18th Civil Court of the State of Sao Paulo Lawsuit n 583.00.2012.

131958-7

Full text of the Decision on the Merits This case has been analyzed. E-COMMERCE MEDIA GROUP INFORMAO E TECNOLOGIA LTDA - BUSCAP filed this LAWSUIT against GOOGLE BRASIL INTERNET LTDA and it claims, in short, that the Defendant, a giant in the world wide web, originally engaged only in internet search services, started to develop and acquire countless "sites" intended for other business, among which, recently, the shopping comparison service called GOOGLE SHOPPING. The Plaintiff asserts it is the owner of the shopping comparison sites BUSCAP and BONDFARO, currently market leaders and Google Shoppings competitors and, as such, it alleges that Defendant abuses its economic power and practices unfair competition, since it uses its search service to favor Google Shopping "site" to the detriment of Plaintiff "sites". In short, Plaintiff claims that Defendant manipulates its search service, that controls 95% of the market, for the purpose of: i) allowing only GOOGLE SHOPPING to display images of the searched merchandise, which is not permitted to BUSCAP and BONDFARO; ii) embezzling and usurping the database of reviews - clients evaluations of the purchases gathered along more than 10 years by BUSCAP, BONDFARO and E-BIT sites; iii) artificially including GOOGLE SHOPPING in the first ranks of the search results, whenever a consumer conducts a query for the purchase of products in Google Search, thus harming the other competitor sites owned by Plaintiff. It claims that the result of the user query at Google, that is, the rank in which a certain site is displayed in the list of pages found with the searched parameters, is not an independent or impartial one, since it is determined by a secret algorithm formula, held by the Defendant and manipulated by it on its favor. It claims that Google is being investigated for the same practices in the United States of America and in European countries. It further reports that the facts discussed in this lawsuit are in part under evaluation by the Secretariat of Economic Law of the Ministry of Justice, after a complaint filed by Plaintiff, which has not been decided yet. For those reasons, alleging a sudden and significant loss of consumer market and revenues, besides the actual threat to its leading position in the segment, the Plaintiff requested an interlocutory relief, so that Defendant is ordered to: i) stop using Plaintiffs reviews, under penalty of a R$500,000.00 daily fine; ii) treat with isonomy the display of Google Shoppings, Buscaps and Bondfaros results for the queries conducted in Google Search; and iii) adopt for the queries in Google Search for Buscap and Bondfaro shopping comparison sites the same ranking criteria adopted for Google Shopping, demanding as a final result of this lawsuit that the complaint is accepted in the merits, confirming the interlocutory relief and condemning the Defendant to allow the display of images in Plaintiff's search results, as well as to pay damages for pain and suffering, everything with legal increases and costs of loss of suit. The documents on pp. 35/575 were entered with the complaint. The interlocutory relief request was denied. Against this decision, Plaintiff filed an interlocutory appeal, which was denied.
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Court of Appeals of the State of So Paulo

