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Trademark Dispute: Yelp Sues Over Fake Reviews

Last year, I wrote a post titled Can a Business Prevent Bad Reviews? about California’s so-called Yelp law.  Now Yelp itself has entered the legal arena by filing a lawsuit in a trademark dispute against a company who’s attempting to profit off of fake restaurant reviews. What can companies do about fake or fraudulent online reviews?

The Verge reported that Yelp has filed suit against a company doing business as Yelpdirector, Revpley, and Revleap in the US District Court (that just means Federal court) for the Northern District of California.

Yelp’s legal complaint* starts off with:

Defendants’ business willfully infringes Yelp’s trademarks, defrauds and spams businesses that use Yelp, and seeks to undermine the integrity of Yelp’s platform.

Strangely enough, Yelp gave the Defendant, Yelpdirector, five stars. (OK, I made that part up.)

The complaint goes on:

Defendants’ Yelp Director business purported to sell business owners 4 and 5 star Yelp reviews and to “filter” or remove businesses’ existing 1, 2 and 3 star Yelp reviews. Defendants marketed and promoted these “services” by making unauthorized use of Yelp’s registered trademarks and sending spam e-mail and text messages to businesses listed on Yelp––including Yelp’s customers, prospective customers, and business account users…Additionally, Defendants’ spam promotional communications have confused recipients into believing that Yelp was affiliated with or sponsored these unlawful communications.

Yelp claims that they reached out to the Defendants about these issues in an attempt to resolve them without filing a lawsuit:

Defendants initially indicated they would comply with Yelp’s requests. Defendant Herzstock stated in e-mail correspondence with Yelp that Defendants could “see how the usage of ‘yelp’ within the domain name and domain is too close for comfort. All material that includes this will be discarded.” Defendants also agreed to otherwise stop referencing Yelp in their materials, stating in January of 2014 that since Yelp had reached out to them, “Revleap has not contacted businesses . . . in relation to Yelp.”

However, the Defendants allegedly continued their infringing actions actions and moved some of their services to new websites.

Yelp sued based on several causes of action, including Trademark Infringement, Trademark Dilution, Unfair Competition, Cybersquatting, Breach of Contract, Interference with Contractual Relations, and False Advertising.

The first the causes – Trademark Infringement and Dilution, and Unfair Competition – relate to the Defendants’ use of Yelp’s business name and logos.

As a reminder, Trademark Dilution is a claim by a trademark owner that the use of the mark by the defendant would diminish the goodwill embodied in the trademark – even if the defendant is not using the mark in connection with similar goods or services.

The Cybersquatting claim has to do with the yelpdirector.com domain. From the complaint:

Defendants have registered and operated the www.yelpdirector.com domain with a bad faith intent to profit from the Yelp Marks…Defendants’ conduct described above, including its use in commerce of the www.yelpdirector.com internet domain, is likely to cause confusion, mistake, or deception as to the source, sponsorship, affiliation or approval of Defendants’ services. Further, Defendants’ acts described above constitute false representations of fact that are likely to cause confusion, mistake or deception as to the source, sponsorship, affiliation, or approval of Defendants’ services.

What about Breach of Contract and Interference with Contractual Relations? Those claims relate to the Defendants’ alleged violations of Yelp’s Terms of Service (TOS). Deep breath:

Defendants have breached the Yelp TOS by, among other things:
a. Soliciting Yelp reviews for Defendants’ business owner customers;
b. Offering Yelp reviews for sale;
c. Promoting their businesses and commercial ventures on the Yelp Site, and
using the Yelp Site for commercial purposes, by soliciting customers on the Yelp Site and making their false representations regarding services relating to the Yelp Site;
d. Sending bulk and fraudulent spam e-mail and text solicitations to Yelp users and business owners;
e. Violating numerous laws related to their use of the Yelp Marks and the Yelp Site; and,
f. Recording, processing, or mining information about other users for the purpose of Defendants’ fraudulent spam marketing and other commercial activities.

Finally, we come to False Advertising, which is a claim under California State law. Yelp’s complaint states:

Defendants’ actions are likely to deceive the public into believing the reviews are uncompensated, objective customer reviews of Defendants’ clients’ services, and Defendants have engaged in these actions with the intent to induce the public to engage into business transactions with Defendants’ clients. Such actions constitute unfair, deceptive, untrue or misleading advertising under Cal. Bus. Prof. Code § 17500.

If the facts in the complaint are accurate, it seems likely that the court will act in Yelp’s favor. It’s fine to create online services that complement existing businesses, but companies have to be careful about using other entities’ trademarks in an infringing manner and violating their Terms of Service.

* In legal terms, a “compliant” is the initial filing in a lawsuit. As opposed to just complaining about stuff. Which is fine, too, but not really an effective legal strategy.

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