United States District Court, E.D. New York.

GENIUS MEDIA GROUP INC., Plaintiff,
v.
GOOGLE LLC and Lyricfind, Defendants.

19-CV-7279 (MKB)
Signed 08/10/2020

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge

Plaintiff Genius Media Group Inc. commenced the above-captioned action on December 3, 2019 in the New York Supreme Court, Kings County, against Defendants Google LLC (“Google”) and LyricFind, Inc. (“LyricFind”). (Notice of Removal ¶ 1, Docket Entry No. 1.) On December 30, 2019, Defendants removed the action to the Eastern District of New York. (Id.) Plaintiff alleges that Defendants misappropriated lyric transcriptions from its website and then used that content for Defendants’ “own financial benefit and to [Plaintiff's] financial detriment,” and asserts state law claims for breach of contract, indemnification, unfair competition under both New York common law and California statutory law, and unjust enrichment. (Compl. ¶¶ 1–2, 111–209, annexed to Notice of Removal as Ex. A, Docket Entry No. 1.)

Plaintiff moves to remand the action to state court. (Pl. Mot. to Remand (“Pl. Mot.”), Docket Entry No. 15; Pl. Mem. in Supp. of Pl. Mot. (“Pl. Mem.”), Docket Entry No. 15-1.) Defendants oppose the motion. (Defs. Opp'n to Pl. Mot. (“Defs. Opp'n”), Docket Entry No. 16.) For the reasons set forth below, the Court denies Plaintiff's motion and dismisses the Complaint for failure to state a claim.

I. Background

According to the allegations in the Complaint, Plaintiff is a “digital media company,” one of whose “primary services is the development and maintenance of ... annotated music lyrics.” (Compl. ¶ 1.) LyricFind is a Canadian company that maintains a database of music lyrics. (Id. ¶¶ 8–9.) Both Plaintiff and LyricFind “license lyrics for display [and distribution] from music publishers.” (Id. ¶¶ 18–19.) Google “owns and operates ... the internet's dominant search platform.” (Id. ¶ 14.) Pursuant to an agreement between Defendants, “LyricFind provides lyrics to Google for use in ... Google's search results.” (Id. ¶ 12.)

a. Plaintiff's services and business model

While music publishers “usually own the copyright in the lyrics for a given song,” companies like Plaintiff and LyricFind “do not typically receive any actual lyrics transcriptions in connection with their licensing agreements,” (id. ¶ 18), and must otherwise generate or obtain the lyrics they have licensed for display, (see id. ¶ 19). Plaintiff “provides a platform” for an online community of “music enthusiasts who transcribe music lyrics.” (Id. ¶ 19.) The transcription process is “arduous,” and Plaintiff has “invested ten years and millions of dollars to build the technology and community that support[ ] collaborative lyrics transcription.” (Id. ¶ 20.) In addition to this collaborative transcription process, Plaintiff also “obtains lyrics ... directly” from artists. (Id. ¶ 19.) Plaintiff “earns revenue in several ways,” including by “licens[ing] its database of high-quality lyrics” to “major companies, such as Apple,” and by “generat[ing] ad revenue through web traffic on its website and apps.” (Id. ¶ 22.)

All visitors to Plaintiff's website are bound by terms and conditions (the “Terms of Service”), “which are accessible to users from all pages of [Plaintiff's] website.” (Id. ¶ 24.) The Terms of Service prohibit, inter alia, the unauthorized “licens[ing], ... copy[ing], modif[ication], s[ale], ... [or] transm[ission] for any commercial purpose, [of] any portion of [Plaintiff's] Service, or access to [Plaintiff's] Service.”[FN1] (Id. ¶¶ 112, 115.) The Terms of Service also prohibit, inter alia, the unauthorized “modif[ication], copy[ing], ... s[ale], [or] distribution” of Plaintiff's content, other than a user's own content that a user has “legally upload[ed]” to Plaintiff's website.[FN2] (Id. ¶ 119.)

b. Google's lyrics information boxes and Plaintiff's suspicions of misconduct

Many visitors arrive at Plaintiff's website via a search engine, “most typically Google's,” and Plaintiff “is often the top-ranked organic search result on Google for lyrics search queries.” (Id. ¶¶ 23, 25.) However, even if Plaintiff is the top-ranked organic result for a user's lyrics search, a Google search feature known as an “Information Box” may still appear “above all other organic search results,” displaying “the complete lyrics for the requested song.” (Id. ¶¶ 28–29.) Such lyrics Information Boxes are often “displayed in such a manner that the user cannot see any other search results without first scrolling down,” (id. ¶ 30), and significantly reduce the “click-through rate” to Plaintiff's website, (id. ¶¶ 101–02).

When Google introduced the Information Box feature into its lyrics search results, Plaintiff “observed that the lyrics in those Information Boxes were sometimes identical, on a character-for-character basis,” to lyrics on Plaintiff's website. (Id. ¶¶ 46–47.) Because such a match “is highly unlikely” given the particular nature of the lyrics transcription process, Plaintiff came to suspect that its “lyrics ... were being misappropriated.” (Id. ¶¶ 48–49.)

c. Plaintiff investigates suspected misconduct and puts Defendants on notice of its findings

In August of 2016, in an effort to further investigate this suspected misappropriation, Plaintiff created a “digital watermark to embed in certain lyrics appearing on its site” (“Watermark #1”). (Id. ¶ 59.) Watermark #1 consisted of a “distinctive pattern of curly ... and straight apostrophes,” which, when converted into “dots” and “dashes,” “spells out ‘REDHANDED’ in Morse code.” (Id. ¶ 60.) In May of 2017, Plaintiff notified Google via email that it had found Watermark #1 in Google's lyrics Information Boxes, “prov[ing] that Google was displaying lyrics copied from [Plaintiff's] website.” (Id. ¶ 62.) In response to that initial email and subsequent follow-up communications by Plaintiff, Google informed Plaintiff that it was “looking into the issue.” (Id. ¶¶ 62–63.)

In October of 2018, Plaintiff “designed [and implemented] an experiment to more systematically assess the incidence of lyrics misappropriated from [Plaintiff's] website in Google's lyrics Information Boxes,” based on which Plaintiff “concluded that the incidence of lyrics irrefutably copied from [Plaintiff's] website in Google's lyrics Information Boxes was widespread and that the copying was systematic.” (Id. ¶¶ 64, 67.)

In April of 2019, Plaintiff “again notified Google, in writing, that it was displaying content misappropriated from [Plaintiff's] website,” in response to which Google eventually “identified LyricFind as the source of the lyrics [in] the examples that [Plaintiff] provided to Google.” (Id. ¶¶ 68, 70.) Plaintiff then “wrote to LyricFind to request that it cease and desist from the misappropriation and commercialization of content appearing on [Plaintiff's] website.” (Id. ¶ 71.) Despite having been “placed on actual notice of their behavior,” Defendants failed to take “any steps to cease such conduct.” (Id. ¶ 72.)

On June 16, 2019, the Wall Street Journal published an article detailing Plaintiff's allegations that Defendants had copied lyrics from Plaintiff's website. (Id. ¶ 74.) On June 18, 2019, Google stated in a blog post that it had asked LyricFind “to investigate the issue to ensure [it is] following industry best practices in [its] approach,” and affirmed Google's commitment to “uphold high standards of conduct for [itself] and from the partners [it] work[s] with.” (Id. ¶ 77.)

Soon after the article's publication, Google began adding source attributions to its lyrics Information Boxes, including attributions to LyricFind for lyrics that Plaintiff had previously notified Google appeared to be taken from Plaintiff's website. (Id. ¶ 81.) Around the same time, Plaintiff “discovered that Watermark #1 had disappeared from Google's lyrics Information Boxes.” (Id. ¶ 82.) Suspecting “a deliberate effort ... to conceal [continued] misappropriation of lyrics from [Plaintiff's] website,” Plaintiff created a second watermark, this time designed to spell out the word “GENIUS” in Morse code (“Watermark #2”). (Id. ¶¶ 83–84.) Plaintiff then watermarked one set of lyrics on its website with Watermark #1, a second group of lyrics with Watermark #2, and a third set of lyrics with both Watermark #1 and Watermark #2. (Id. ¶ 85.) In monitoring the three sets of lyrics, Plaintiff observed Watermark #2 on lyrics in both the second and third groups, but did not observe Watermark #1 on any lyrics in either the first or third group. (Id. ¶ 86.) In a number of instances involving lyrics in which Plaintiff had embedded both Watermark #1 and Watermark #2, Plaintiff observed that Watermark #2, “the details of which had not previously been made public,” was present, while Watermark #1 was not. (Id. ¶ 88.)

On November 6, 2019, Plaintiff informed Google of these findings, and “demanded that Google stop displaying lyrics misappropriated from [Plaintiff's] website and address the issue.” (Id. ¶ 90.) In response, Google asserted it had not done anything wrong, and stated that it had “ ‘obtained additional assurances’ that their data partners ‘do not, and would not, obtain lyrics from [Plaintiff's] website.’ ” (Id. ¶ 91.)

d. State court action and removal to this Court

On December 3, 2019, Plaintiff commenced this action in the New York Supreme Court, Kings County, asserting claims for (1) breach of contract, based on Defendants’ alleged violation of Plaintiff's Terms of Service, (id. ¶¶ 111–23, 128–40); (2) indemnification for “damages and incurred expenses ... including ... attorneys’ fees and lost advertising and licensing revenue,” pursuant to Plaintiff's Terms of Service, (id. ¶¶ 124–27, 141–44); (3) unfair competition under both New York common law and California Business and Professional Code § 17200 et seq., (id. ¶¶ 145–99); and (4) unjust enrichment, (id. ¶¶ 200–09). Plaintiff seeks money damages and injunctive relief. (Id. at 49.)

On December 30, 2019, Defendants removed the action to this Court. (Notice of Removal.) Defendants assert that the state law claims alleged in the Complaint all arise from “(i) the alleged copying of digital transcriptions of copyrighted musical lyrics from [Plaintiff's] website by LyricFind, and (ii) the display of these copyrighted lyrics on Google's website,” and that “[t]hese are in essence claims for copyright infringement disguised as various state law causes of action.” (Id. ¶ 4.) Defendants further assert that “this Court has original jurisdiction [over the action] under 28 U.S.C. §§ 1331 and 1338,” and that the action “may be removed to this Court [by Defendants], pursuant to 28 U.S.C. § 1441 et seq., because it is a civil action containing purported state law claims which are preempted by Section 301(a) of the Copyright Act, 17 U.S.C. § 301(a) and thus within the exclusive jurisdiction of this Court.” (Id. ¶ 8.)

On March 11, 2020, Plaintiff moved to remand the action to state court, arguing that Defendants have not established that the Court has jurisdiction over this action because Plaintiff's claims are not preempted by the Copyright Act. (See Pl. Mot; Pl. Mem.)

II. Discussion

a. Standard of Review

A notice of removal must allege a proper basis for removal under 28 U.S.C. §§ 1441–1445. See In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 124 (2d Cir. 2007) (“In determining whether jurisdiction is proper, we look only to the jurisdictional facts alleged in the Notices of Removal.”); Bankhead v. New York, No. 13-CV-3377, 2013 WL 6145776, at *1 (E.D.N.Y. Nov. 21, 2013) (“An effective petition for the removal of a state action to federal court must allege a proper basis for the removal under sections 1441 through 1445 of Title 28.” (quoting Negron v. New York, No. 02-CV-1688, 2002 WL 1268001, at *1 (E.D.N.Y. Apr. 1, 2002))). The party seeking removal bears the burden of proving that the jurisdictional and procedural requirements have been met. Cal. Pub. Emps.’ Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir. 2004) (“Where, as here, jurisdiction is asserted by a defendant in a removal petition, it follows that the defendant has the burden of establishing that removal is proper.”).

b. Plaintiff's claims are preempted by the Copyright Act

Defendants argue that “Plaintiff's claims are wholly premised on Defendants’ alleged use of musical lyrics, which are expressly identified as falling among the ‘works of authorship’ protected by the Copyright Act.” (Defs. Opp'n 7–8.) Defendants also argue that of the two-part test to determine whether Plaintiff's claims are preempted by the Copyright Act — the subject-matter and the general scope requirements — “Genius concedes, as it must, that the subject matter requirement is satisfied here.” (Id. at 7.)

Plaintiff argues that “the creation, curation, and provision of timely and accurate music lyrics transcriptions ... is not protected by the Copyright Act.” (Pl. Reply 2, Docket Entry No. 17.)

“The Copyright Act exclusively governs a claim when (1) the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act under 17 U.S.C. §§ 102 and 103, and (2) the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law under 17 U.S.C. § 106.” Universal Instruments Corp. v. Micro Sys. Eng'g, Inc., 924 F.3d 32, 48 (2d Cir. 2019) (citing Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004)). “The first prong of this test is called the ‘subject matter requirement,’ and the second prong is called the ‘general scope requirement.’ ” Briarpatch Ltd., L.P., 373 F.3d at 305 (quoting Nat'l Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 848 (2d Cir. 1997)).

“The subject matter requirement is satisfied if the claim applies to a work of authorship fixed in a tangible medium of expression and falling within the ambit of one of the categories of copyrightable works.” Id. (citing Nat'l Basketball Ass'n, 105 F.3d at 848–49). “A work need not consist entirely of copyrightable material in order to meet the subject matter requirement, but instead need only fit into one of the copyrightable categories in a broad sense.” Id. (citing Nat'l Basketball Ass'n, 105 F.3d at 848–50). “These categories encompass literary works and motion pictures, including those based on preexisting works.” Id. (citations omitted).

“The general scope requirement is satisfied only when the state-created right may be abridged by an act that would, by itself, infringe one of the exclusive rights provided by federal copyright law.”[FN3] Briarpatch Ltd., L.P., 373 F.3d at 305 (quoting Comput. Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992)); Universal Instruments Corp., 924 F.3d at 48 (“ ‘A state law right is equivalent to one of the exclusive rights of copyright if it may be abridged by an act which, in and of itself, would infringe one of the exclusive rights.’ ” (internal quotation marks omitted) (quoting Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 430 (2d Cir. 2012)). “In other words, the state law claim must involve acts of reproduction, adaptation, performance, distribution or display.” Briarpatch Ltd., L.P., 373 F.3d at 305 (first citing 17 U.S.C. § 106; and then citing Comput. Assocs. Int'l Inc., 982 F.2d at 716). “ ‘But if an extra element is required instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state-created cause of action,’ there is no preemption.” Universal Instruments Corp., 924 F.3d at 48 (quoting Forest Park Pictures, 683 F.3d at 430 (internal quotation marks omitted)). “Preemption, therefore, turns on ‘what [the] plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.’ ” Id. (alteration in original) (quoting Comput. Assocs. Int'l, Inc., 982 F.2d at 716); Briarpatch Ltd., L.P., 373 F.3d at 306 (“To determine whether a claim is qualitatively different, [courts in this Circuit] look at what the plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.” (alterations, quotations, and citation omitted)). The Second Circuit has directed courts to “take a restrictive view of what extra elements transform an otherwise equivalent claim into one that is qualitatively different from a copyright claim.” Briarpatch Ltd., L.P., 373 F.3d at 306.

i. Plaintiff's claims satisfy the subject matter prong

The transcribed song lyrics that are the subject matter of Plaintiff's claims fall within the type of works protected by the Copyright Act and therefore satisfy the subject matter prong.