Once properly served, the Defendant filed an answer, alleging as preliminary defenses: the processing of the lawsuit under secrecy of justice (confidentiality), lack of interest to sue due to the pending administrative dispute of the issue, existence of external priority justifying a stay of this lawsuit until the decision on the complaint filed by Plaintiff with the Secretariat of Economic Law, lack of standing to sue and defective complaint for failure to state a certain and determined claim. On the merits, the Defendant alleged that there is no unfair competition or abuse of economic power, considering that: i) Google search results are displayed separately by thematic areas (shopping, maps, news, images and videos, for example) and that just reflects an evolution of Google search, which started to display results both from generalist algorithms and from specialized algorithms in a sole page for benefit of the users, since the thematic results show with more accuracy the product or service actually searched by the user and everything just with just one query in the general box; ii) users have other internet search services available, from Defendants competitors, such as Yahoo!, Microsoft, Ask and others, and said sites also make available thematic results, including in the shopping category; iii) Defendants search service is not an essential facility, but rather a mere convenience facility, that is, if it is not used, competition will not be eliminated; iv) Defendant does not have the obligation to promote third parties sites and neither to rank the Plaintiff, its competitor, in a certain way, in the search results; v) Defendant has the right to display search results in its service with basis on subjective determinations of whatever the Defendant thinks its users will find more relevant; vi) Defendant has the right to show pictures and other information for its own shopping results and it does not have the obligation to do it for third parties sites; and vii) Buscap and Bondfaro sites are leaders in the price comparison segment and have continued to be so even after the launch of Google Shopping, which is nothing more than a thematic result that integrates the page of general search results, not constituting a separate product. Moreover, the Defendant explained about the operation of its search service and the ranking criteria, claiming that Google Shoppings results as a thematic division of Googles general search results, intended to meet the needs of the user who is looking to buy something, display only images of products provided by merchants who make available for the user methods to directly buy from their site; but they do not display shopping comparison sites, because they do not sell products; it is certain, however, that said sites are displayed in the general search results. The Defendant denied the claim of violation of antitrust laws, and it upheld the lawfulness of the market conquest due to the improvement of its competitive efficiency, achieved with the evolvement of its search mechanism. It also denied to have embezzled and display or have displayed Buscaps, Bondfaros or E-Bits reviews in Google Shoppings pages, and it challenged the suitability of the image used by the Plaintiff in the complaint (item 46). Finally it challenged the existence of pain and suffering. The secrecy of justice (confidentiality) of the lawsuit was granted. There was a rebuttal, with exhibits, followed by a petition from the Defendant. This is the REPORT. DECISION. This is a case of summary judgment considering that the controversy is solely of law, once the facts have been sufficiently demonstrated. The production of expert evidence is unnecessary, since the Defendant admitted, in its extensive defense, that the results of its internet search mechanism are not neutral, but rather reflect Defendants opinion about the way to identify the best result for the
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Court of Appeals of the State of So Paulo

final intention of its users with a certain query. Besides that, the Defendant does not deny that Google Shopping results, as a thematic division of Googles general search results, only display images of products provided by merchants who make available methods for the user to buy directly in its site, but do not display shopping comparison sites, such as Buscap and Bondfaro, since these sites do not sell products. It also does not deny that it displays photos and other information just for its own shopping results and not for third parties sites. Therefore, the dispute lies only in the issue of law, and, likewise, oral evidence is not required. THE PRELIMINARY ALLEGATIONS DEDUCED BY DEFENDANT. THE COMPLAINT IS NOT DEFECTIVE. There is no such a thing as a defective complaint, which met all the requirements established in Article 282 of the Civil Procedure Code, and it contains the logic report of the facts that describe the cause of action, which are compatible with the certain, determined and legally possible request. The need for an eventual indemnification to be defined in a future phase or to be determined by the judge does not make the request uncertain or undetermined. THERE IS NO EXTERNAL PRIORITY WHICH REQUIRES THE STAY OF THE LAWSUIT. The legal rule pointed out by Defendant is not applicable to this case. Using Article 265, IV, a, of the Civil Procedure Code, Defendant claims that the complaint filed by Plaintiff before the Secretariat of Economic Law, which deals with facts and addresses rights if not identical ones, almost coincident to the ones disputed in this lawsuit, between the same parties, is an external priority that leads to the stay of the lawsuit until a decision is rendered in the administrative sphere. However, this is not correct. The legal rule at issue reads as follows: "Article 265. The proceeding will be stayed: (...) IV - when the decision on the merits: a) depends on the trial of another case, or on the declaration of existence or inexistence of a legal relation, which is the main purpose of another pending lawsuit." Law is very clear upon referring to the trial of another pending case or lawsuit, and it means that a stay may only be granted if the main or incidental decision depends on the result of another judicial action; it is not applicable to administrative proceedings. THERE IS NO LACK OF INTEREST IN THE SUIT. The filed action is proper to the request sought in the complaint and the need for Court intervention is evidenced by the resistance offered by Defendant to Plaintiffs claim. The pendency of the administrative dispute of the issue cannot prevent Plaintiff from filing its claim with the Courts, under penalty of violation of the guarantee set forth in Article 5, item XXXV of the Brazilian Federal Constitution, according to which, law shall not exclude an injury or a threat to a right from the Courts review. THERE IS NO LACK OF STANDING TO FILE SUIT Contrary to Defendants claim, the draft of the complaint shows clearly that Plaintiff did not seek any claim in regard to third parties, but only claims which interfere with the legal sphere of Buscap and Bondfaro price comparison sites which it owns. THE MERITS. About the claims of abuse of economic power and practice of unfair competition: in summary, Plaintiff claims that Defendant uses its search service to favor Google Shopping site to the detriment of Plaintiffs sites. The claims are without grounds, for the following reasons: I - The Defendant is a profit legal entity governed by private law, just like several others in its line of business, and although its internet search service is the market leader in this segment, it is not the only one. Other companies, which are Defendants competitors also have internet generic search services, some equally well-known by a large part of the public. As a matter of fact, there are several search services at the disposal of the consumers who are looking for products, and at the disposal of the merchants intending to attract consumers. Just to mention some examples without intending to list them all, there are the Plaintiff's "sites", and also the search engines called Yahoo!, Bing (Microsoft) and Ask. Google search service competes with said search engines. Googles leadership in the internet search segment in Brazil cannot be mistaken with a monopoly of that activity.
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September 5th, 2012

