Google Searches for a Way to End "Googles" Breach Lawsuit

SM Kids alleges Google has violated a 2008 deal by producing content for children on YouTube.
Adam Berry/Getty Images

If there's one thing that Google knows how to do, it's search. On Friday, after combing through bankruptcy records and digital archives of the internet, the web giant asked a New York federal judge to dismiss a lawsuit that accuses Google of breaching a settlement agreement.

The lawsuit was filed in February by SM Kids, which claims ownership of "Googles" and traces the origin of the term back to a 1995 book titled The Googles From Goo. According to the complaint, SM's predecessor had maintained a multimedia platform for children under the "Googles" brand. Having Google compete with Googles was confusing, though. After a prior lawsuit was commenced, Google reached a settlement whereby it promised to limit itself in certain ways in the market for children's related content.

SM Kids now alleges Google has breached the "Googles" agreement by operating Google Play — the app store for the Android operating system which includes games, music, books, movies and more for kids — and YouTube Kids, a mobile app that facilitates the sharing of videos appropriate for children.

Is the lawsuit worth $25 million in compensatory damages, as the plaintiff demands, or is "Googles" worth nothing more than zeroes?

Google now tells a judge that SM Kids can't possibly enforce an agreement executed by Stelor Productions. The defendant says the purpose of the agreement was to permit Stelor to continue using "Googles" for its limited business. Although a judge is required to accept facts presented in the complaint as true at the pleading stage, Google presents a memorandum in support of dismissal that is stuffed with all sorts of new information. 

"In 2009, Stelor filed for bankruptcy," state Google's lawyers, Brendan Hughes and Ian Shapiro at Cooley. "When it went bankrupt, Stelor had $12,220.48 in assets and nearly $3 million in secured debts to a real estate developer named Stephen Garchik. While Stelor appeared to maintain a website at googles.com, it did not come close to operating a 'multimedia platform for children' that 'develop[ed] music, books, animated series, and other media,' as now alleged by SM Kids. To the contrary, in a sworn affidavit in 2009, Garchik described the business operations as 'defunct and/or non-sustainable.'"

In challenging whether SM Kids has standing to enforce the settlement agreement, Google says Garchick transferred the Googles trademark a few times until it wound up in the possession of a Delaware LLC registered this year "presumably for the purpose of filing this lawsuit."

"However, Stelor’s rights under the Settlement Agreement were never expressly assigned to SM Kids," states the dismissal brief. "Rather, Plaintiff is relying on the purported trademark assignment from Stelor to Garchik to SJM Partners to SM Kids to establish its rights under the Agreement. But Plaintiff did not acquire the GOOGLES trademark because the assignments from Garchik to SJM Partner to SM Kids were 'in gross' and thus invalid."

Besides questioning what was transferred, Google also makes the argument that Garchik's company has essentially abandoned Googles as a multimedia site for children.

"[N]one of Stelor’s purported assignees ever used the GOOGLES mark to produce substantially similar goods or services, or any goods or services at all," write Hughes and Shapiro. "Stelor’s use of the GOOGLES mark, and the use of the mark by Stelor’s assignees since the bankruptcy, can be reconstructed through the Wayback Machine, a digital archive of the Internet... For the past four and one-half years, the website has remained in disuse. There is no evidence that the website was used during that period to provide a 'multimedia platform for children'...”

Google asserts that non-use of the Googles mark thus terminated the agreement, and if the abandonment argument doesn't work, the web giant contends that its 2008 agreement had a safe harbor for selling, publishing or distributing third-party content.

"That is why the Complaint emphasizes that YouTube Kids also 'creates fictional children’s-related content on YouTube Kids,'" Google tells the judge. "But while such children’s content created by Google — rather than merely sold, published, or distributed by it — may not fall within Section 7’s safe harbor, the bare allegation that the YouTube Kids content was created by Google fails to state a claim for breach. To breach Section 7, Google must 'modif[y] its current offerings of products or services in a manner that is likely to create confusion in connection with Stelor’s present business.'”

Ultimately, Google insists that no confusion could have occurred with a "defunct" business. Here's the full brief.

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