This post concerns an unresolved US click fraud court case which raises questions such as - What are the  legal obligations to prevent click fraud in pay-per-click online or Internet advertising? There are lessons here for advertisers (ie those who place ads) as well as search engines and others who offer opportunities for pay-per-click online advertising.

Click fraud is an Internet sector term, not a legal term. It involves a human being or a robot computer program (ie bot) repeatedly clicking a hyperlinked pay-per-click advertisement. This results in inflated Internet advertising costs payable by advertisers (ie those who place and pay for the ads) who pay per click.

The brief facts in a recent US case are, Payday Advance Plus was an advertiser seeking to use pay-per-click advertising. On or about 3 January 2004 it entered into a contract to place pay-per-click Internet ads with Findwhat.com (renamed Miva, Inc in June 2005), a search engine. It was "on or about" because Payday can't find a signed contract.  
 

A New York court ordered on 11 March 2007 that Payday may proceed with a class action claiming breach of contract against Findwhat due to click fraud. The rationale for this court decision is noteworthy.

While allowing the breach of contract claim to proceed, the court accepted a motion to dismiss all other legal grounds for the click fraud claim. Those dismissed grounds include negligence, unjust enrichment, fraudulent concealment and civil conspiracy.

The breach of contract argument of Payday survived because US District Court Judge John G. Koeltl accepted Payday's argument that there existed an implied contract law covenant of "good faith and fair dealing" in Payday's contract with Findwhat: 

Payday alleges that click fraud increased the data recorded in ClickTracker, a software developered by Findwhat's advertising "affiliate", Advertising.com, Inc. Under their "affiliate relationship" Findwhat fed its client's selected keywords to Advertising.com which in return fed back Internet traffic to Findwhat's search result listings. In this quite usual pay-per-click arrangement the Findwhat funny business alleged to have taken place (and for which Payday says Findwhat is responsible) includes:

• use of bots (ie automated software) and individuals to commit click fraud;
• use of bots to "spoof" different reference points on the Internet to make it appear that clicks came from different sources; and
• secret bidding for keywords by the search engine company and Advertising.com.

It is also alleged Findwhat had little or no internal controls, policies or procedures to monitor click fraud. If Findwhat in fact lacks such items it will not help its defence against Payday's claims. Justice Koeltl comments are noteworthy:

All bold emphasis in all the above quotes is our. 

You can read the full judgement here: Payday Advance Plus, Inc. v. Findwhat.com, Inc., No. 06-cv-1923, 2007.

The case is part of a line of high profile click fraud cases involving allegations against Google and Yahoo! In July 2005, Yahoo paid an estimated US$4.95 million, all for the legal bills for the plaintiffs, to settle a class action lawsuit against it by plaintiffs alleging it did not do enough to prevent click fraud. In July 2006, Google settled a similar suit for US$90 million.

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Note on photos: Click fraud often involves use of a computer mouse. The two photos on this post are of Dr. Douglas C. Engelbart's mouse and hand. With Bill English he invented the computer mouse (and many other things that inspired developments in later decades for interactive digital media).