You are on page 1of 16

Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 1 of 16

1 COOLEY LLP
ANGELA L. DUNNING (212047)
2 (adunning@cooley.com)
JUDD D. LAUTER (290945)
3 (jlauter@cooley.com)
ADDISON M. LITTON (305374)
4 (alitton@cooley.com)
3175 Hanover Street
5 Palo Alto, CA 94304-1130
Telephone: (650) 843-5000
6 Facsimile: (650) 849-7400

7 Attorneys for Plaintiff


VISUAL SUPPLY COMPANY
8

9 UNITED STATES DISTRICT COURT

10 NORTHERN DISTRICT OF CALIFORNIA

11 VISUAL SUPPLY COMPANY, a Delaware Case No.


corporation,
12 COMPLAINT FOR (1) VIOLATION OF THE
Plaintiff, LANHAM ACT, 15 U.S.C. 1125(a);
13 (2) BREACH OF CONTRACT; (3) BREACH OF
v. DUTY OF GOOD FAITH AND FAIR DEALING;
14 (4) VIOLATION OF CAL. BUS. & PROF CODE
PICSART, INC., a Delaware corporation §§ 17200 ET SEQ.; AND (5) VIOLATION OF
15 CAL. BUS. & PROF CODE §§ 17500 ET SEQ.
Defendant.
16 DEMAND FOR JURY TRIAL

17

18 Plaintiff Visual Supply Company (“VSCO”), producer of the award-winning VSCO photo

19 editing mobile application, files the following Complaint against Defendant PicsArt, Inc.

20 (“PicsArt”) and alleges as follows:

21 NATURE OF THE ACTION

22 1. VSCO brings this action against PicsArt for monetary and injunctive relief to

23 remedy PicsArt’s ongoing campaign of false advertising and misuse of VSCO technology.

24 2. VSCO’s mobile app for iOS and Android devices is one of the world’s most popular

25 photo editing apps. Among other innovative and creative tools offered through the app are more

26 than 170 proprietary presets—preconfigured digital image display settings, or “filters”—that allow

27 users to enhance their digital photos with a variety of effects. VSCO has invested significant time

28 and resources in developing its presets, which represent valuable intellectual property of VSCO.
COOLEY LLP
ATTORNEYS AT LAW
1.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 2 of 16

1 3. Defendant PicsArt offers a competing photo editing app, and touts itself as “the #1

2 photo editor & pic collage maker on mobile” with “500 million+ installs strong.” Among its photo

3 editing tools, the PicsArt application has a library of purportedly exclusive presets.

4 4. On information and belief, beginning at least as early as the summer of 2018, PicsArt

5 used registered VSCO accounts to exploit access to VSCO content and reverse engineer at least

6 nineteen of VSCO’s proprietary filters, which it then offered on PicsArt’s own app. PicsArt also

7 commenced a campaign of false advertising, which is still ongoing, pursuant to which it falsely

8 represents to prospective customers that it “created” its premium content filters and that they are

9 “unique” or “exclusive” to PicsArt, when in fact it has pilfered many of its filters from VSCO.

10 Although PicsArt removed a number of the filters in question when VSCO called out its improper

11 conduct, at least four of VSCO’s proprietary filters remain available on PicsArt’s app, and PicsArt

12 has refused to account for, or even acknowledge, the substantial harm that its unlawful conduct has

13 caused, and is continuing to cause, VSCO.

14 5. PicsArt’s misconduct constitutes false advertising in violation of Section 43(a) of

15 the federal Lanham Act, 15 U.S.C. 1125(a), as well as a flagrant breach of the VSCO Terms of Use

16 Agreement, which expressly prohibits users from copying VSCO content or using it to develop a

17 competing product. PicsArt’s conduct also constitutes a breach of the duty of good faith and fair

18 dealing, unfair competition in violation of Cal. Bus. & Prof. Code §§ 17200 et seq., and false

19 advertising in violation of Cal. Bus. & Prof. Code §§ 17500 et seq.