Court of Appeals of the State of So Paulo

II - The use, by Buscap and Bondfaro sites, of an internet search service is not an essential or vital condition for the achievement of its corporate purposes. Buscap and Bondfaro are price comparison sites, that is, they offer a query box in which the user enters the product he is searching for and, then, they show the results with companies which sell said products with respective prices, allowing the comparison and choice of the most convenient deal by that specific consumer. Buscaps and Bondfaros sites revenues come from publicity income (advertisement placed on these sites) and the commissions paid by merchants to them. Hence, Buscaps and Bondfaros revenues are directly linked to the number of accesses their sites receive and to the number of closed deals from queries started in said sites. Happens that the Plaintiff does not need and is not dependent on Google Search to achieve these goals. The users may access Buscap and Bondfaro sites without passing through Google. It is enough to type these sites address in the browser and click enter. After having accessed Buscap or Bondfaro once, the user can use the functionality available in browsers and save the address as a favorite site, so that, in the next access, it will suffice to just open the list of favorite sites to access Buscap or Bondfaro. If the user chooses to access Buscap or Bondfaro through a search engine, it may do it through Yahoo!, Bing (Microsoft) or Ask. All these foregoing access options do not require access to Google, and, even then, consumers are fully able to easily access Buscap and Bondfaro sites and, with that, generate revenue for Plaintiff. III - Jointly, reasons explained in items I and II above, make clear that Defendant Google does not hold the monopoly of the internet search services and that Buscap and Bondfaro sites do not depend on Google web search for the success of their corporate activities. IV - Google Shopping is not a shopping comparison site like Buscap and Bondfaro. Actually, just by accessing the page www.google.com.br one may conclude that with the intention stated in the answer to improve its search service and supply user with a higher degree of accuracy in the desired results, Defendant has developed a routine which allows the internet user, in the same general screen search, to type the word to be searched and opt to search by theme, decreasing the inaccuracy of the results in case of words with multiple meanings or related to several areas. The Google search engine will list, in the first ranking positions, the results that best match the need of each user. In that sense, besides the general search indicated as search in the "web", when typing any word the user may choose the specific search that will relate that word specifically to the themes images maps news books and shopping among others. Therefore, Google Shopping is one more among the thematic search options of Google search. If the user opts for the shopping thematic search signaling his intent to buy something, the results will be the list of products supplied by merchants which make allow the user to directly buy in its site. By confessed option of the Defendant, there will not be price comparison sites results such as Buscap and Bondfaro, because these sites do not sell products, unless these sites, just like any other, buy publicity space in the mentioned shopping results page. V - In this context, Defendant admits that, both in the general search and in the thematic search, including the shopping search, the ranking of results is not neutral, that is, it is not controlled by an absolute and mechanical standard, such as, for example, alphabetical order. On the contrary, Defendant admits that the display order of the most relevant results is based on its algorithmic formula, developed with the clear intention of ranking first the results which best fit its criteria of quality and relevance to meet users actual intention. VI - And nothing prevents Defendant, in the conduction of its profit corporate business, from developing and using a tool (algorithmic formula) that returns results to a user query in Google search in a display order dictated by Google's quality and relevance criteria. Defendant does not have the legal obligation to grant to Plaintiffs sites this or that treatment, inserting them in this or that position in the ranking of search results conducted in its search service.

