Beruflich Dokumente
Kultur Dokumente
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Plaintiff,
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CRITEO S.A.,
v.
STEEL HOUSE, INC.,
Defendant.
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v.
CRITEO S.A.,
Counter-Defendant.
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ATTORNEYS AT LAW
LOS ANGELES
attorneys, hereby responds to the complaint and demand for jury trial of plaintiff
and counter-defendant Criteo S.A. (Criteo), upon information and belief based
Criteo, who will resort to any means, including false and egregious accusations, to
protect its dying business model. Rather than transform itself, as others in the
industry have done, Criteos suit attacks the very essence of what it fears: A new,
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advertising (Ad Tech) industry, and ultimately render Criteos business model
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obsolete.
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At the heart of Criteos claims is the inaccurate notion that the entire Ad
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Tech industry believes and operates as Criteo does. It does not. Criteo
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which advertisers must choose either Criteo or SteelHouse. But this is simply not
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evolving marketplace. The industry itself operates akin to Wall Street where the
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the hopes of maximizing its return. Many online advertisers (e-tailers) reallocate
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their money on a weekly or even daily basis. Nothing is static in the industry, and
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the billions.
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Although Criteo and SteelHouse compete for clients in the Ad Tech industry,
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Criteo and SteelHouse offer drastically different products and use very different
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ATTORNEYS AT LAW
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where clients are charged each time a consumer clicks on one of Criteos ads.
click rate that is unexplainably and suspiciously high, four times as high as the rest
Where Criteo charges per click, SteelHouse believes that clicks do not singularly
define advertising, and charges clients for ads served (ads placed on the websites),
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solution for creating and executing ad campaigns. And where Criteo believes that
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it should have complete control over its clients ad campaigns; SteelHouse gives
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total control to the client. SteelHouses business model is about transparency, and
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offering its clients a creative solution, unlike Criteos black box operation.
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SteelHouses advertising suite and business model are truly unique within
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the Ad Tech industry. As a result, SteelHouse succeeded upon entering the market
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since October 2009, and has taken market share from other vendors, by offering
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provides its clients with the ability to develop, create, customize, and launch ad
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transitions, and countdown timers. Criteo offers no such solution. Not only does
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SteelHouse provide a creative software solution, but it also provides its clients with
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real-time data, which show its clients how consumers are reacting to their ads, and
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allows its clients to respond to consumers while they are on the advertisers
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website. These products and services are highly appealing to advertisers, who
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recognize the competitive nature of online advertising and want their ads to stand
out to consumers.
The industry agrees with SteelHouse, and more and more online marketing
vendors are moving away from a pure click-based concept. Up until recently,
Criteos superior click rate was enough to guarantee that clients would choose
advertising, they are choosing SteelHouse over Criteo, despite Criteos apparent
superior click rate. Troubled by its loss of market share, Criteos solution was to
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order to inflate its numbers and induce clients to choose SteelHouse over Criteo.
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business model is not based on clicks, which are the obsessive focus of Criteos
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denies the remaining allegations of Paragraph 1 of the Complaint, and avers that
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2.
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and particularly denies that it has counterfeited clicks or tricked any e-tailers or
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other clients, and therefore denies the allegations of Paragraph 2 of the Complaint.
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3.
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and particularly denies that it stole credit for sales, or that it artificially inflated and
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continues to artificially inflate key metrics of its performance, and therefore denies
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4.
and particularly denies that it stole credit for sales, or that it artificially suppressed
STEEL HOUSE, INC.S AMENDED ANSWERS AND
and continues to suppress the conversation rates of Criteo and other competitors,
and the ROAS of their respective e-tail clients, and therefore denies the allegations
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and particularly denies that it manipulated or exploited metrics, or that it made any
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6.
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SteelHouse admits that Criteo approached SteelHouse and conveyed its belief that
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SteelHouse was stealing credit for clicks, and admits that SteelHouse advised
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Criteo that it had no knowledge of any attribution issue, but would investigate the
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Complaint.
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7.
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and particularly denies that it counterfeited clicks, and that Criteo has suffered any
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any of Criteos lost revenue or market share is the result of SteelHouses superior
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product offerings and client service, which many clients have found preferable
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vendors. Companies compare many things when they compare products in head-
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Services, and Reporting and Services. SteelHouse therefore denies the allegations
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STATEMENT OF FACTS
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address on the internet that enables computers and other devices to visit the
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address. SteelHouse also admits that e-tailers often contract with multiple
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marketing vendors at the same time. SteelHouse denies that e-trailers track clicks
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SteelHouse also denies that when tracking is used, the only method of doing so is
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to add tracking codes to a URL. SteelHouse further denies that tracking code is
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15.
Google Analytics is the largest system for tracking website visits. Google
Analytics does not have a metric that tracks clicks. Rather, Google Analytics
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and particularly denies that the dominant web analytics solution, Google Analytics,
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17.
Coremetrics can track and measure clicks or Last-Click Attribution, and on that
basis, SteelHouse denies the allegations of Paragraph 17 of the Complaint.
Retargeting
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18.