20 PARTIES, JURISDICTION AND VENUE

21 4. Plaintiff VSCO is a Delaware corporation with its principal place of business in

22 Oakland, California.

23 5. Defendant PicsArt is a Delaware corporation with its principal place of business in

24 San Francisco, California.

25 6. The Court has original jurisdiction under 28 U.S.C. § 1331, as this is a civil action

26 arising under 15 U.S.C. § 1125(a). The Court has supplemental jurisdiction over all other claims

27 pursuant to 28 U.S.C. § 1367 insofar as all claims alleged herein form part of the same case or

28 controversy under Article III of the United States Constitution.


COOLEY LLP
ATTORNEYS AT LAW
2.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 3 of 16

1 7. Venue is proper in this district because PicsArt resides and regularly conducts

2 business in this district, because a substantial portion of the unlawful activities alleged herein

3 occurred in this district, because VSCO was harmed in this district as a result of PicsArt’s unlawful

4 conduct, and because PicsArt, through its agents and employees, consented to jurisdiction in this

5 district as set forth in the Agreement at issue.

6 FACTUAL BACKGROUND

7 VSCO AND THE VSCO APP

8 8. VSCO was founded in 2011 as a developer of digital photo editing tools marketed

9 toward professional photographers and graphic designers. VSCO’s experience developing high

10 quality offerings for photography professionals paved the way for the success of its eponymous

11 photo editing app. The VSCO app, which allows users to capture, edit, and share digital photos,

12 was an immediate success and quickly became one of the world’s leading photo editing apps for

13 professional and lay users alike.

14 9. Users of the VSCO app are provided access to VSCO’s library of presets, which are

15 the output of years of research, hard work, and fine-tuning by VSCO’s color scientists. VSCO’s

16 presets have enjoyed strong customer engagement, resulting in more than 450 million downloads,

17 and its app has been recognized as among the industry’s best. For instance, the VSCO app has

18 been named as one of Google Play’s Best Apps and an Apple iOS App of the Year Runner Up.

19 VSCO was also named as a Best Mobile App Runner-Up (TechCrunch); one of the Top 100 iPhone

20 Apps of All Time and Top 5 Photo Apps of all Time (Mashable); and one of the Top 20 Apps of

21 the Year (Gizmodo). Fast Company lauded VSCO as one of the World’s Top 10 Most Innovative

22 Companies in Social Media.

23 10. VSCO offers a free version of the VSCO app with a limited number of presets and

24 basic editing tools, as well as a paid membership that unlocks access to VSCO’s full presets library

25 and advanced editing tools. Regardless of which version of the VSCO app users download, all

26 registered users are required to assent to the VSCO Terms of Use Agreement (“Agreement”) and

27 affirmatively accept the provisions and restrictions set forth therein.

28
COOLEY LLP
ATTORNEYS AT LAW
3.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 4 of 16

1 11. Section C of the “Use of Our Service” Section of the Agreement (titled “Service

2 Rules”) prohibits users from “copying, distributing, or disclosing any part of the service in any

3 medium.”

4 12. Section B of the “End User License Grant” section of the Agreement (titled “Mobile

5 Software”) states, in relevant part, that users “may not: (i) modify, disassemble, decompile or

6 reverse engineer the Mobile Software or use the Mobile Software to develop a competing product.”

7 (Emphasis added.)

8 13. The “Our Proprietary Rights” section of the End User License Grant section of the

9 Agreement states, in relevant part:

10 [T]he Service and all materials therein . . . , including, without limitation, software,

11 images, text, graphics, illustrations, logos, patents, trademarks, service marks,

12 copyrights, photographs, audio, videos, music, and User Content belonging to other

13 Users (the “VSCO Content”), and all Intellectual Property Rights related thereto,

14 are the exclusive property of VSCO and its licensors (including other Users who

15 post User Content to the Service). Except as explicitly provided herein, nothing in

16 this Agreement will be deemed to create a license in or under any such Intellectual

17 Property Rights, and you agree not to sell, license, rent, modify, distribute, copy,

18 reproduce, transmit, publicly display, publicly perform, publish, adapt, edit or

19 create derivative works from any VSCO Content. Use of the VSCO Content for

20 any purpose not expressly permitted by this Agreement is strictly prohibited.

