SnipSnap is Sued, Accused of Infringing Coupon Copyrights

Critics of SnipSnap could have seen this one coming. Several months after the controversial coupon app came under intense criticism in the couponing community, the app now finds itself the defendant in a lawsuit. A coupon book publisher displeased with seeing its offers reproduced in the app, alleges that SnipSnap “willfully and knowingly” helps users “illegally access, copy and redeem” its coupons, and that SnipSnap “has ignored the numerous red flags of infringing activity.”

And they’re not just going after SnipSnap itself – they want to hold SnipSnap users accountable, too.

KidStuff is an Allentown, Pennsylvania-based company that publishes coupon books, which are sold by schools as fundraisers. Over the past 20 years, KidStuff says its coupon books have helped to raise more than $50 million for schools across the country, with the help of vendors who “budget the number of their coupons and base their offers upon the number of KidStuff coupon books expected to be distributed.”

So KidStuff was alarmed and unhappy to find that many of its coupons are freely available to anyone who uses the SnipSnap app. “SnipSnap and the individuals who upload our coupons to SnipSnap to be redistributed illegally threaten the millions of dollars that KidStuff raises for schools each year,” KidStuff vice president Seymour Traub told Coupons in the News.

As a result, the company filed suit in the U.S. District Court for the Eastern District of Pennsylvania last week, against SnipSnap and ten “John Does” – unknown users who uploaded KidStuff coupons to the app. “Consumers will find no need to legally purchase KidStuff’s coupon books so long as Defendant illegally offers the same coupons for free,” KidStuff argues in its suit.

The lawsuit came about, after KidStuff’s repeated requests to remove its coupons failed to eliminate them from the app. That’s despite legal disclaimers printed on each coupon stating that “reproducing KidStuff coupons in whole or in part is unlawful. Users must present coupons in their original paper form. Coupons may not be sold or bartered.”

“Given this clear notice,” Traub told Coupons in the News, “individuals who upload our coupons to SnipSnap to be shared, widely distributed, and used in mobile form are participating in an illegal activity.”

SnipSnap disputes the notion that there’s anything illegal about its app. In fact, its very reason for being, is to help eliminate the need for paper coupons.

SnipSnap was founded by Philadelphia area entrepreneur Ted Mann in 2011, as a high-tech way for users to organize their coupons. No need to bring all of your store coupons with you when you go shopping, the app promised, you can just snap a photo with your smartphone and SnipSnap will turn that old-fashioned paper coupon into a mobile coupon that you can carry with you wherever you go.

One crucial wrinkle – the coupons don’t even have to be yours. Anyone can upload a photo of a coupon to the app, and then it becomes available to all other users of the app. So a single paper coupon given to one user, could in theory become available to more than a million users via SnipSnap. And while SnipSnap claims to support only retailers’ offers, and not manufacturer’s coupons, cursory looks at the app regularly turn up a number of manufacturer’s coupons that somehow managed to “slip through”.

As the app gained more users and publicity, several influential coupon bloggers began speaking out against it earlier this year. “It is unethical, wrong, and fraudulent to make and use photocopies of coupons,” Jill Cataldo wrote, back in May, “yet, that’s what this app does.” More recently, the owners of TheKrazyCouponLady.com jumped on the anti-SnipSnap bandwagon earlier this month, saying that it “may have started out as an innocent way to remember store coupons, but it has turned into a fraudulent operation.”

A number of retailers have objected to their coupons being made available on SnipSnap. And many, including Target, Publix and ShopRite, have requested that their coupons no longer appear on the app. SnipSnap has complied, in most cases, which has largely shielded it from any legal action – until now.

KidStuff says SnipSnap’s assurances that it will remove coupons upon request are entirely inadequate, as evidenced by its pre-lawsuit correspondence with SnipSnap CEO Ted Mann.

In an email to SnipSnap dated September 23, which is provided as evidence in the lawsuit, Traub wrote that “KidStuff demands that you remove its coupons and cease and desist from further posting and distributing of KidStuff coupons… In the event you do not comply, KidStuff will take legal action to enjoin you, seek monetary damages, and report you to criminal authorities.”