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SteelHouse admits that Criteo uses Pay-Per Click, also called Cost-
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Per-Click (CPC), pricing model. SteelHouse denies that most marketing vendors
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use Pay-Per-Click. SteelHouse does not (and has not) used a Pay-Per Click or
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SteelHouse denies that the amount Criteo can charge its clients per
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click depends on its performance, but rather avers that the amount that Criteo
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charges its clients is based on the number of clicks that Criteo claims to have
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Criteos conversion rate or ROAS, and therefore denies the remaining allegations
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admits it and Criteo are competitors in the online marketing market, along with
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but avers that SteelHouse offers its clients a unique, customizable product that is
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offers retargeting as one part of a larger set of services it offers its clients.
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such allegations.
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clicks that Criteo claims to have generated, and therefore denies the allegations of
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and particularly denies that it has engaged in any unlawful conduct, counterfeiting,
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or fraudulent behavior.
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SteelHouse admits that, in its opinion, its products and services are
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ATTORNEYS AT LAW
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27.
clicks between two vendors. Companies compare many things when they compare
Creative Services, and Reporting and Services, and on these bases, admits that it
particularly denies that its claims in this email were false or misleading, or that it
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clicks between two vendors. Companies compare many things when they compare
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Creative Services, and Reporting and Services. Therefore, SteelHouse denies the
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31.
as to what metrics were used in the head-to-head comparison, and on that basis,
more than just a comparison of clicks between two vendors. Companies compare
SteelHouse avers that it won TOMS business because SteelHouse has numerous
features that Criteo does not offer. SteelHouse offers custom segmentation, self-
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TOMS actions with respect to Criteo, and on such basis, denies the allegations.
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comparison, what metrics were used in the comparison, and the results of the
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comparison, and, on that basis, denies the allegations. SteelHouse denies the
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such allegations.
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clicks between two vendors. Companies compare many things when they compare
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Creative Services, and Reporting and Services. SteelHouse also denies that its
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35.
such allegations.
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as to whether Criteo used Web traffic analysis software and what it learned from
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that software, and, on that basis, denies such allegations. SteelHouse denies the
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also denies that analytics tools solely track clicks; rather such tools track site visits
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and other metrics. SteelHouses code ensures that visits are properly recorded
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companies.
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also denies that analytics tools solely track clicks; rather such tools track site visits
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40.
Criteo lost clients, and on that basis, denies the remaining allegations of Paragraph
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and particularly denies that it engaged in any acts of counterfeiting, and therefore
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Criteos Chief Revenue Officer (Criteos CRO), and that Criteos CRO alerted
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such allegations.
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Criteos New York office, and that Criteos CRO and SteelHouses Chief
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admits that a member of Criteos Business Intelligence team attended the meeting
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by phone. SteelHouse admits that its CEO did not attend. SteelHouse further
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admits that Criteo explained that it believed SteelHouse was misattributing clicks,
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and that SteelHouse told Criteo that it would investigate the situation. SteelHouse
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denies the log files show counterfeit clicks. SteelHouse further admits that it
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informed Criteo that it was investigating the issue. SteelHouse denies all
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49.
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Marketing Officer that Criteo was planning to notify its clients about the
information that Criteo had shared with SteelHouse. SteelHouse admits that it
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tracking pixel was conflicting with Criteos tracking pixel, that it only affected a
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and that SteelHouse worked to correct the issue. SteelHouse denies all remaining
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Minimizer Tool was the source of any data discrepancy. SteelHouse denies
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conference call on May 12, 2016. SteelHouse admits that it told Criteo that a
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change to its code went live on May 5, 2015. SteelHouse denies all remaining
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client, and as to whether SteelHouse allegedly beat Criteo in the comparison, and,
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58.
SteelHouse admits that it received a letter from Criteo dated May 23,
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Creative Services, and Reporting and Services. SteelHouse therefore denies the
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vendors. Companies compare many things when they compare products in head-
Services, and Reporting and Services. SteelHouse otherwise lacks knowledge and
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vendors. Companies compare many things when they compare products in head-
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clients made business and purchasing decisions, and, on that basis, denies such
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Complaint.
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that its principal place of business is in California, and that it has advertised and
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sold products and services to e-tail clients through the United States. SteelHouse
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67.
(Fraud)
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68.
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70.
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denies that it counterfeited clicks, and therefore denies the allegations of Paragraph
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71 of the Complaint.
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when they compare products in head-to-head competitions. Click count is just one
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such allegations.
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advertising budget with Criteo, or why potential clients decided not to sign on with
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Criteo, and, on that basis, denies such allegations. SteelHouse denies all remaining
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82.
clicks, or made false or misleading statements, and therefore denies the associated
the Complaint are conclusions of law to which no response is necessary, but to the
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based not on click counts, but on a combination of the products and services that
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when they compare products in head-to-head competitions. Click count is just one
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the Complaint.
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88.
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89.
clicks between two vendors. Companies compare many things when they compare
counterfeited clicks, and particularly denies that its representations about its
products and services were false, and therefore denies the allegations of Paragraph
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89 of the Complaint.