To satisfy the “subject matter” prong, “a claim must involve a work ‘within the subject matter of copyright.’ ” Forest Park Pictures, 683 F.3d at 429 (quoting 17 U.S.C. § 301(a)); see also Briarpatch Ltd., L.P., 373 F.3d at 305 (“The subject matter requirement is satisfied if the claim applies to a work of authorship fixed in a tangible medium of expression and falling within the ambit of one of the categories of copyrightable works.”). “Copyright protection exists for ‘original works of authorship fixed in any tangible medium of expression,’ but does not extend to an ‘idea, ... regardless of the form in which it is described, explained, illustrated, or embodied.’ ” Forest Park Pictures, 683 F.3d at 429 (quoting 17 U.S.C. § 102(a)–(b)). The Second Circuit has held, “however, that works may fall within the subject matter of copyright, and thus be subject to preemption, even if they contain material that is uncopyrightable under section 102.” Id. “The scope of copyright for preemption purposes, then, extends beyond the scope of available copyright protection.” Id. at 429–30.

“Under the Copyright Act, ‘[a] work is “fixed” in a tangible medium of expression when its embodiment in a copy ..., by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.’ ” Mourabit v. Klein, No. 19-2142-CV, 2020 WL 3042131, at *3 (2d Cir. June 8, 2020) (quoting 17 U.S.C. § 101). “The Act defines ‘[c]opies,’ in turn, as ‘material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.’ ” Id. “The work is a form of intangible property that can be physically embodied in (i.e., fixed in) any number of different material objects (i.e., tangible mediums of expression).” Id. (quoting Matthew Bender & Co. v. West Pub. Co., 158 F.3d 693, 699 n.9).

Plaintiff alleges in the Complaint that lyrics are copyrightable and that “music publishers and/or songwriters usually own the copyright in the lyrics for a given song ....” (See Compl. ¶ 18; Pl. Opp'n 12 & n.4.) Because the subject of Plaintiff's claims is the transcribed song lyrics, and Plaintiff concedes that the lyrics themselves fall under federal copyright law, the subject matter prong of the preemption test is met. See Saint-Amour v. Richmond Org., Inc., 388 F. Supp. 3d 277, 290 (S.D.N.Y. 2019) (concluding that “[t]he subject matter of the [p]laintiffs’ claims [was a] [s]ong” and “[t]he [s]ong [was] a musical composition and as such a paradigmatic work protected by the Copyright Act” and finding the subject matter requirement met because the plaintiffs “challeng[ed] the validity of the copyrights in a song, which fits into the copyrightable category of musical works” (citing 17 U.S.C. § 102(a)(2))); Affiliated Records Inc. v. Taylor, No. 09-CV-9938, 2012 WL 1675589, at *5 (S.D.N.Y. May 14, 2012) (“[T]here is no question that the lyrics in the [s]ongs constitute copyrightable subject matter under [s]ection 102 of the Act.” (citing 17 U.S.C. § 102(a)(2))).

Moreover, the fact that the lyric transcriptions are fixed in writing further supports a finding that Plaintiff's claims are within the subject matter of copyright. See Forest Park Pictures, 683 F.3d at 30 (“[B]ecause the ideas that are the subject of the claim were fixed in writing — whether or not the writing itself is at issue — the claim is within the subject matter of copyright.”).

Accordingly, the Court finds that the subject matter prong is met.

ii. Plaintiff's claims satisfy the general scope requirement

Because the Court finds that the subject matter prong is met, the Court next considers each of Plaintiff's state law claims to determine whether they include an “extra element” in addition to acts of reproduction, adaptation, performance, distribution or display that would preclude preemption.

1. Breach of contract claims

In addressing its breach of contract claims, Plaintiff argues that “Defendants are bound by [Plaintiff's] Terms of Service, which impose on Defendants an obligation not to copy or scrape [Plaintiff's] Service for ‘commercial purposes,’ ” and that “[u]nder the law of the Second Circuit, this independent, contractual obligation constitutes an ‘extra element’ ” which renders Plaintiff's claims asserted pursuant to its Terms of Service “qualitatively different from a Copyright Act claim.” (Pl. Mem. 15.) In support, Plaintiff argues that “in order to prove its contract claims, [Plaintiff] not only needs to prove that Defendants scraped content from its website, but also that Defendants used it for ‘commercial endeavors,’ ” which Plaintiff asserts is an “ ‘extra element’ [that] makes [Plaintiff's] breach of contract claims qualitatively different from its copyright claim.” (Id. at 17.)

Defendants argue that the restrictions in Plaintiff's Terms of Service “do no more than protect against the unauthorized use, reproduction, adaptation, and distribution of the work in question, which plainly falls within the general scope requirement of 17 U.S.C. § 106.” (Defs. Opp'n 15.) In response to Plaintiff's assertion that its breach of contract claims are different from a copyright claim because Plaintiff must demonstrate both that Defendants scraped content from its website and that they used the content for commercial endeavors, Defendants argue that these assertions fail for separate reasons. As to the first provision of the Terms of Service Plaintiff alleges Defendants breached, which “broadly states that a user may not ‘modify, copy, frame, scrape, rent, lease, loan, sell distribute or create derivative works,’ ” this argument fails because the “provision is nothing more than a recitation of exclusive rights reserved for true copyright owners under [s]ection 106.” (Id. at 16 (quoting Compl. ¶¶ 119–20).) As to the second provision, “which states that users may not use copyright content ‘for any commercial purpose,’ ” the argument fails because “[Plaintiff] does not cite a single case that suggests that the presence of ‘commercial use’ in a provision in a contract renders a breach claim qualitatively different from a claim for copyright infringement.” (Id. (quoting Compl. ¶¶ 115–16, 132–33).) In support, Defendants argue that each case cited by Plaintiff in which the court found no preemption also involved a contractual provision that “had nothing to do with the unauthorized use of copyrighted material,” and assert that “that plainly is not the situation here.” (Id. at 16 n.3.) Defendants further argue that the fact “that one provision of [Plaintiff's] [Terms of Service] agreement requires ‘commercial use’ may limit the scope of Plaintiff's claim, but it does not change its fundamental nature — what Plaintiff's own Complaint describes as ‘conduct breach[ing] [Plaintiff's] Terms of Service regarding the copying and reproduction of [Plaintiff's] Content.’ ” (Id. at 17 (quoting Compl. ¶¶ 122, 139 (second alteration in original)).)

In response, Plaintiff argues that “Defendants cite to a number of cases where a party who owns or controls copyright rights in the work at issue asserts contract claims — either in addition [to] or in lieu of Copyright Act claims,” (Pl. Reply 6), and asserts that none of the other cases cited by Defendants are “at all instructive here, as it is undisputed that the parties to this action are not copyright holders and do not seek to possess or exercise the rights of a copyright holder,” (id. at 7).[FN4] Plaintiff argues that the fact “[t]hat parties like Google have paid to license music lyrics transcriptions from companies like LyricFind demonstrates the value of licensing the music lyrics transcriptions separate and apart from the value of the necessary predicate license from the copyright owners” and that “companies ... pay to license transcriptions from [Plaintiff], often the very lyrics transcriptions Defendants are misappropriating.” (Id. at 2.)

The Second Circuit has noted that “preemption cannot be avoided simply by labeling a claim ‘breach of contract,’ ” but rather, “[a] plaintiff must actually allege the elements of an enforceable contract (whether express or implied-in-fact), including offer, acceptance, and consideration, in addition to adequately alleging the defendant's breach of the contract.” Forest Park Pictures, 683 F.3d at 432. In Forest Park Pictures v. Universal Television Network, Inc., the Second Circuit considered whether the Copyright Act preempted the plaintiff's implied-in-fact breach of contract claim and “held the contract at issue not to be preempted because it included an ‘extra element’ of a promise to pay, and plaintiff sought contract damages when defendant used plaintiff's copyrighted work without paying for the privilege.” Universal Instruments Corp., 924 F.3d at 49 (quoting Forest Park Pictures, 683 F.3d at 429). Although in reaching its decision, the Second Circuit explicitly declined to “address whether preemption is precluded whenever there is a contract claim, or only when the contract claim includes a promise to pay,” Forest Park Pictures, 683 F.3d at 432, district courts in this Circuit have decided the issue and are divided on the question of “ ‘whether the promise inherent in every contract is sufficient to establish an “extra element.’ ”” Shepard v. Eur. Pressphoto Agency, 291 F. Supp. 3d 465, 472 (S.D.N.Y. 2017) (quoting BroadVision Inc. v. Gen. Elec. Co., No. 08-CV-1478, 2008 WL 4684114, at *4 (S.D.N.Y. Oct. 15, 2008)). Some district courts “follow the holding in Architectronics, Inc. v. Control Systems, Inc., 935 F. Supp. 425 (S.D.N.Y. 1996), which held that ‘[p]rotection from breach of contract, however, is not equivalent to copyright protection because a contract claim requires an ‘extra element,’ that renders the claim qualitatively different from a claim for copyright infringement: a promise by the defendant.’ ” Id. at 472–73 (quoting Architectronics, Inc., 935 F. Supp. at 438); see also id. (collecting cases). Other district courts “follow the holding in American Movie Classics Co. v. Turner Entertainment Co., 922 F. Supp. 926 (S.D.N.Y. 1996), which held that ‘a breach of contract claim is preempted if it is merely based on allegations that the defendant did something that the copyright laws reserve exclusively to the plaintiff (such as unauthorized reproduction, performance, distribution, or display).’ ” Id. (quoting Am. Movie Classics Co., 922 F. Supp. at 931); see id. (collecting cases).

In recent years, the majority of district courts in this Circuit have followed the approach taken in American Movie Classics Co. and have engaged in an analysis of the contractual promises alleged in order to determine whether the Copyright Act preempts a breach of contract claim. See, e.g., Betty, Inc. v. PepsiCo, Inc., 283 F. Supp. 3d 154, 166 (S.D.N.Y. 2017) (noting “ ‘as a general matter, a breach of contract action is not preempted by the Copyright Act’ ” and considering whether the alleged implied-in-fact contract “required [the defendant] to pay for any use of [the plaintiff's] presented storylines and ideas” before finding that the plaintiff failed to state a claim for breach of contract (quoting BanxCorp v. Costco Wholesale Corp., 723 F. Supp. 2d 596, 617 (S.D.N.Y. 2010))); Shepard, 291 F. Supp. 3d at 474 (“American Movie Classics held that a breach of contract claim is preempted if it is merely based on allegations that the defendant did something that the copyright laws reserve exclusively to the plaintiff .... However, if the breach of contract claim is based on allegations that the parties’ contract creates a right not existing under copyright law — a right based upon a party's contractual promise — and the plaintiff is suing to protect that contractual right, then the claim is not preempted.” (citing Nat'l Car Rental Sys., Inc. v. Comput. Assocs. Int'l, Inc., 991 F.2d 426, 431–33 (8th Cir. 1993), cert. denied, 510 U.S. 861 (1993))); Simmons v. Stanberry, No. 10-CV-5815, 2014 WL 3611639, at *2 (E.D.N.Y. July 22, 2014) (finding the “[p]laintiff's breach of contract claim consist[ed] of no extra element, such as a promise to pay, that would make the claim qualitatively different from a federal copyright claim”), aff'd, 810 F.3d 114 (2d Cir. 2016).

Plaintiff's breach of contract claims are nothing more than claims seeking to enforce the copyright owners’ exclusive rights to protection from unauthorized reproduction of the lyrics and are therefore preempted. The parties agree that Plaintiff is not the owner of the copyrights to any of the lyrics it transcribes, and Plaintiff concedes that it licenses lyrics from the copyright owners. (See Compl. ¶ 19 (“[Plaintiff] provides a platform for music enthusiasts who transcribe music lyrics, and also obtains lyrics through partnerships with artists who provide their lyrics directly to [Plaintiff]. [Plaintiff], in turn, obtains licenses from music publishers permitting the display and distribution of these lyrics.”).) Although Plaintiff describes the rights it seeks to enforce as “broader and different than the exclusive right existing under the Copyright Act,” based on “the substantial investment of time and labor by [Plaintiff] in a competitive market,” (Pl. Mem. 15), and asserts breach of contract claims based on alleged violations of Plaintiff's Terms of Service, Plaintiff's own ability to transcribe and display the lyrics on its website arises from the licensing rights Plaintiff has in the lyrics, see Shepard, 291 F. Supp. 3d at 473 (finding that the copyright-owner plaintiff's claims for breach of contract based on a licensing agreement arose out of an “exclusive right [that] flowed from the Copyright Act, not from the [parties’] [a]greement .... [and] [t]hus the claim that [the] [d]efendants usurped the exclusive right of [the plaintiff] to adapt the [f]ilm is nothing more than a claim that [the] defendants have violated a right of [the plaintiff] under the Copyright Act”).

Plaintiff asserts that its contract rights for use of the lyrics transcriptions are “separate and apart” from the copyright owners’ exclusive rights in the lyrics. (Pl. Reply 2.) Although Plaintiff does not refer to the lyrics as derivative works, Plaintiff's argument parallels how derivative works are defined by the Copyright Act. See Stewart v. Abend, 495 U.S. 207, 220 (1990) (“An author holds a bundle of exclusive rights in the copyrighted work, among them the right to copy and the right to incorporate the work into derivative works.”); Keeling v. Hars, 809 F.3d 43, 49 (2d Cir. 2015) (“Under the Copyright Act, a derivative work involves a transformation to the work's ‘form.’ ” (quoting 17 U.S.C. § 101)); TufAmerica, Inc. v. Codigo Music LLC, 162 F. Supp. 3d 295, 303 (S.D.N.Y. 2016) (“A ‘derivative work’ is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ‘derivative work.’ ” (quoting 17 U.S.C. § 101)).