21 PICSART AND ITS MISCONDUCT

22 14. PicsArt is a developer of mobile photo editing software that competes directly with

23 VSCO’s offerings. Like the VSCO app, the PicsArt Photo Studio: Collage Maker & Pic Editor

24 allows users to create, edit, and share digital photos with other users.

25 15. On or about July 6, 2018, PicsArt launched a new photo editing tool for the PicsArt

26 Photo Studio app called “FLTRS.” In connection with the launch, PicsArt published a promotional

27 article on its website entitled, “Introducing FLTRs, The New Editing Tool on PicsArt To Match

28 Any Mood.” The article states, in relevant part, that PicsArt has “launched a brand new editing
COOLEY LLP
ATTORNEYS AT LAW
4.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 5 of 16

1 tool for you to bring all of the light, dark, cold and warm tones to your images with nothing more

2 than a swipe of your finger. We are so excited to launch FLTRS, a series of image filters to fit all

3 of the diverse moods and personas that make up our global PicsArt community.”

4 16. In connection with its “launch” announcement, PicsArt encouraged readers to

5 subscribe to PicsArt Gold for early access to its filters.

6 17. The PicsArt app is free to download, but much of its content is only available to

7 “Gold” subscribers. Gold subscribers receive access to a library of filters, which PicsArt represents

8 are “exclusive” to PicsArt and “only for Gold users.”

10

11

12

13

14

15

16

17 18. In the week following announcement of its FLTRS feature, PicsArt published a

18 series of promotional articles on the PicsArt website titled “Meet the FLTRS,” Parts 1-4.

19 19. In “Meet The FLTRs, Part 1,” published on July 12, 2018, PicsArt introduced its

20 users to “our” four new millennial filters, MIL1, MIL2, MIL3, and MIL4. PicsArt encouraged

21 readers to subscribe to PicsArt Gold for early access to the filters.

22 20. In “Meet The Filters, Part 2,” published on July 13, 2018, PicsArt touted the four

23 filters that make up “our Vintage collection,” VIN1, VIN2, VIN3, and VIN4. PicsArt encouraged

24 readers to secure early access to “our premium Millennial filters” by subscribing to PicsArt Gold.

25 21. In “Meet The Filters, Part 3,” published on July 16, 2018, PicsArt touted the “three

26 new filters” that make up “our third FLTR category, Blush!”; namely, BLH1, BLH2, and BLH3.

27 As before, PicsArt encouraged readers to secure early access to “our premium Millennial filters”

28 by subscribing to PicsArt Gold.


COOLEY LLP
ATTORNEYS AT LAW
5.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 6 of 16

1 22. In “Meet The Filters, Part 4,” published on July 17, 2018, PicsArt featured a

2 category of green hued filters titled JD1, JD2, JD3, and JD4. Once again, PicsArt represented that

3 these filters were its own, and encouraged readers to sign up for PicsArt Gold to access them.

4 23. On October 17, 2018, PicsArt published a promotional article entitled, “Bring Out

5 The Ghosts, Ghouls and Goblins Hiding In Your Image With Our Second DuoTone FLTR.” The

6 article states: “When we first launched FLTRs, we quickly saw how the image filters defined and

7 transformed the mood of our PicsArt photographers. . . . They quickly became a big hit, and we

8 watched more and more photographers set themselves apart from the crowd with each unique

9 filter.”

10 24. In November 2018, PicsArt began promoting its “Movie FLTR,” FLMS1. In a

11 promotional article published on November 21, 2018, PicsArt invited users to make use of its

12 “exclusive photo filters,” which have “quickly [grown] to become a PicsArt favorite.” Again,

13 readers were encouraged to subscribe to PicsArt Gold for access to these filters.

14 25. Days later PicsArt posted about “our new Film School FLTRS, FLMS1 and

15 FLMS2,” on its Facebook page, which included a link for users to subscribe to PicsArt Gold.

16

17

18

19

20

21

22

23

24

25

26

27

28
COOLEY LLP
ATTORNEYS AT LAW
6.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 7 of 16

1 26. On November 24, 2018, PicsArt published another promotional article, this one

2 titled “Shop ‘Til You Drop: The PicsArt Cyber Sale is Here!” Under the header “Why Go Gold,”

3 the article states: “Our mantra at PicsArt has long stood: we’ll provide the tools, and you create

4 something awesome. . . . After a few years, our users began to ask for specific ways to boost their

5 creations. For a small subscription fee, we decided to pool our resources and create a new frontier

6 in your PicsArt universe. We called it PicsArt Gold.”