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extent it is deemed an allegation of fact, SteelHouse denies that its statements were
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(Trade Libel)
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products and services. This representation was based not on click counts, but on a
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vendors. Companies compare many things when they compare products in head-
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Services, and Reporting and Services. SteelHouse therefore denies the remaining
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false representations, and therefore denies the allegations of Paragraph 101 of the
Complaint.
102. SteelHouse admits that it uses the wires of the United States in
states and various nations outside the United States. SteelHouse denies engaging
clicks, and therefore denies all remaining allegations of Paragraph 102 of the
Complaint.
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and particularly denies that it counterfeited clicks, and therefore denies the
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inflated its performance metrics. SteelHouse asserts that the remaining allegations
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are a conclusion of law to which no response is necessary, but to the extent they
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SteelHouse denies engaging in any fraudulent conduct, and therefore denies the
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misleading statements, and therefore denies the allegations of Paragraph 106 of the
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Complaint.
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of the requested relief and denies any allegations. SteelHouse respectfully requests
that Criteo take nothing from the Complaint, that SteelHouse be awarded
reasonable attorneys fees and expenses, and that SteelHouse be awarded any other
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AFFIRMATIVE DEFENSES
115. SteelHouse asserts the following affirmative defenses. There may be
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additional affirmative defenses to the claims alleged by Criteo that are currently
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Amended Answer to allege additional affirmative defenses in the event that its
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asserting these affirmative defenses, SteelHouse does not admit that it bears the
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burden of proving these affirmative defenses. Criteo bears the burden of proving
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in part, because it has failed to state a claim for which relief can be granted for
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each of its claims. With respect to its first and seventh claims, Criteo failed to
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the purchasing public. With respect to its second claim, Criteo failed to allege
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facts sufficient to state that SteelHouse engaged in fraudulent acts. With respect to
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its third and sixth causes of action, Criteo failed to allege facts sufficient to show
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fourth and fifth causes of action, Criteo failed to allege facts sufficient to show that
117. Upon information and belief, Criteos claims are barred by one or
more of the following doctrines: waiver, estoppel, and laches. Criteo told
but then allowed SteelHouse to remedy the alleged activity. Criteo informed
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SteelHouse that Criteo wanted to resolve this dispute amicably and that if
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SteelHouse did as Criteo wished, the dispute would go away. SteelHouse was
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therefore induced to change its code regarding its attribution system at Criteos
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request in order to pacify Criteo. Criteos claims are therefore barred under the
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emails containing allegedly false statements upon which Criteo bases its first and
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seventh causes of action for months, but Criteo failed to take any action or even
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(Unclean Hands)
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118. Upon information and belief, Criteos claims are barred, in whole or
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in part, by the doctrine of unclean hands. SteelHouse is informed and believes, and
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therefore alleges, that Criteo is engaged in a fraudulent scheme to falsely inflate its
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performance metrics that it reports to clients and potential clients. Criteo also
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SteelHouse were false. Criteo has therefore engaged in unlawful behavior, and its
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(Justification)
was engaged in lawful conduct. SteelHouses actions, with respect to the subject
matters alleged in each cause of action, were undertaken in good faith, with the
absence of intent to injure Criteo or other third parties, and constitute lawful,
proper, and justified means to further the sole purpose of engaging in and
continuing SteelHouses business. SteelHouse truthfully asserted its belief that its
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products and services were superior to Criteos, and SteelHouse engaged in lawful
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competition.
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(Privilege of Competition)
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actions are protected by the privilege of competition. SteelHouse and Criteo are
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services. The competitive privilege thus bars Criteo from recovery on each of its
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causes of action.
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(Intervening Causes)
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121. Criteos claims are barred, in whole or in part, because the damages
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the actions and decisions of multiple third party e-tail clients who independently
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made decisions with respect to running ad campaigns with the marketing vendor of
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their choice.
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(Lack of Standing)
122. Criteos claims are barred, in whole or in part, because Criteo lacks
standing to bring forth its claims. Criteo has not plead facts sufficient to show that
it has suffered actual injury from any alleged acts by SteelHouse of which Criteo
complains. Rather, Criteo claims injury to the Ad Tech industry as a whole and
third party e-tail clients. Therefore, Criteo lacks standing to bring its suit.
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(Lack of Causation)
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123. Criteos claims are barred, in whole or in part, because SteelHouse did
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Criteo.
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(Speculative Damages)
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124. Criteos claims are barred, in whole or in part, because any damages
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claimed by Criteo are speculative. Criteos injuries are based on its belief that any
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e-tail clients that worked with SteelHouse would have chosen to work with Criteo
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if the e-tail clients were aware of SteelHouses alleged conduct. Criteos alleged
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damages are thus based on lost profits which are based on the decisions of multiple
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damages are not available under applicable provisions of law, including but not
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126. Criteos claims are barred, in whole or in part, because Criteo has
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section 389.
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(Truth)
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A.
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B.
That the Court find that SteelHouse is entitled to recover its costs of
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by law; and
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C.
That SteelHouse be awarded such other and further relief that the
Court may deem just and proper.
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AMENDED COUNTERCLAIMS
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complete control to Criteo (along with a large budget), Criteo claims its click rate
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2.
