PeopleBrowsr Gets Temporary Restraining Order Against Twitter For 'Felony Interference With A Business Model'

Business Models

from the someone-else's-bitch dept

For years, we’ve seen so many legal disputes that could be jokingly described as arguing “felony interference of a business model” — a term coined by Steven Bellovin a while ago as shorthand for lawsuits that are much more about a company who bet on the wrong business model, than any actual legal wrongs. Normally, this relates to legacy companies upset at upstarts who win through the disruptive judo of taking a totally different approach. But it can be seen in other arenas as well. We’ve also talked, for example, about how odd it is that some companies appear to base their entire business on what some other company does — and they seem wholly unprepared for a situation in which the company they are 100% reliant on changes. As venture capitalist Fred Wilson has summarized, a good company can’t be someone else’s bitch.

Both of those concepts seem relevant given the news that a startup called PeopleBrowsr has successfully obtained a temporary restraining order against Twitter for changing how it doles out access to its “Firehose” (i.e., the raw stream of all public tweets). As has been covered widely, over the last few months, Twitter has really clamped down on some of its more open practices lately. I actually agree with many people that I’m not sure this is a smart long-term business move, but I can’t see how it could possibly be a legal violation. Yet, that’s what PeopleBrowsr appears to be claiming. Of course, its Firehose offering has long been an offering that companies had to work out a deal with Twitter to get access to, so even then it was never fully “open.”

As part of the changing business strategy, Twitter has cut off many of its “Firehose” partners, including PeopleBrowsr. In response, PeopleBrowsr sued arguing that this change has a negative impact on PeopleBrowsr’s business (apparently true), and thus it must be illegal. The company highlights how it has all sorts of highly valuable deals with other companies because of its analytics of Twitter’s Firehose.

PeopleBrowsr’s products are highly valuable to its users, who utilize them to extract relevant information from the massive Twitter stream, as well as to organizations marketing their messages or brands. PeopleBrowsr has entered into valid contracts including: (1) a three-year, $3 million contract with defense contractor Strategic Technology Research, (2) a long term, $400,000 contract with Cadalys to build a customized Kred application, (3) a long term, $300,000 contract with Radian6 to incorporate Kred into its products, (4) a long term, $400,000 contract with Badgeville to incorporate Kred into its products, (5) a contract with Mashable to power its mRank product through PeopleBrowsr’s API, and (6) a contract for at least one year with DynamicLogic, worth at least $75,000. PeopleBrowsr has business relationships that are likely to ripen into new business with firms including Dell Computer, Demand Media, Ogilvy, Bell-Pottinger, and CBS Interactive, among others.

It is not difficult to understand why PeopleBrowsr is upset that Twitter decided to end the relationship, even as PeopleBrowsr claims to pay over $1 million a year to Twitter for access to the Firehose. The key argument that PeopleBrowsr makes, is that Twitter has, in the past, made various statements concerning its embrace of an open platform that allows others to build on top of their work. But I’m not sure why that’s actually relevant here. PeopleBrowsr obviously knew that Firehose wasn’t completely open since it signed two separate licensing agreements with Twitter (according to its own filing). In fact, they explicitly note that the agreement has a termination provision, so PeopleBrowsr had to know it was a possibility. In addition, most of the statements about openness that PeopleBrowsr cites, are vague statements about the importance of openness. Even the specific comments about keeping Firehose open are things like an engineer noting that he’s “fighting to keep access to the Firehose and other API’s as open as possible,” which should have clearly indicated to PeopleBrowsr that the entire company was not in agreement, and there was a very real chance that it would not remain so open.

In the end, it really seems like the problem is entirely PeopleBrowsr’s for building a business in which it relied almost entirely on a single relationship, and did not set up the contract to ensure that relationship would not go away. Again, I’m not sure that Twitter’s strategy here is smart, but it’s difficult to see how it’s illegal. The problems seem entirely self-created by PeopleBrowsr. It even seems to admit that it bet its entire business on this fact, without securing a contract that they knew would last.

The Firehose is an essential input for PeopleBrowsr’s business. PeopleBrowsr’s products function by creating a comprehensive view of Twitter activity, and a mere sample of Twitter’s data is not sufficient to provide the sophisticated analytics PeopleBrowsr’s clients have contracted for.

All that says is that perhaps they shouldn’t have put things in their client contracts that they really couldn’t promise they’d have access to — or they should have put together a much more solid agreement with Twitter in the first place. While PeopleBrowsr may have won a temporary injunction, preventing Twitter from turning off its access to Firehose for the time being, it seems like a massive long shot to think that it can possibly win this lawsuit. Yes, it sucks that the one partner you bet your business on is changing its own ways of doing business, but that’s what happens when you bet your business model on being someone else’s “bitch.”

Filed Under: business models, contracts, firehose, interference
Companies: peoplebrowsr, twitter