7 27. The November 24, 2018 article goes on to state, under the header “FLTRs Galore”:

8 “Sometimes, sending the message you want is just a matter of finding the right set of shadows,

9 highlights, and contrast. We went ahead and created the perfect combination for each feeling, from

10 nostalgically vintage to trendy millennial. Set your mood with our constantly-growing selection of

11 image FLTRs. . . . You will be amazed at what you can create when you subscribe to PicsArt Gold.”

12 28. Each of the foregoing representations by PicsArt was false and misleading. Many

13 of the filters that PicsArt claims to have “created” and describes as its “own,” “new,” “unique,”

14 “exclusive,” and “only for Gold users” were, in fact, created by VSCO and available through

15 VSCO’s mobile app first. Such filters were not “created” by PicsArt, are not “own[ed]” by PicsArt,

16 and were neither “new” nor “unique” or “exclusive” to Gold users.

17 29. On information and belief, PicsArt knew or should have known through the exercise

18 of reasonable care that the foregoing statements were false and misleading and would mislead

19 consumers into believing that PicsArt developed the filters in question and that they could only be

20 accessed through a PicsArt Gold membership, none of which is true.

21 30. On information and belief, PicsArt’s false and misleading statements were made for

22 the purpose of directing prospective customers to download PicsArt’s app and subscribe to

23 PicsArt’s services instead of those apps and services of its competitors, such as VSCO. On

24 information and belief, PicsArt’s false and misleading statements achieved their intended effect.

25 31. On information and belief, PicsArt agents and employees created accounts,

26 including paid accounts, with VSCO in order to obtain access to VSCO content and appropriate

27 that content for use in the PicsArt app in violation of the Agreement.

28
COOLEY LLP
ATTORNEYS AT LAW
7.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 8 of 16

1 32. As of January 31, 2019, at least seventeen such VSCO user accounts had been

2 created with email addresses associated with PicsArt employees. All such user accounts were, and

3 are, subject to the restrictions and obligations in the Agreement.

4 33. VSCO’s color scientists have determined that at least nineteen presets published by

5 PicsArt are effectively identical to VSCO presets that are only available through a VSCO account.

6 Specifically, VSCO determined that those PicsArt filters have a Mean Color Difference (“MCD”)

7 of less than two CIEDE2000 units (in some cases, far less than two units) compared to their VSCO

8 counterparts. An MCD of less than two CIEDE2000 units between filters is imperceptible to the

9 human eye and cannot have been achieved by coincidence or visual or manual approximation. On

10 information and belief, PicsArt could have only achieved this degree of similarity between its filters

11 and those of VSCO by using its employees’ VSCO user accounts to access the VSCO app and

12 reverse engineer VSCO’s presets.

13 34. On information and belief, at least the following PicsArt presets were copied from

14 VSCO: BLH3; FLMS1; FLMS2; FLMS3; FLMS4; JD1; JD2; JD3; JD4; MIL1; MIL2; MIL3;

15 MIL4; MNCH1; MNCH2; SUN1; SUN2; SUN3; and VIN1.

16 35. On information and belief, at the time of PicsArt’s initial launch of its FLTRs

17 feature, at least ten of the available fifteen filters were copied from VSCO.

18 36. On February 21, 2019, VSCO, through counsel, sent PicsArt a letter demanding that

19 PicsArt: (i) identify all PicsArt filters that were reverse engineered or otherwise copied from VSCO

20 presets and the date they were first made available to users; (ii) immediately and permanently

21 discontinue use of all such presets (including the nineteen referenced in Paragraph 34 above);

22 (iii) provide an accounting of all profits and revenues generated from such filters; and (iv) identify

23 all PicsArt employees who have opened a VSCO account at any time, whether using a PicsArt

24 email address or otherwise.