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industryprovides each client the ability to create unique, customizable ads and
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services with greater choice and flexibility, SteelHouse has succeeded in attracting
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tactics. In doing so, Criteo hopes to protect the secret to its past success:
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artificially high and manufactured click-count numbers. Because Criteo charges its
incentive to drive up its click numbers. Criteo does this by masking the source of
its attributions and fraudulently manufacturing and enhancing its click numbers.
4.
Criteos users generate 25% of its clicks. Such behavior by real human users is
highly unlikely. This behavior is indicative of adware, bots, click farms, or other
code created by Criteo or its affiliates to generate clicks and drive up Criteos
click-count numbers.
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5.
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numbers, Criteo has deceived its own clients, and diverted actual and potential
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clients from SteelHouse. Criteo has compounded that behavior by making false,
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misleading, and malicious statements about SteelHouse directly to its clients (prior
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to the filing of any lawsuit). These false allegations have not only caused
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but have also resulted in loss of actual and potential clients, and loss of revenue.
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innovative newcomer that does not charge e-tailers based on clicks, Criteo seeks to
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maintain a business model that rewards Criteo for its false and misleading behavior
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and distract unwanted attention from Criteos own conduct. Criteos actions create
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7.
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injury. SteelHouse seeks actual, punitive, treble, and compensatory damages, and
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enhancing and manufacturing its click count by falsely attributing clicks with no
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attributable source; (ii) enhancing and manufacturing its click count by falsely
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attributing clicks that occur after a consumer has purchased a product from a
website and engaging in click cluster generation; (iii) engaging in other conduct
SteelHouse, its officers, agents, servants, employees, attorneys, and any other
persons who are acting in concert or participation with it, its services, or its
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THE PARTIES
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the French Republic, with its principal place of business in Paris, France.
II.
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U.S.C. 1331 and 1367 as this Court has jurisdiction over the counterclaims that
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arise under federal law, and supplemental jurisdiction over claims that arise under
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state; and the matter in controversy exceeds the sum of $75,000, exclusive of
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14.
Times) and data is sent from the consumer to the publisher and back to the
impression loads in a users web browser, information about the page and the user
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auctions occur in parallel. The winners ad is then loaded into the webpage nearly
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tailers often work with multiple marketing firms at the same time and determine
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where and how to allocate their advertising budget on a daily basis. E-tailers track
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unique tracking code. Web analytic providers track user engagement with
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Tech industry. Criteo earns at least ten times the revenue of SteelHouse. Criteos
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Criteo. Criteos clients do not control the visual creative in their ads, impressions,
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with [Criteos] dashboard, we werent able to have much control over the
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January 29, 2016 email from Criteo salesperson David Hughes to Chuck Melber at
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Nomad Goods, Inc., Hughes stated that theres literally no extra dev[elopment]
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17.
performance without client insight or control. Indeed, Criteo flaunts that its clients
provide Criteo with a large budget with minor oversight. For instance, during a
in June 2014, Criteos Chief Financial Officer, Benoit Fouilland, stated that 70% of
provide volume at the return of expenses . . . they are willing to take it. Unlike
Tech.
Criteo Claims The Highest Click Rate In The Industry
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18.
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clicks. Clicks refers to any page view on an advertisers website that contains
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Criteo in the query string parameters of the unique tracking code that each e-tail
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tracking codes, Criteo appears in the utm parameter of the tracking code
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http://www.example.com/home.html?utm_source=Criteo_x&utm_medium=
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display.
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its numbers. Criteo claims it has the highest click rate in the retargeting industry,2
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industry giants Google and Facebook. No company has ever come close to the
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Figure 1
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20.
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DMEurope, a European newswire available via the internet, that it achieve[s] ten
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times higher click through rates than the market average, having achieved around
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.06 percent and rising. In February 2014, at the Stifel Nicolaus Technology,
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Internet & Media Conference held at the Fairmont Hotel in San Francisco,
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http://www.stifel.com/newsletters/eimages/2014/corporate_events/tech_conference
/invite/stifel_tech_2014_invite_ce.pdf.
STEEL HOUSE, INC.S AMENDED ANSWERS AND
Rudelle, touted that Criteos click through rate is on average 3 or 4 times higher
than the typical click through rate you would see in the internet.
21.
In 2015, Eric Eichmann, who at the time was President and COO of
websitein which Criteo claimed that its click through rate is seven times the
industry average. See Figure 2. All of Criteos statements regarding its click rates,
Figure 2
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Criteos click rate is not entirely based on actual user activity, and as a
22
result is false and/or misleading. On information and belief, Criteos click rate is
23
fraudulent because a large percentage of its clicks occur in click clusters as a result
24
of adware, click bots (a software application that runs automated tasks, such as
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ATTORNEYS AT LAW
LOS ANGELES
23.
