Snapkeys, LTD v. Google LLC

Background

Snapkeys described itself as a software development company specializing in smartphone and smartwatch keyboard technology. The opinion states that Snapkeys was a foreign limited liability company based in Israel and that Google was organized under Delaware law with its principal place of business in Mountain View, California.

The parties began discussions in 2015 about promoting Snapkeys’ “iType” technology on Google’s Android Wear smartwatches. They signed a nondisclosure agreement, but that agreement imposed no obligation to proceed with a business transaction. Snapkeys alleged that Google made fraudulent and misleading promises to use and promote the technology. Snapkeys provided Google with prototypes, including two smartwatches containing the technology, but Google allegedly declined to work with Snapkeys and instead cooperated with a competitor to develop a substantially similar keyboard.

The operative complaint asserted claims for breach of the nondisclosure agreement, conversion, and unfair and fraudulent conduct under California’s Unfair Competition Law. In an earlier order, the court denied Google’s motion to dismiss the breach-of-agreement and conversion claims, dismissed the fraud and implied-covenant claims with prejudice, and dismissed the Unfair Competition Law claim with leave to amend. Snapkeys then filed a third amended complaint, and Google moved to dismiss only the amended Unfair Competition Law claim.

Legal Standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. A complaint must provide enough factual content to make liability plausible, not merely possible. The court generally accepts well-pleaded factual allegations as true and views them favorably to the nonmoving party, but it need not accept legal conclusions or unsupported inferences.

When a claim is dismissed, leave to amend is generally allowed unless amendment would be futile, would unfairly prejudice the opposing party, would cause undue delay, or would result from bad faith.

Unfair Prong

The Unfair Competition Law provides separate bases for liability based on unlawful, unfair, or fraudulent business practices. Snapkeys relied on the unfair and fraudulent prongs.

For the unfair prong, Snapkeys alleged that Google made statements indicating it would enter a business relationship with Snapkeys even though it did not intend to do so. Snapkeys also alleged that Google used delay tactics that prevented it from entering agreements with other smartwatch companies and manufacturers.

The court held that an unfair-prong claim based on harm to competition must allege harm to the market as a whole, not just injury to an individual competitor. Snapkeys alleged that Google’s conduct allowed it to avoid compensating startup companies, stifle competition from larger competitors, and harm startups seeking to market technology. The court found these allegations conclusory because Snapkeys provided no specific supporting facts beyond facts concerning Snapkeys itself. The court also noted that the nondisclosure agreement did not require the parties to proceed with a transaction or prevent Snapkeys from working with Google’s competitors.

The court rejected two examples Snapkeys offered in its opposition. An article concerning Google’s age rating of another startup’s keyboard did not show that the startup had delayed other business opportunities based on promises from Google. Allegations from another case concerned Google’s alleged disclosure of trade secrets, a theory Snapkeys had abandoned, and therefore did not support Snapkeys’ claim.

The court granted Google’s motion to dismiss the unfair-prong claim. It denied Snapkeys leave to amend because Snapkeys had failed to state the claim in four complaints, Google had repeatedly identified the same deficiency, and another amendment and motion would be futile, would unduly prejudice Google, and would further delay the case.

Fraudulent Prong and Standing

Snapkeys alleged that Google created a misleading alert for consumers who enabled the iType keyboard on an Android Wear smartwatch. The alert stated that the keyboard “may be able to collect all the text you type, including personal data like passwords and credit card numbers.” Snapkeys alleged that the alert was misleading because its keyboard was not designed to collect typed text.

Before reaching the merits of a fraudulent-prong claim, the court required Snapkeys to show standing. Under California law, standing requires an injury in fact and loss of money or property caused by the unfair competition. The court explained that a plaintiff must have actually relied on the allegedly deceptive statement; reliance by third parties is not enough.

The court found that Snapkeys alleged only that consumers relied on the alert. Snapkeys did not allege that it relied on the alert itself. The court therefore held that Snapkeys lacked standing to bring the fraudulent-prong claim and granted Google’s motion to dismiss that claim.

The court dismissed the fraudulent-prong claim with prejudice and denied leave to amend. It concluded that amendment would be futile because Snapkeys had repeatedly failed to adequately allege the claim and, according to the court, was unlikely to cure the standing problem because it was not a consumer who relied on Google’s alert. The court also cited undue prejudice and delay.

Disposition

Judge Lucy Koh granted Google’s motion to dismiss Snapkeys’ Unfair Competition Law claim with prejudice. The opinion’s conclusion concerns the Unfair Competition Law claim; it does not state that this order dismissed the breach-of-agreement or conversion claims.