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September 5th, 2012

Court of Appeals of the State of So Paulo

VII - No consideration should be given, as sought in the complaint, to the claim that the Defendant artificially includes Google Shopping in the first rankings of search results at any query in Google search by a consumer looking to buy products, to the detriment of the competitor sites owned by Plaintiff, Buscap and Bondfaro. And that is so because, as seen above, Google Shopping is not a "site" to compare prices, but just a thematic search option within the generic search made available by Google Search. Therefore, it is not the Google Shopping "site" that is displayed in the first positions of the ranked results with photos of the searched products; what appear in the first positions, other than paid advertisements, are the sites of merchants that Defendant company understands best meet the quality and relevance criteria to fit the actual intention of the user who chose Google Search for that query. In light of the foregoing reasoning, the court understands that Defendants conduct does not characterize unfair competition or abuse of economic power. Now, only Plaintiffs claim that Defendant has embezzled the reviews (clients evaluations on the carried out purchases) is left to be decided. Plaintiff states that these are reviews gathered along more than 10 years by Buscap, Bondfaro and E-Bit sites, owned by Plaintiff, and Defendant has usurped said database. This allegation is rejected either. Plaintiff stores several reviews of internet users of Buscap and Bondfaro sites about the quality of the searched products or the quality of companies and merchants who offer said products online. A compilation in the format of a database (with evaluations from consumers about products) can only be considered an intellectual work if the author treats such comments, which are not his/hers, in a manner sufficiently different, so as to offer the user of the compilation something else, a functionality or aspect that did not exist before his intervention and that came up through his selection, organization or arrangement of the content. In this case, even if considers that the Plaintiff organized said evaluations and that the comments selection and their presentation format are sufficient to consider the data base to be an intellectual work subject to copyright protection (under Article 7, XIII, of Law n 9610/98), actually, there is no embezzlement in the use of said database by Defendant. From a search of any product (such as 40 LCD TV set, for example), made in Google site, whether a generic or thematic search (with the shopping theme), the information inherent to the pages indexed by Google search will appear in all results, regardless of the ranking, so that the internet user can see the results and have the minimum elements to decide on which result he should click, that will lead him directly to the desired page. In other words, each result displayed by a search engine such as Google, necessarily brings portions of the respective page (of the result) on the internet. Therefore, for example, among the hypothetical results for a query, the search engine will display a link to a certain store or brand, such as Sony, Samsung, Semp Toshiba or Panasonic, among others. That link will necessarily bring information on said stores or brands, information that may or may not be a protected intellectual work. However, this will not mean an undue use by Google just because the user had access to the information through its search mechanism. Anyway, the information continues to be displayed and treated as being the stores or the manufacturers or sites information. The source is mentioned at all times. That is why there is no undue use of a copyrighted work if a query conducted in Google turns out a result which directs the user to Buscap or Bondfaro and, from there, the user has access to the Plaintiff's compilation of reviews. In this event, the search engine does not use Plaintiffs database, but rather, turns out links which allow user to access said database, which will not be shown as being Googles.

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September 5th, 2012

Court of Appeals of the State of So Paulo

Even if the result is the page of a certain store and, in the result link there are stars which show that said store was evaluated by internet users, and further that said evaluations are those compiled by Plaintiff, no embezzlement of intellectual work will occur, since the user who intends to access the evaluations will know that the source is Buscap or Bondfaro, or another of Plaintiffs site. The very example used by Plaintiff in its complaint (pp. 13, item 46) as an embezzlement of its reviews by Defendant shows that the results with evaluations make express, visible and prompt mention to the source of the evaluations, in that case, to Buscap. The technical opinion entered by Plaintiff also shows that even in Google search results that display reviews compiled by Plaintiff, these reviews have been duly credited to Plaintiff, in that case, to Buscap site (pp. 120/121). Finally, the pointed out violation does not exist. In light of the above, and taking into account the whole content of these records, I DISMISS THE CASE IN THE MERITS. I condemn the Plaintiff to pay all court costs and fees, as well as a compensation to the Defendant's lawyers for the defeat in this action, which I hereby determine, with basis on Article 20, paragraph 4, of the Civil Procedure Code, at thirty thousand Reais (R$ 30,000.00). To be published, registered and notified.

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