clients that overlap with Criteo, including all 37 shared clients,4 to analyze the
source of Criteos clicks. This analysis is across 14 industries (e.g. fashion, sports,
healthcare, media, and others), includes more than 5.5 billion rows and 21
terabytes of data, and is ongoing. Using this data, SteelHouse analyzed the
the internet users globally unique identifier (GUID).5 Page view data logs,
which include GUID information, indicate how the user arrived at the advertisers
website. Page view data logs include both the referrer and the parent referrer. This
10
data, which spans from January 1, 2016 to September 11, 2016, shows an
11
12
13
None. Put simply, more than half of the claimed clicks do not originate from any
14
known website or publisher. This means the source of origin or the parent referrer
15
for the click is empty. Although the source of an ad may sometimes be unknown
16
due to security technology, like Secure Sockets Layer (SSL), the average
17
percentage of clicks from unattributable sources due to security for any marketing
18
vendor generally is less than 8%. Criteos percentage of clicks that have no
19
attributable source is more than six times the industry average. Because all
20
marketing vendors, including Criteo and SteelHouse, bid on ad space from the
21
same publishers (the majority of which are not secure), it is implausible that Criteo
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ATTORNEYS AT LAW
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could have six times the number of clicks with no attributable source than the rest
25.
click originated) is standard internet protocol. The sheer volume of Criteo clicks
stripped out the publishers information or that these clicks are fake. In other
8
9
26.
Criteo falsely elevates its click count. For e-tail clients singularly focused on click
10
counts, Criteos fraudulent behavior makes it impossible for any other marketing
11
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27.
13
consumers purchase a product. Because the ultimate goal of serving ads is actual
14
e-commerce sales, marketing vendors generally stop serving consumer ads once
15
the consumer has made a purchase from a particular website. Criteo, however,
16
does not.
17
28.
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September 11, 2016, and found that 20.31% of Criteos clicks occur after a
19
20
post-sale ads drives up Criteos click rate enabling it to charge its clients more,
21
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29.
23
click clusters. Click clusters are patterns of clicks that occur in high volume from
24
the same user for the same advertiser in a short period of time. Across the 99
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ATTORNEYS AT LAW
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30.
source. But for the other 45.2% where the referrer was known, SteelHouses
See Figure 3. In contrast, when Criteos ads were served on Facebook, a reputable
Figure 3
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31.
percentage of times a user generated two or more clicks within a 30-minute period
across the 99 accounts from January 1, 2016 to September 11, 2016. SteelHouse
clusters. 44.9% of Criteos apparent clicks are from users clicking the same
standard.
32.
This means that almost 1 out of every 2 users who clicks on a Criteo
10
11
website that one typically sees with a real user. This lack of activity indicates
12
these clicks are not a result of actual internet users making authentic clicks.
13
33.
14
15
clusters even over a longer timeframe. Criteos click clusters thus are not limited
16
to 30 minutes after an initial click, but continue to occur for hours, days, and weeks
17
18
34.
19
September 11, 2016 to determine the number of times a single user clicked on an
20
ad for the same advertiser in a rolling 30-day window. 25% of Criteos clicks
21
occur in click clusters, where a single user clicked on an ad for the same
22
advertiser at least eight times to as many as 1,311 times in a 30-day period. Such
23
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adware, bots, click farms, or other code created by Criteo or its affiliates to
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26
35.
27
Criteos overall clicks occur in click clusters. While a real human user may click
28
on a single ad or even two or three ads for the same advertiser within a 30-day
ATTORNEYS AT LAW
LOS ANGELES
period, it is improbable that a real user would click ads at the high volumes
36.
clusters of five of more clicks for a single user clicking a single advertiser in a 30-
day period. 20.1% of clicks occurred in click clusters of ten or more clicks in a 30-
day period. 13.0% of clicks occurred in click clusters of 15 or more clicks; 9.2%
of clicks occurred in click clusters of 20 or more clicks; and 2.4% of all clicks
Figure 4
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37.
But while these clicks account for a large percentage of Criteos total
22
click count, only a small fraction of users account for these clicks. 3.6% of
23
users clicked a Criteo ad for the same advertiser eight or more times in a 30-day
24
period, but these users generated more than 25% of Criteos total clicks.
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38.
Individual clients show similar results. For Client A,6 20.8% of clicks
occurred in click clusters of five or more clicks for a single user in a rolling 30-day
time period; 10.9% of clicks occurred in click clusters of ten or more clicks; 7.8%
click clusters of 20 or more clicks; and 3.7% of clicks occurred in click clusters of
50 or more times.
39.
analyzed, with click clusters intermixed with single clicks by individual users in a
rolling 30-day time period. See Figure 5 (click clusters indicated in red). In
10
addition to the frequency with which these clusters occur, there is often very little
11
time between clicks, with multiple clicks occurring in rapid succession in a rolling
12
30-day time period. See Figure 6 (time between clicks highlighted in yellow).
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Figure 5
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Client A preferred that its name was not mentioned in SteelHouses Amended
Answer and Counterclaims. To respect that e-tailers wishes, that e-tailer is
28 referred to as Client A.
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ATTORNEYS AT LAW
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Figure 6
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40.
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clicks: a mere 3.7% of users clicked on a Client A ad at least five times in a 30-
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day period, but accounted for nearly one quarter of all of the clicks.
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41.
