United States: Discontinuing Free App Is Not Unfair Competition Nor False Advertising Under California Law

Last Updated: February 25 2016
Article by Richard Raysman

Richard Raysman is a Partner in our New York office

Although TechCrunch once declared that "It's Over for Paid Apps, With a Few Exceptions," and research indicates that by 2016, 94.5 percent of mobile apps downloaded will be free apps, as of two years ago, 34 percent of users in five surveyed countries do upgrade from the free app to a paid version. In the case of the free remote login app LogMeInFree, and the paid versions offered by the same developer, the rights of the developer to migrate users from free to paid versions of the app has recently incited litigation in California. See Handy v. LogMeIn, Inc., No. 1:14-cv-01355-JLT (E.D. Cal. Jan. 27, 2016).

Facts

In 2009, Darrin Handy (Plaintiff) downloaded a free mobile and tablet app called LogMeIn Free (LogIn Free) from the defendant LogMeIn Inc. (LogMeIn or Defendant). LogIn Free allowed the Plaintiff to access a remote desktop computer from another laptop or desktop via a virtual private network. A year later, the Plaintiff also paid a onetime fee of $29.99 to LogMeIn for a second, related product called Ignition, which allowed access to a remote desktop from a tablet or smart phone, also via a VPN. According to the Plaintiff, LogMeIn had offered the free app for "years" and that "most of" LogMeIn's customers used the free product.

Sometime before January 21, 2014, LogMeIn introduced "LogMeIn Pro" (LogIn Pro). It provided the same features as the previous two LogMeIn products, and also included additional features such as "remote printing and file sharing." Unlike the previous two products from the Defendant, LogIn Pro required the payment of an annual subscription fee. 

On January 21, 2014, the Defendant, via a message on its website, notified users of LogIn Free that it was discontinuing this product, and would be migrating all users of LogIn Free and Ignition, to LogIn Pro. On and after this date, users of LogIn Free could not login and use their computers remotely, and continuing access was predicated upon the payment to LogMeIn of $49/year for two computers. The Defendant did offer LogIn Free users a six month free trial of the pro version. In this January 21, 2014 message, the Defendant stated that it would provide future details as to the status of Ignition.

On January 31, 2014, the Defendant offered Ignition users the same free trial, but appeared to have a change of heart and later clarified that Ignition users could use the app as long as the Defendant maintained it. Notwithstanding this alleged assurance by the Defendant, the Plaintiff later concluded that he could not use LogIn Free, nor Ignition, even though he had only been denied access to LogIn Free. In a footnote, the Court noted that it found this assertion highly dubious. In fact, as noted in another footnote, the Court mentioned that elsewhere the Plaintiff had claimed his Ignition worked without interruption throughout 2015.
The Plaintiff characterized this January 21, 2014 message as a way of deceiving him into thinking that Ignition was now inoperable, thereby forcing into a purchase of LogIn Pro that he did not wish to make. In short, he described Defendant's actions as a "classic bait and switch."

In his third amended complaint, the Plaintiff claimed that he was unaware that Defendant could discontinue LogIn Free, and that had he known, he would not have purchased Ignition in the first place. He also averred that the Defendant notified users of Ignition that it would become inoperable to mislead users into purchasing a subscription to the newer product, LogIn Pro. He brought causes of action under both the state false advertising and unfair competition statutes. The Defendant filed motions to dismiss and for summary judgment, and the court addressed the latter.

Legal Analysis and Conclusions

Suffice it to say, the court did not think much of the Plaintiff's arguments. The opinion is replete with text and footnotes scolding and dismissing the Plaintiff for failing to support his legal conclusions with relevant facts and for failing to take advantage of all potential discovery options.

Unsurprisingly then, even when viewing the evidence in the light most favorable to the Plaintiff, and drawing all justifiable inferences in his favor, the court rejected each of his claims.

False Advertising Claims

California's False Advertising Law "prohibits any person or entity from making an untrue and misleading statement in advertising." Cal. Bus & Prof. Code § 17500. This statute applies to both statements that are untrue, but also to those "which may be accurate on some level, but will nonetheless tend to mislead or deceive." It proscribes both fraudulent omission and active concealment.

First, the statement by the Defendant informing Ignition users that they would be "gradually migrated" to LogIn Pro could not have been false or misleading, as there was no evidence at the time that the Defendant knew the statement was misleading or false, or should have known it was. In fact, as the court observed, Ignition is still operating as of today.  Moreover, the court emphasized that the Defendant "explicitly told Ignition users that it would provide further details as to how they would be impacted by the change," and that ten days later, the Defendant told users that Ignition would be available to them as long as the company maintained the app. Perhaps most notably, the plaintiff himself had access to Ignition for the entirety of 2014 and 2015. This fact led the court to concluded that while the Plaintiff may be outraged about some purported deception that occurred involving others, "the Court is not clear why he believes this outrage makes him aggrieved such that he can vindicate this grievance in this litigation."

Therefore, the Defendant had not fraudulently induced users to purchase LogIn Pro after having already paid for Ignition, as no statement was offered or omitted that would deceive users into thinking that Ignition had been discontinued, and in fact, the opposite was true as evidenced by the January 21 and January 31 statements. 

Unfair Competition Claims

California Unfair Competition Law prohibits any "unlawful, unfair, or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. The plaintiff must have suffered an injury in fact, which can be shown when he or she "(1) expended money due to defendant's acts ...; (2) lost money or property; or (3) been denied money to which he or she has a cognizable claim."  Chacanaca v. Quaker Oats. Co., 752 F. Supp. 2d 111, 1125 (N.D. Call. 2010).  Further elements of a cognizable claim under this Law are reliance upon either a misrepresentation or material omission that was an immediate cause of an economic injury.

The court similarly rejected the Plaintiff's claims under the Unfair Competition Law. First, as with the claims under the False Advertising Law, the court made it plainly clear that it believed that the Defendant had not made any false or misleading statements, much less actionable ones that could engender reasonable reliance under the California UCL. Speaking of the reliance element, the court focused most of its analysis on the Plaintiff's lack of reliance on the Defendant's purported misleading statements in January 2014 about the inevitable phasing out of LogIn Free and Ignition.

It poked holes in the Plaintiff's reasoning in a number of ways. First, it observed that it was unclear whether the Plaintiff even saw these January 2014 statements contemporaneously. Although Plaintiff's declaration averred as such, his counsel later specifically denied what messages or when Plaintiff had seen them. Second, the Plaintiff characterized the Defendant's message as "discontinuing all technical and financial support" in January, all the while, his earlier complaints had claimed that occurred in July 2014. Finally, and perhaps most problematic for the Plaintiff, notwithstanding any notice he did see, he continued to use Ignition through 2015 unencumbered.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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