Legal Woes Mount For Google: “Locationgate,” Skyhook Suit And FTC-Search Probe

Following the revelation last week that the iPhone stored user location data a consumer class action was filed. This kind of disclosure/revelation-class action cycle is now familiar. And because Google also collects location data it is now also the subject of a similar class action (Brown et al v. Google) seeking $50 million in damages.

Google says it captures user location data only on an opt-in, consensual basis.

Where Are the Damages?

As a former lawyer who did a fair amount of plaintiff-side litigation in my past I’m sympathetic to the consumer class action and believe that it has been a valuable tool to police corporate misconduct, which regulators have often been unwilling to do themselves. However class actions have also been abused by opportunistic lawyers, especially in the tech industry and especially of late.

The Apple and Google suits fall into that category. For example, where are the damages?

Arguably nobody has suffered any actual harm as a result of having location identified by their smartphones — at this point. Adverse PR has already brought about a policy change at Apple; and Google will probably change its disclosure rules and policy around location data collection and retention for smartphones as well.

The increasing frequency of opportunistic and dubious class actions is undoubtedly what motivated the US Supreme Court’s conservative majority, at least in part, to find in favor of AT&T in a case called AT&T Mobility v. Concepcion. The majority ruled that The Federal Arbitration Act pre-empted a state rule (CA here) that allowed consumers to avoid contracts containing waivers of class action rights.

What this decision probably means as a practical matter is that every contract, including online TOS agreements, will now contain some sort of waiver of class action rights. That will probably preclude most if not all future consumer class action cases, such as those filed against Apple and Google. It’s a major decision and an unfortunate outcome for consumers. It could equally kill the actual Apple-Google location cases if there are similar arbitration clauses buried somewhere in the fine print.

Internal Emails Show Importance of Location Data to Google

In another lawsuit involving location against Google, Skyhook Wireless v Google, there was disclosure of internal Google emails showing the importance of location data to Google. Emails exchanged between now-CEO Larry Page and Google’s Steve Lee reveal that Google’s ability to capture location data from Android handsets was crucial to Google’s “mobile-product strategy.” Here’s the specific language from an article in the Wall Street Journal:

“I cannot stress enough how important Google’s Wi-Fi location database is to our Android and mobile-product strategy,” wrote Steve Lee, the Google product manager, in an email that emerged in a suit filed against Google by Skyhook Wireless Inc. in a Massachusetts court. The message was a response to an emailed question last May by Larry Page, who is now Google’s chief executive.

The email exchange came after Motorola’s decision to use Skyhook to provide location data on Android phones rather than Google. Subsequently Motorola returned to using Google’s location database and tools. Skyhook claims that Google interfered with its relationship with Motorola; the complaint alleges:

Google wielded its control over the Android operating system, as well as other Google mobile applications such as Google Maps, to force device manufacturers to use its technology rather than that of Skyhook, to terminate contractual obligations with Skyhook, and to otherwise force device manufacturers to sacrifice superior end user experience with Skyhook by threatening directly or indirectly to deny timely and equal access to evolving versions of the Android operating system and other Google mobile applications.

As I wrote last October:

After abandoning WiFi data collection Google may need to more heavily depend on deriving location data from the handset itself. I could be quite wrong but that would theoretically be precluded by an alternative provider of location (i.e., Skyhook on Motorola Droid and other Android handsets). Accordingly it may now be very strategic for Google to provide core location on Android handsets, thus motivating the company to guard those relationships more closely and perhaps resulting in the outcomes described in the Skyhook complaint.

The emails cited by the Wall Street Journal will form core evidence that Skyhook will use to argue Google was motivated to thwart its relationship with Motorola (and another unnamed OEM, which is probably Samsung) to preserve its access to location data from Android handsets. If Skyhook’s case is really strong — there are also patent infringement claims — Google may wind up buying the company rather than paying damages.

FTC Readies Broad Google Investigation

The final legal headache, for the time being, comes as the FTC is said to be readying a formal probe into Google’s dominance of the search market. According to Bloomberg:

The U.S. Federal Trade Commission is preparing an investigation of Google Inc.’s dominance of the Internet search industry by alerting high-tech companies to gather information for the probe, three people familiar with the matter said. The agency told the companies that it plans to issue so- called civil investigative demands for the information, said the people, who requested anonymity because the FTC hasn’t made the matter public. The demands are similar to subpoenas.

The FTC’s investigation comes amid calls in Congress for inquiries into Google’s dominance of search. Texas is already engaged in a formal antitrust investigation and several other state attorneys general are considering similar moves.

The investigation hasn’t been formally announced and any outcome is far from certain. However the probable investigation raises all the familiar questions surrounding what to do if Google is found to be in violation of antitrust rules. The FTC doesn’t really want to get involved in regulating the SERP — nor should it. In addition, with the combined Bing-Yahoo share at roughly 30 percent (and growing), Google will argue that the market is competitive.

The European Commission is right now involved in a similar antitrust investigation. The outcome there and any remedy issued could have an impact on the FTC action potentially.

Google’s size and success seem to be giving rise to investigations and lawsuits at every turn, in the US, Europe and even Asia. As an outsider, the only context in which I’ve seen Google do anything that appears anti-competitive is in the Skyhook case. However the allegations there remain to be proven.