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clicks for Brilliant Earth. For Brilliant Earth, 33.0% of clicks occurred in click
17
clusters of five or more clicks for a single user in a rolling 30-day time period;
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17.1% of clicks occurred in click clusters of ten or more clicks; 10.7% of clicks
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more clicks. Like Client A, a small portion of users generated a significant portion
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times in a 30-day period, but accounted for nearly one quarter of all of the clicks.
24
42.
25
remained true when analyzing Criteos clicks for Lens.com. For Lens.com, 23.4%
26
of clicks occurred in click clusters of five or more clicks for a single user in a
27
rolling 30-day time period; 15.5% of clicks occurred in click clusters of ten or
28
more clicks; 13.0% of clicks occurred in click clusters of 15 or more clicks, 12.3%
ATTORNEYS AT LAW
LOS ANGELES
occurred in click clusters of 50 or more clicks. Again, like Client A and Brilliant
accounted for nearly one quarter of all of the clicks. This pattern of a small
43.
focused its analysis on individual users and IP addresses. Across all 99 accounts
10
analyzed over the entire 9 month period, the most active user clicked a Criteo ad
11
12
20,647 times across 96% of all 99 advertisers queried. Such behavior is not typical
13
of real human users, but rather adware, bots, click farms, or other code created by
14
Criteo or its affiliates to generate clicks and drive up Criteos click-count numbers.
15
44.
16
boast similar success. This is not surprising, given Criteos pervasive click
17
18
discovered that Criteos referred traffic has a 76.08% bounce or abandonment rate.
19
A bounce rate is the rate at which a user abandons the site with one page view and
20
no interaction with the site within 30 minutes of clicking on the ad. Once again,
21
22
bounce rate is more than double the industry average. See Figure 7. And despite
23
Criteo generating on average four times the number of sessions as its competitors,
24
Criteos average conversion rate is barely half of its competitors. Because the
25
behavior patterns of the users are contrary to actual internet users typical web
26
behavior, these patterns indicate that bots, adware, or other automated code
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Figure 7
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and generate increased revenue, Criteo or its affiliates regularly inject adware into
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users personal computers, serve ad impressions through the adware, and buy
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untrustworthy.
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46.
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inject its ads into a users computer even when unwanted and take credit for clicks
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47.
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April 2015, Professor Edelman gave a presentation at the 2015 UK Investor Show
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charging advertisers for traffic that already occurred on Zapposs website. Such
practices have damaged SteelHouse, other advertisers, and the Ad Tech industry by
making online marketing vendors less trustworthy to their clients and consumers.
48.
Senate. In a letter to the Federal Trade Commission, two U.S. Senators recently
CPC model upondue to the rampant problem involving fake clicks generated by
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clicks and generating click clusters has damaged SteelHouse and prohibited
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SteelHouse from being able to compete fairly for e-tail clients singularly focused
16
on click rates.
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50.
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false data into Google Analytics and other analytic systems. Criteo is then able to
19
falsely advertise click rates that are at least four times higher than its competitors
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marketing vendor. More disturbingly, Criteo charges its clients for all of these
22
clicks, further inflating its click count and revenue. Upon information and belief,
23
at least $400 million of Criteos projected 2016 revenue of $1.7 billion is based on
24
fraudulent clicks.
25
51.
26
skews the relative performance of Criteo versus other marketing vendors giving
27
Criteo an unfair and artificial advantage. In turn, advertisers who are unaware of
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this behavior are making inaccurate decisions around budget allocations that
52.
other practices, Criteos statements regarding its click rate have deceived, or are
intended to deceive, actual and potential clients of Criteo and divert actual and
potential clients from SteelHouse. For clients whose only concern is click rate,
SteelHouse has lost clients and potential clients based on Criteos fraudulent click-
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others.
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53.
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Indeed, it refuses to charge its clients on a CPC basis. Rather, to differentiate itself
17
creating distinct products and services, including its new Creative Ad Suite.
Criteos Unlawful Attempt To Discredit SteelHouse
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54.
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and false attack against SteelHouse in an effort to discredit the upstart, and
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55.
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SteelHouse clientsincluding, but not limited to, Brilliant Earth, Nike, RevZilla,
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Jack Rogers USAthat SteelHouse was purposely and maliciously altering its
56.
code change on May 5, 2016 to ensure no such attributions could occur, Criteo
made oral and written representations to SteelHouses current and potential clients
knew or should have known these statements were false, as through its discussions
with SteelHouses executives, it knew that any misattribution was inadvertent and
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11
Criteo Senior Product Manager Robert Shaw told SteelHouse on a conference call
12
on May 12, 2016, that it would take him up to six months to QA (conduct quality
13
assurance) and determine if the change was effective. Without waiting to verify
14
that the change had worked, Criteo continued its campaign to contact SteelHouses
15
current and potential clients and disparage the company and wrongly claim that
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57.
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knowing that SteelHouse was working with Criteo to resolve any issues relating to
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58.
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SteelHouse clients into believing that SteelHouse was somehow inflating its
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59.
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60.