Plaintiff's argument is, in essence, that it has created a derivative work of the original lyrics in applying its own labor and resources to transcribe the lyrics, and thus, retains some ownership over and has rights in the transcriptions distinct from the exclusive rights of the copyright owners. (See Pl. Reply 2.) This argument is consistent with the treatment of derivative works under federal copyright law. See Stewart, 495 U.S. at 223 (“The aspects of a derivative work added by the derivative author are that author's property, but the element drawn from the pre-existing work remains on grant from the owner of the pre-existing work.”); TufAmerica, Inc., 162 F. Supp. 3d at 314 n.20 (“When a derivative work is created with consent of the owner of the pre-existing work, ‘[t]he aspects of a derivative work added by the derivative author are that author's property, but the element drawn from the pre-existing work remains on grant from the owner of the pre-existing work.’ ” (quoting Stewart, 495 U.S. at 223)).

Plaintiff likely makes this argument without explicitly referring to the lyrics transcriptions as derivative works because the case law is clear that only the original copyright owner has exclusive rights to authorize derivative works. See, e.g., TufAmerica, Inc., 162 F. Supp. 3d at 314 (“Since the original copyright owner has the exclusive right to creative derivative works, someone ‘who reproduces a derivative work without the authorization of the preexisting work's registered owner violates ... the exclusive rights of the copyright owner ... [and] is an infringer of the copyright.’ ” (quoting Mattel, Inc. v. Robarb's, Inc., 139 F. Supp. 2d 487, 497 (S.D.N.Y. 2001))).

Even accepting the argument that Plaintiff has added a separate and distinct value to the lyrics by transcribing them such that the lyrics are essentially derivative works, because Plaintiff does not allege that it received an assignment of the copyright owners’ rights in the lyrics displayed on its website, Plaintiff's claim is preempted by the Copyright Act because, at its core, it is a claim that Defendants created an unauthorized reproduction of Plaintiff's derivative work, which is itself conduct that violates an exclusive right of the copyright owner under federal copyright law. Stewart, 495 U.S. at 223 (“So long as the pre-existing work remains out of the public domain, its use is infringing if one who employs the work does not have a valid license or assignment for use of the pre-existing work .... It is irrelevant whether the pre-existing work is inseparably intertwined with the derivative work.” (citation omitted)).

In addition, Plaintiff's allegations as to how Defendants breached the contract also support a finding that Plaintiff's breach of contract claims are preempted. Plaintiff's breach of contract claims are based on the theory that Defendants breached their obligation under the Terms of Service by using Plaintiff's lyrics — LyricFind by selling those lyric transcriptions to Google and Google by employing and displaying those lyric transcriptions in its search engine. (See Compl. ¶ 120 (“Upon information and belief, notwithstanding the foregoing, since at least 2016, LyricFind has accessed [Plaintiff's] website to copy, modify, sell and/or distribute content appearing on [Plaintiff's] website that LyricFind did not upload.”); see also id. ¶ 137 (“Upon information and belief, notwithstanding the foregoing, since at least 2016, Google has accessed [Plaintiff's] website to copy, modify, sell and/or distribute content appearing on [Plaintiff's] website that Google did not upload.”).) Plaintiff's allegations that Defendants “scraped” and used their lyrics for profit amount to allegations that Defendants made unauthorized reproductions of Plaintiff's lyric transcriptions and profited off of those unauthorized reproductions, which is behavior that falls under federal copyright law. See Shepard, 291 F. Supp. 3d at 475 (“Here, the [plaintiffs’] claim that [the defendant] displayed, reproduced, published, distributed, and otherwise made use of the [plaintiffs’] artworks beyond the expiration of the one[-]day term in the license agreement. That is conduct that the Copyright Act prohibits and for which it grants remedies. [The defendant's] promise not to infringe the [plaintiffs’] copyright is the same as its duty to comply with the copyright law, and is therefore preempted by it.” (citation omitted)).

Moreover, Plaintiff has not cited any authority to support its argument that the “commercial use” language in the Terms of Service is sufficient to render the breach of contract claims qualitatively different from claims arising under the Copyright Act. Nor does Plaintiff allege that Defendants made the kind of “promise to pay” that courts in this Circuit have sometimes found to constitute an additional element of a breach of contract claim sufficient to avoid preemption. Cf. Simmons, 2014 WL 3611639, at *2 (“[The] [p]laintiff's breach of contract claim[ ] does no more than allege [the] [p]laintiff's right to protect against the unauthorized use, reproduction, adaptation, and distribution of the work in question, which plainly falls within the general scope requirement of 17 U.S.C. § 106. The [p]laintiff's breach of contract claim consists of no extra element, such as a promise to pay, that would make the claim qualitatively different from a federal copyright claim.”), aff'd, 810 F.3d 114 (2d Cir. 2016); Bill Diodato Photography LLC v. Avon Prod., Inc., No. 12-CV-847, 2012 WL 4335164, at *7 (S.D.N.Y. Sept. 21, 2012) (“[The] [p]laintiff has plead[ed] a valid breach of contract claim on the theory that [the] [d]efendant breached its obligation under the agreements by using [the] [p]laintiff's images beyond the one-year licensing term without negotiating a fee to be paid to [the] [p]laintiff .... [The] [p]laintiff bears the burden of proving not just that [the] [p]laintiff used the images beyond the one-year licensing agreement, but also that [the] [d]efendant failed to negotiate a fee.”). Because Plaintiff's breach of contract claims are based on alleged behavior by Defendants that would, itself, fall under federal copyright law and Plaintiff has not alleged a contractual promise to pay or any contractual promise not based on rights arising from federal copyright law, Plaintiff fails to allege breach of contract claims that are qualitatively different from federal copyright claims.

Accordingly, the Court find that the Copyright Act preempts Plaintiff's breach of contract claims.[FN5]

2. Unjust Enrichment Claims

Plaintiff asserts state law claims for unjust enrichment based on Defendants’ alleged “misappropriation of content from [Plaintiff's] website,” which Plaintiff alleges has benefited Defendants at Plaintiff's expense, causing Plaintiff to “suffer[ ] (and continue[ ] to suffer) decreased web traffic and associated revenue,” and “plac[ing] [Plaintiff] at an unfair competitive advantage in its efforts to license its lyrics to content partners.” (Compl. ¶¶ 201–02, 207–08.) Plaintiff argues that its unjust enrichment claims are “qualitatively different than a copyright infringement claim,” because it has alleged that Defendants engaged in “deceptive and wrongful conduct in unjustly enriching themselves through their improper exploitation of the fruits of [Plaintiff's] substantial labor and investment ... and subsequent concealment.” (Pl. Mem. 18.)

In response, Defendants argue that courts in this Circuit have routinely found that unjust enrichment claims are preempted by the Copyright Act, and that Plaintiff “fails to mention any of these authorities.” (Defs. Opp'n 23–24.) Defendants also argue that “merely pleading deception is not enough to escape preemption,” and that Plaintiff “does not and cannot claim that Defendants exploited some kind of fiduciary, confidential, or other trusting relationship with it.” (Id. at 24.)

“The basic elements of an unjust enrichment claim in New York require proof that (1) defendant was enriched, (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.” Briarpatch Ltd., L.P., 373 F.3d at 306. “The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered.” GFRE, Inc. v. U.S. Bank, N.A., 13 N.Y.S.3d 452, 454 (App. Div. 2015) (quoting Paramount Film Distrib. Corp. v. New York, 30 N.Y.2d 415, 421 (1972)).

The Second Circuit has held that “[w]hile enrichment is not required for copyright infringement,” it does “not ... go[ ] far enough to make the unjust enrichment claim qualitatively different from a copyright infringement claim.” Briarpatch Ltd., L.P., 373 F.3d at 306; see also Forest Park Pictures, 683 F.3d at 432 (“Under these quasi-contractual theories, [such as unjust enrichment,] the plaintiff need only prove that the defendant was unjustly enriched through the use of her idea or work. Such a claim is not materially different from a claim for copyright infringement that requires a plaintiff to prove that the defendant used, reproduced, copied, or displayed a copyrighted work.”); Stadt v. Fox News Network LLC, 719 F. Supp. 2d 312, 321–22 (S.D.N.Y. 2010) (“[T]he Second Circuit and courts in this district have consistently held that this enrichment element does not suffice to shield an unjust enrichment claim from preemption when the claim arises from unauthorized use of a copyrighted work.”). “Like the elements of awareness or intent, the enrichment element ... limits the scope of the claim but leaves its fundamental nature unaltered.” Briarpatch Ltd., L.P., 373 F.3d at 306. “Where the gravamen of an unjust enrichment claim is that defendants ‘unjustly benefitted from unauthorized use’ of a work within the scope of the Copyright Act ... the claim is preempted.” Stanacard, LLC v. Rubard, LLC, No. 12-CV-5176, 2016 WL 462508, at *22 (S.D.N.Y. Feb. 3, 2016) (quoting Einiger v. Citigroup, Inc., No. 14-CV-4570, 2014 WL 4494139, at *6 (S.D.N.Y. Sept. 12, 2014)); see also Panizza v. Mattel, Inc., No. 02-CV-7722, 2003 WL 22251317, at *4 (S.D.N.Y. Sept. 30, 2003) (“The overwhelming majority of courts in this [C]ircuit have held that an unjust enrichment claim based upon the copying of subject matter within the scope of the Copyright Act is preempted.” (quoting Boyle v. Stephens Inc., No. 97-CV-1351, 1998 WL 690816, at *5–6 (S.D.N.Y. 1998))).

Plaintiff's unjust enrichment claims are preempted because they fall within the scope of the Copyright Act. Plaintiff alleges that LyricFind copied content from Plaintiff's website and then “benefitted by ... entering into licensing agreements with content partners whereby LyricFind received compensation for distributing content misappropriated from [Plaintiff's] website,” and that those “benefits ... came at [Plaintiff's] expense.” (Compl. ¶¶ 206–07.) Plaintiff similarly alleges that Google benefitted from its “misappropriation of content from [Plaintiff's] website,” by “retaining users in and among Google-owned properties further concentrating its market power,” and that these “benefits ... came at [Plaintiff's] expense.” (Id. ¶¶ 201–02.) Because the “gravamen” of Plaintiff's unjust enrichment claims is that Defendants were unjustly enriched by their use of Plaintiff's lyric transcriptions — work that, as discussed above, is within the scope of the Copyright Act — these claims are preempted. See Stanacard, LLC, 2016 WL 462508, at *22; see also, e.g., BroadVision Inc., 2008 WL 4684114, at *5 (finding unjust enrichment claim preempted and “qualitatively the same as a copyright infringement claim” where the plaintiff “allege[d] that [the defendant] was unjustly enriched by copying and using the [plaintiff's] software in excess of the licensed usage rights”); Logicom Inclusive, Inc. v. W.P. Stewart & Co., No. 04-CV-0604, 2004 WL 1781009, at *18 (S.D.N.Y. Aug. 10, 2004) (finding unjust enrichment claim preempted where the “plaintiffs allege[d] that [the] defendants [had] misappropriated [the plaintiffs’] software and used the programs to make derivative works for their own benefit”); Panizza, 2003 WL 22251317, at *4 (finding unjust enrichment claim preempted where claim “solely concern[ed] the benefit [the] defendant allegedly received by using [the] plaintiff's ideas and related materials without her permission or authorization to do so”).

In support of its argument that its unjust enrichment claims are not preempted because it has alleged that Defendants engaged in “deceptive and wrongful conduct,” Plaintiff relies on one district court case, CVD Equipment Corp. v. PrecisionFlow Technologies, Inc., No. 02-CV-651, 2007 WL 951567 (N.D.N.Y. Mar. 27, 2007), in which the court held that the plaintiff's unjust enrichment claim was not preempted. (Pl. Mem. 18; Pl. Reply 7.) In CVD Equipment Corp., the plaintiff alleged that the defendant-competitor's shareholders and employees, as well as the individual defendants, were former employees and officers of the plaintiff's predecessor-in-interest and had “had access to [its] intellectual property,” which they then gave to the defendant-competitor for use and which had also been purchased by the plaintiff. 2007 WL 951567, at *1. The plaintiff alleged that the “defendants [had] been unjustly enriched by their misappropriation of products embodying [the plaintiff's] intellectual property and/or proprietary and confidential information.” Id. In finding that the unjust enrichment claim was not preempted by the Copyright Act, the court stated that “[t]he extra element of inequity through fraud, deception, or abuse of fiduciary relationships is sufficient to change the nature of the unjust enrichment claim so that it is qualitatively different from a copyright infringement claim.” Id. at *2 (first citing Kregos v. Assoc. Press, 3 F.3d 656, 666 (2d Cir. 1993); and then citing Comput. Assocs. Int'l, Inc., 982 F.2d at 716).

While the court in CVD Equipment Corp. listed deception as an extra element sufficient to avoid preemption, the Court finds, based both on the facts in that case and the Second Circuit decisions cited in support, that the decision in CVD Equipment Corp. was based on the defendant's alleged abuse of a fiduciary relationship, which is not present in this case. The factual allegations in CVD Equipment Corp., described above, clearly supported a claim that the defendants had unjustly enriched themselves by abusing a fiduciary relationship. See id. at *1. Moreover, the two Second Circuit cases the district court relied on in making its ruling further support the conclusion that the basis for the court's holding was not that the plaintiffs had alleged “deception,” but rather, that they had alleged the abuse of fiduciary relationships. In Kregos, cited by the court in CVD Equipment Corp., in finding that the plaintiff's unfair competition claim was preempted, the Second Circuit stated that “unfair-competition claims based upon breaches of confidential relationships, breaches of fiduciary duties and trade secrets have been held to satisfy the extra-element test and avoid § 301 preclusion.” Kregos, 3 F.3d at 666. Similarly, in Computer Associates International, Inc., also cited by the court in CVD Equipment Corp., the Second Circuit noted that the “state law rights that ... satisfy the extra element test, and thus are not preempted by section 301 ... include unfair competition claims based upon breaches of confidential relationships, breaches of fiduciary duties and trade secrets.” Comput. Assocs. Int'l, Inc., 982 F.2d at 717. In contrast, in this case, Plaintiff has not alleged that Defendants abused a confidential or fiduciary relationship.

In addition, as discussed further below, other district courts in this Circuit have found, in the context of unfair competition claims, that deception does not constitute an extra element sufficient to avoid preemption. See Woolcott v. Baratta, No. 13-CV-2964, 2014 WL 1814130, at *10 (E.D.N.Y. May 7, 2014); Atrium Grp. de Ediciones y Publicaciones, S.L. v. Harry N. Abrams, Inc., 565 F. Supp. 2d 505, 509–10 (S.D.N.Y. 2008).