25 37. PicsArt’s counsel responded to VSCO’s demand letter by letter dated March 7,

26 2019. In the letter, PicsArt asserted that it was already “in the process of replacing certain

27 underperforming filters and modifying others,” including the nineteen presets identified in VSCO’s

28 demand letter. PicsArt further represented that it would remove two of the nineteen filters identified
COOLEY LLP
ATTORNEYS AT LAW
8.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 9 of 16

1 by VSCO by the close of business on March 8, 2019, and that the remaining seventeen filters would

2 be “addressed” by March 22, 2019.

3 38. However, as of the filing of this Complaint, PicsArt appears to have removed only

4 seventeen of the nineteen filters identified in VSCO’s February 21 letter, notwithstanding its

5 representation that all nineteen would be removed. Two of the filters at issue, SUN1 and VIN1,

6 remain essentially identical to VSCO filters, with an MCD of well below two CIEDE2000 units.

7 Furthermore, PicsArt appears to have replaced two other challenged filters, MIL1 and SUN3, with

8 two new filters that, on information and belief, were similarly reverse engineered from VSCO’s

9 proprietary presets. PicsArt has also failed and refused to provide the information demanded by

10 VSCO in its February 21 letter.

11 39. PicsArt has no excuse for its behavior. Notably, its own Terms of Use, which are

12 publicly available online, prohibit precisely the same improper activities of which it is accused

13 herein. Among other things, its Terms of Use state: “DO NOT . . . 10. Duplicate, reproduce,

14 transfer, give access to, copy or distribute any part of the PicsArt Services in any medium without

15 PicsArt’s prior written authorization[; or] 11. Attempt to reverse compile, reverse engineer, alter,

16 make derivative works of, disassemble, or modify any part of the PicsArt Services[; or] 12. Access

17 any part of the PicsArt Services in order to build a similar or competitive service.”

18 40. PicsArt’s ongoing campaign of false advertising and misuse of VSCO presets in

19 violation of the Agreement have necessitated this suit for damages and injunctive relief, among

20 other remedies.

21 FIRST CLAIM FOR RELIEF

22 (Violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125)

23 41. VSCO realleges and incorporates herein by reference every allegation contained in

24 Paragraphs 1 through 40, inclusive, of this Complaint as though set forth fully herein.

25 42. PicsArt promotes its “Gold” subscription service as providing users access to

26 “exclusive” content, including PicsArt filters.

27 43. However, many of the filters that PicsArt claims to have “created” and has described

28 as “our filters” or “new,” “unique,” “exclusive,” and “only for Gold users” were, in fact, created by
COOLEY LLP
ATTORNEYS AT LAW
9.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 10 of 16

1 VSCO and made available through VSCO’s mobile app long before PicsArt misrepresented them

2 as its “own.” That is, they were not “created” by PicsArt, are not “own[ed]” by PicsArt,” and were

3 neither “new” nor “unique” or “exclusive” to Gold users.

4 44. On information and belief, PicsArt knew or should have known through the exercise

5 of reasonable care that such statements are false and would mislead consumers into believing that

6 PicsArt had created the filters, that they were not available anywhere other than PicsArt, and that

7 consumers could only access the filters through a PicsArt Gold membership, none of which is true.

8 45. In fact, PicsArt reverse engineered popular filters from the VSCO app in violation

9 of the Agreement and falsely promoted them to consumers as its own.

10 46. PicsArt’s false and misleading representations, which remain on PicsArt’s website

11 to this day, are material and likely to affect consumers’ purchasing decisions because they concern

12 the quality or characteristics of PicsArt’s competitive photo editing app and, on information and

13 belief, were made for the purpose of convincing prospective consumers to obtain a PicsArt Gold

14 membership.

15 47. PicsArt’s statements challenged herein constitute “false or misleading description[s]

16 of fact, or false or misleading representation[s] of fact, which . . . in commercial advertising or

17 promotion, misrepresent[] the nature, characteristics, [and] . . . qualities” of PicsArt’s goods and

18 services, and therefore constitute false advertising in violation of 15 U.S.C. § 1125(a).