Unique Vintage, a SteelHouse client, even though that client was not currently
using Criteos services. In fact, that client had not worked with Criteo since the
previous year. This client also reached out to SteelHouse regarding Criteos
persistence in accusing SteelHouse of fraud. Indeed, David Nutt sent this client
and accused SteelHouse of inflated click and post-click volumes. Between May
10
9 and May 13, 2016, David Nutt similarly pursued several SteelHouse clients,
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61.
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clients, including Brads Deals, JibJab Media, Jack Rogers USA, and Carved.
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business practices.
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62.
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practices. These conversations also occurred prior to the filing of any lawsuit.
22
63.
Criteo knew or should have known that its statements were false
23
and/or misleading. In fact, Criteo knew that the alleged fraudulent behavior it
24
accused SteelHouse of was unintentional, and not fraudulent. Criteo knew that
25
SteelHouse was collaborating with Criteo to address the alleged issue. Criteo and
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made edits to that statement. But Criteo never informed SteelHouse which clients
28
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were going to receive this email. Nor did Criteo tell SteelHouse that it was going
to target SteelHouse clients that were not even working with Criteo.
64.
or should have known that actual and potential clients would act in reliance on
65.
10
clients, including VistaPrint, Nike, TOMS, Thrift Books, Shutterfly, RevZilla, and
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others, have left SteelHouse, or substantially reduced the amount of money they
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SteelHouses conduct.
15
FIRST COUNTERCLAIM
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66.
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Counterclaims, Criteo has violated Section 43(a) of the Lanham Act, which
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68.
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advertising about the nature, quality and characteristics of Criteos products and
25
services, including that its click rate is the highest in the retargeting industryfour
26
times its competitors. At times, Criteo even claims its click rate is somehow seven
27
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69.
Criteo or its affiliates inflate its click count through the use of adware, click bots,
or code that Criteo or its affiliates developed. More than half of Criteos clicks
have no attributable source. 20.31% of its clicks are generated after a consumer
has already purchased a product from a website, 44.9% of its clicks occur in click
clusters of two or more clicks in a 30-minute window, and 25% of Criteos clicks
occur in click clusters, of at least eight clicks, in a 30-day period. The inclusion of
purchased a product, and that occur in click clusters, artificially inflate Criteos
10
click count. Criteo then advertises its enhanced click rate to induce clients to use
11
its products and services. Criteos statements regarding its click count are false
12
and/or misleading.
13
70.
14
potential clients of Criteo and divert actual and potential clients from SteelHouse.
15
Based on Criteos claimed superior click rate, SteelHouses potential and current
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71.
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purchasing decisions of e-tailers, because Criteo advertises, at least, four times the
19
click rate as any other retargeting company. Such a claim influences the
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72.
22
commerce because its products and services are advertised and sold across state
23
lines through the internet. Its salesforce and officers have made false and
24
misleading statements regarding its click rate via email. Indeed, Criteos click rate
25
is readily available on its website. Criteo advertised and sold its products and
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73.
a result of Criteos false and misleading statements, SteelHouse has lost business.
STEEL HOUSE, INC.S AMENDED ANSWERS AND
74.
Tech industry as a whole has been injured, and Criteo has lessened the good will
SECOND COUNTERCLAIM
7
8
75.
10
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12
13
14
advertising about the nature, quality and characteristics of Criteos products and
15
services, including that its click rate is the highest in the retargeting industryfour
16
times its competitors. At times, Criteo even claims its click rate is somehow seven
17
18
78.
19
reasonable care, that the above-reference statements were false and/or misleading
20
because Criteo or its affiliates inflate its click count through the use of adware,
21
click bots, or code that Criteo or its affiliates developed. More than half of
22
Criteos clicks have no attributable source. 20.31% of its clicks are generated after
23
a consumer has already purchased a product from a website, 44.9% of its clicks
24
occur in click clusters of two or more clicks in a 30-minute window, and 25% of
25
Criteos clicks occur in click clusters, of at least eight clicks, in a 30-day period.
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27
has already purchased a product, and that occur in click clusters, artificially inflate
28
Criteos click count. Criteo knew or should have known that its data did not
ATTORNEYS AT LAW
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support the conclusion that real internet users were engaging in actual clicks on all
of its ads. Yet, Criteo falsely advertises its enhanced click rate to induce clients to
4
5
6
79.
potential clients of Criteo and divert actual and potential clients from SteelHouse.
80.
purchasing decisions of e-tailers because it advertises at least four times the click
rate as any other retargeting company, which influences the purchasing decisions
10
81.
11
activities in State of California and has its U.S. headquarters in the State of
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82.
17
result of Criteos false and misleading statements, SteelHouse has lost business.
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83.
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Tech industry as a whole has been injured, and Criteo has lessened the good will
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THIRD COUNTERCLAIM
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84.
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85.
Criteos acts and practices constitute unlawful, unfair and/or fraudulent business
acts or practices within the meaning of the UCL, including, but not limited to,
falsely enhancing its click rate by claiming credit for clicks with no attributable
source, clicks after a consumer has purchased a product from a website, and
86.
Criteos acts and practices are unlawful because they violate section
43(a) of the Lanham Act, 15 U.S.C. 1125(a), California Business & Professions
10
11
interference with prospective economic advantage, and trade libel as set forth
12
13
87.