Accordingly, the Court finds that Plaintiff's claims for unjust enrichment are preempted by the Copyright Act.[FN6] See Schleifer v. Berns, No. 17-CV-1649, 2017 WL 3084406, at *5 n.2 (E.D.N.Y. July 19, 2017) (“[I]t is well-settled that a claim for unjust enrichment is preempted by the Copyright Act.”).

3. Unfair competition claims

Plaintiff asserts state law claims for unfair competition under both New York and California law, based on Defendants’ alleged misappropriation of content from Plaintiff's website. (Compl. ¶¶ 145–99.) In support, Plaintiff argues that its unfair competition claims are “qualitatively different from a copyright claim” because they “include an ‘extra element’ of ‘bad faith’ and ‘unfairness,’ ” and therefore are not preempted. (Pl. Mem. 19.) Plaintiff also argues that the “allegations in the Complaint demonstrate how Defendants’ deceptive, unethical and immoral conduct is substantively different than a copyright claim,” (id. at 21), and that “[b]ecause [Plaintiff's] unfair competition claims focus on Defendants’ deceptive and unscrupulous conduct, they are not preempted by federal law,” (id. at 22).

In response, Defendants argue that Plaintiff's unfair competition claims “are entirely premised on the misappropriation of copyrighted lyrics,” and thus “are preempted because courts in New York and California have consistently held that claims for unfair competition based on misappropriation of copyrighted material are preempted.” (Defs. Opp'n 17–18.) Defendants also argue that Plaintiff's theory that bad faith and unfairness are extra elements under copyright preemption law is “directly contrary to established law.” (Id. at 20.) Finally, Defendants argue that Plaintiff's attempt to differentiate the rights it seeks to enforce from those protected under the Copyright Act based on allegations that Defendants misappropriated Plaintiff's time and labor must fail, because “if that were true, no misappropriation claim would ever be preempted.” (Id. at 21.)

“Under New York law, unfair competition includes ‘taking the skill, expenditures and labors of a competitor,’ as well as ‘misappropriat[ing] for the commercial advantage of one person ... a benefit or property right belonging to another.’ ” Broker Genius Inc. v. Gainor, ––– F. App'x ––––, ––––, No. 19-2686-CV, 2020 WL 1908341, at *1 (2d Cir. Apr. 20, 2020) (alteration in original) (quoting Roy Exp. Co. Establishment of Vaduz v. Columbia Broad. Sys., Inc., 672 F.2d 1095, 1105 (2d Cir. 1982)); see also Jacino v. Ill. Tool Works Inc., No. 16-CV-1704, 2017 WL 4480752, at *5 (E.D.N.Y. Oct. 6, 2017) (“The essence of unfair competition under New York common law is the bad faith misappropriation of the labors and expenditures of another, likely to cause confusion or to deceive purchasers as to the origins of the goods.” (quoting Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 34 (2d Cir. 1995))). “A claim of unfair competition” under New York common law “requires evidence of [the] defendant's bad faith.” Stadt, 719 F. Supp. 2d at 320. Under California law, “unfair competition ... include[s] any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. “ ‘Unfair’ simply means any practice whose harm to the victim outweighs its benefits.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1044 (9th Cir. 2010) (quoting Saunders v. Super. Ct., 27 Cal. App. 4th 832, 839 (Cal. Ct. App. 1994)).

“Following [the] ‘extra element’ test, [the Second Circuit has] held that unfair competition and misappropriation claims grounded solely in the copying of a plaintiff's protected expression are preempted by section 301.” Comput. Assocs. Int'l, Inc., 982 F.2d at 717; see also Buttner v. RD Palmer Enters., Inc., No. 13-CV-0342, 2013 WL 6196560, at *3 (N.D.N.Y. Nov. 27, 2013) (“An unfair competition claim under New York law is preempted by § 301 of the Copyright Act if it is based solely on copying expression protected by the Act.”); Integrative Nutrition, Inc. v. Acad. of Healing Nutrition, 476 F. Supp. 2d 291, 297 (S.D.N.Y. 2007) (“The Copyright Act preempts unfair competition and misappropriation claims ‘grounded solely in the copying of a plaintiff's protected expression.’ ” (quoting Kregos, 3 F.3d at 666)). In contrast, “unfair competition claims based upon breaches of confidential relationships, breaches of fiduciary duties and trade secrets” do “satisfy the extra element test, and thus are not preempted by section 301.” Comput. Assocs. Int'l, Inc., 982 F.2d at 717; see also Wnet v. Aereo, Inc., 871 F. Supp. 2d 281, 291 (S.D.N.Y. 2012) (“[A] state law claim is qualitatively different if it requires such elements as breach of fiduciary duty, or possession and control of chattels.” (quoting Briarpatch Ltd., L.P., 373 F.3d at 305)); Integrative Nutrition, Inc., 476 F. Supp. 2d at 297 (“[U]nfair competition claims based upon breaches of confidential relationships, breaches of fiduciary duties and trade secrets have been held to satisfy the extra element test and avoid § 301 preclusion.” (quoting Kregos, 3 F.3d at 666)).

Where unfair competition claims are “predicated on a theory of ‘passing off,’ ‘the essence of which is false representation of origin,’ ” courts distinguish between claims for “passing off” and “reverse passing off.” Integrative Nutrition, Inc., 476 F. Supp. 2d at 297 (first quoting Am. Movie Classics Co., 922 F. Supp. at 934; and then citing Colour & Design v. U.S. Vinyl Mfg. Corp., No. 04-CV-8332, 2005 WL 1337864, at *6 (S.D.N.Y. June 3, 2005)). “In a ‘passing off’ case, the tortfeasor misleads customers into believing that the product he produces emanates from another source.” Am. Movie Classics Co., 922 F. Supp. at 934; see also Integrative Nutrition, Inc., 476 F. Supp. 2d at 297 (“In a passing off case, the alleged infringer sells its products as the plaintiff's.”). A “claim of ‘reverse passing off,’ ” in contrast, involves “a claim that the defendant misrepresented the plaintiff's work as its own.” Stadt, 719 F. Supp. 2d 312, 322; see also Shepard, 291 F. Supp. 3d at 476 (“[The plaintiffs] allege that the defendants misrepresented the [plaintiffs’] goods as their own. That is known as ‘reverse passing of[f].’ ”); Am. Movie Classics Co., 922 F. Supp. at 934 (“[I]f any unfair competition claim is asserted [in this case], it is of the ‘reverse passing off’ variety — i.e., that [the defendant] took goods of another and passed them off as [its] own.”).

Plaintiff's unfair competition claims are preempted by the Copyright Act. Plaintiff alleges that Defendants “misappropriated content from [Plaintiff's] website,” (Compl. ¶ 147; see also id. ¶¶ 169, 171, 179), in “an unjustifiable attempt to profit from [Plaintiff's] expenditure of time, labor and talent in maintaining its service,” (id. ¶¶ 154, 182). Plaintiff has not alleged that Defendants breached any fiduciary duty or confidential relationship, or that Defendants misappropriated Plaintiff's trade secrets. Instead, Plaintiff's claims are precisely the type of misappropriation claims that courts have consistently held are preempted by the Copyright Act. See, e.g., Shepard, 291 F. Supp. 3d at 475–76 (“[T]he Copyright Act ... preempts claims ‘asserted under the misappropriation branch of New York's unfair competition claim, which generally “protects against a defendant's competing use of a valuable product or idea created by the plaintiff through investment of time, effort, money and expertise.’ ”” (quoting Am. Movie Classics, 922 F. Supp. at 933)); Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523, 1535 (S.D.N.Y. 1985) (“In this case, the alleged misappropriation of [the plaintiff's] time, talent and effort is by the reproduction of the product of her time, talent and effort,” and that is “precisely the type of misconduct the copyright laws are designed to guard against.”).

Plaintiff's claims are essentially “reverse passing off” claims, as Plaintiff alleges that Defendants copied Plaintiff's work product — song lyrics displayed on its website — and attempted to pass them off as either, in LyricFind's case, its own work product or, in Google's case, either its own work product or work product it was licensed to display. See Integrative Nutrition, Inc., 476 F. Supp. 2d at 297 (finding that the “plaintiff's unfair competition claim [was] predicated on a theory of reverse passing off” and was preempted by the Copyright Act where the “primary allegation in the claim [was] that the defendants [had] ‘plagiarized’ the plaintiff's website”). Unfair competition claims involving allegations of reverse passing off are preempted by the Copyright Act. See Shepard, 291 F. Supp. 3d at 476 (“It is well-settled that a claim for reverse passing off predicated on the theory that defendant's product replicates plaintiff's expressions contains no extra element and is therefore preempted.” (quoting Silverstein v. Penguin Putnam, Inc., 522 F. Supp. 2d 579, 608 (S.D.N.Y. 2007))); Stadt, 719 F. Supp. 2d 312, 322 (“[R]everse passing off does not constitute an extra element for preemption purposes because it is essentially a claim for unauthorized use of copyrightable material.”); see also Integrative Nutrition, Inc., 476 F. Supp. 2d at 297; Colour & Design, 2005 WL 1337864, at *6; Am. Movie Classics Co., 922 F. Supp at 934.

Furthermore, as discussed below, Plaintiff's unfair competition claims are not saved from preemption by its allegations of bad faith, unfairness, and deceptive, unethical, and immoral conduct.

A. “Bad faith” under New York law

In support of its argument that “bad faith” is an extra element that saves its New York unfair competition claims from preemption, Plaintiff relies almost exclusively on SCO Group, Inc. v. International Business Machines Corp., 879 F.3d 1062, 1080–81 (10th Cir. 2018), (Pl. Mem. 20), in which the Tenth Circuit found that “a misappropriation claim under New York law has an ‘extra element’ beyond the elements of a federal copyright infringement claim,” SCO Grp., Inc., 879 F.3d at 1080. The court found that the “bad faith” element of New York misappropriation claims was “not simply a scienter requirement, which would be insufficient to provide the requisite extra element to avoid preemption by the Copyright Act,” and that instead, “in the context of an independent New York unfair competition claim[,] [bad faith] ‘typically results from fraud, deception, or an abuse of fiduciary or confidential relationship.’ ” Id. at 1080–81 (first citing Comput. Assocs. Int'l, Inc. 982 F. 2d at 717; and then quoting Robert L. Haig, Business and Commercial Litigation in Federal Courts, 105:20 (3d Ed. 2011)). The Tenth Circuit concluded that “[b]ecause misappropriation under New York law is an independent claim with a separate element of bad faith business dealings, [the plaintiff's] claim [was] not ‘equivalent’ to a federal copyright infringement claim,” and therefore was not preempted. Id. at 1081.

The Tenth Circuit's decision in SCO Group, Inc. is directly contradicted by caselaw in this Circuit, discussed above, finding that New York unfair competition claims alleging misappropriation of copyrightable works are preempted by the Copyright Act. Regardless of how the Tenth Circuit interpreted the “bad faith” element of New York unfair competition claims, in this Circuit, “bad faith” on its own is not sufficient to avoid preemption — if it were, unfair competition claims under New York law would never be preempted. See Stadt, 719 F. Supp. 2d at 320 (“A claim of unfair competition ... requires evidence of [the] defendant's bad faith.”); see also Eyal R.D. Corp. v. Jewelex N.Y. Ltd., 784 F. Supp. 2d 441, 447 (S.D.N.Y. 2011) (“[T]o avoid preemption, that which is claimed to be unfair competition must be something different from copying, or the fruits of copying, or the intent or bad faith that can be inferred from the act of copying ....”). Instead, courts have regularly noted that “bad faith” is essential to unfair competition claims under New York law, and nevertheless have found those claims preempted. See Jacino, 2017 WL 4480752, at *5–6; Stadt, 719 F. Supp. 2d at 319–20, 322.

Accordingly, the Court finds that the bad faith element of Plaintiff's unfair competition claims under New York law is not an extra element that defeats preemption.

B. Unfairness under California law

Plaintiff argues that its claims for unfair competition under California law are not preempted because “[s]ection 17200 ... requires an extra element of unfairness.” (Pl. Mem. 21.) Because unfairness, without more, is immaterial to the preemption determination, the Court rejects Plaintiff's argument.

The Second Circuit has held that “[n]o matter how ‘unfair’ ” a defendant's alleged conduct is, “such unfairness alone is immaterial to a determination whether a cause of action has been preempted by the Copyright Act.” Barclays Cap. Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 896 (2d Cir. 2011).

Accordingly, the fact that Plaintiff's unfair competition claims under California law require that Plaintiff demonstrate that Defendants’ conduct was unfair does not preclude a finding that Plaintiff's unfair competition claims are preempted.[FN7]

C. Deceptive, unethical, and immoral conduct

Plaintiff argues that because its “unfair competition claims are based on [Defendants’] misappropriation of content from [Plaintiff] through ... deceptive, immoral and dishonest practices ... they are not preempted by federal law.” (Pl. Mem. 22.)

“[A]n action will not be saved from preemption by elements such as awareness or intent, which alter the action's scope but not its nature.” Am. Movie Classics Co., 922 F. Supp. at 931 (quoting Comput. Assocs. Int'l, Inc., 982 F.2d at 717) (internal quotation marks omitted); Wnet, 871 F. Supp. 2d at 291 (“Awareness or intent ... are not extra elements that make a state law claim qualitatively different.” (quoting Briarpatch Ltd., L.P., 373 F.3d at 305)). Moreover, as noted above, “unfairness alone is immaterial to a determination whether a cause of action has been preempted by the Copyright Act.” Barclays Cap. Inc., 650 F.3d at 896.

Courts in this Circuit have found that deception is not an extra element that saves an unfair competition claim from preemption. In Atrium Group de Ediciones y Publicaciones, S.L., the court rejected the plaintiffs’ argument that their misappropriation claim was not preempted because the defendants’ “alleged deception” constituted an extra element, finding that “ ‘deception’ is not the sort of element that would cause claims for ... misappropriation to be ‘qualitatively different’ from the Federal Copyright Act.” 565 F. Supp. 2d at 509–10. The court reasoned that deception alters only the scope and not the nature of the claim. Id. at 510; see also Woolcott, 2014 WL 1814130, at *10 (finding that the plaintiff's unfair competition claim “lack[ed] any extra qualitative element” where the plaintiff alleged “intentional, unlawful, and deceptive conduct”); cf. Katz Dochrermann & Epstein, Inc. v. Home Box Office, No. 97-CV-7763, 1999 WL 179603, at *4 (S.D.N.Y. Mar. 31, 1999) (finding that the plaintiff's “allegation of fraudulent intent simply alters the scope of the state [unfair competition claim] but not the equivalency of its nature to a copyright infringement claim”).[FN8]

Finally, the Second Circuit has explicitly rejected any “exception to the general rule of preemption in the misappropriation area ... for claims involving ‘any form of commercial immorality,’ ” Nat'l Basketball Ass'n, 105 F.3d at 851 (quoting Fin. Info., Inc. v. Moody's Inv'rs Serv., Inc., 808 F.2d 204, 208 (2d Cir. 1986)), and has found that “amorphous concepts such as ‘commercial immorality’ ... are virtually synonymous [with] wrongful copying and are in no meaningful fashion distinguishable from infringement of a copyright,” id. at 851.

