Facebook, Inc. v. MaxBounty, Inc.

274 F.R.D. 279, 2011 U.S. Dist. LEXIS 32343, 2011 WL 1120046
CourtDistrict Court, N.D. California
DecidedMarch 28, 2011
DocketNo. CV-10-4712-JF
StatusPublished
Cited by9 cases

This text of 274 F.R.D. 279 (Facebook, Inc. v. MaxBounty, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Facebook, Inc. v. MaxBounty, Inc., 274 F.R.D. 279, 2011 U.S. Dist. LEXIS 32343, 2011 WL 1120046 (N.D. Cal. 2011).

Opinion

ORDER1 GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

JEREMY FOGEL, District Judge.

Pursuant to Fed. R. Civ. Pro. 12(b)(6), Defendant MaxBounty Inc. (“MaxBounty”) moves to dismiss Claims One through Three asserted by Plaintiff Facebook, Inc. (“Face-book”) for failure to state a claim upon which relief may be granted. The complaint includes claims for: (1) violation of 15 U.S.C. § 7701 (“CAN-SPAM Act”); (2) violation of 18 U.S.C. § 1030 (“Computer Fraud and Abuse Act”); (3) fraud; (4) tortious interference with contract; (5) breach of contract; (6) violation of 15 U.S.C. § 1125(c) (federal trademark dilution); and (7) violation of 15 U.S.C. § 1125(a) (false designation of origin). Facebook seeks compensatory, statutory, and punitive damages. Facebook also requests disgorgement of profits, reasonable costs, and attorney’s fees.

I. BACKGROUND

Facebook is a popular social networking website with more than 500 million active users. (Compl. ¶ 10.) It is designed to be “a network that helps people communicate more efficiently and effectively with their friends, family, and co-workers.” (Id.) To become a Facebook user an individual must provide his or her real identity. (Id. at ¶¶ 11-12.) Commercial, political, and charitable organizations also may establish a presence on Face-book by creating “pages” to which users can connect their profiles. (Id. at ¶ 14.) All users must agree to Facebook’s statement of rights and responsibilities. Facebook’s advertising guidelines prohibit false, misleading, fraudulent, and deceptive advertisements. (Id. at ¶ 37(c).) They also prohibit advertisements that are “deceptive or fraudulent about any offer made,” (Id. at ¶ 37(d)), and any advertisement that includes a “discount or free offer ... must link to a page that clearly and accurately offers the exact deal the advertisement has displayed____” (Id. at ¶ 37(h).) Moreover, advertisements that contain, facilitate or promote spam are prohibited, (Id. at ¶ 37(j)), and if obtaining the promoted benefit requires user enrollment in a third-party subscription service then that requirement must be stated both in the advertisement and on the Facebook page. (Id. at ¶ 37(k).)

[281]*281MaxBounty is an advertising and marketing company that uses a network of publishers to drive traffic to its customers’ websites. Its marketing program is based on a cost-per-action model (“CPA”). As explained on MaxBounty’s website, “an advertiser under the CPA model pays only when a specific action is taken on their website. The advertiser defines the action in advance and only pays when the action is taken ... [generally speaking, the more involved the action, the higher a publisher would expect to be paid for generating it.”2 MaxBounty acts as an intermediary between its network of publishers (advertisement content creators) and its customers (third-party advertisers). Max-Bounty appears to generate revenue for its CPA program through a shared compensation agreement with its network of publishers.

Facebook alleges that MaxBounty engaged and continues to engage in impermissible advertising and commercial activity on Faeebook.com. (Compl. ¶¶ 40 — 41.) It asserts that MaxBounty misleads its affiliates “into believing that its campaigns are approved by Facebook____” (7datfl44.) It claims that MaxBounty facilitates traffic to its contracting advertiser websites by “providing] technical support to its affiliates on how to create fake Facebook campaigns, and [by] providing] substantial advance payments to its affiliates that agree to participate in [Max-Bounty’s] Facebook campaigns.” (Id.)3 Facebook also claims that MaxBounty’s conduct has caused it economic damage, has “tainted the Facebook experience,” resulting in economic loss to many Facebook users, and has caused and continues to cause significant harm to Facebook’s reputation and goodwill. (Id. at ¶¶ 53-54.)

A. The Alleged Fraudulent Scheme

Facebook alleges that MaxBounty, through its network of affiliates, creates fake Face-book pages that are intended to re-direct unsuspecting Facebook users away from Facebook.com to third-party commercial sites. (Compl. ¶¶ 46-52.) It provides examples of two such pages in the complaint. (Id.) Both pages utilize a similarly structured, multistep scheme: in the first step, MaxBounty establishes a network of affiliates; in the second step, MaxBounty’s affiliates create numerous Facebook pages that function like (and in effect are) advertisements; in the third step, the page displays a message indicating that upon registration a user will be able to take advantage of a “limited time offer,” such as receiving a gift card or becoming a product tester for a high-end product (e.g. an Apple iPad); in the fourth step, the Facebook user is induced by the page and begins the registration process. (Id.) The registration process requires three discrete user actions: (1) to become a “fan” of the page, (2) to invite all of his or her Facebook friends to join to the page, and (3) to complete additional administrative registration requirements. (Id. at ¶¶ 46, 50.) Upon completion of these requirements, Facebook users are not sent the promised item but instead are directed “to a domain registered to and managed by MaxBounty that then redirects the user to a third-party commercial website____” (Id. at ¶¶47, 50.) The third-party commercial site informs the user that he or she must complete still more steps in order to obtain the promised item. (Id. at ¶¶ 48-52.) Such additional steps include signing up for numerous “sponsor offers,” which typically are offers for memberships in subscription services. (Id.) Facebook asserts that “[MaxBounty] receive[s] payment for the traffic it delivers to [the third-party commercial sites] based on the [number of] users who successfully complete[] the steps to receive a free gift.” (Id. at ¶¶48, 51.)

B. MaxBounty’s Motion to Dismiss

MaxBounty argues that Facebook’s claim under the CAN-SPAM Act is insufficient as a matter of law because the “customer advertisements Facebook complains about ... are not email and therefore cannot give rise to a [282]*282claim under the Act.” (Mot. to Dismiss, 1:7— 11.) Facebook contends that communications on its website come within the meaning of “electronic mail messages” under the CAN-SPAM Act. It argues that any other conclusion would be against the weight of the authority and run counter to “the plain language and legislative purpose of the act.” (Pl.’s Opp. to MTD, 2:18-24.)

MaxBounty also contends that Facebook’s claim under the Computer Fraud and Abuse Act (“CFAA”) fails to satisfy the heightened pleading standard of Fed. R. Civ. Pro.

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274 F.R.D. 279, 2011 U.S. Dist. LEXIS 32343, 2011 WL 1120046, Counsel Stack Legal Research, https://law.counselstack.com/opinion/facebook-inc-v-maxbounty-inc-cand-2011.