19 48. PicsArt’s false and misleading advertising has caused, and is continuing to cause,

20 VSCO significant injury and irreparable harm in the form of lost customers, damaged goodwill,

21 and consumer deception. Accordingly, VSCO is entitled to an injunction against PicsArt, as well

22 as all other remedies available under the Lanham Act, including but not limited to, compensatory

23 damages, disgorgement of profits, corrective advertising, and costs and attorneys’ fees.

24 SECOND CLAIM FOR RELIEF

25 (Breach of Contract)

26 49. VSCO realleges and incorporates herein by reference every allegation contained in

27 Paragraphs 1 through 48, inclusive, of this Complaint as though set forth fully herein.

28
COOLEY LLP
ATTORNEYS AT LAW
10.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 11 of 16

1 50. PicsArt entered into a valid, binding, and enforceable written contract with VSCO

2 when its agents and employees agreed to the VSCO Terms of Use Agreement.

3 51. PicsArt breached the Agreement by, among other things: (a) copying, distributing,

4 and publishing VSCO’s filters in violation of Section C of the “Use of Our Service” section of the

5 Agreement (titled Service Rules); (b) modifying, disassembling, decompiling and/or reverse

6 engineering the VSCO filters in violation of Section B of the “End User License Grant” section of

7 the Agreement (titled “Mobile Software”); (c) using VSCO filters to develop a competing product

8 in violation of Section B of the “End User License Grant” section of the Agreement (titled “Mobile

9 Software”); (d) publishing and offering filters reverse engineered from VSCO’s filters in the

10 competing PicsArt app; and (e) selling, licensing, renting, modifying, distributing, copying,

11 reproducing, transmitting, publicly displaying, publicly performing, publishing, adapting, editing,

12 and/or creating derivative works from VSCO Content in violation of the “Our Proprietary Rights”

13 section of the “End User License Grant” section of the Agreement.

14 52. VSCO has at all times complied with and performed all of its obligations under the

15 Agreement. There are no unsatisfied conditions for PicsArt’s performance under the Agreement.

16 53. As a direct and proximate result of PicsArt’s breach of the Agreement, VSCO has

17 been injured and sustained damages in an amount to be determined at trial. PicsArt is liable to

18 VSCO for these damages, plus pre-judgment interest.

19 54. PicsArt was also unjustly enriched as a result of its breach of the Agreement. Any

20 profits PicsArt realized from its unauthorized use of VSCO filters should be disgorged.

21 55. PicsArt’s breach of the Agreement is ongoing and, unless enjoined, will continue to

22 cause irreparable harm to VSCO in the form of lost customers, damaged goodwill, and consumer

23 deception. Accordingly, VSCO is entitled to an order enjoining PicsArt’s continued use or

24 promotion of presets developed by or copied from VSCO.

25 THIRD CLAIM FOR RELIEF

26 (Breach of the Implied Covenant of Good Faith and Fair Dealing)

27 56. VSCO realleges and incorporates herein by reference every allegation contained in

28 Paragraphs 1 through 55, inclusive, of this Complaint as though set forth fully herein.
COOLEY LLP
ATTORNEYS AT LAW
11.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 12 of 16

1 57. PicsArt entered into a valid, binding, and enforceable written contract with VSCO

2 when its agents and employees agreed to the VSCO Terms of Use Agreement.

3 58. Pursuant to California law, the Agreement includes a covenant of good faith and fair

4 dealing that imposed upon PicsArt a duty to deal with VSCO honestly, fairly, and in good faith, so

5 as to not destroy the rights of VSCO or interfere with its rights to receive the benefits of the

6 Agreement.

7 59. PicsArt breached these duties by, among other things, falsely promoting filters that

8 PicsArt copied and/or reverse engineered from VSCO’s app as having been “created” by PicsArt,

9 as “new,” “unique,” and “exclusive” to PicsArt, and as “only for [PicsArt] Gold users.”

10 60. VSCO has at all times complied with and performed all of its obligations under the

11 Agreement. There are no unsatisfied conditions for PicsArt’s performance under the Agreement.

12 61. As a direct and proximate result of this breach, VSCO has been injured and sustained

13 damages in an amount to be determined at trial. PicsArt is liable to VSCO for these damages, plus

14 pre-judgment interest.