Accordingly, the Court finds that Plaintiff's allegations that Defendants engaged in deceptive, unethical, or immoral conduct do not save Plaintiff's unfair competition claims from preemption. Because the Court finds that all of Plaintiff's claims are preempted by the Copyright Act, the Court denies the motion to remand the action to state court.

c. The Court dismisses the Complaint for failure to state a claim

The Second Circuit has held that the “complete preemption doctrine” extends to the Copyright Act, because it is a “federal statute that both preempts state law and substitutes a federal remedy for that law, thereby creating an exclusive federal cause of action,” and “therefore ... the district courts have jurisdiction over state law claims preempted by the Copyright Act.” Briarpatch Ltd., L.P., 373 F.3d at 305. “[O]nce a district court determines that a state law claim has been completely preempted and thereby assumes jurisdiction over it, the court must then dismiss the claim for failing to state a cause of action.” Id. at 309.

Given that the Court finds that all of Plaintiff's state law claims are preempted by the Copyright Act, and Plaintiff has not asserted any federal law claims, the Court dismisses the Complaint for failure to state a claim. See Kennedy v. LaCasse, No. 17-CV-2970, 2017 WL 3098107, at *5 (S.D.N.Y. July 20, 2017) (dismissing state law claims preempted by the Copyright Act for failure to state a claim).

III. Conclusion

For the reasons set forth above, the Court denies the motion to remand the action to state court and dismisses the Complaint for failure to state a claim. The Clerk of Court is directed to close this case.

SO ORDERED

Footnotes

[FN1] The Terms of Service provision regarding commercial use provides that:

Unless otherwise expressly authorized herein or by [Plaintiff's] express written consent, you agree not to display, distribute, license, perform, publish, reproduce, duplicate, copy, create derivative works from, modify, sell, resell, exploit, transfer or transmit for any commercial purpose, any portion of the Service, or access to the Service. The Service is for your personal use and may not be used for direct commercial endeavors without the express written consent of [Plaintiff].

(Compl. ¶ 115.)

[FN2] The Terms of Service provides that:

Except as expressly authorized by [Plaintiff] in writing, you agree not to modify, copy, frame, scrape, rent, lease, loan, sell, distribute or create derivative works based on the Service of the [Plaintiff] Content, in whole or in part, except that the foregoing does not apply to your own User Content that you legally upload to the Service.

(Compl. ¶ 119.)

[FN3] Section 106 of the Copyright Act establishes the exclusive rights held by a copyright right owner in copyrighted works. See 17 U.S.C. § 106. Section 106 provides, in relevant part:
[T]he owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

Id.

[FN4] Plaintiff also makes this same argument regarding the cases cited by Defendants as to Plaintiff's state law claims for unjust enrichment and unfair competition. (See Pl. Reply 8 n.8, 9 n.9.)

[FN5] Plaintiff asserts separate indemnification claims in addition to its claims for breach of contract; however, based on the Terms of Service agreement, Plaintiff cannot assert such claims. “ ‘[U]nder New York law, absent “unmistakably clear” language in an indemnification provision that demonstrates that the parties intended the clause to cover first-party claims, an agreement between two parties “to indemnify” each other does not mean that one party's failure to perform gives rise to a claim for indemnification.’ ” Lehman XS Tr., Series 2006-GP2 by U.S. Bank Nat'l Ass'n v. GreenPoint Mortg. Funding, Inc., 916 F.3d 116, 125–26 (2d Cir. 2019) (quoting Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 21 (2d Cir. 1996)). Because the Terms of Service do not include language of a clear agreement between the parties to indemnify each other for losses not related to liability to a third party arising from a breach of contract, the Court finds the indemnification claims redundant of the breach of contract claims and addresses only the breach of contract claims. See id. at 126 (finding that “ ‘[w]here parties agree to “indemnify” each other for losses incurred by a breach of contract, where those lo[s]ses do not relate to liability to a third party, the characterization of “indemnification” is no more than an epithet for recovery for breach of contract.’ ” (alterations in original) (quoting Xerox State & Local Sols., Inc. v. Xchanging Sols. (USA), Inc., 216 F. Supp. 3d 355, 364 (S.D.N.Y. 2016))).

[FN6] Plaintiff cites no authority in support of its argument that because Defendants allegedly engaged in “wrongful conduct,” its unjust enrichment claims are not preempted. (Pl. Mem. 18.) Moreover, as discussed further below, the Second Circuit has made clear that allegations that defendants have engaged in immoral or unfair behavior are not sufficient to distinguish state law claims and avoid preemption. See Barclays Cap. Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 896 (2d Cir. 2011) (“[U]nfairness alone is immaterial to a determination whether a cause of action has been preempted by the Copyright Act.”); Nat'l Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 851 (2d Cir. 1997) (“[A]morphous concepts such as ‘commercial immorality’ ... are virtually synonymous [with] wrongful copying and are in no meaningful fashion distinguishable from infringement of a copyright.”); see also Comput. Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 717 (2d Cir. 1992) (“An action will not be saved from preemption by elements such as awareness or intent, which alter ‘the action's scope but not its nature ....’ ” (quoting Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523, 1535 (S.D.N.Y. 1985) (alteration in original))).

[FN7] Plaintiff cites no authority to support its argument that an unfair competition claim pursuant to section 17200 contains an extra element precluding preemption by the Copyright Act. (See Pl. Mem. 21; Pl. Reply 8–10.) However, California courts have found unfair competition claims under section 17200 to be preempted by the Copyright Act where they are “based solely on rights equivalent to those protected by the federal copyright laws.” Media.net Advert. FZ-LLC v. NetSeer, Inc., 156 F. Supp. 1052, 1074 (quoting Koladex v. MTV Networks, Inc., 152 F.3d 1209, 1213 (9th Cir. 1988)).

[FN8] Plaintiff cites a single case in which a district court found that the plaintiff's unfair competition claims were not preempted based in part on the “extra element of misrepresentation or deception,” Silverstein v. Penguin Putnam, Inc. (Silverstein I), No. 01-CV-309, 2003 WL 1797848, at *8 (S.D.N.Y. Apr. 4, 2003), but, as Defendants note, Plaintiff failed to address in its opening brief the case's subsequent history, (Pl. Mem. 21; Defs. Opp'n 22). On appeal, the Second Circuit vacated the judgment on other grounds and remanded the case for further proceedings. Silverstein v. Penguin Putnam, Inc. (Silverstein II), 368 F.3d 77, 78, 86 (2d Cir. 2004). On remand, and following a bench trial, the district court held that the plaintiff's unfair competition claims were preempted, finding that the “allegation that [the defendant] also misrepresented [the work] as its own does not transform the claim into one qualitatively different from a copyright claim,” and that “the allegation that the reproduction was immoral does not differentiate the claim from one of copyright infringement.” Silverstein v. Penguin Putnam, Inc. (Silverstein III), 522 F. Supp. 2d 579, 608–09 (S.D.N.Y. 2007).

Plaintiff nevertheless argues that the district court's “post-trial decision” in Silverstein III “did not address whether ‘deception’ satisfied the ‘extra element’ test whatsoever and thus that aspect of [Silverstein I] still stands.” (Pl. Reply 5 n.4.) In Silverstein I, the plaintiff's unfair competition claim was based on the “defendant's copying of [the] plaintiff's work,” as well as allegations that the “defendant committed a false designation of origin or confusion as to source.” Silverstein I, 2003 WL 1797848, at *8. The court found that “[c]laims based on false designation or confusion as to source are not preempted because the claims require a showing of actual confusion, an element not required of a copyright infringement claim.” Id. In addition, the court in Silverstein I noted the plaintiff's argument that “its unfair competition claims covering reverse passing off are not preempted because those claims involved the extra element of misrepresentation or deception,” before concluding that “based on the required presence of these elements, ... [the] plaintiff's unfair competition claims are not preempted.” Id.

In essence, the court in Silverstein I found that unfair competition claims for reverse passing off were not preempted by the Copyright Act — a finding that is against the weight of authority in this Circuit, discussed above, holding that such claims are preempted. Indeed, in Silverstein III, in finding that the plaintiff's unfair competition claims were preempted, the court noted that it was “well-settled that a claim for reverse passing off predicated on the theory that defendant's product replicates plaintiff's expressions contains no extra element and is therefore preempted.” Silverstein III, 522 F. Supp. 2d at 608. Accordingly, the Court finds that Silverstein I does not support a finding that Plaintiff's unfair competition claims are preempted based on Defendants’ alleged deceptive conduct.

Opinion

Kafker, J.

Plaintiffs Christopher Kauders and Hannah Kauders commenced a lawsuit against defendants Uber Technologies, Inc., and  Rasier, LLC (collectively, Uber),[FN4] in the Superior Court, claiming, among other things, that three Uber drivers, in violation of G. L. c. 272, § 98A, refused to provide Christopher Kauders with rides because he was blind and accompanied by a guide dog. Each of the plaintiffs registered with Uber through its cellular telephone application (app). Citing a provision in its terms and conditions, Uber sought to compel arbitration. The plaintiffs opposed arbitration on various grounds, including that there was no enforceable arbitration agreement. The judge granted Uber's motion, and the parties arbitrated their dispute in early 2018. On June 4, 2018, the arbitrator issued findings and a decision, ruling in favor of Uber on all of the plaintiffs' claims.

On June 25, 2018, the United States Court of Appeals for the First Circuit issued a decision in Cullinane v. Uber Techs., Inc., 893 F.3d 53, 62 (1st Cir. 2018) (Cullinane II), concluding that Uber's registration process did not create a contract because it did not provide reasonable notice to users of the terms and conditions. Several months later, after Uber moved to confirm the arbitration award, the judge who had granted the motion to compel arbitration allowed a motion for reconsideration and reversed his earlier decision, concluding that there was no enforceable contract requiring arbitration. In this appeal, Uber contends that the judge had no choice but to confirm the arbitration award once the plaintiffs failed to challenge the award within thirty days.

We conclude that the issue of arbitrability[FN5] was preserved for appeal. We also conclude that Uber's terms and conditions did not constitute a contract with the plaintiffs. The app's registration process did not provide users with reasonable notice of the terms and conditions and did not obtain a clear manifestation of assent to the terms, both of which could have been easily achieved. Indeed, a review of the case law reveals that Uber has no trouble providing such reasonable notice and requiring express affirmation from its own drivers. Here, in remarkable contrast, both the notice and the assent are obscured in the registration process. As a result, Uber cannot enforce the terms and conditions against the plaintiffs, including the arbitration agreement at issue here.[FN6]

1. Background

We recite the undisputed facts as alleged in the complaint and as alleged by the parties in their filings on Uber's motion to compel arbitration.

a. Uber's registration process

Uber describes itself as a technology company that allows its users to request transportation services from drivers in their geographic area through its app. Before they can request trips, users must register with Uber. Users can register by means of their cellular telephones by using the app.

Christopher Kauders's registration process via the app involved three steps, with each step involving a separate screen. The first screen was titled “CREATE AN ACCOUNT.” This title appeared in a gray bar at the top of the screen. The rest of the screen was a dark color. In the middle of the screen, there was white text that stated, “We use your email and mobile number to send you ride confirmations and receipts.” Below the text, a keypad appeared by which the user could enter the required information. On this screen, the user was required to enter an e-mail address, a mobile telephone number, and a password. Once the user entered this information, a button in the top right corner of the screen that stated “NEXT” was enabled. All of the information was provided on a single screen; there was no need for the user to scroll to review any information. The user was required to press (or “click”) “NEXT” to move to the second screen.

The second screen was titled “CREATE A PROFILE.” The title again appeared in a gray bar at the top of the screen. On this screen, which has a similar dark background, the user was required to enter a first and last name and had the option to add a photograph. In the middle of this screen, white text stated, “Your name and photo helps your driver identify you at pickup.” As with the first screen, a keypad appeared with which the user could enter the requested information. Also like the first screen, a button in the top right corner that stated “NEXT” was enabled once the user entered the required information.

The third screen was titled “LINK PAYMENT.” Like the first two screens, the third screen had a dark background with a gray bar across the top. Under the gray bar, there was a white, rectangular field in which the user was required to enter a credit card number. Under the box, white, boldface text stated “scan your card” and “enter promo code.” In the middle of the screen, below the word “OR” in white text, there was a large, dark button labeled “PayPal” that provided another mechanism for entering payment information.[FN7]

At the bottom of the screen, there was white text that stated, “By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy.” This text was oddly divided into two parts. The first part of the sentence, which informed the user, “By creating an Uber account, you agree to the,” was far less prominently displayed than the words “Terms & Conditions and Privacy Policy,” which followed. The second part of the sentence -- “Terms & Conditions and Privacy Policy” -- was in a rectangular box and in boldface font. According to Uber, this presentation was used to indicate that the box was a clickable hyperlink. If a user clicked this box, the user would be taken to a screen that contained other clickable buttons, labeled “Terms & Conditions” and “Privacy Policy.” Once at this linked screen, if the user clicked the “Terms & Conditions” button, the terms and conditions would appear on the screen.

If the user interacted with the rectangular field at the top of the third screen, a number keypad appeared in the bottom half of the screen. The user could use the number keypad to enter credit card information. Once this keypad appeared, the white text and the link from the bottom of the screen moved to the middle of the screen between the rectangular box and the keypad. After a user filled in the credit card information, a button labeled “DONE” became clickable in the top right corner. Once the user clicked “DONE,” the user completed the account creation process.

Using this process, Christopher Kauders registered with Uber through the app on June 27, 2014. He used a cellular telephone to do so. Hannah Kauders registered with Uber sometime around October 2015.[FN8]

b. Uber's terms and conditions[FN9]

Uber's terms and conditions are extensive and far reaching, touching on a wide variety of topics. Uber can amend the terms and conditions whenever it wants and without notice to the users that have already agreed to them. In fact, under the terms and conditions, the burden is on the user to frequently check to see if any changes have been made.[FN10] Yet, even if a user somehow detects a change, there is no way for the user to object to or contest any of the changes, as the changes are automatically binding on the user.