“We cannot police the user-generated content,” Mann offered in response, explaining that SnipSnap relies on users to report any offending coupons. But “I took the liberty of scouring our app to see if any KidStuff coupons were available,” he added generously, and reported that “I was able to find 10 that had the phrase ‘kidstuff’ in the coupon promo codes. I went ahead and flagged these.” Mann went on to suggest that perhaps KidStuff would be interested in working with SnipSnap and becoming an authorized (paying) coupon provider.

Traub was not interested. In an email sent the next day, he reiterated that “KidStuff requests that you immediately remove any and all of its coupons from your app and immediately install a procedure which prevents anyone from uploading KidStuff coupons into your app.”

“Any time our system detects the text ‘kidstuff’ in a coupon, it will be flagged automatically,” Mann assured Traub, before adding somewhat obsequiously that “I have a great deal of admiration for KidStuff coupon books, and all the money you have raised for schools.”

The problem, KidStuff soon discovered, was that flagging the word “KidStuff” was not nearly effective enough to ensure that no KidStuff coupons appear on the app. KidStuff offers coupons for more than a hundred different retailers, so most are uploaded using the names of the retailers, not KidStuff.

“The only way for KidStuff to locate infringing activity is to use SnipSnap’s ‘search’ feature,” KidStuff concludes in its lawsuit. “KidStuff must sift through the hundreds of thousands of coupons available on the app on a coupon-by-coupon basis” to discover the hundreds of its coupons that “appear daily on the SnipSnap app.” Such an effort is “futile”, KidStuff says, since “the scale of the infringing acts at issue is enormous.”

KidStuff goes on to slam the entire concept of SnipSnap, calling it “a business model that depends on infringement.” Even so, as detailed in an earlier article on Coupons in the News, SnipSnap claims protection under the Digital Millennium Copyright Act’s “safe harbor” provision. A third party that inadvertently hosts copyrighted content uploaded by users, can claim protection as long as it has a policy to allow copyright holders to lodge a complaint, and acts upon takedown requests.

KidStuff argues that SnipSnap cannot claim such protection, for a number of reasons. One, it does not and cannot disable coupons once they’re downloaded by users – it can only remove newly-uploaded coupons that users have not yet “snipped”. Two, it “has no safeguard or method to prevent the repeated reappearance of infringing coupons.” And three, its “reporting system is wholly inadequate to control the infringing activities.” KidStuff also argues that SnipSnap is guilty of contributory infringement, because it “has actual knowledge of infringing activity” and “provides the site, means, and facilities for infringement of KidStuff’s copyrighted works.”

KidStuff is seeking statutory damages of up to $150,000 per violation, plus attorney’s fees – not only from SnipSnap, but from the users known only as “John Does” who are included in the lawsuit as well. “We intend through discovery in the lawsuit to require SnipSnap to identify those individuals who are employees, agents of SnipSnap, and others who have extensively and intentionally participated in violating our copyrights,” Traub told Coupons in the News. “After obtaining that information, we will consider adding these individuals as additional defendants.”

Sued, for using SnipSnap. For anyone who’s been on the fence about whether to use the app, the possibility of a $150,000 judgement against them for uploading or using copyrighted coupons, might now give them pause. It’s reminiscent of the case currently under way, in which Link Snacks is suing eBay users who sold counterfeit coupons on the site, even though many claimed they had no idea the coupons were counterfeit, and had no idea that what they were doing could be considered wrong.

SnipSnap CEO Ted Mann did not respond to a request for comment about the lawsuit. His company has earned well over a million dollars in seed funding, and has legal representation, so it may well be able to survive a lawsuit that might otherwise inflict a fatal blow on other startups. Unless, that is, KidStuff’s move opens the floodgates for others to follow suit – and file suit.

“It is expected that all users of any part of the App will comply with applicable copyright laws,” reads SnipSnap’s terms of service. Perhaps it’s been a little too trusting of its users, especially since some of those users’ failure to “comply with applicable copyright laws” has now ended up getting SnipSnap sued. But it’s SnipSnap’s own ability, or inability, to comply with those laws that could ultimately determine whether this lawsuit represents a mere bump in the road for SnipSnap – or a nail in the coffin.

(Read complete coverage of the SnipSnap app controversy here).