15 62. PicsArt was also unjustly enriched as a result of its breach of the covenant of good

16 faith and fair dealing, entitling VSCO to disgorgement of PicsArt’s profits from the false promotion

17 and unauthorized use of VSCO’s filters.

18 63. PicsArt’s breach of the covenant of good faith and fair dealing is ongoing and, unless

19 enjoined, will continue to cause irreparable harm to VSCO in the form of lost customers, damaged

20 goodwill, and consumer deception. Accordingly, VSCO is entitled to an order enjoining PicsArt’s

21 continued use or promotion of presets developed by or copied from VSCO.

22 FOURTH CAUSE OF ACTION

23 (Violation of Cal. Bus. & Prof. Code §§ 17200 et seq.)

24 64. VSCO realleges and incorporates herein by reference every allegation contained in

25 Paragraphs 1 through 63, inclusive, of this Complaint as though set forth fully herein.

26 65. PicsArt has engaged in “unfair competition” within the meaning of California’s

27 Unfair Competition Laws, Cal. Bus. & Prof. Code §§ 17200 et seq. (the “UCL”).

28
COOLEY LLP
ATTORNEYS AT LAW
12.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 13 of 16

1 66. PicsArt’s conduct is “unlawful” within the meaning of the UCL because it violates

2 15 U.S.C. § 1125(a) and amounts to an intentional breach of the VSCO Terms of Use Agreement

3 and the implied covenant of good faith and fair dealing. PicsArt’s conduct is also unlawful and

4 actionable under the UCL insofar as it violates Cal. Bus. & Prof. Code §§ 17500 et seq., as set forth

5 more fully below.

6 67. PicsArt’s conduct is “unfair” within the meaning of the UCL in that PicsArt

7 knowingly, intentionally, and in bad faith accessed VSCO’s app to copy and/or reverse engineer

8 VSCO’s proprietary photo filters and falsely promoted them as its own, competing filters.

9 68. PicsArt’s conduct constitutes “unfair, deceptive, untrue or misleading advertising”

10 within the meaning of the UCL in that many of the filters that PicsArt claims in promotional

11 materials to have “created” and has described as “our filters” or “new,” “unique,” “exclusive,” and

12 “only for [PicsArt] Gold users” were, in fact, created by VSCO and made available through

13 VSCO’s mobile app long before PicsArt unlawfully appropriated them and offered them as its

14 “own.” That is, they were not “created” by PicsArt, are not “own[ed]” by PicsArt,” and were

15 neither “new,” nor “unique” or “exclusive” to Gold users. PicsArt’s false and misleading

16 representations, which remain on PicsArt’s website to this day, are material and likely to affect

17 consumers’ purchasing decisions because they concern the quality or characteristics of PicsArt’s

18 competitive photo editing app and, on information and belief, were made for the purpose of

19 convincing prospective consumers to obtain a PicsArt Gold membership.

20 69. As a result of PicsArt’s conduct, VSCO has suffered, and unless PicsArt’s conduct

21 is enjoined, will continue to suffer, injury in fact and actual damages and irreparable harm, to which

22 VSCO has no remedy at law. Accordingly, VSCO is entitled to restitution and injunctive relief,

23 including corrective advertising.

24 FIFTH CAUSE OF ACTION

25 (Violation of Cal. Bus. & Prof. Code §§ 17500 et seq.)

26 70. VSCO realleges and incorporates herein by reference every allegation contained in

27 Paragraphs 1 through 69, inclusive, of this Complaint as though set forth fully herein.

28
COOLEY LLP
ATTORNEYS AT LAW
13.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 14 of 16

1 71. PicsArt promotes its “Gold” subscription service as providing users access to

2 “exclusive” content, including PicsArt filters.

3 72. However, many of the filters that PicsArt claims to have “created” and has described

4 as “our filters” or “new,” “unique,” “exclusive,” and “only for [PicsArt] Gold users” were, in fact,

5 created by VSCO and made available through VSCO’s mobile app long before PicsArt

6 misrepresented them as its “own.” That is, they were not “created” by PicsArt, are not “own[ed]”

7 by PicsArt, and were neither “new” nor “unique” or “exclusive” to Gold users.