14
through oral communications by its salesforce, and on its own website that it has
15
the highest click rate in the retargeting industry, at least four times that of its
16
17
superior click rate is the result of fake clicks generated through adware, click bots,
18
or code that Criteo or its affiliates developed to generate fake clicks and mask the
19
20
88.
21
count rates in making business decisions. SteelHouse business model is not click-
22
23
creating distinct products and services, including its new Creative Ad Suite.
24
25
26
89.
Criteos acts and practices were fraudulent within the meaning of the
UCL because they were designed to deceive and defraud SteelHouse and e-tailers.
90.
27
care, that its statements about its click rate were false and misleading because
28
Criteo counts clicks with no attributable source, that occur in clusters, and after a
ATTORNEYS AT LAW
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consumer made a purchase. These clicks were generated through adware, click
91.
Criteos unlawful acts and practices, and has been irreparably harmed and will
FOURTH COUNTERCLAIM
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92.
Criteo knew that SteelHouse had contracts with its e-tail clients
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14
Criteo knew these clients were shared clients. Indeed, Criteo directly referenced
15
the fact that these e-tailers were clients of SteelHouse in Criteos communications
16
to these e-tailers.
17
95.
18
advertising about the nature, quality and characteristics of Criteos products and
19
services, including that its click rate is the highest in the retargeting industryfour
20
times its competitors. At times, Criteo even claims its click rate is somehow seven
21
22
96.
23
artificially inflated its click-count numbers through the use of adware, click bots,
24
and code. Criteo made these false statements to disrupt SteelHouses contractual
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26
97.
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clients to target. Then Criteo made false statements orally and via email to these
with SteelHouse.
98.
lost actual clients with whom it had contractual relationships including, but not
8
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99.
clients, and by extension, revenue. SteelHouses damages include all lost profits,
expenses and prospective profits, in an amount to be determined at trial.
11
FIFTH COUNTERCLAIM
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102. Criteo knew that SteelHouse had relationships with these e-tailers.
20
Criteo knew these clients were SteelHouse clients as they were shared clients.
21
Moreover, Criteo directly referenced the fact that these e-tailers were clients of
22
23
24
advertising about the nature, quality, and characteristics of Criteos products and
25
services, including that its click rate is the highest in the retargeting industryfour
26
times its competitors. At times, Criteo even claims its click rate is somehow seven
27
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104. These statements are misleading because Criteo or its affiliates have
artificially inflated its click count numbers through the use of adware, click bots,
and code. Criteo made these false statements to disrupt SteelHouses relationships
105. Criteo also intentionally made false and misleading statements about
false and misleading statements accusing SteelHouse of fraud, Criteo has induced
10
11
advertising budget with SteelHouse including, but not limited to Nike, VistaPrint,
12
13
potential clients were dissuaded from retaining SteelHouse. Criteos conduct and
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16
California Business & Professions Code sections 17200 et seq. and 17500 et seq.,
17
as set forth above. SteelHouse has suffered actual harm from Criteos wrongful
18
19
determined at trial.
20
SIXTH COUNTERCLAIM
21
Trade Libel
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25
oral communications by its salesforce, and on its own website that its click rate is
26
the highest in the retargeting industryfour times its competitors. At times, Criteo
27
even claims its click rate is somehow seven times the industry average.
28
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109. In sum, Criteo claims its products and services are superior to
SteelHouse, and its other competitors. These statements are false, as Criteos
apparent superior click rate is the result of fake clicks generated through adware,
click bots, or code that Criteo or its affiliates developed to generate fake clicks and
110. Criteo also made claims both orally and in written emails to actual and
scheme to inflate its numbers and deceive clients. These statements are false
because SteelHouse has not engaged in fraud, nor intentionally inflated its click
10
11
count numbers.
111. Criteo made these statements with actual knowledge of their falsity, or
12
did not use reasonable care in determining their truth or falsity. Criteo advertised
13
its false click rates with full knowledge that its data did not support the conclusion
14
that real internet users were engaging in actual clicks on all of its ads. Further,
15
16
17
code change to stop this behavior. Despite claiming to SteelHouse that it would
18
take Criteo several months to determine whether the code change was working,
19
20
fraud immediately after the code change and without waiting for confirmation.
21
Criteo has acted with actual malice in disparaging the quality of SteelHouses
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form of lost clients, lost advertising budgets, and loss of potential clients. Criteos
statements have also severely damaged the goodwill and reputation of SteelHouse
and its products and services. SteelHouse seeks actual and special damages in an
amount to be proven at trial, as well as punitive damages to punish Criteo for its
9
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agents, servants, employees, attorneys, and other persons who are acting in concert
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(i)
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(ii)
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(iii)
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(iv)
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(v)
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(b)
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(c)
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For such other relief as the Court may deem just and proper.
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By /s/Marvin S. Putnam_________
Marvin S. Putnam
Attorneys for Defendant and CounterClaimant Steel House, Inc.
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SteelHouse hereby demands a jury trial on all claims and issues triable to a jury.
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By /s/Marvin S. Putnam_________
Marvin S. Putnam
Attorneys for Defendant and CounterClaimant Steel House, Inc.
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