The terms and conditions contain numerous provisions, many of which are extremely favorable to Uber. There is a broad limitation of liability provision. This provision purports to release Uber from all liability for

“ANY INDIRECT, PUNITIVE, SPECIAL, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES OF ANY TYPE OR KIND (INCLUDING PERSONAL INJURY, LOSS OF DATA, REVENUE, PROFITS, USE OR OTHER ECONOMIC ADVANTAGE). [UBER] SHALL NOT BE LIABLE FOR ANY LOSS, DAMAGE OR INJURY WHICH MAY BE INCURRED BY YOU .... YOU EXPRESSLY WAIVE AND RELEASE [UBER] FROM ANY AND ALL ANY [sic] LIABILITY, CLAIMS OR DAMAGES ARISING FROM OR IN ANY WAY RELATED TO THE THIRD PARTY TRANSPORTATION PROVIDER.”

The terms and conditions also include a strict no-refund policy. They disclaim all warranties “to the maximum extent permitted by law,” including any warranties as to the “reliability, safety, timeliness, [or] quality” of any services Uber provides. There is also a broad indemnification provision, under which a user must indemnify Uber for all costs Uber incurs arising out of a user's “violation or breach of any term of this Agreement or any applicable law or regulation,” “violation of any rights of any third party,” or the “use or misuse of the Application or Service.”[FN12]

A user must also provide Uber with “whatever proof of identity [it] may reasonably request.” Uber can monitor user access to or use of its service or the app, and it can provide law enforcement or a government agency with whatever user information it chooses. Additionally, a user cannot “use the Service or Application to cause nuisance, annoyance or inconvenience.”

The “Dispute Resolution” section appears near the end of the terms and conditions. It provides that “any dispute, claim or controversy arising out of or relating to this Agreement ... will be settled by binding arbitration.” The terms and conditions describe the procedures to be used in the arbitration. The terms and conditions also mandate that “[t]he arbitrator's award damages must be consistent with the terms of the ‘Limitation of Liability’ section above as to the types and the amounts of damages for which a party may be held liable.” If Uber makes changes to the dispute resolution section, the user has thirty days in which to object to the changes.[FN13]

c. Procedural history

The plaintiffs filed a complaint in the Superior Court in Suffolk County in 2016. They alleged that Uber, through its drivers, unlawfully discriminated against Christopher Kauders on the basis that he is blind and accompanied by a guide dog. Uber moved to compel arbitration in June 2017, relying in part on a Federal District Court decision in Cullinane that held that Uber's terms and conditions, and specifically the arbitration provision, were enforceable. See Cullinane vs. Uber Techs., Inc., U.S. Dist. Ct., No. 14-14750-DPW, 2016 WL 3751652 (D. Mass. July 11, 2016) (Cullinane I).[FN14] The plaintiffs opposed arbitration on various grounds, including that the terms and conditions were not enforceable against them because they neither received adequate notice of the existence of the terms and conditions nor assented to them. The Superior Court judge granted Uber's motion to compel, omitting any discussion or analysis of the contract formation issue.[FN15]

The case proceeded to arbitration in early 2018, and the arbitrator issued the decision on June 4, 2018. Although the arbitrator concluded that Christopher Kauders was the victim of discriminatory acts by the drivers, the arbitrator, relying on agency principles, ruled for Uber on all of the plaintiffs' claims because the drivers were independent contractors, not employees, of Uber, and therefore, Uber was not liable for the drivers' actions. The plaintiffs did not attempt to vacate or modify the arbitrator's award under G. L. c. 251, §§ 12-13.

On June 25, 2018, the First Circuit reversed the District Court's ruling in Cullinane I and held that the same registration process at issue here did not create an enforceable contract under Massachusetts law between Uber and its users as to the terms and conditions. See Cullinane II, 893 F.3d at 64. Specifically, the First Circuit held that Uber failed to provide users with adequate notice of the existence of the terms and the hyperlink to those terms. Id. Despite the relevance of this decision to this case, the plaintiffs did not raise it with the judge until months later.

On September 4, 2018, Uber filed a motion to confirm the arbitrator's award, and the plaintiffs submitted a one-paragraph response to Uber's motion arguing that they “were forced to arbitration over their objections.” On October 25, 2018, at the hearing on the motion to confirm, the plaintiffs reiterated their prior arguments against arbitration and raised the First Circuit's decision in Cullinane II for the first time. In response, the judge indicated to the plaintiffs that they would need to file a motion for reconsideration or a motion to vacate to pursue these arguments further. The judge did not rule on Uber's motion to confirm at that time but instead invited and scheduled briefing on the plaintiffs' forthcoming motion. The plaintiffs then filed a motion for reconsideration seeking to have the court vacate the July 2017 order compelling arbitration.

On January 2, 2019, over six months after the arbitrator issued his award, the judge granted the plaintiffs' motion and vacated the earlier order compelling arbitration on the ground that there was no enforceable agreement to arbitrate. The judge first observed that the original order failed to address the contract formation argument even though the plaintiffs had raised it in their opposition to the motion to compel. The judge then concluded that, in light of the Appeals Court's decision in Ajemian v. Yahoo!, Inc., 83 Mass. App. Ct. 565, 575-577, 987 N.E.2d 604 (2013), S.C., 478 Mass. 169, 84 N.E.3d 766 (2017), cert. denied sub nom. Oath Holdings, Inc. v. Ajemian, ––– U.S. ––––, 138 S. Ct. 1327, 200 L.Ed.2d 526 (2018),[FN16] and the First Circuit's recent decision in Cullinane II, the original order compelling arbitration was error and that no enforceable contract existed. As a result, the judge allowed the plaintiffs' motion for reconsideration, denied Uber's motion to compel arbitration, and denied Uber's motion to confirm the award.[FN17]

2. Discussion

Uber raises three issues on appeal. First, it argues that we should reverse the judge's order denying Uber's motion to confirm because the plaintiffs did not challenge the arbitrator's award within the thirty-day time frame as required by G. L. c. 251, § 11. Second, Uber argues that the judge lacked the authority to reconsider the earlier ruling because there was no change in fact or law that triggered the ability to reconsider the earlier ruling. Finally, Uber argues that we should reverse the judge's order denying Uber's motion to compel because the terms and conditions were an enforceable contract between the parties. We address each issue in turn, ultimately concluding that the arbitrability issue was properly preserved for appeal here. We further conclude that Uber's terms and conditions did not constitute an enforceable contract.

a. Motion to confirm the arbitration award

Uber argues that the judge erred by denying its motion to confirm the arbitration award. It contends that when the plaintiffs failed to move to vacate the award within thirty days, the judge had no choice but to confirm the award. Whether the arbitration award should have been confirmed and whether the statutory time frames in the Massachusetts Arbitration Act (MAA or the act)[FN18] for postaward challenges apply to the issue of arbitrability in the circumstances here -- where the plaintiffs originally challenged arbitrability and lost but did not revisit the issue in the thirty-day period after the award -- are questions of statutory interpretation, which we review de novo. Dorrian v. LVNV Funding, LLC, 479 Mass. 265, 271, 94 N.E.3d 370 (2018). To answer these questions, it is necessary to go step by step through the MAA and consider its over-all structure and purpose.

General Laws c. 251 governs the enforceability and interpretation of arbitration agreements. Pursuant to § 2, a party can file a motion for an order compelling arbitration. See G. L. c. 251, § 2. The trial court judge must then determine whether an enforceable agreement to arbitrate exists. If the judge denies a motion to compel arbitration, the act permits the moving party to take an interlocutory appeal from that order. G. L. c. 251, § 18 (a) (1).[FN19] On the other hand, if the court grants the motion and compels arbitration, that order is not immediately appealable. See School Comm. of Agawam v. Agawam Educ. Ass'n, 371 Mass. 845, 847, 359 N.E.2d 956 (1977) (“The legislative purpose [of G. L. c. 150C] is clear that an arbitration proceeding should not be delayed by an appeal when a judge has concluded that there is an ‘agreement to arbitrate’ .... The issue of arbitrability under the terms of an agreement may be preserved and raised subsequently in a proceeding seeking to vacate the arbitrator's award”); Old Rochester Regional Teacher's Club v. Old Rochester Regional Sch. Dist., 18 Mass. App. Ct. 117, 118, 463 N.E.2d 581 (1984) (same).[FN20] Instead, a party wishing to challenge an order compelling arbitration must wait until the arbitration is completed and the award is confirmed before challenging the order compelling arbitration on appeal. See G. L. c. 251, § 18 (a) (3), (6).[FN21] See also Weston Sec. Corp. v. Aykanian, 46 Mass. App. Ct. 72, 76, 703 N.E.2d 1185 (1998) (party can challenge order compelling arbitration on appeal under § 18).

This dichotomy, allowing interlocutory appeals of orders denying a motion to compel arbitration but precluding such appeals of orders compelling arbitration, reflects the act's preference for expeditious arbitration once an initial decision on arbitrability is made. The MAA “expresses a strong public policy favoring arbitration as an expeditious alternative to litigation for settling commercial disputes.” Miller v. Cotter, 448 Mass. 671, 676, 863 N.E.2d 537 (2007), quoting Home Gas Corp. of Mass., Inc. v. Walter's of Hadley, Inc., 403 Mass. 772, 774, 532 N.E.2d 681 (1989). See also Lumbermens Mut. Cas. Co. v. Malacaria, 40 Mass. App. Ct. 184, 192, 662 N.E.2d 241 (1996), quoting Lawrence v. Falzarano, 380 Mass. 18, 28, 402 N.E.2d 1017 (1980) (“The overriding purpose behind the [MAA] is to provide for the expeditious resolution of disputes through a method ‘not subject to delay and obstruction in the courts’”).

Once the arbitration is completed and the arbitrator issues an award, the MAA sets the procedure for limited judicial review of the award itself. Either party can move to vacate, modify, or correct the award. G. L. c. 251, § 11. More specifically, § 11 provides that “[u]pon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in [§§ 12 and 13].” Both §§ 12 and 13 require that any challenge be brought within thirty days of receipt of the award. G. L. c. 251, §§ 12 (b), 13 (a).

Section 12 (a) provides the grounds for vacating an award, and § 13 (a) provides the grounds for modifying or correcting an award. These grounds focus on problems with the arbitration and the award itself, such as fraud, partiality of the arbitrator, or miscalculations of figures, and not with whether the order compelling arbitration was appropriate. See G. L. c. 251, §§ 12 (a) (1)-(5) (grounds for vacating award), 13 (a) (1)-(3) (grounds for modifying or correcting award). The statutory language of § 12 is clear on this issue: the court shall only vacate an arbitration award on arbitrability grounds if “there was no arbitration agreement and the issue was not adversely determined in proceedings under [§ 2] and the party did not participate in the arbitration hearing without raising the objection” (emphasis added). G. L. c. 251, § 12 (a) (5). Here, the issue was adversely determined in proceedings under § 2. Consequently, the plaintiffs could not have moved to vacate the award on the issue of arbitrability because the issue had already been decided against them.

The act, as explained above, does not envision relitigation of the arbitrability issue in the trial court after the award is issued because it will further delay final resolution. Rather, it preserves the issue of arbitrability for the appellate courts after confirmation of the award. Consequently, the judge should have confirmed the arbitration award while expressly stating that the issue of arbitrability was preserved.

Although somewhat unclear, Uber appears to contend further that once the plaintiffs agreed to participate in the arbitration they were bound to raise the arbitrability issue again within the thirty-day time frame or that issue could not be raised on appeal. For support, Uber relies on language in various Federal cases that have wrestled with the question whether participation in arbitration binds plaintiffs who have previously challenged arbitrability to the procedural rules set out in the Federal Arbitration Act (FAA). See, e.g., MCI Telecomm. Corp. v. Exalon Indus., Inc., 138 F.3d 426, 429-431 (1st Cir. 1998); Professional Adm'rs, Ltd. v. Kopper-Glo Fuel, Inc., 819 F.2d 639, 642-643 (6th Cir. 1987). As our statute contains different language, expressly precluding a second arbitrability challenge if it was previously adversely determined, we do not consider participation in the arbitration process as requiring revisitation of the arbitrability issue within the thirty-day time period. That issue is preserved for appeal.

b. Motion for reconsideration

Further complicating the procedural posture of this case is the judge's allowance of a motion for reconsideration on his original order compelling arbitration six months after the award and several months after Uber filed its motion to confirm the award. We review a decision on a motion for reconsideration for abuse of discretion. See Piedra v. Mercy Hosp., Inc., 39 Mass. App. Ct. 184, 188, 653 N.E.2d 1144 (1995).

Uber argues that the judge abused his discretion in granting the motion for reconsideration because there was no change in fact or law and the motion for reconsideration was untimely. As a general matter, it is well established that a judge retains discretion to reconsider prior rulings and correct errors at any time until a final judgment is entered, regardless of whether there has been a change in fact or law. See, e.g., Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 401, 788 N.E.2d 522 (2003); Riley v. Presnell, 409 Mass. 239, 242, 565 N.E.2d 780 (1991); Genesis Tech. & Fin., Inc. v. Cast Navigation, LLC, 74 Mass. App. Ct. 203, 206, 905 N.E.2d 569 (2009). We therefore reject Uber's arguments that the judge lacked the ability to reconsider his earlier ruling absent a change in law or fact.

The issue of untimeliness is more complicated. In evaluating whether the judge abused his discretion here, we recognize that the unique history of this case put the judge in a difficult position. The issuance of Cullinane II, a relevant and significant decision, after the parties completed arbitration but before Uber moved to confirm the award, understandably led the judge to question whether the original ruling compelling arbitration was correct. At this point, however, the arbitration had been completed. Indeed, by the time it was brought to his attention and decided, six months had passed. Although a judge ordinarily may reconsider a prior decision until a final judgment, once the order to compel arbitration had been issued and the arbitration commenced, the arbitration should have continued without further involvement by the judge. The statute contemplates an initial decision by the judge and then expeditious arbitration for the reasons discussed above. We have made clear that we do not want judges injecting themselves once the arbitration has commenced. See, e.g., School Comm. of Agawam, 371 Mass. at 847, 359 N.E.2d 956. See also Cavanaugh v. McDonnell & Co., 357 Mass. 452, 457, 258 N.E.2d 561 (1970) (“arbitration, once undertaken, should continue freely without being subjected to a judicial restraint which would tend to render the proceedings neither one thing nor the other, but transform them into a hybrid, part judicial and part arbitrational”).

At the time the judge decided the motion for reconsideration, he was even further constrained by statute. General Laws c. 251, § 11, expressly provides that “[u]pon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in [§§ 12 and 13].” (emphasis added). The use of “shall” is mandatory. Katz, Nannis & Solomon, P.C. v. Levine, 473 Mass. 784, 791, 46 N.E.3d 541 (2016) (“shall confirm” in § 11 “carries no hint of flexibility” [citation omitted]).