8 73. On information and belief, PicsArt knew or should have known through the exercise

9 of reasonable care that such statements are false and would mislead consumers into believing that

10 PicsArt had created the filters, that they were not available anywhere other than PicsArt, and that

11 consumers could only access the filters through a PicsArt Gold membership, none of which is true.

12 74. In fact, PicsArt reverse engineered popular filters from the VSCO app in violation

13 of the Agreement and falsely promoted them to consumers as its own.

14 75. PicsArt’s false and misleading promotional materials, which remain on PicsArt’s

15 website to this day, are material and likely to affect consumers’ purchasing decisions because they

16 concern the quality or characteristics of PicsArt’s competitive photo editing app and, on

17 information and belief, were made for the purpose of convincing prospective consumers to obtain

18 a PicsArt Gold membership.

19 76. Accordingly, PicsArt’s statements challenged herein constitute “false advertising”

20 in violation of California’s False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq. (the

21 “FAL”), which makes it “unlawful for any person, firm, corporation or association, or any

22 employee thereof with intent directly or indirectly . . . to make or disseminate or cause to be made

23 or disseminated before the public in this state, or to make or disseminate or cause to be made or

24 disseminated from this state before the public in any state, in any newspaper or other publication,

25 or any advertising device, or by public outcry or proclamation, or in any other manner or means

26 whatever, including over the Internet, any statement, concerning [a competitor’s] services, . . . or

27 concerning any circumstance or matter of fact connected with the proposed performance or

28
COOLEY LLP
ATTORNEYS AT LAW
14.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 15 of 16

1 disposition thereof, which is untrue or misleading, and which is known, or which by the exercise

2 of reasonable care should be known, to be untrue or misleading.”

3 77. PicsArt’s statements challenged herein also constitute “false advertising” in

4 violation of Cal. Bus. & Prof. Code § 17508, which makes it “unlawful for any person doing

5 business in California and advertising to consumers in California to make any false or misleading

6 advertising claim.”

7 78. As a result of PicsArt’s false and misleading advertising, VSCO has suffered, and

8 unless PicsArt’s conduct is enjoined, will continue to suffer, injury in fact and irreparable harm in

9 the form of lost sales, loss of goodwill, and consumer deception, for which VSCO has no remedy

10 at law. Accordingly, VSCO is entitled to restitution and injunctive relief, including corrective

11 advertising.

12 PRAYER FOR RELIEF

13 WHEREFORE, VSCO prays for judgment as follows:

14 a) For judgment in favor of VSCO on each of its claims for relief;

15 b) For injunctive relief;

16 c) For compensatory damages;

17 d) For disgorgement of any proceeds obtained from PicsArt’s use of VSCO filters

18 and/or promotion of VSCO filters as its own;

19 e) For restitution;

20 f) For attorneys’ fees;

21 g) For the costs of corrective advertising;

22 h) For pre-judgment and post-judgment interest;

23 i) For costs of this suit; and

24 j) For such other relief as the court deems just and proper.

25 ///

26 ///

27 ///

28 ///
COOLEY LLP
ATTORNEYS AT LAW
15.
PALO ALTO
COMPLAINT
Case 3:19-cv-01831 Document 1 Filed 04/04/19 Page 16 of 16

1 DEMAND FOR JURY TRIAL

2 Plaintiff VSCO hereby demands a trial by jury on every claim for relief alleged in this

3 Complaint against Defendant PicsArt, Inc.

4
Dated: April 4, 2019 Respectfully submitted,
5
COOLEY LLP
6 ANGELA L. DUNNING (212047)
JUDD D. LAUTER (290945)
7 ADDISON M. LITTON (305374)
8

9 By: /s/ Angela L. Dunning


Angela L. Dunning (212047)
10
Attorneys for Plaintiff
11 Visual Supply Company
12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28
COOLEY LLP
ATTORNEYS AT LAW
16.
PALO ALTO
COMPLAINT