hiQ Labs, Inc. v. Linkedin Corporation

Background

hiQ Labs, Inc. accessed and aggregated publicly available profiles of LinkedIn users and used the information in data-analytic tools that it sold. hiQ had sued LinkedIn on several theories, including requests for declarations concerning computer-access and copyright laws, interference with contracts and prospective economic advantage, and unfair competition.

LinkedIn asserted five counterclaims against hiQ: violation of the federal Computer Fraud and Abuse Act, violation of California Penal Code § 502, breach of contract, misappropriation, and trespass to chattels. The pending matter was hiQ’s motion under Federal Rule of Civil Procedure 12(b)(6), which asks whether the opposing party’s allegations state a legally sufficient claim. The court generally accepts well-pleaded factual allegations as true at this stage and asks whether they make liability plausible.

Federal and California Computer-Access Counterclaims

The court deferred ruling on the Computer Fraud and Abuse Act counterclaim. The Ninth Circuit’s earlier decision in this case had found that hiQ raised a serious question about whether the statute’s “without authorization” requirement applies when access is open to the public. LinkedIn had asked the Supreme Court to review that decision, and the Supreme Court was also considering United States v. Van Buren, which concerned when a person exceeds authorized computer access. The court concluded that those proceedings could affect the counterclaim and that it would be better positioned to decide the issue later.

The court likewise deferred ruling on the California Penal Code § 502 counterclaim. Although that statute is not identical to the federal law and focuses on knowing access and unauthorized use or copying, the court concluded that the Supreme Court proceedings could still affect the analysis, including whether using public information should be treated as criminal conduct.

Breach of Contract

The contract counterclaim was based on LinkedIn’s User Agreement, which prohibited accessing the website and scraping data through automated means. hiQ argued that earlier rulings stating it was no longer bound by the User Agreement after LinkedIn terminated its user status prevented LinkedIn from claiming continuing or future breaches.

The court rejected dismissal at this stage. LinkedIn alleged that the User Agreement applied to anyone using the website, not only members, and that the agreement was prominently linked on LinkedIn’s homepage. The court discussed “browsewrap” agreements, in which a user may assent to website terms by using the site rather than clicking an agreement box. Whether hiQ had actual or constructive knowledge of the terms, and therefore could be bound by them, presented a factual question. The court held that LinkedIn had a basis for seeking future injunctive or declaratory relief and denied hiQ’s motion as to this counterclaim.

Misappropriation

The court held that LinkedIn adequately pleaded a California common-law misappropriation counterclaim. Such a claim protects certain property or commercial value developed through substantial time, skill, or money when another party uses it at little or no cost without authorization and causes injury.

The court agreed with hiQ that LinkedIn’s members, rather than LinkedIn, owned the information in their public profiles. But that did not eliminate possible property rights belonging to LinkedIn. The court explained that California law may protect quasi-property interests based on a company’s labor, skill, and expenditures in developing a commercial system or advantage. The court also declined to require the narrower set of limitations proposed by hiQ, including a requirement of direct competition. In any event, the allegations raised factual questions about time-sensitive profile updates, free-riding, competition, and whether hiQ’s conduct reduced LinkedIn’s incentive to invest in its infrastructure.

The court also rejected hiQ’s argument that the counterclaim was preempted by the California Uniform Trade Secret Act. LinkedIn was not claiming that the public profiles were confidential or secret. Instead, its alleged property interest was based on the labor, skill, and money invested in developing LinkedIn’s professional-networking system. The court denied hiQ’s motion as to misappropriation.

Trespass to Chattels

Under California law, trespass to chattels is intentional interference with possession of personal property that causes injury. The court considered hiQ’s argument that LinkedIn had not adequately alleged injury.

The court found the allegations sufficient. LinkedIn alleged that automated scraping generated millions of requests, burdened its servers and infrastructure, required additional capital and operational resources, and impaired the efficiency of its computing resources. The court noted that a merely momentary or theoretical loss of use may be insufficient, but concluded that the extent of the alleged burden presented a factual question. LinkedIn also alleged threatened future injury to its servers, infrastructure, and services, which could support injunctive relief. The court therefore denied hiQ’s motion as to trespass to chattels.

Disposition

The court denied hiQ’s motion to dismiss the counterclaims for breach of contract, misappropriation, and trespass to chattels. It deferred ruling on the motion to dismiss the Computer Fraud and Abuse Act and California Penal Code § 502 counterclaims. For administrative purposes only, the court terminated the motion, expressly stating that this termination did not prevent hiQ from renewing its motion as to the deferred counterclaims after the Supreme Court issued the relevant decision or decisions. Judge Edward M. Chen signed the order.