Uber applied to confirm the award, and the plaintiffs had not, within thirty days, presented any grounds for vacating, modifying, or correcting the award. Moreover, as described above, § 12 (a) (5) also clearly precluded the plaintiffs from raising the issue of arbitrability again with the trial court, instead leaving that issue for appeal. In these circumstances, Uber was entitled to confirmation of the award, rather than a revisiting and unsettling of the order compelling arbitration by the trial court and the delay that accompanied that review. Requiring the judge to confirm the award in these circumstances results in an expeditious confirmation of the arbitration award that may be challenged on appeal.[FN22] We therefore conclude that allowing the motion for reconsideration was an abuse of discretion.[FN23]

c. Enforceability of the terms and conditions

As described above, the enforceability of an arbitration agreement will often be decided by the trial court judge in the first instance and then reviewed on appeal. Because we conclude that the judge abused his discretion in granting the plaintiffs' motion for reconsideration, we ordinarily would remand the case to the Superior Court for further proceedings. In this case, the judge, upon remand, would be required to confirm the award, while at the same time ruling that the issue of arbitrability would be preserved for appeal. The plaintiffs would then undoubtedly appeal on that ground, and the case would be right back before us.

It makes little sense to delay appellate review of the order compelling arbitration in these circumstances. The parties have fully briefed and argued that issue, and it is one that the plaintiffs are entitled to have reviewed by an appellate court. In the interests of judicial economy, therefore, in lieu of a remand, we turn to the major online contract formation issue before us: whether Uber's terms and conditions constitute an enforceable contract with the plaintiffs.

i. Legal standard for online contract formation

As the online contract here includes an arbitration agreement, we first recognize that the FAA establishes a “liberal federal policy favoring arbitration agreements.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). But “this policy [does not] override[ ] the principle that a court may submit to arbitration only those disputes ... that the parties have agreed to submit” and “courts may [not] use policy considerations as a substitute for party agreement” (quotation and citation omitted). Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 302-303, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010). Indeed, “[t]he FAA reflects the fundamental principle that arbitration is a matter of contract.” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 67, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). “When deciding whether the parties agreed to arbitrate a certain matter ... courts generally ... should apply ordinary state-law principles that govern the formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). See Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012) (“Whether or not the parties have agreed to arbitrate is a question of state contract law”); Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 295-296 (2d Cir. 1999) (“[W]hile ... the FAA preempts state law that treats arbitration agreements differently from any other contracts, it also preserves general principles of state contract law as rules of decision on whether the parties have entered into an agreement to arbitrate” [quotation, citation, and footnote omitted]).[FN24] With these principles in mind, we turn to the enforceability of the online contract under Massachusetts law.

We have not previously considered what standard a court should use when considering issues of contract formation for online contracts. That being said, the fundamentals of online contract formation should not be different from ordinary contract formation. See, e.g., Sgouros v. TransUnion Corp., 817 F.3d 1029, 1034 (7th Cir. 2016). The touchscreens of Internet contract law must reflect the touchstones of regular contract law.

In evaluating whether provisions in an online agreement were enforceable, the Appeals Court in Ajemian used a reasonableness standard, focusing on whether the contract provisions at issue “were reasonably communicated and accepted.” Ajemian, 83 Mass. App. Ct. at 574, 987 N.E.2d 604.25 Under this standard, for there to be an enforceable contract, there must be both reasonable notice of the terms and a reasonable manifestation of assent to those terms. See id. at 574-575, 987 N.E.2d 604, quoting Specht v. Netscape Communications Corp., 306 F.3d 17, 35 (2d Cir. 2002); Schnabel, 697 F.3d at 120. See also Conroy & Shope, Look Before You Click: The Enforceability of Website and Smartphone App Terms and Conditions, 63 Boston Bar J. 23, 23 (Spring 2019) (Conroy & Shope) (“This two-part test is consistent with the approach taken by other courts around the country”).

We conclude that this two-prong test, focusing on whether there is reasonable notice of the terms and a reasonable manifestation of assent to those terms, is the proper framework for analyzing issues of online contract formation. Setting out these general fundamental contract principles is not, however, the difficult part of analysis. “The trick here is to know how to apply these general principles to newer forms of contracting” over the Internet. Sgouros, 817 F.3d at 1034. We elaborate more on each prong infra. We also emphasize that the burden of proof on both prongs is on Uber, the party seeking to enforce the contract. See Canney v. New England Tel. & Tel. Co., 353 Mass. 158, 164, 228 N.E.2d 723 (1967).

A. Reasonable notice

The first prong requires that the offeree receive reasonable notice of the terms of the online agreement. Where the offeree has actual notice of the terms, this prong is satisfied without further inquiry. Miller, 448 Mass. at 680, 863 N.E.2d 537 (party bound by terms of contract regardless of whether party actually read terms). Actual notice will exist where the user has reviewed the terms. It will also generally be found where the user must somehow interact with the terms before agreeing to them.

Absent actual notice, the totality of the circumstances must be evaluated in determining whether reasonable notice has been given of the terms and conditions. See Sgouros, 817 F.3d at 1034-1035 (discussing reasonable notice, and relevant considerations, in context of contracting over Internet). This is “clearly a fact-intensive inquiry.” Meyer v. Uber Techs., Inc., 868 F.3d 66, 76 (2d Cir. 2017). See Sgouros, supra. It includes consideration of the form of the contract. See, e.g., Polonsky v. Union Fed. Sav. & Loan Ass'n, 334 Mass. 697, 701, 138 N.E.2d 115 (1956) (terms may not be enforceable where document containing or presenting terms to offeree does not appear to be contract); Sgouros, supra at 1035 (discussing how contracting over Internet is different from paper transactions and how reasonable users of Internet may not understand that they are entering into contractual relationship). In determining whether the notice is reasonable, the court should also consider the nature, including the size, of the transaction, whether the notice conveys the full scope of the terms and conditions, and the interface by which the terms are being communicated. Sgouros, supra at 1034 (in case involving contracting for credit scores over Internet, “we might ask whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement”). For Internet transactions, the specifics and subtleties of the “design and content of the relevant interface” are especially relevant in evaluating whether reasonable notice has been provided. Meyer, supra at 75. See Nicosia v. Amazon.com, Inc., 834 F.3d 220, 233 (2d Cir. 2016).

In examining the interface, we evaluate the clarity and simplicity of the communication of the terms. Does the interface require the user to open the terms or make them readily available? How many steps must be taken to access the terms and conditions, and how clear and extensive is the process to access the terms? See Cullinane II, 893 F.3d at 62, quoting Ajemian, 83 Mass. App. Ct. at 575, 987 N.E.2d 604 (court should consider “the language that was used to notify users that the terms of their arrangement ... could be found by following the link, how prominently displayed the link was, and any other information that would bear on the reasonableness of communicating [the terms]”). Ultimately, the offeror must reasonably notify the user that there are terms to which the user will be bound and give the user the opportunity to review those terms.

B. Reasonable manifestation of assent

When considering whether the user assented to the terms of the online agreement, we consider the specific actions required to manifest assent. A user may be required to expressly and affirmatively manifest assent to an online agreement by clicking or checking a box that states that the user agrees to the terms and conditions. See, e.g., Emmannuel v. Handy Techs., Inc., 442 F. Supp. 3d 385, 389 (D. Mass. 2020) (user required to affirmatively indicate assent by clicking “Accept” button); Covino v. Spirit Airlines, Inc., 406 F. Supp. 3d 147, 152-153 (D. Mass. 2019) (enforcing agreement where user checked box acknowledging agreement with terms and conditions set forth in offeror's contract of carriage); Wickberg v. Lyft, Inc., 356 F. Supp. 3d 179, 181 (D. Mass. 2018) (screen required user to click box indicating that he “agree[d] to Lyft's terms of services” before he could continue with registration process). These are often referred to as “clickwrap” agreements, and they are regularly enforced. See Conroy & Shope, supra at 23. See also Ajemian, 83 Mass. App. Ct. at 576, 987 N.E.2d 604; Wickberg, supra at 184; Note, The Electronic “Sign-in-Wrap” Contract: Issues of Notice and Assent, the Average Internet User Standard, and Unconscionability, 50 U.C. Davis L. Rev. 535, 539 (2016) (“Clickwrap contracts require Internet users to affirmatively click ‘I agree’ when assenting to the terms and conditions on a website or making online purchases”). As one court has observed, “[w]hile clickwrap agreements ... are not necessarily required ..., they are certainly the easiest method of ensuring that terms are agreed to.” Nicosia, 834 F.3d at 237-238. These are the clearest manifestations of assent.

Requiring a user to expressly and affirmatively assent to the terms, such as by indicating “I Agree” or its equivalent, serves several important purposes. It puts the user on notice that the user is entering into a contractual arrangement. This is particularly important regarding online services, where services may be provided without requiring compensation or contractual agreements, and the users may not be sophisticated commercial actors. Without an action comparable to the solemnity of physically signing a written contract, for example, we are concerned that such users may not be aware of the implications of their actions where agreement to terms is not expressly required. See Sgouros, 817 F.3d at 1035 (“a person using the Internet may not realize that she is agreeing to a contract at all, whereas a reasonable person signing a physical contract will rarely be unaware of that fact”); Moringiello, Signals, Assent and Internet Contracting, 57 Rutgers L. Rev. 1307, 1316 (2005) (“In contract law, a written signature provides the traditional evidence of assent because when we are asked to sign something, we are conditioned to think that we are doing something important”). Requiring an expressly affirmative act, therefore, such as clicking a button that states “I Agree,” can help alert users to the significance of their actions. Where they so act, they have reasonably manifested their assent.

Where no such express agreement is required by the offeror, we must turn to other less obvious manifestations of assent to the terms. This makes the task of the court more difficult. See Cullinane II, 893 F.3d at 62 (“We note at the outset that Uber chose not to use a common method of conspicuously informing users of the existence and location of terms and conditions: requiring users to click a box stating that they agree to a set of terms, often provided by hyperlink, before continuing to the next screen”). In these cases, courts must again carefully consider the totality of the circumstances, and assent may be inferred from other actions the users have taken. Where the connection between the action taken and the terms is unclear, or where the action taken does not clearly signify assent, it will be difficult for the offeror to carry its burden to show that the user assented to the terms.

ii. Application

Turning first to whether the plaintiffs had reasonable notice of the terms and conditions, we begin with the form and nature of the transaction. Users are registering through an app that will connect drivers and riders for future short-term, small-money transactions. The registration process expressly explained: “We use your email and mobile number to send you ride confirmations and receipts”; and “Your name and photo helps your driver identify you at pickup.” Reasonable users may not understand that, by simply signing up for future ride services over the Internet, they have entered into a contractual relationship. See, e.g., Sgouros, 817 F.3d at 1035 (signing up for credit-score information over Internet not obviously contractual). It is qualitatively different from a large business deal where sophisticated parties hire legal counsel to review the fine print. It is also not comparable to the purchase or lease of an apartment or a car, where the size of the personal transaction provides some notice of the contractual nature of the transaction even to unsophisticated contracting parties.

It is also by no means obvious that signing up via an app for ride services would be accompanied by the type of extensive terms and conditions present here. Among those terms are those that indemnify Uber from all injuries that riders experience in the vehicle, subject riders' data to use by Uber for purposes besides transportation pick-up, establish conduct standards for riders and other users, and require arbitration. Indeed, certain of the terms and conditions may literally require an individual user to sign his or her life away, as Uber may not be liable if something happened to the user during one of the rides.

In these circumstances, we must carefully consider the interface and whether it reasonably focused the user on the terms and conditions. That notice was essentially as follows. At the bottom of one screen in Uber's registration process, the following language appeared: “By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy.” This text was divided into two parts, with the first part -- describing the consequences of creating an account -- being less prominently displayed than the link to the terms and conditions and the privacy policy. The app also contained a button that led to a link to the terms and conditions. The question then becomes whether this type of notice was reasonable, particularly given the nature of the online transaction and the scope of the terms and conditions.

The notice of the terms was not reasonable for several reasons. Importantly, the interface did not require the user to scroll through the conditions or even select them. The user could fully register for the service and click “done” without ever clicking the link to the terms and conditions. The connection between the creation of the account and the terms and conditions was also somewhat oddly displayed in the two-part format, with the significant information (i.e., that by creating the account, the user expresses his or her agreement) being displayed less prominently than other information.

This is in striking contrast to the interface of the app provided to drivers by Uber, as demonstrated by the case law. Our review of numerous cases demonstrates that Uber required its drivers, before signing up, to review the terms and conditions by clicking a hyperlink. For example, in one case involving the driver registration process in June 2014, the Uber app there carefully required drivers to consider the terms and conditions. See Singh v. Uber Techs., Inc., 235 F. Supp. 3d 656, 661 (D.N.J. 2017), vacated on other grounds, 939 F.3d 210 (3d Cir. 2019). “When [the driver] logged on to the Uber App with his unique user name and password, he was given the opportunity to review the [agreement] by clicking a hyperlink to the [agreement] within the Uber App.” Id. “To advance past the screen with the hyperlink and actively use the Uber App, [the driver] had to confirm that he had first reviewed and accepted the [agreement] by clicking ‘YES, I AGREE.’ After clicking ‘YES, I AGREE,’ he was prompted to confirm that he reviewed and accepted the [agreement] for a second time.” Id. The app was also designed to allow the drivers ample time to review the terms and conditions. Id. (driver accepted terms three months after terms first made available for review). See Capriole vs. Uber Techs., Inc., U.S. Dist. Ct., No. 1:19-cv-11941-IT, 2020 WL 1536648 (D. Mass. Mar. 31, 2020) (registration required clicking “YES I AGREE” at least twice and informed registrant that “[b]y clicking below, you represent that you have reviewed all the documents above and that you agree to all the contracts above”); Okereke vs. Uber Techs., Inc., U.S. Dist. Ct., No. 16-12487-PBS, 2017 WL 6336080 (D. Mass. June 13, 2017) (same).

The contrast between the notice provided to drivers and that provided to users is telling. As Uber is undoubtedly aware, most of those registering via mobile applications do not read the terms of use or terms of service included with the applications. See, e.g., Conroy & Shope, supra at 23 (“Most users will not have read the terms and, in some instances, may not have even seen the terms or any reference to them”). See also Ayres & Schwartz, The No-Reading Problem in Consumer Contract Law, 66 Stan. L. Rev. 545, 547-548 (2014) (describing empirical evidence showing number of Internet users who read terms is “miniscule”); Tentative Draft Restatement of the Law of Consumer Contracts, Reporters' Introduction (Apr. 18, 2019) (“The proliferation of lengthy standard-term contracts, mostly in digital form, makes it practically impossible for consumers to scrutinize the terms and evaluate them prior to manifesting assent”). Yet the design of the interface for the app here enables, if not encourages, users to ignore the terms and conditions. See Sgouros, 817 F.3d at 1035 (interface misleading user about existence of contractual terms weighed against enforcing terms).

