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Kickflip, Inc. v. Facebook, Inc.

United States District Court, D. Delaware

March 31, 2015

KICKFLIP, INC., Plaintiff,
v.
FACEBOOK, INC., Defendant.

Mary B. Matterer, Kenneth L. Dorsney, MORRIS JAMES LLP, Wilmington, DE Derek A. Newman, Derek Linke, NEWMAN DU WORS LLP, Seattle, WA Brian R. Strange, Keith L. Butler, STRANGE & CARPENTER, Los Angeles, CA Attorneys for Plaintiffs.

David E. Ross, Benjamin J. Schladweiler, SEITZ ROSS ARONSTAM & MORITZ LLP, Wilmington, DE Thomas O. Barnett, Jonathan Gimblett, COVINGTON & BURLING LLP, Washington, D.C. Attorneys for Defendants.

LEONARD P. STARK, District Judge.

Plaintiff Kickflip, Inc., doing business as Gambit (hereinafter "Plaintiff' or "Kickflip") filed this action against Defendant Facebook (hereinafter "Defendant" or "Facebook") on October 26, 2012 alleging antitrust violations, as well as tortious interference with Gambit's contracts and prospective business opportunities, in relation to Facebook's virtual-currency service, Facebook Credits, and Facebook's social-gaming network. (D.I. 1) Facebook filed its answer and counterclaims against Kickflip on October 18, 2013 (D.I. 31), which Facebook then amended on December 3, 2013 (D.I. 47). Facebook's amended counterclaims assert against Kickflip: breach of contract (Count I), inducement to breach of contract (Count II), and fraud (Count III). ( Id. ) Facebook requests compensatory and injunctive relief in addition to judgment in its favor on the three counterclaims. ( Id. )

On December 31, 2013, Kickflip moved to dismiss Facebook's amended counterclaims under Delaware's statute of limitations and Federal Rule of Civil Procedure 12(b)(6). (D.I. 49) The Court heard argument on Kickflip's motion on April 4, 2014. ( See D.I. 72) ("Tr.")[1]

I. BACKGROUND

Facebook operates a social networking service that enables users to connect and share information with their friends and family. (D.I. 47 ¶ 1)[2] Kickflip is a virtual currency and payment processing provider, and offers its services to software developers that publish games on Facebook and other social networks.[3] (D.I. ¶ 2) These games are typically free to play, but players can "improve the game experience" by acquiring virtual goods and spending "virtual currency, " which can be bought with real money or earned by viewing advertisements or otherwise interacting with an in-game advertiser. ( Id. ¶ 3) While game developers recognize the value of monetizing their game play, according to Kickflip "most social-game developers remain[] focused on game development and hire[] third-party virtual-currency service providers." ( Id. ¶ 34)

In 2007, Facebook launched its "Platform, " allowing developers to make their applications and games available via Facebook, which allowed developers to "create games in which players can cooperate and/or compete with their real-world friends with minimal effort spent signing up or connecting." ( Id. ¶¶ 25, 28) Facebook has developed a series of terms and policies (hereinafter "Terms") governing the use of its services. As alleged in Facebook's counterclaims:

... Developers and other operators of Platform applications are required to agree to the Terms applicable to them as a condition of their use ofFacebook's services. The Terms include (a) the Statement of Rights and Responsibilities ("SRR"), which applies to both users and developers; (b) the Platform Policies, which apply to developers; and (c) the Advertising Guidelines, which apply to all parties displaying advertisements on Facebook, including on applications that are made available on Facebook through the Platform.
The operative SRR in November 2009 incorporated by reference the Platform Policies and Advertising Guidelines as "Special Provisions Applicable to Developers/Operators of Applications and Websites." The SRR further provided that "[i]f you violate the letter or spirit of this Statement, or otherwise create possible legal exposure for us, we can stop providing all of part of Facebook to you."
The obligations assumed by developers under the SRR included the following commitments designed to keep Facebook safe:
• You will not develop or operate a third party application containing, or advertise or otherwise market alcohol-related or other mature content without appropriate age-based restrictions.
• You will not use Facebook to do anything unlawful, misleading, malicious, or discriminatory.
• You will not facilitate or encourage any violations of this Statement.
Developers that displayed advertisements on Facebook also were prohibited under the operative Advertising Guidelines from:
• Developing advertisements or using the Facebook website in ways that violate Facebook's Advertising Guidelines.
• Misleading Facebook users.
• Sending users to different landing pages than the advertised page when they click on the advertisement.
• Using landing pages that generate pop-ups, pop-overs, pop-unders, or "fake" application close behavior.
• Promoting gambling without authorization from Facebook.
• Promoting alcoholic beverages in violation of Facebook's ...

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