only way to obtain PC Drivers' DRIVER SUPPORT, ACTIVE OPTIMIZATION and DRIVER DETECTIVE products (collectively "Products") is by searching and clicking on an internet advertisement, installing the software on the consumer's device, and then purchasing a license. Id. PC Drivers offers its Products under its federally registered trademarks, a common law mark and a design mark (collectively "Marks"). Id. ¶ 11.

Defendant Malwarebytes is a software company that sells malware detection software designed to scan consumer's computers and to report to consumers in commercial advertisements or promotions any threats, PUPs, malware and viruses for de-installation. Id. ¶ 13. Malwarebytes gains customers by offering a free version of its software and upselling premium versions for purchase after scanning. Id. "Once the free version is downloaded and installed and the consumer scans his computer, Malwarebytes promotes its premium versions by allegedly identifying and quarantining alleged PUP and malware and their official websites." Id. When the free version of Malwarebytes software is downloaded and installed, a user who searches for DRIVER SUPPORT or ACTIVE OPTIMIZATION will find PC Drivers' ads or website links bearing the Marks, but if the user clicks on the links, the user is redirected to Malwarebytes' website to purchase Malwarebytes' product. Id. ¶ 22.² Thus, Malwarebytes is allegedly profiting from PC Drivers' Marks and "stealing market share through click redirection." Id. ¶¶ 22-23.

In October of 2016, Malwarebytes categorized all builds and releases of PC Drivers' DRIVER SUPPORT and DRIVER DETECTIVE software with a negative PUP rating and a security risk to Malwarebytes' customers. Id. ¶ 14. PC Drivers customers who received Malwarebytes' warnings were allegedly deceived into removing PC Drivers' software. Id. Upon learning about the negative categorization and warnings, PC Drivers contacted Malwarebytes and provided the company with information regarding PC Drivers' compliance with industry leading standards and requirements, including the Clean Software Alliance ("CSA") Guidelines, Microsoftand Google's standards and other anti-malware vendor certifications by McAfee and Symantec. Id. Malwarebytes refused to delist the negative PUP rating for PC Drivers' software and referred PC Drivers to AppEsteem for third party certification. Id. Malwarebytes "proffered that if AppEsteem gave its approval seal to PC Drivers' software, then Malwarebytes would reconsider delisting that software as PUPs." Id. ¶ 16. AppEsteem conducted tests and issued a "clean software certification" for the current and prior builds of PC Drivers' software. Id. ¶ 17. PC Drivers informed Malwarebytes of the certification and Malwarebytes delisted PC Drivers' Products. Id.

PC Drivers later learned that Malwarebytes had relisted the Products as PUPs and had barred customers' access to PC Drivers' official websites. Id. ¶ 18. By letter dated February 1, 2018, PC Drivers demanded that Malwarebytes remedy the situation. Id. ¶ 19. PC Drivers did not receive a formal response. Id.

PC Drivers also learned that a Malwarebytes staff member posted "Removal instructions for Driver Support" on Malwarebytes' message board forum. The post, which shows a screen shot of PC Drivers' system optimizer containing PC Drivers' Marks, includes allegedly false and misleading comments about PC Drivers' Products and advises consumers that the best way to uninstall DRIVER SUPPORT is to use Malwarebytes' software. Id. ¶¶ 20, 23. PC Drivers found another Internet site, www.botcrawl.com, with a post by a person named Sean Doyle that contained similar comments about DRIVER SPPORT and instructions for removal. Id. ¶ 21. PC Drivers alleges on information and belief that Sean Doyle receives monetary or in-kind benefits from Malwarebytes for each sales lead or software download generated from his post. Id.

PC Drivers alleges that Malwarebytes' alleged conduct above has resulted in trademark misappropriation and infringement, dilution of PC Drivers' Marks, confusion among PC Drivers' customers and potential customers, and diminution in the value of PC Drivers as a going concern. Id. ¶¶ 22-27.

III. STANDARDS

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). The factual allegations in the complaint "must be enough to raise a right to relief above the speculative level" such that the claim "is plausible on its face." Id. at 556-57, 127 S.Ct. 1955. A complaint that falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008).

When deciding whether to grant a motion to dismiss, the court must generally accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal , 556 U.S. 662, 664, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court must also construe the alleged facts in the light most favorable to the plaintiff. See Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am. , 768 F.3d 938, 945 (9th Cir. 2014) (providing the court must "draw all reasonable inferences in favor of the nonmoving party" for a Rule 12(b)(6) motion). However, "courts are not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

Also, the court usually does not consider any material beyond the pleadings for a Rule 12(b)(6) analysis. Hal Roach Studios, Inc. v. Richard Feiner & Co. , 896 F.2d 1542, 1555 n.19 (9th Cir. 1989). Exceptions to this rule include material submitted as part of the complaint or relied upon in the complaint, and material subject to judicial notice. See Lee v. City of Los Angeles , 250 F.3d 668, 688-69 (9th Cir. 2001) ; see also Branch v. Tunnell , 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. County of Santa Clara , 307 F.3d 1119, 1127 (9th Cir. 2002) ("documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss").

IV. DISCUSSION

Malwarebytes' motion to dismiss raises the following issues: (1) whether section 230(c)(2)(B) of the CDA immunizes Malwarebytes from the false advertising and common law claim, and if not, whether PC Drivers alleges sufficient facts to support a plausible claim; (2) whether PC Drivers has alleged sufficient facts showing that its Marks are famous to support a claim for trademark dilution claim under 15 U.S.C. section 1125(c) ; and (3) whether PC Drivers has alleged facts showing that consumers are confused as to the source of goods by Malwarebytes' alleged use of PC Drivers' Marks to support a claim for trademark infringement under 15 U.S.C. section 1114.

A. Statutory Immunity For Non-Trademark Claims (Counts 1, IV-X)

Malwarebytes contends that the safe harbor provision of the CDA provides immunity from all of the non-trademark claims.³ The statute provides, in relevant part:

(c) Protection for "Good Samaritan" blocking and screening of

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