We also consider the specific placement in the app of the link to the terms and conditions. On all three screens that a user was required to fill out, the top of the screen was where the user was required to focus and fill in information. It was not until the third screen that any reference to the terms and conditions appeared. The hyperlink to the terms and conditions was also at the very bottom of this “LINK PAYMENT” screen. The purpose of the screen, as indicated by the title at the top, was for the user to enter payment information. The place to enter that information -- a white field set apart against a dark background -- was at the top of the screen. Under that field, there were two separate pieces of text in boldface, white font that related to the payment purpose of the screen. There was also a large button in the middle of the screen that provided another mechanism through which a user could link a payment. Nothing about this third screen, therefore, conveyed to a user that he or she should open a link that would reveal an extensive set of terms and conditions at the bottom of the screen to which the user was agreeing. As discussed previously, the statement explaining the connection between creating the account and agreeing to the terms, which would encourage opening and reviewing the terms, was displayed less prominently than the other information on the screen.

Similarly, the title of the screen, as well as much of the information on the screen, focused on payment information, not the terms and conditions. Other words on the screen also appeared as prominently as the link, if not more so. For example, the phrases “scan your card” and “enter promo code” appeared to be in boldface as well as the same size as the link. Further, the PayPal button appeared in the middle of the screen in a different color and in what appeared to be a larger box than the terms and conditions link. Put succinctly, “the presence of other terms on the same screen with a similar or larger size, typeface, and with more noticeable attributes diminished the hyperlink's capability to grab the user's attention.” Cullinane II, 893 F.3d at 64.

We also observe that a user could complete the “LINK PAYMENT” screen and the account creation process without ever focusing on the link or the notice on the screen. Uber relies on the fact that the notice of and the link for the terms and conditions “fall[ ] directly in the middle of the screen, where any reasonable user's eyes would naturally be drawn.” This assertion is contradicted by Uber's own evidence, however, which shows that the notice and link only appear in the middle of the screen if the user interacts with the field where the user can enter credit card information and the number keypad appears. The limited record before us indicates that, unless this happens, the notice and link for the terms and conditions remain at the very bottom of the screen, while the white credit card field remains at the top and the PayPal button remains in the middle of the screen, where (as Uber puts it) “any reasonable user's eyes would naturally be drawn.”

Moreover, while the record does not explain what happens if the user clicks “scan your card” or the PayPal button in the middle of the screen, it seems likely that, in either situation, the terms and conditions notice and link either remain at the bottom of the screen or disappear from view altogether. So, if a user uses either of these features rather than clicking the white box to enter a credit card number, the user may never even see the notice and the link at the bottom of the screen.[FN26] The user's attention is simply never directed to the notice and the link; it is instead directed at the white rectangular box or the number keypad.

In sum, we do not consider the notice provided by this interface reasonable. In such a transaction, a user may reasonably believe he or she is simply signing up for a service without understanding that he or she is entering into a significant contractual relationship governed by wide-ranging terms of use. Instead of requiring its users to review those terms and conditions as it appears to do with its drivers, Uber has designed an interface that allows the registration to be completed without reviewing or even acknowledging the terms and conditions. In these circumstances, Uber has failed to show that it provided the plaintiffs with reasonable notice of the terms and conditions.

As we conclude that there was not reasonable notice of the terms, a contract cannot have been formed here. We nonetheless observe that the interface here also obscured the manifestation of assent to those terms. The interface did state in one sentence broken into two parts, one more prominent than the other, “By creating an Uber account, you agree to the Terms & Conditions and Privacy Policy.” The words “Terms & Conditions and Privacy Policy” were more prominently displayed than what it meant to create the account. Uber claims this highlights the terms and conditions. A reasonable alternative interpretation is that it downplays the legal significance of creating the account.

What is clear is that a user could create an account without ever affirmatively stating that he or she agreed to the terms and conditions, or even opening those terms and conditions. Instead, the final step in the process was to input payment information and click “DONE.” “DONE” is also different from, and less clear than, other affirmative language such as “I agree.” Furthermore, there was nothing stating that “DONE” itself signified either creation of an account or acceptance of the terms. See Nicosia, 834 F.3d at 236-237 (“Nothing about the ‘Place your order’ button alone suggests that additional terms apply, and the presentation of terms is not directly adjacent to the ‘Place your order’ button so as to indicate that a user should construe clicking as acceptance”). The connection between the action and the terms was thus not direct or unambiguous. Uncertainty and confusion in this regard could have simply been avoided by requiring the terms and conditions to be reviewed and a user to agree. By obscuring this process, the app invited questions about whether the interface was designed to enable a user to sign up for services without requiring him or her to understand that he or she was contractually bound. See Wilson v. Huuuge, Inc., 351 F. Supp. 3d 1308, 1317 (W.D. Wash. 2018), aff'd, 944 F.3d 1212 (9th Cir. 2019) (“The fact is, [the offeror] chose to make its Terms non-invasive so that users could charge ahead to play their game. Now, they must live with the consequences of that decision”).

Again, Uber's own registration process for its drivers stands in striking contrast. As demonstrated by the case law, after clicking “ ‘YES, I AGREE,’ [the driver] was prompted to confirm acceptance a second time. On the second screen, the App state[d]: ‘PLEASE CONFIRM THAT YOU HAVE REWIEWED [sic] ALL THE DOCUMENTS AND AGREE TO ALL THE NEW CONTRACTS’ ” (citations omitted). Okereke, supra. Additionally, in that case “Uber received an electronic receipt following [the driver's] acceptance” and “[t]he receipt only could have been generated by someone using [the driver's] unique username and password and hitting ‘YES, I AGREE’ twice when prompted by the Uber App.” Id. Other cases involving the driver registration process for Uber describe similar registration processes. See, e.g., Capriole, supra (registration required clicking “YES I AGREE” at least twice and informed registrant that “[b]y clicking below, you represent that you have reviewed all the documents above and that you agree to all the contracts above”); Singh, 235 F. Supp. 3d at 661 (same). Clearly, Uber knows how to obtain clear assent to its terms. We therefore conclude that there was no reasonable manifestation of assent here.

3. Conclusion

For the foregoing reasons, we conclude that there was no enforceable agreement between Uber and the plaintiffs, and therefore the dispute was not arbitrable. The case is remanded for further proceedings consistent with this opinion.

Footnotes

[FN1] Hannah Kauders.

[FN2] Raiser, LLC.

[FN3] Justice Lenk participated in the deliberation on this case prior to her retirement.

[FN4] Rasier, LLC, is a wholly owned subsidiary of Uber Technologies, Inc.

[FN5] We use the term “arbitrability” to refer to the legal determination as to whether an enforceable arbitration agreement exists.

[FN6] We acknowledge the amicus briefs submitted by the Massachusetts Academy of Trial Attorneys and the American Association for Justice; the New England Legal Foundation; the Chamber of Commerce of the United States of America; and Public Justice, P.C., and the National Consumer Law Center.

[FN7] PayPal is an Internet payment service. See Cullinane II, 893 F.3d at 58 n.5, citing United States v. Frechette, 583 F.3d 374, 377 n.1 (6th Cir. 2009), cert. denied, 562 U.S. 1053, 131 S.Ct. 594, 178 L.Ed.2d 452 (2010).

[FN8] There is nothing in the record indicating that Hannah Kauders's registration process differed in any way from the process described above. We therefore assume that both plaintiffs registered with Uber through the same process.

[FN9] Because the plaintiffs registered at different times, and because of when the alleged incidents occurred, there are multiple versions of the terms and conditions in the record before us. Our discussion of the terms and conditions focuses on the version that was in effect when Christopher Kauders first registered with Uber through the app, as this version would have been the version that would have been available to Christopher Kauders had he attempted to review them during the registration process. Most of the provisions discussed above appear in each of the versions in the record.

[FN10] We note that the United States Court of Appeals for the Ninth Circuit has held that a provision in terms of use providing for unilateral changes without notice to the other parties is unenforceable. See Douglas v. United States Dist. Court for the Cent. Dist. of Cal., 495 F.3d 1062, 1066 (9th Cir. 2007) (per curiam), cert. denied sub nom. Talk America, Inc. v. Douglas, 552 U.S. 1242, 128 S.Ct. 1472, 170 L.Ed.2d 296 (2008) (“a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so.... Even if [a user's] continued use of [a] service could be considered assent, such assent can only be inferred after he received proper notice of the proposed changes”).

[FN11] The judge also held that this provision was unenforceable insofar as it released or waived the right to recover the type of statutory damages sought by Christopher Kauders. This part of the order is not before us in this appeal.

[FN12] Uber invoked the indemnification provision in this case. In arbitration, Uber brought a counterclaim for breach of contract against the plaintiffs, alleging that they committed a breach of the terms and conditions by commencing a lawsuit and pursuing litigation in court against Uber. Through this counterclaim, Uber sought to recover the “substantial unnecessary costs and fees” it incurred litigating the plaintiffs' lawsuit.

[FN13] These terms and conditions are apparently not uncommon in similar online contracts. See, e.g., Benoliel & Becher, The Duty to Read the Unreadable, 60 B.C. L. Rev. 2255, 2265-2266 (2019) (identifying common provisions); Hartzog, Website Design as Contract, 60 Am. U. L. Rev. 1635, 1642 (2011) (same). This is true even though some of these provisions have been held to be unlawful or unenforceable. See, e.g., Douglas, 495 F.3d at 1066. See also Preston, “Please Note: You Have Waived Everything”: Can Notice Redeem Online Contracts?, 64 Am. U. L. Rev. 535, 555 (2015) (“Wrap contracts frequently include disclaimers that actually are unenforceable, and that the drafters know are unenforceable, but are included anyway”).

[FN14] As explained infra, this decision would later be reversed by the First Circuit.

[FN15] The judge also explicitly “retain[ed] jurisdiction to consider whether any eventual arbitration award should preclude further litigation in this case, or whether it should be affirmed or vacated pursuant to G. L. c. 251.”

[FN16] In Ajemian, 83 Mass. App. Ct. at 575-577, 987 N.E.2d 604, the Appeals Court analyzed whether a forum selection clause and a clause limiting the statute of limitations period for bringing claims against Yahoo!, Inc., were enforceable. The court concluded that nothing in the record before it established that the terms of service were either reasonably communicated or accepted. Id. at 576, 987 N.E.2d 604.

[FN17] Uber appealed, and we transferred the case to this court sua sponte.

[FN18] The official title of G. L. c. 251 is the “Uniform Arbitration Act for Commercial Disputes.” See St. 1960, c. 374, § 1. We refer to this chapter, as do the parties, as the Massachusetts Arbitration Act or the MAA.

[FN19] General Laws c. 251, § 18, provides:
“(a) An appeal may be taken from:
“(1) an order denying an application to compel arbitration made under [§ 2 (a)];
“(2) an order granting an application to stay arbitration made under [§ 2 (b)];
“(3) an order confirming or denying confirmation of an award;
“(4) an order modifying or correcting an award;
“(5) an order vacating an award without directing a rehearing; or
“(6) a judgment or decree entered pursuant to the provisions of this chapter. Such appeal shall be taken in the manner and to the same extent as from orders or judgments in an action.”

[FN20] General Laws c. 150C, §§ 1-16, the statute governing arbitration agreements in collective bargaining agreements, contains statutory provisions that are very similar to those provisions in the MAA. Our courts have interpreted the analogous provisions of G. L. c. 150C to those of G. L. c. 251 that are at issue in this case on several occasions. See, e.g., School Comm. of Agawam, 371 Mass. at 847, 359 N.E.2d 956; Old Rochester Regional Teacher's Club, 18 Mass. App. Ct. at 118, 463 N.E.2d 581. These decisions are instructive as we interpret the MAA in this case.

[FN21] The list of orders in § 18 from which an appeal can be taken under the MAA is exhaustive; there is no right to appeal from any order not listed. See Old Rochester Regional Teacher's Club, 18 Mass. App. Ct. at 118, 463 N.E.2d 581.

[FN22] In confirming the award, the judge could also have expressed his reservations, highlighting the issue on appeal despite the statutory constraints on his own ability to fix the problem.

[FN23] In the instant case, however, the only significance of allowing the motion for reconsideration is that it essentially made Uber the appealing party, rather than the plaintiffs. As previously explained, the plaintiffs could still appeal the issue of arbitrability.

[FN24] The United States Supreme Court recently reiterated: “We do not suggest that a state court is precluded from announcing a new, generally applicable rule of law in an arbitration case. We simply reiterate here what we have said many times before -- that the rule must in fact apply generally, rather than single out arbitration.” Kindred Nursing Ctrs. Ltd. v. Clark, ––– U.S. ––––, 137 S. Ct. 1421, 1428 n.2, 197 L.Ed.2d 806 (2017).

[FN25] We note that Ajemian involved a forum selection clause. Ajemian, 83 Mass. App. Ct. at 575-576, 987 N.E.2d 604. As we have explained elsewhere, forum selection clauses must meet higher standards than other contractual provisions. See, e.g., Cambridge Biotech Corp. v. Pasteur Sanofi Diagnostics, 433 Mass. 122, 130, 740 N.E.2d 195 (2000) (forum selection clause only enforced if fair and reasonable). We only adopt the reasoning of Ajemian to the extent it requires reasonable notice of the terms of a contractual provision and reasonable manifestation of assent to those terms. We do not require that the notice be “conspicuous,” as required for certain types of contractual provisions or as required by other jurisdictions. See, e.g., Meyer v. Uber Techs., Inc., 868 F.3d 66, 74-75 (2d Cir. 2017) (under California law, user must have “[r]easonably conspicuous notice of the existence of contract terms”).

[FN26] For this reason, so-called “browsewrap” agreements have been held to be unenforceable. See, e.g., Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1179 (9th Cir. 2014). A “browsewrap” agreement is an agreement where “website terms and conditions of use are posted on the website typically as a hyperlink at the bottom of the screen.” Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 366 (E.D.N.Y. 2009), aff'd, 380 Fed. Appx. 22 (2d Cir. 2010). These agreements are often unenforceable because there is no assurance that the user was ever put on notice of the existence of the terms or the link to those terms. See, e.g., Nguyen, supra at 1178-1179 (“where a website ... provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on -- without more -- is insufficient to give rise to constructive notice.... [T]he onus must be on website owners to put users on notice of the terms to which they wish to bind consumers”).