Googles v Google

In 1995, Steven Silvers created the Googles brand. Two years later, he registered the Googles trademark and the internet domain name www.googles.com. The website launched in 1998 as a children’s education and entertainment website. That year, the search engine Google adopted the Google name. Subsequently, in 2005, Silvers sued Google for trademark infringement.

In February 2007, Silvers assigned all rights in Googles to Stelor Productions, LLC. In December 2008, Google and Stelor settled the trademark infringement litigation. As the trademark infringement litigation unfolded, in 2006 Stephen Garchik invested in Stelor. The company soon defaulted on Garchik’s loans.

Following a bankruptcy proceeding, in 2011 Stelor assigned the “entire interest and the goodwill” of the Googles trademark to Garchik, doing business as Stelpro Loan Investors, LLC. By that point, the Googles website remained operational, but there is some evidence that its content was static and quickly grew outdated.

In January 2013, Garchik transferred the Googles assets to SJM Partners, a company of which he is the sole owner. Following this transfer, Garchik replaced the Googles website with a “coming soon” page, posted a solicitation for joint venture partners, and added some audiovisual content. Finally, in February 2018, SJM Partners transferred the Googles assets to Plaintiff-Appellant SM Kids, a newly formed firm owned by Garchik.

In February 2018, SM Kids sued Google LLC, Alphabet Inc., XXVI Holdings Inc., and 100 John and/or Jane Doe defendants (collectively, “Google”) in New York County Supreme Court, alleging that Google had breached the 2008 settlement agreement.

That agreement prohibited Google from “intentionally making material modifications to its then-current offering of products and services in a manner that is likely to create confusion in connection with Googles.” More specifically, Google agreed not to “create, develop and publish children’s books, fictional children’s videos, or other fictional children’s related content that have a title of ‘GOOGLE’ or a ‘GOOGLE-‘formative title or mark.”

The complaint alleged that Google had breached that agreement by creating Google Play and YouTube Kids, which publish and distribute children’s content. SM Kids further objected to Google’s acquisition of several children’s entertainment businesses, including Launchpad Toys and the “Toontastic” application.

Google argued that SM Kids lacked standing to sue because it never validly acquired the Googles trademark, and only the holder of that trademark could enforce the settlement agreement. Before the motion was fully briefed, the district court denied it without prejudice and ordered that discovery be stayed except as to the issues of standing and subject-matter jurisdiction.

Relying on materials outside the complaint that had been generated during discovery, the district court found that SM Kids had not shown by a preponderance of the evidence that it had validly acquired the trademark. The court held that a valid assignment requires that the mark be used in commerce and found that the mark was not used in commerce from 2010 to 2018, when it was assigned to SM Kids.

Specifically, it found that the Googles website had not been used to identify goods or services sold to consumers because it was merely a “coming soon” page. Treating this deficiency as jurisdictional, the district court granted the motion to dismiss. The appeal followed.

Google contended that the Googles mark had not been used in commerce and, therefore, could not be assigned to SM Kids. Because SM Kids was not the holder of the mark, Google reasoned, it had no rights under the settlement agreement and did not have a legally protected interest whose impairment could be redressed in a lawsuit. In other words, it had not suffered an injury in fact.

The district court agreed and concluded that, because SM Kids lacked Article III standing, the court did not have subject-matter jurisdiction. The appeal did not agree that the validity of the assignment was a question of Article III standing. Instead, the question was one of contractual standing, which asks a different question: whether a party has the right to enforce a contract.

Contractual standing is distinct from Article III standing and does not implicate subject-matter jurisdiction. Article III standing speaks to the power of a court to adjudicate a controversy; contractual standing speaks to a party’s right to relief for breach of contract.

Although the question of whether Google breached a contract with SM Kids depends on whether SM Kids enjoyed a contractual relationship with Google, the existence of such a relationship is not a prerequisite to a court’s power to adjudicate a breach-of-contract claim.

SM Kids produces content under the name Googles, and it alleges that Google confusingly produces similar content under its own name, in breach of a contract. SM Kids plausibly alleges that the availability of Google’s content – which allegedly violates the settlement agreement – has injured the popularity of Googles content and thereby caused it economic injury. That injury could be redressed by injunctive or monetary relief. As a result, the three requirements of Article III standing are satisfied.

The appeal did not reach the questions of validity of the assignment of the Googles mark and whether SM Kids possesses contractual standing. The judgment of the district court has been vacated, and the case has been remanded for further proceedings consistent with appeal’s opinion.